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Nordic Capital

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

Nordic Capital is committed to investing responsibly, with a firm belief that responsible business practice is essential for achieving long-term success and value creation. With a clear commitment to making a positive contribution to society by helping to build strong companies, we drive sustainable development and awareness within our own organisation as well as in the portfolio companies.

Nordic Capital's ambition is to help our portfolio companies become successful, sustainable businesses. We seek to do this in a responsible way, with a clear understanding of the environmental and social impacts. As a result, sustainability factors are fully integrated into all stages of our investment and ownership processes from evaluation through to exit. Nordic Capital investment professionals are well placed to address sustainability risks and opportunities with the support of a dedicated in-house Sustainability Team and external advisors.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

Nordic Capital is a signatory of the United Nations Principles of Responsible Investments (PRI) and we are committed to integrate sustainability factors into our investment process. Our responsible investment policy takes into consideration the Ten Principles of the United Nations Global Compact (UNGC) and recognises the Sustainable Development Goals as a guideline in our investment process. We encourage our portfolio companies to consider UNGC's 10 principles together with the Sustainable Development Goals (SDGs) when developing their sustainability strategies.

In its role as a responsible owner, Nordic Capital makes the following commitments to its stakeholders:

  • We are committed to comply with applicable laws in the jurisdictions in which we operate.
  • We integrate sustainability considerations into our investment process.
  • We encourage our portfolio companies to strive for long-term continuous improvement on sustainability matters and expect them to comply with applicable laws.
  • We integrate and promote transparency on sustainability matters in our communication to our investors and other stakeholders.

Nordic Capital is a member of Invest Europe and the local Venture Capital Associations where Nordic Capital is present. We follow the professional standards set by those associations. We seek to disclose information in line with the guidance on responsible investment provided by Invest Europe.

It is General Partners of the Nordic Capital vehicles that have the overall responsibility on our Responsible investment policy and its implementation. The policy is reviewed on an annual basis and updated if deemed necessary.

01.6. Additional information [Optional].

          
        

SG 01 CC. Climate risk

01.6 CC. Indicate whether your organisation has identified transition and physical climate-related risks and opportunities and factored this into the investment strategies and products, within the organisation’s investment time horizon.

Describe the identified transition and physical climate-related risks and opportunities and how they have been factored into the investment strategies/products.

We believe the fundamental impact of climate change has the direct impact on global economy. The transition into tackling these climate related risks and opportunities has since 2014, added a new dimension into our way of working and do business. Physical risks due to climate change as well as other macro trends are taken into consideration when screening new businesses and markets.  Nordic Capital assess environmental factors and their impact as part of the investment process. Risks and opportunities considered and assessed are for example such as; dependency on natural resources, transports and logistics, heavy energy usage, chemical substances, water use and waste handling as well as identified future risks and opportunities such as the development of environmentally friendly technologies, transformation to renewables and efficiency in logistics and operational processes.

Nordic Capital believes that a company aware of its own environmental impact as well as understanding how the environment impacts their business is better able to manage associated risks and is more likely to have a long-term sustainable business model in place. We have clear requirements in our ESG integration and follow up on portfolio company level as well as in Nordic Capital’s own sustainability agenda. The global climate is changing in ways that affect our planning and day to day operations of businesses in our companies. We expect our portfolio companies to support a precautionary approach and encourage companies to ensure energy efficiency, lower greenhouse gas emissions, use water responsibly, reduce waste and chemicals, and choose sustainable materials when sourcing. We encourage our portfolio companies to disclose information on climate change mitigation and/or adaption as well as providing climate related financial risk disclosures.

Nordic Capital is a long-term investor, with an average holding period for realised buyout investments of average 5.4 years. The portfolio companies of the Nordic Capital vehicles are not being considered as high-carbon-intense businesses directly involved in such as the extraction of oil and gas, shipping and raw material industries. However, the transition risk of going into a low-carbon and climate resilient future is challenging every portfolio company indirectly and in different ways. Risks and opportunities depend on geographies, sectors, policy change, shifts in market preferences and norms, technology, time horizons and government and business commitments in limiting global temperatures to rise.

In our mission to deliver superior returns to our investors, Nordic Capital understands that these risks must unceasingly be evaluated and mitigated, and transition opportunities must be captured and capitalised upon on. We believe resource efficiency, capturing new markets and supporting the development of new technologies, products and services is not only crucial developing businesses, but also for the survival of portfolio companies.

Additionally, Nordic Capital is continuously evaluating possible impacts of change in national and international climate policies, directives and regulations.

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

Describe the associated timescales linked to these risks and opportunities.

From a Responsible Investor perspective, portfolio companies' attention to environmental factors is as relevant as their financial performance. When assessing risks and opportunities related to all environmental, social and Governance (ESG) factors, there is no specific timescale mentioned. We believe in building strong, sustainable businesses that consistently generate returns for our investors. It is of highest importance that sustainable values are well managed and developed throughout our investment process as well as after companies have proceeded.

We have strong current and future impact by proactively and selectively sourcing investment opportunities with the potential for substantive value creation and where sustainability is an important key area in this. During the ownership period, we ensure to accelerate potentials from a sustainability perspective and support positive transformative change at the company level. It is crucial that sustainable value is continuously well-managed, also after an exit, for a company’s continued potential and growth.

01.8 CC. Indicate whether the organisation publicly supports the TCFD?

Explain the rationale

Nordic Capital has not yet publicly committed to support the TCFD. We understand integrating climate risk into the broader risk management framework requires guidelines to understand and measure potential exposures to climate change. In 2019, we updated one of our three ESG trainings (aimed at portfolio company management teams and board members) with an additional section to inform about TCFD, its relationship to the NFR directive and practical recommendations on integration of the TCFD recommendations. The training also includes disclosure of climate data.

We are also taking the TCFD's recommendations into consideration when developing our policy in 2020. In response to the TCFD recommendations, we need to develop Climate scenario analysis serves as a "what-if" analysis and is a useful tool to quantify the potential exposures of an institution to transition and physical risks.

01.9 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.

Describe

Screening of potential investments always consists of three measures; financial, legal and sustainable measures. Sustainable measures include climate related risks and opportunities, as well as social aspects and corporate governance and ethics. 

In addition to our Responsible Investment policy, Nordic Capital has a clear ambition to both reduce its own environmental footprint and continuously encourage our portfolio companies to do the same. Understanding of a company’s greenhouse gas emissions at an early state, not only result in a thorough ESG risk and opportunities assessment, it enables us to plan for further actions to reduce negative climate impact and as part of the full value creation plan.

We expect our portfolio companies to take a precautionary approach and encourage companies to ensure energy efficiency, lower greenhouse gas emissions, use water responsibly, reduce waste and chemicals, and choose sustainable materials when sourcing.

We have increased the focus on climate related data and in 2019, we started to measure and disclose our own carbon footprint (Scope1-3) as well as assessing the climate impact of our portfolio companies (scope 1-2). We are currently conducting the climate report in accordance with the GHG protocol and it will be published in March 2020.

1.10 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.

specify

          We are currently conducting a climate report showing NC carbon footprint (Scope1-3) and Port Co (scope1-2) in accordance with the GHG protocol.
        

SG 02. Publicly available RI policy or guidance documents

 

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

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02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

02.3. Additional information [Optional].

We are committed to investing responsibly and has a firm belief that responsible business practice is essential for achieving long-term success and value creation. Nordic Capital has a well-established Responsible Investment Policy and supporting organisational framework to ensure high environmental, social and governance standards from sourcing to exit. Sustainability factors, including Nordic Capital’s Responsible Investment Policy are integrated into the investment decision process. The investment process is built on a high focus and understanding of impact issues within Nordic Capital’s Responsible Investment framework. 

When establishing its Responsible Investment Policy and supporting framework, Nordic Capital took the values and principles of key stakeholders and investors into consideration. The Firm’s policy is revised and updated on an annual basis, as Nordic Capital aims to remain at the forefront of best practice. Our responsible investment policy is publicly disclosed on our website.


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

Nordic Capital has a comprehensive Business Risk Assessment which is regularly reviewed with an intrinsically linked Compliance Monitoring Programme. The types of risks assessed range from IT-related risks, such as cyber-attacks or data loss, to operational errors and regulatory non-compliance, such as money laundering and conflicts of interest. Our decision-making is based on what is best for our investors and for the organisation, and not on personal gains or obtaining improper advantages for friends or family members. We take appropriate steps to identify and prevent or otherwise manage situations that may compromise our professional performance including the disclosure of pertinent conflicts of interest.

Nordic Capital engages with its portfolio companies to encourage strong corporate governance. We involve portfolio companies in a centralised programme, which covers key corporate compliance areas such as anti-corruption, competition, cybersecurity, data protection, and trade sanctions. The programme includes training, risk-assessments, a policy package, and implementation plans and support. Nordic Capital expects its portfolio companies, as well as their suppliers and business partners, to conduct business in an ethical manner at all times - working against corruption in all of its forms, promoting a culture of good governance, and seeking necessary and positive engagement with key stakeholders.

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within investee entities.

04.2. Describe your process on managing incidents

Nordic Capital's credibility and long-term success requires that its actions reflect its values and ethical guidelines. We encourage an open culture of trust and transparency within our business and portfolio companies and to ensure well-established whistleblowing systems as well as grievance mechanisms and reporting systems. To support our portfolio companies, we recommend selected external suppliers that can provide fast and secure implementation of whistleblowing systems.

Nordic Capital staff are made aware that any concerns should be raised with their line manager or via the established whistleblowing system should they prefer. We work with our portfolio to seek to achieve the same level of open channels of communication. In addition, we are continuously developing our sustainability evaluation methods in order to enhance the accuracy and transparency of reporting to investors in the Nordic Capital vehicles and other important stakeholders.


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