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Zouk Capital

PRI reporting framework 2019

You are in Direct – Private Equity » Pre-investment (selection)

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.

Zouk’s overall goal in selecting investments is to ensure that each of its investee companies inherently advances ESG goals as part of its core business model and value proposition. ESG factors are first taken into account from the initial screening of opportunities, where an initial checklist is used to screen out opportunities. During further due diligence, in order to properly identify and monitor the potential ESG-related upside and downside risks, Zouk employs a bespoke methodology that draws on its years of investment experience as well as recent academic literature on the topic. This leads to the identification of relevant ESG metrics and considerations to be factored into the investment assessment process.

Zouk’s methodology is applied consistently across all investments, whilst allowing for differences across geographies/industries/business models/technologies to be taken into account and factored into the overall analysis.

05.3. Additional information. [Optional]

The team’s investments in leading growth-stage technology companies, capitalising on a compelling market opportunity for technology and sustainability identified by Zouk, with the aim of delivering attractive risk-adjusted returns to investors.

Zouk believes that technology companies are unique in their potential to deliver highly scalable sustainable benefits across a broad range of ESG metrics through the usage and/or promotion of digital efficiency mechanisms. In order to properly identify and monitor this potential in its target investments, Zouk has developed and employs a bespoke and unique methodology that draws on its years of investment experience as well as recent academic literature on the topic.

The methodology defines four efficiency mechanisms (or “impact methods”) and four factors to which these can be applied to drive sustainability. This leads to the identification of a target company’s “impact scope”, from which relevant ESG metrics are then defined and incorporated into the investment assessment and monitoring process.

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.

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

The findings of Zouk’s ESG assessment (as described in PE 05.2) are summarised in the Investment Committee discussion materials and form an integral part of the investment thesis for each of Zouk’s investments.

The assessment would typically include:

-               An analysis of ESG metrics as determined/selected pursuant to Zouk’s sustainability assessment methodology (described in PE 05.2)

-               A comparison of such metrics against competitors in the market and against industry standards

-               A summary of governance-related considerations, examples of which could include board structure, reporting and information rights/obligations, and/or specific compliance                  provisions

The Investment Committee discusses the substantive conclusions of this assessment and determines whether the proposed investment meets Zouk’s requirements for investing in businesses that inherently and meaningfully advance ESG and sustainability goals. The Committee may request further due diligence and analysis on the topic if deemed necessary.

The ESG assessment forms the basis for post-investment actions and ongoing monitoring.

PE 07. Encouraging improvements in investees (Private)

PE 08. ESG issues impact in selection process (Private)