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Impax Asset Management

PRI reporting framework 2019

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Pre-investment (selection)

PE 05. Incorporating ESG issues when selecting investments

05.1. During due-diligence indicate if your organisation typically incorporates ESG issues when selecting private equity investments.

05.2. Describe your organisation's approach to incorporating ESG issues in private equity investment selection.

The assessment and mitigation of environmental, social and governance (ESG) risks are an integral and necessary consideration of our due diligence processes for each investment and go beyond simply complying with the applicable environmental laws and other permitting procedures. Our Investment Committee must approve all potential investments against our ESG-parameters and policy and any breach prevents us from making an investment.

1. Environmental. These considerations are a key factor for renewable energy projects. A thorough environmental impact assessment (EIA) is required in order to procure the permits/licences to build and operate wind, solar, hydro in all European jurisdictions. We have undertaken to comply with the EU EIA Directive and apply it to investments in the EU and will apply to investments outside the EU if relevant in the future. We are particularly sensitive to potential impacts on the habitat, air and water, especially if the area is a Natura 2000 site. Assessments generally cover the following areas;

  • Flora and fauna
  • Birds, bats and aquatic biodiversity
  • Soil and water/ water flow
  • Noise

2. Social. We take due consideration of social issues involved in our investment decisions and management of portfolio companies. Local communities are closely involved in the permitting phase of the projects we invest in and under EU-standard permitting procedures local citizens have a right to participate in the procedure and often lease the land benefiting economically during the life of the project. Many of the projects in which we invest do not have employees. We tend to outsource operations, which are typically contracted competitively under international, project-finance standard terms. When we outsource operations or engage contractors, we ensure local employees are engaged when possible and as appropriate, for instance in operations and maintenance and security of the projects we invest in. We always insist that all applicable employment laws and health and safety regulations are duly observed. Moreover, in corporate investments, where the investee company has employees, we closely monitor that such investee company adheres to all applicable employment laws and health and safety regulations and all employee rights are respected. Quarterly board meetings will review such issues.

3. Governance. We seek to address and resolve any material governance issues prior to investing. Investment structures ensure control and accountability is maintained of our ownership interest in our targets so that we can implement straight forward direction and governance systems. Structures are established to ensure that interests between parties are aligned and where necessary independent non-executive directors are sought.  We will abandon discussions over a prospective transaction if we have any doubts over the integrity or practices of a counterparty and we may initiate a forensic review as a safeguard in this regard. Impax’s compliance team complete checks on suppliers, service providers and counterparties engaged during sales and exit processes to comply with anti-monitoring laundering requirements and policies are in place at subsidiary company levels.

05.3. Additional information. [Optional]


PE 06. Types of ESG information considered in investment selection

06.1. Indicate what type of ESG information your organisation typically considers during your private equity investment selection process.

          Legal and regulatory aspects in the local context.
        

06.2. Describe how this information is reported to, considered and documented by the Investment Committee or similar.

The assessment and mitigation of environmental, social and governance (ESG) risks are an integral and necessary consideration of our due diligence processes for each investment and go beyond simply complying with the applicable environmental laws and other permitting procedures. We engage specialist advisers to review potential targets and identify risk areas. Our investment team provide reports to our Investment Committee who must approve all potential investments against our ESG-parameters and policy and any breach prevents us from making an investment. Compliance checks are completed prior to any investments being made or new suppliers being appointed.

 


PE 07. Encouraging improvements in investees

07.1. During deal structuring,what is the process for integrating ESG-related considerations into the deal documentation and/or the post-investment action plan?.

If yes

07.2. Describe the nature of these improvements and provide examples (if any) from the reporting year

ESG aspects are a key factor for obtaining project permitting and continued operation, therefore at all stages of the project life, full compliance and where possible improvements of ESG-processes must be achieved. Regulations can tighten over time, hence requiring our projects to remain compliant and stay abreast of any changes. We engage local experts to ensure that we are up-to-date with current best practices.

During the year we established a joint venture platform to invest in small scale hydro development, construction and operation in Norway. During the investment process we designed the strategy, which was implemented after acquisition through the 100-day, 6 month and 12 months plans. These plans were aimed at setting up good structures and governance procedures (control systems, anti-money laundering procedures, appointment of non-executive directors, board charters), developing environmental plans for a portfolio of hydro power plants (site specific detailed environmental designs per plant) and establishing a well-functioning team with appropriate working conditions and protection (new local office for new appointments, liability insurance, compliance checks on appointments).

07.3. Additional information. [OPTIONAL]


PE 08. ESG issues impact in selection process

08.1. Indicate how ESG issues impacted your private equity investment selection processes during the reporting year.

08.2. Indicate how ESG issues impacted your private equity investment deals during the reporting year.

08.3. Additional information. [OPTIONAL]

ESG aspects are a key factor for obtaining project permitting and continued operation, therefore at all stages of the project life, full compliance and where possible improvements of ESG-processes must be achieved. Risks are identified during the due diligence phase and any issues considered a risk to ESG which cannot be resolved post acquisition would result in a negative decision from the Investment Committee. Consideration is given to post acquisition structuring and may result in a requirement to resolve certain issues prior to our ownership.

 


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