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Investisseurs & Partenaires

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.

At the initial screening of a potential investment opportunity the investment team assesses whether the investment proposition is in line with I&P’s key ESG requirements:

- The prospective investment (the main company, and, when applicable, its subsidiaries) shall not operate (or plan to operate) in sectors being in breach of the investment vehicle’s Exclusion list (included in each investment vehicles ESG tool and legal documentation).

- Challenging governance and business integrity issues should be highlighted at this stage, as they may be considered as “red flags” or may require additional scrutiny during the due diligence.

The investment team prepares a preliminary ESG risk categorization based on the Classification Tables.

As creating effective and sustainable impacts is a key feature of I&P investment thesis, the expected impact of the investment project on its main stakeholders is also assessed with an Impact Screening Scorecard (included in each investment vehicle ESG tool). The scorecard consists in a questionnaire structured around the core areas of the investment vehicle impact investing thesis.

Among other information about the investment opportunity, the initial screening memorandum will include a summary of the ESG preliminary analysis (included in each investment vehicle ESG tool), with the following elements:

·         Preliminary ESG Risk Categorization and mention of applicable IFC Environmental, Health, and Safety Guidelines (if any).

·         Short description of the project key ESG risks, opportunities and impacts

·         Description of external ESG due diligence considered when applicable.

This ESG preliminary analysis is complemented by the commented results of the impact screening scorecard.

The initial screening committee, including a member assigned with general ESG & Impact oversight function: 

·         reviews the ESG risk rating and the impact performance;

·         advises the investment team member about the due diligence process and the key-points to address as far as ESG and impact are concerned; 

·         confirms or raises the need for external expertise.

As far as ESG & impact are concerned, the initial screening committee can decide not to proceed with a project:

·         if some significant ESG risks cannot be reasonably managed by the company;

·         if the investment project is not in line with the investment vehicle main impact goals, as reflected by the Impact Screening Scorecard;

·         if the company mission and/or its entrepreneur(s) are not fully aligned with I&P impact mission and core values.

Minutes of the committee meeting shall include a summary of the key ESG and impact issues raised. Additional guidance can be provided by the ESG & impact coordinator in an ad hoc meeting or email

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.

Investment Committees generally comprise independent members, as well as representatives from I&P team and, for some investment vehicles, from the Investors. They generally include a member assigned with general ESG & Impact oversight function.

 The investment team shall address key ESG & Impact matters in the investment memorandum, both in dedicated sections and general ones. These key elements include:

Outcome from the Impact Screening Scorecard and analysis of the expected impact;
ESG Risk and Management ratings;
Description of key ESG risks & opportunities and their current management, as well as actions considered to improve ESG performance in a dedicated section;
Outcomes of external ESG expertise (if any);
Where necessary, Remediation Actions considered to address non-compliance issues with appropriate timeframe for implementation and, when applicable, related commitments to be included in legal documentation (such as conditions precedent to disbursement or specific put options).

The Investment Committee member assigned with ESG & Impact oversight function ensures that ESG & Impact matters are part of the investment committee’s discussion and are considered for the final decision. In some cases, the investment committee might ask for additional ESG related preconditions or commitments from the target company.

PE 07. Encouraging improvements in investees (Private)

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