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Nexxus

PRI reporting framework 2020

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Outputs and outcomes

PE 14. ESG issues affected financial/ESG performance (Private)


PE 15. Examples of ESG issues that affected your PE investments

15.1. Provide examples of ESG issues that you identified in your potential and/or existing private equity investments during the reporting year.

Investment Stage
ESG issues

ESG issues

          Lack of a professionalized and centralized HR function in a company with complex HR administration with hundreds of temporary contracts.
        
          Poor corporate governance structure relative to the complexity of the business. Lack of board of directors and excessive concentration of roles in two key persons.
        
Sector(s)
          Advertising production
        
Impact (or potential impact) on the investment
  • The HR administration is decentralized in each project generating administrative errors sometimes that may lead to potential administrative fines and may affect the continuity of a project. A number of the temporary workers had signed consecutive contracts which arises concerns regarding its potential reclassification as permanent contratacts with a compensation.The absence of a Human Resources department causes these risks to be inadequately managed.
  • The excessive concentration of roles in two key persons is a threat to business continuity. 
  • The lack of a board of directors is contrary to corporate governance best practices and entails risks of lack of control and mismanagement practices (arbitrary remuneration, conflicts of interest, etc.)
Activities undertaken to influence the investment and its response

The 180-days plan includes specific social and corporate governance measures addressed to manage the abovementioned risks:

  • Creation of a centralized HR department that will control and manage the hiring process.
  • Creation of a diverse board of directors with independent mebers.
  • Implement talent retention mechanism to ensure the retention of the key persons and underwrite a key person policy to cover the risk of death of key people in the business. Both actions are aimed to ensure business continuity.
Investment Stage
ESG issues

ESG issues

          Company focused on distribution, logistics and ground transportation industry in Mexico with more than 8,000 units.
        
          Company focused on transportation, it acknowledges that Mexico is an emerging market with several social issues that must be addressed by the private sector.
        
Sector(s)
          Transportation and logistics.
        
Impact (or potential impact) on investment
  • Given the sector in which the company is focused and the number of units it operates, the carbon footprint, noise and other environmental effects are significantly higher compared to other industries.
  • In addition, each division of the company (freight, integrated logistics, warehousing services, and personnel and student transportation) has different environmental impacts, hence, the company has to develop various programs to counter the environmental impact and address social issues in Mexico.   
Activities undertaken to influence the investment and its response

The company has developed 4 programs to counter its environmental impact and address social issues in Mexico:

1. Resting Better: Reducing Environmental Impact Program

When the truck operators are resting in the resting areas, the company promotes fuel savings and reduce its emissions by replacing the use of motor vehicles´ AC with external electrical AC equipment. The energy source of some stations comes from solar panels which contributes to a cleaner program. 

2. Environmental and Natural Resources Ministry´s (SEMARNAT for its Spanish acronym) Certification as “Clean Transport”

  • Constant renewal of its fleet; and
  • Cargo division has implemented new technologies to reduce the fuel consumption and the CO2 emissions, particulate matter (PM) and nitrogen oxides (N0x).

3. Making Mexico Greener Program (Environmental and Sustainability Project)

The company built a tree-nursery with a capacity of 100,000 trees, providing training on the management of the nursery, and raising awareness among children and their families on issues of good agricultural and environmental conservation practices.

4. DHBus: On Route for the Education in Low-Income Communities

A professional team of experienced educators educate children, teenagers and adults from low-income families on human rights, finance and sustainability in a mobile classroom. 

15.2. Describe how you define and evaluate the materiality of ESG factors.

Risks that may have a material impact on the long term value of the business or material reputational damage.


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