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.
- ESG due diligence by an independent specialist (pre closing) together with the Ambienta team.
- 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).
- Execution of a Materality Analysis for risks and opportunities.
- 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.
- 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.
- 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.
- 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.
- 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.