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Swedfund International AB

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.

Please see section OO 11.4 about Swedfunds mission and Business model based on the three pillars: Social impact, Sustainability, Financial viability 

Please see section SG 01 about international norms applied to all Swedfund's investments, including private equity. 

Please see section SG 05-06  about RI objectives, progress and Swedfund's Strategic Sustainability Goals.

Please see section SG 07.2 about Swedfund's investment process, the use of ESG audits and ESG action plans

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.

          Company Policies, Integrity Checks are examples of further assessments and  information we require
        

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

We send out an ESG DD Questionnaire to all our potential investments, where Swedfund is a lead investor. Among core information is to understand the fund managers’ attitude towards sustainable business and how they have integrated ESG considerations into their investment process. The questionnaire will be completed with site visit and external evaluations, where applicable, and finally the findings and draft action plans from ESG due diligence are documented in ESG PM and screening document that are presented to Investment Committee. The findings are summarised to a Board presentation.  


PE 07. Encouraging improvements in investees

07.1. During deal structuring,what is the process for integrating ESG-related considerations into the deal documentation and/or the post-investment action plan?.

If yes

07.2. Describe the nature of these improvements and provide examples (if any) from the reporting year

Compliance with ILO Core Conventions and Basic Terms and Conditions of Employment, implementation of Environmental Management and/or Social Management Systems as well as implementation of an Anti-Corruption Management System. All investment are assessed based on above mentioned criteria and any gaps identified are included in an ESG Action Plan that will be included in the contract. For more detailed information please refer to:

  • OO 11.4 about Swedfunds mission and investment modell standing on three pillars.
  • SG 01 about international norms applicable to all Swedfund's investments, including private equity.
  • SG 05-06 about RI objectives and progress and Swedfund's Strategic Sustainability Goals.
  • SG 07.2 about Swedfund's investment process, the use of ESG audits and action plans

One person in the portfolio company's management shall have the ultimate responsibility for Sustainable Business Development. Competence to manage environmental and social issues as well as an Anti-Corruption policy should be implemented and maintained through continuous education for relevant staff.

During the reporting year, we have for example asked a fund manager to conduct a gender assessment and create a plan that would aim to improve the gender balance at the fund manager and in the portfolio.

07.3. Additional information. [OPTIONAL]

DECENT WORK

  • Through investment in the private sector - where the majority of all jobs in our markets are generated - we help create more jobs.
  • During our Due Diligence, we look at whether the company complies with the ILO's core conventions and the ILO's basic terms and conditions of employment. If deficiencies are identified, these are addressed through an ESGAP (Environmental Social Governance Action Plan), with a set target date for rectifying the situation. ESGAP forms a part of the investment agreement with the portfolio companies.
  • By developing financially sustainable businesses, we create the conditions for continued and additional employment in companies that survive and progress.
  • We measure ​the number of jobs in our portfolio companies, and one of our objectives is that they shall increase over time.

GENDER EQUALITY

  • Swedfund invests in companies that have employing women as an explicit goal.
  • We invest in banks, which focus on lending to women.
  • In our Due Diligence when evaluating an investment, we analyse the company's approach to equality and non-discrimination, such as the availability of parental leave and equal pay for equal work. We start from the ILO's core conventions and the ILO's basic terms and conditions of employment.
  • Through Women4Growth, a talent development programme for women employed in our portfolio companies, we make targeted interventions to strengthen them in a professional role and to further develop them to achieve leading positions.
  • We set requirements and constantly measure key ratios linked to compliance with the ILO's core conventions and the ILO's basic terms and conditions of employment..and genderequality in the form of proportion of female employees, female in leading positions and on the Board of Directors

This way we highlight women in our data. We know that what is measured is visible - and highlighting facts is the start of change!

THE ENVIRONMENT & CLIMATE

  • In our Due Diligence in preparation for an investment, we analyse the company's resource utilisation and impact on the environment.
  • We work actively to minimise resource use and negative environmental impact. We place requirements on the implementation of environmental and social management systems within three years from the date of the investment.
  • Swedfund focuses in its investment in the production of renewable energy.
  • DFIs fulfil an important role as sources of finance in the early stages of high-risk energy projects. In this, we act as catalysts and accelerate private investment within the renewable energy sector in Africa.
  • We set requirements on and measure the degree of implementation of environmental and social management systems in our portfolio.
  • We measure GWh of renewable electricity generated and monitor energy and water consumption of our direct investments.

TAX

  • Tax forms part of Swedfund's Due Diligence. This means that, in preparation for an investment, we review the project and its structure from a tax perspective. Swedfund will not, for example, invest in corporate structures which lead to unjustified profit transfers from the operating country to another country, leading to an unbalanced tax situation. We also require that our portfolio companies submit reports on their tax situation. In the course of its normal activities, Swedfund will encourage its portfolio companies to act responsibly on taxation matters.
  • Swedfund reports the taxes reported by portfolio companies in its annual report, and aims to record information on the amount of tax paid by the companies, using a harmonised definition.
  • We also report the amount of tax which our portfolio companies declare in their annual reports in an aggregate country- by-country report.
  • The Chief legal Counsel and Investment Managers are responsible for tax issues in portfolio companies.

HUMAN RIGHTS

  • Swedfund's responsibility to respect human rights has been long enshrined in the guidelines and duties that guide us. These include Sweden's national action plan for business and human rights, the state's owners' policy, the UN's Global Compact and the OECD's guidelines. In 2014, we began the implementation of the UN Guiding Principles on Business and Human Rights.
  • Human rights are an integral part of the Due Diligence which covers all our new investments

ANTI-CORRUPTION

  • Swedfund aims for zero tolerance to all forms of corruption. There is a high prevalence of corruption in Swedfund's markets. In the event of a serious case of corruption, Swedfund ultimately has the right to withdraw from the investment.
  • In every Due Diligence carried out on all new investments, corruption risks are analysed, as is the company's approach to combating corruption. For each direct investment, an ESG Action Plan is drawn up, with measures to ensure that the companies comply with Swedfund's Sustainability policy and Anti-corruption policy.
  • To make things easier for the portfolio companies, Swedfund has produced a template for an anti-corruption policy, which portfolio companies are welcome to use.
  • Education and skills development on anti-corruption issues, internally and in portfolio companies, are another important component of Swedfund's anti-corruption work.
  • Swedfund requires that portfolio companies implement a management system in respect of anti-corruption issues. This is one of Swedfund's strategic sustainability goals.

PE 08. ESG issues impact in selection process

08.1. Indicate how ESG issues impacted your private equity investment selection processes during the reporting year.

08.2. Indicate how ESG issues impacted your private equity investment deals during the reporting year.

          Influence through agreement of common ESG terms and references together with co-investors for the fund manager
        

08.3. Additional information. [OPTIONAL]

ESG issues always impact the terms of our agreements through our requirements for our portfolio compnies/investments to fullfill our Strategic Sustaibaility Targets. Please see SG 05-06.


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