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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.

For all new investment opportunities, an appraisal of ESG risks and opportunities will be considered by the Investment Team as part of early screening and due diligence processes. During early screening, the team will give due consideration to any specific investor exclusion criteria and restrictions. As the opportunity progresses (i.e. post Operating Committee approval), the Investment Team will typically engage a third party ESG adviser to support its assessment of material risks and opportunities.

On a case by case basis, the ESG team may be consulted by the Investment Team for advice on scoping of the work and / or to discuss particular issues that have been identified. In addition, the Bridgepoint ESG Due Diligence Scoping Guide acts as a useful reference should the teams need further guidance when appointing advisers and scoping the work.

Bridgepoint's policy requires that a summary of the key ESG risks and opportunities are included within the investment appraisal papers submitted to the Investment Advisory Committee for consideration. A dedicated senior Partner on the committee is responsible for confirming that the committee has considered ESG matters during the investment decision making process.

Given significant differences between companies operating in different sectors, we have adopted a flexible approach to ESG due diligence. Each ESG assessment will be tailored to focus on potential material issues relevant to the individual company and the sector / geography it operates in.

We do acknowledge that there are some common ESG themes across sectors and our portfolio, and Investment Teams are encouraged to ensure that these are routinely assessed and managed. For example these typically include topics such as environmental compliance, contaminated land liabilities, energy and water management, carbon emissions, waste management, flood risk, health and safety, labour standards, supply chain management, anti-bribery and corruption, anti-money laundering and cyber security.

Should the Firm proceed to make the investment, material ESG issues identified during due diligence may be addressed in the Sale & Purchase Agreements through warranties and indemnities and / or 100 day plans (or similar improvement plans) as appropriate. The Firm also includes specific forward-looking clauses on ESG in its Shareholders' Agreements with the senior management of its portfolio companies. Typical ESG considerations in Shareholders' Agreements include: ESG policies and compliance with such ESG policies, requirements to provide ESG performance information, and requirements to review ESG policies and compliance with such ESG policies on a regular basis. Other clauses that are typically covered include modern slavery and ABC requirements.


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.

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

During the due diligence process, numerous data and information sources will be used to identify and evaluate ESG issues at the company. This will include, but not limited to:

Engaging a third party ESG adviser, who will typically analyse: ESG information disclosed by the Target company; publically available information, for example a company's website, environmental and health and safety data from regulatory databases such as the UK's Environment Agency and Health and Safety Executive; and information purchased from third party ESG data providers such as Landmark Information Group and RepRisk.

As part of our internal early due diligence screening processes, we often use a number of credible ESG sources such as those published by the Sustainability Accounting Standards Board (SASB).

As previously noted, a summary of ESG risks and opportunities will be included within all Investment Advisory Committee papers. A senior Partner on the committee is responsible for confirming that ESG was taken into account during the investment decision making process. A final internal check is undertaken by the Investment Team in conjunction with the Legal team prior to making a binding commitment, confirming that various due diligence workstreams, including ESG, were considered pre-investment.


PE 07. Encouraging improvements in investees (Private)

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