Zouk has identified six key points at which ESG considerations are critical. This helps us to apply a holistic approach to ESG throughout the investment cycle.
Below is an illustration of how Zouk considers ESG through the investment cycle:
Initial screening: Zouk applies ESG considerations from its initial screening of investment opportunities. Whilst performing an initial assessment of any company, platform or project, Zouk will immediately decline any investment that does not pass through the Ethical Investment Exclusions Policy.
Due Diligence: During due diligence, Zouk further consider the value proposition and risk assessment of the ESG evaluation. At this point, Zouk conduct a Sustainable Impact Assessment and an ESG Risk Assessment. This serves two main purposes:
1. Confirms the sustainable impact potential of a Company or Project determining 1) adherence to Zouk’s investment thesis and 2) scope and scalability of the value creation across ESG considerations
2. Helps to identify the potential ESG-related risks associated with an investment and conclude if there is an appropriate mitigation / need for an action plan
Investment Decision: If the deal is brought to the Investment Committee, the deal team will present the assessment and findings from the ESG due diligence as part of the discussion. These considerations form a key part of the final investment decision.
The Sustainable Impact Assessment findings indicate what the ESG merits of the investment are, in particular highlighting how these might extend the value proposition of an investment beyond financial considerations.
The ESG Risk Assessment findings identify to the Investment Committee any relevant and material ESG-related risks and propose mitigations for these and / or the need and suggestions for an action plan.
Investment Agreement: Following the investment decision, the deal team will take into account all due diligence findings and recommendations from the Investment Committee in order to finalise the documentation for the transaction. Where appropriate, the documentation will integrate a section on ESG in order to formalise a policy.
Such an ESG “Action Plan” may govern the ESG measures that need to be put into place and the timeframe the Company will have to implement these.
Monitoring: Following investment, ESG remains a key focus throughout Zouk’s ownership. Zouk seek to monitor all the key impact criteria that were identified through due diligence and documentation. It is often the case that the ESG performance criteria are closely correlated with some of the key performance indicators (“KPIs”) for a business.