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Swen Capital Partners

PRI reporting framework 2019

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

SWEN CP undertakes, in its investments, to be a responsible player in the long-term financing of the economy by including environmental, social and governance (ESG) criteria in its investment analysis and monitoring processes. This approach is based on the belief that companies and infrastructure assets that integrate ESG issues into their strategy, offer better long-term prospects and will be among the leaders in their sector tomorrow, therefore outperforming in the long term. In general, the consideration of ESG criteria in the evaluation of management companies as holdings, meets four objectives: 

  • to have an overview of performance and improve our decision support tools for investment;
  • to anticipate and prevent extra-financial risks and their financial impact in order to preserve value;
  • to identify our exposure to current and emerging ESG issues to seize opportunities and create long-term value;
  • to report to our investor clients and respond to their expectations and commitments with transparency and completeness.

Moreover, for each institutional fund launched by SWEN CP since 2017, a specific amount is allocated to sustainable investments. These sustainable investments have a positive social and/or environmental impacts.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

01.6. Additional information [Optional].

          
        
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SG 01 CC. Climate risk

01.6 CC. Indicate the climate-related risks and opportunities that have been identified and factored into the investment strategies and products, within the organisation's investment time horizon.

First SWEN Capital Partners is a long term investor as we hold our assets on average between 4 to 15 years. Aware that failure to take account of environmental issues may adversely affect long-term financial performance, SWEN CP aims to respond to the challenges of the Energy and Environmental Transition by identifying potential devalued assets and other related opportunities. 

The asset classes in which SWEN CP invests in are exposed to climate and transition risks to varying degrees. Some underlying companies, like infrastructure assets, are likely to contribute to climate change while others can bring concrete solutions. This is particularly the case in infrastructure, where the financing of new cleaner energy and transport facilities is a major lever for contributing to the energy transition.

In order to demonstrate its commitment to climate change in particular, SWEN CP has supported several initiatives as iC20 (Initiative Climat 2020) and the TCFD.

Before setting objectives for its climate strategy, SWEN CP decided to conduct a clear diagnosis of its funds exposed to climate risks (both physical and/or transitional). It undertook the task of creating a climate risk map with the help of several consultants. Faced with various difficulties in the first years, SWEN CP decided to concentrate its efforts mainly on measuring the carbon footprint for various reasons (linked to transition risks and also Carbon footprint is emerging at all levels of the economy as a standard of communication between companies and their funder). 

The results of this mapping make it possible to identify and understand main risk areas and SWEN CP’s attainable goals using performance indicators (carbon intensity, carbon emissions financed, and for infrastructure assets carbon intensity avoided by comparing the performance of the portfolio assets against a baseline reference point).

As a result of this diagnosis, SWEN CP can communicate to its institutional investors and put in place a dialogue/ raise awareness to managers of their funds in their portfolio that contribute the largest carbon footprint. The aim is to raise awareness of these issues, to promote best practices in this field, and to encourage the actors concerned to implement action plans (in line with the TCFD's recommendations). Following this diagnostic, SWEN CP decided to set up a Climate Strategy in 2017 in order to factor into its investment strategies climate risks and opportunities. SWEN CP committed on several points :

  • Each new fund managed by SWEN CP will allocate a fraction of its resources to "green" assets, i.e. specialized investments in the financing of solutions for the ecological transition
  • For each investment in funds, asset management companies will be required to plan a meeting with SWEN CP's ESG team in the 18 months following SWEN’s investment 
  • The list of exclusions has been extended to the following sectors: Coal-powered plants; coal mines for thermal purposes. For diversified assets (Electricity generating stations, heat networks and conglomarate), thresholds have been put in place (% of coal in the total mix, electricity or heat emission factor, turnover).

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

01.8 CC. Indicate the associated timescales linked to these risks and opportunities.

SWEN CP is a long term investor (see previous question) and can hold its assets for more than 10 years so it’s critical to include this climate change analyses in all its assets due diligences because all the assets will be impacted. The aim is to have an impact on their business strategy in order to make the right decisions quickly, to maximize their value and be a part of this “global business transformation” in order to be among the leaders tomorrow.

At the level of its investment activity : SWEN CP takes opportunities into consideration that foster the financing of new solutions right now because it will take time to develop a business and to gain market share. Regarding the risks, we are strongly convinced that we can avoid mistakes and underperforming assets (the stranded assets) by factoring it in our investment decisions and in our investment monitoring.

At the level of our own management company : we are convinced that we will strengthen our business growth, our brand and our ability to attract great people in our team thanks to our strong commitments and actions to contribute to a low carbon world. It’s key for SWEN CP, it’s our conviction and we can contribute to a more sustainable world for everyone factoring all these ESG issues in our own business management and governance.

01.9 CC. Indicate whether the organisation publicly supports the TCFD?

01.10 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.

Describe

Climate risks are included throughout the ESG risks analysis for each investment opportunity, especially since the implementation of SWEN CP's Climate Strategy. The main risks that could be identified are of two kinds: physical and transitional risks.
As the assets in the portfolio are inherently illiquid, the reduction of climate risks can take two complementary forms: selection of GPs which have themselves committed to reduce their exposition to climate risks, and selection of funds or assets in line with energy transition objectives. SWEN CP takes also into account in its due diligence process the ability of the asset management team to analyze climate risks of a new asset, to encourage underlying assets to improve their environmental performance and to provide a clear reporting to investors for on climate issues (carbon footprint). Moreover, SWEN Capital Partners is supported in the implementation of its Climate Strategy by an independent climate expert. The latter is solicited on an ad-hoc basis, depending on the materiality level of climate-related risks and opportunities of any given investment opportunity, to provide SWEN CP with specific highlights.

1.12 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.


SG 02. Publicly available RI policy or guidance documents

New selection options have been added to this indicator. Please review your prefilled responses carefully.

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

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02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

URL/Attachment

02.3. Additional information [Optional].


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

SWEN CP has formalised a specific policy regarding the prevention and management of potential conflicts of interest, in compliance with applicable laws. This policy has been set up by the Compliance and Internal Control Officer. The latter is responsible for overseeing its implementation and the respect of the rules and procedures enacted in it.

Regarding conflicts of interest prevention, employees are committed to comply with SWEN CP’s code of ethics and are subject to compliance rules regarding transparency (personal transactions, gifts received, etc.). SWEN CP’s code of ethics refers directly to the ethical guidelines of professional associations (France Invest, AFG, Invest Europe). Moreover, before any new investment, each member of the investment team is required to fill in a questionnaire assessing potential conflicts of interest. 

Each co-investment must be in compliance with SWEN CP's co-investment Charter. The latter rules the distribution of invesment among the different investment vehicles (with overlaping investment strategies) managed by SWEN CP. The co-investment Charter is frequently reviewed.

SWEN CP has established a risk mapping in order to identify potential conflicts of interest situations. It is reviewed annually.

Finally, SWEN CP's policy sets the applicable rules for managing conflicts of interest that could'nt have been avoided.

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within portfolio companies.

04.2. Describe your process on managing incidents

Since 2016, SWEN CP defined and rolled out a monitoring process of ESG incidents. This process formalizes, consolidates and deepens existing practices. It has been set up in a way that covers each step of investment (due diligence, monitoring, reporting), each investment strategy (co-investment, primary and secondary activities) and for a majority of the asset under management (selected according to the level of materiality). The monitoring of ESG incidents is conducted by the SWEN CP’s ESG team with the support of classic monitoring tools (Google Alerts, press review, etc.) and using a database to assess the risk exposure of individuals as well as organisations (Worldcheck). It also benefits from the expertise and resources of OFI AM’ SRI Team which follows-up, on behalf of SWEN CP, a specific listing of underlying assets. Moreover, during the pre-investment process (due diligence), an ESG background checking is also carried out to identify any incident affecting the asset managers (or lead GP), the underlying portfolio assets invested by the target fund (or the co-investment) and their key executives. SWEN CP has also defined a specific pool of portfolio companies (based on their weighting in portfolios) to perform an ongoing monitoring (daily check). Depending on the level of severity of each incident, procedures have been set up. They range from emails to our investment team to meetings with investment managers (lead investor side) to better understand the causes of the incident, how it has been managed and the measures implemented to prevent a new occurrence. In the case of a particularly incident that could impact their reputation, SWEN CP’s clients will be warned as soon as possible. Thus, the monitoring of ESG incidents is an efficient mean to engage a dialogue with our General Partners on ESG topics and a good way to keep them up to date about the recent improvements of our Responsible Investment policy. Finally, we report quarterly to our clients on ESG incidents. These reporting are made, since 2017, for every fund of funds managed by SWEN CP and send to our clients. They highlight ESG incidents with different levels of severity in order to provide our clients with context and explanations from a public source (mostly press articles) and from the relevant General Partners which have an access to the management the concerned company. Finally, it is also noteworthy that management of incidents are also specified in side letter agreements signed between SWEN CP and its fund managers. Thus, the investment manager must immediately report to SWEN CP any ESG-related incident (in relation with the ten principles of the United Nations' Global Compact and the fundamental Conventions of the International Labour Organisation).


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