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Ambienta SGR SpA

PRI reporting framework 2019

You are in Direct – Private Equity » Post-investment (monitoring)

Post-investment (monitoring)

PE 09. Proportion of companies monitored on their ESG performance

09.1. Indicate whether your organisation incorporates ESG issues in investment monitoring of portfolio companies.

09.2. Indicate the proportion of portfolio companies where your organisation included ESG performance in investment monitoring during the reporting year.

 (in terms of total number of portfolio companies)

09.3. Indicate ESG issues for which your organisation typically sets and monitors targets (KPIs or similar) and provide examples per issue.

ESG issues

List up to three example targets of environmental issues

Example 1

          We believe ISO certifications are a key management process upgrade (ISO50001 for energy and ISO14001 for H&S) and are often targets we set
        

Example 2 (optional)

          In a portfolio company (manufacturing) we set targets for noise and dust emissions and ask to implement new capex to monitor them
        

Example 3 (optional)

          At aggregate portfolio level ("Cross Portfolio KPIs") we monitor Total Water Consumption; Total Energy Consumption; Environmental Capex Expenditure
        

List up to three example targets of social issues

Example 1

          At aggregate portfolio level ("Cross Portfolio KPIs") we monitor "Training Expenditure per Employee" and "Job Creation". Here the target is monitor and improve across portfolio.
        

Example 2 (optional)

          Improve occupational safety; KPIs in this field are present in almost all our ESG Action Plans
        

Example 3 (optional)

          Portfolio company Safim had "achieve Occupational Health & Safety certification ISO 45001" as a target for 2018 in its ESG Action Plan (achieved).
        

List up to three example targets of governance issues

Example 1

          Implement management incentive plans in order to guarantee alignment and empowerment; in almost all our portfolio companies
        

Example 2 (optional)

          Buy out of large or potentially obstructive/hostile minorities (portfolio company Restiani in 2018; and others)
        

Example 3 (optional)

          In Calucem, Ambienta's direct governance of ESG issues is provided for in its shareholder agreements with management and minorities.
        

09.4. Additional information. [Optional]


PE 10. Proportion of portfolio companies with sustainability policy

10.1. Indicate if your organisation tracks the proportion of your portfolio companies that have an ESG/sustainability-related policy (or similar guidelines).

10.2. Indicate what percentage of your portfolio companies has an ESG/sustainability policy (or similar guidelines).

(in terms of total number of portfolio companies)

10.3. Additional information. [Optional]

We track adoption of ESG related policies and the percentage of implementation is 100% of portfolio companies.

We enforce implementation of our ESG in Action programme across all portfolio companies, this target is in the investment team members yearly performance appreisal. The first step of of the programme is for each portfolio company 's board to implement three new policies:

  1. "Business integrity"; the company formalizes its commitment to conducting its business lawfully and ethically, setting out its approach to business integrity and the prevention of unacceptable business practices, including bribery and corruption.
  2. "Environment, Health and Safety"; the company formalizes its commitment to the best standards of environmental protection, resource efficiency and also the health and safety of employees, contractors, customers and local communities. 
  3. "Employment and Labour standards"; the company formalizes its commitment to the implementation of fair labour practices, ensuring that employees at all levels are treated with respect and consideration, and safeguarding the company’s compliance with applicable laws, industry standards and known best practices. A section dedicated to gender equality has been added in 2018 as part of the latest review of our ESG In Action programme.

PE 11. Actions taken by portfolio companies to incorporate ESG issues into operations

11.1. Indicate the types of actions taken by your portfolio companies to incorporate ESG issues into operations and what proportion of your portfolio companies have implemented these actions.

Types of actions taken by portfolio companies

Implemented by percentage of portfolio companies

(in terms of total number of portfolio companies)

Implemented by percentage of portfolio companies

(in terms of total number of portfolio companies)

Implemented by percentage of portfolio companies

(in terms of total number of portfolio companies)

Implemented by percentage of portfolio companies

(in terms of total number of portfolio companies)

Implemented by percentage of portfolio companies
Implemented by percentage of portfolio companies

Implemented by percentage of portfolio companies

          All our portfolio companies must implement Follow our ESG In Action programme, which encompasses a Risk and Opportunity Materiality Analysis and an ESG  Action Plan
        

(in terms of total number of portfolio companies)

11.2. Describe how your organisation contributes to the portfolio companies’ resourcing and management of ESG issues.

Accountability and expertise is what we contribute at single portfolio company level.

Accountability: once a company is acquired, a senior company manager, usually the CEO, is appointed as ESG reference. At the same time Ambienta's leading partner in the transaction is appointed as ESG node. The ESG node, and the rest of the management team, have the duty (success is assessed at year end as part of the internal performance evaluation process) of implementing our ESG in Action programme, which is where the expertise lies.

Expertise: the ESG in Action programme, developed and formalised internally through a handbook which is available to the whole investment team,  with its five steps, defines and provides a tested roadmap for integrating, managing and reporting ESG issues.

  1. ESG due diligence by an independent specialist (pre closing) together with the Ambienta team.
  2. Adoption at company board level of 3 Goal Setting policies: "Business integrity"; "Environment, Health and Safety"; "Employment and Labour standards"; carbon footprinting and carbon strategy in place.(6 monhs from closing).
  3. Execution of a Materality Analysis for risks and opportunities.
  4. Board approval of an ESG Action Plan (1 year from closing) with actions at both preventative level (ISO certifications) and on single-issue related specific KPIs.
  5. KPI Monitoring and Reporting phase.

The first step, ESG due diligence, provides the foundation to identify, prevent and mitigate potential risks. The ESG assessment is included in the investment memorandum before the investment decision is made.

Since 2019, after acquisition we require our new portfolio companies to run a third party carbon footprint analysis develop a carbon strategy accordingly which will be considered alongside other ESG items in the ESG Action Plan preparation (step 4).

The second step is the adoption of 3 “goal setting” policies in each of the three areas of business integrity, environment, health and safety and employment and labour standards, as outlined below.

  1. Business integrity: the company formalizes its commitment to conducting its business lawfully and ethically, setting out its approach to business integrity and the prevention of unacceptable business practices, including bribery and corruption.
  2. Environment, health and safety: the company formalizes its commitment to the best standards of environmental protection, resource efficiency and also the health and safety of employees, contractors, customers and local communities.
  3. Employment and labour standards: the company formalizes its commitment to the implementation of fair labour practices, ensuring that employees at all levels are treated with respect and consideration, and safeguarding the company’s compliance with applicable laws, industry standards and known best practices. A section dedicated to gender equality has been added as part of the latest review of our ESG In Action programme.

Once formulated, the policies are approved by the portfolio company’s Board of Directors. Once approved at company board level, we seek to ensure that these policies are well understood by the wider management team.

The third step. Once the above set of goal setting policies are in place, the management team with Ambienta and other stakeholders carry out a Materiality Analysis. We evaluate all of the principal risk factors found during the pre-investment phase and discuss them with the management team in the context of the current company business, its operating practices and its wider community of stakeholders. The goal is to work with the management team to identify the main risks and opportunities areas and a path to address them. A careful review of governance, corporate citizenship, operations, suppliers, customers, management and employee relationships is carried out to identify any potential ESG issues. For each of them, wherever possible, we define a key performance indicator (KPI) that will be used by the management team to monitor and report.

The fourth step. Once specific KPIs to monitor are selected, we are ready to enter the execution phase through an ad hoc developed ESG Action Plan which needs to be approved at company board level. Implementation of the Action Plan allows us to improve the asset, to create an ESG responsible organization and a management system capable of meaningful monitoring and reporting.

The content of each portfolio company’s ESG Action Plan varies, however the purpose of each is the same – to engage management in ESG conscious practices and delegate accountability to support processes and practices in line with our framework. As Ambienta is accountable to our investors, we want management of the portfolio companies to be accountable to Ambienta and all company's stakeholders. Therefore a major part of the Action Plan is comprised of the assignment of responsibilities across the management team for the implementation of actions and the development of the monitoring process and reporting.

The ESG Action Plan typically includes both preventative and monitoring actions. Preventative actions include the implementation of best practice management systems such as quality, environment and energy management in the form of the relevant International Standard Organization (ISO) certifications. The ESG Action Plan is the roadmap that enables the company set a course of action, implement the required measures and report to the Board of Directors. At the same time this allows Ambienta to monitor and report the progress of each portfolio company.

 

 


PE 12. Type and frequency of reports received from portfolio companies

12.1. Indicate the type and frequency of reports you request and/or receive from portfolio companies covering ESG issues.

Type of reporting 

Typical reporting frequency 

Typical reporting frequency 

          Management and monitoring of ESG integration is a fixed item on the board's agenda; therefore up to monthly.
        

Typical reporting frequency 

12.2. Describe what level of reporting you require from portfolio companies, and indicate what percentage of your assets are covered by ESG reporting.[OPTIONAL]

100% of portfolio companies report on ESG

We require reporting at company's board level on the execution of the ESG Action Plan (step 4 and 5 of ESG in Action programme) The ESG Action Plan is usually developed and Board approved within 12 months from acquisition for 100% of our portfolio companies. The plan includes objectives, milestones and relevant KPIs to be monitored with frequency that go from monthly (like e.g. for H&S matter) to yearly (e.g. on environmental capex matter). Management team reports against this topic as prescribed and at board level.

In addition, we have a dedicated ESG yearly call between the ESG manager of the company and our sustainability team, facilitated by the investment team, to assess progress.

At exit, we perform a gap analysis between ESG status at exit and ESG Action Plan targets and we ask the board of the company to review and approve it.

On top of company specific KPIs and actions deriving from the implementation of ESG Action Plans, we also collect and monitor 6 addition KPIs that are the same for all our portfolio companies. These KPIs are called "Cross Portfolio KPIs". These KPIs are collecte/monitored at GP level yearly.

 

 


PE 13. Disclosure of ESG issues in pre-exit

13.1. Indicate whether during the reporting year your organisation disclosed information on ESG issues to potential buyers prior to exit for private equity investments.

13.2. Apart from disclosure, describe how your organisation considers ESG issues at exit.

We consider ESG issues at exit as we do at entry.

ESG issues in general represent both a risk and an opportunity. Under our ownership companies have addressed both and implemented actions to improve the pre-acquisition situation. In this respect our ESG in Action programme contributes to enhance company value and long term opportunities and should represent a lasting legacy on which new shareholders can build upon. In particular, ESG Action Plans always emphasise increasing the level of ISO certifications of the key management processes: best practicing. There are two reasons for this: i) it is a good preventative action that addresses the quality foundation of management processes ii) is often a legacy action that survives ownership transitions (seldom a buyer would give up an already attained certification).

During the exit process we analyse the gap between the current status and the goals which were set out at the time the ESG Action Plan (step 4 of our ESG in Action programme) was approved by the company being sold. Such gap analysis is discussed at board level, approved by the company's board and made available to the buyer.

Very often progress with ESG implementation goes hand in hand with the overall quality of the management team.

13.3. Additional information.

On top of company specific KPIs and actions deriving from the implementation of ESG Action Plans, we also collect and monitor 6 addition KPIs that are the same for all our portfolio companies. These KPIs are called "Cross Portfolio KPIs". These KPIs are collected/monitored at GP level yearly.

"Cross Portfolio KPIs" are inspired by our environmental investment strategy and ambition. "Cross Portfolio KPIs" are collected, aggregated and monitored at GP level, homogeneously across portfolio companies. They 6 "Cross Portfolio KPIs" are:

  1. Total Energy Consumption: to monitor where in our portfolio the largest energy consumption takes place;
  2. Total Water Consumption: to monitor where in our portfolio the largest water consumption takes place;
  3. Training Expenditure per Employee: to monitor the level of activity in building professional skills;
  4. Environmental Capex Expenditure: to monitor the investment on ESG relevant aspects of business as defined by the company;
  5. Percentage of Eco-Innovative Sales: as defined by the European Commission, to monitor the percentage of sold products, or services, which bear a positive environmental contribution;
  6. Job Creation: defined as the number of employees at the end of the year, to monitor the development of workforce and the number of jobs created under our ownership.

All of Ambienta’s portfolio companies are required to report these Cross Portfolio KPIs in addition to any company KPIs.This happens yearly during the call of the company's ESG Manager with our sustainability internal team, facilitated by the investment team.


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