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Foresight Group LLP

PRI reporting framework 2020

Export Public Responses

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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.

Foresight has adopted a regional strategy focusing on a structural gap in private equity funding of UK SMEs with an investment focus under £5m. It does this through a number of different funds including those with institutional investors, Venture Capital Trusts ("VCTs") and EIS schemes. It therefore has to address the demands of both institutional and retail investors whilst also balancing the different mandates of the funds themselves.

Foresight's regional, small cap investment approach has been developed through the Foresight Nottingham Fund LP, the Foresight Regional Investment LP, MEIF ESEM Equity LP, Foresight Scottish Growth Scheme and Foresight East of England Fund, and complements Foresight's long and substantial track record of investing through VCTs. With this approach, the Funds seek to deliver commercial returns to investors alongside socio-economic benefits.

With the exception of investments made by MEIF ESEM Equity LP, all new investments made by Foresight are subject to ESG due diligence before investment and are then assessed annually thereafter. The investments within the MEIF portfolio are subject to various ERDF non-financial targets as monitored by the British Business Bank, the single investor in the fund. These targets include job creation, non-financial advice and the introduction of new goods to the market, particularly those that contribute to a low carbon economy.

Given the nature of the companies in which Foresight invests, it takes into account the relative scale of operations of the investee company. In many cases there are limited governance and reporting structures and, post-investment, Foresight works with the management team to improve these to meet with Foresight's ESG requirements.

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.

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

ESG assessments are undertaken during due diligence on any new investment and are the responsibility of the relevant deal team, who are held accountable by the Investment Committee (“IC”).  Each initial investment submission to the IC includes a summary of the ESG due diligence conducted with a description of any risks and opportunities identified. To aid completion of the assessment, each investment team executive has an ESG due diligence questionnaire covering a range of topics across the five guiding principles.  The IC in turn reports to the Executive Committee, consisting of the Group Chairman, Chief Investment Officer, Group Finance Director, Head of Infrastructure and Head of Private Equity.

For each material risk identified during due diligence, a mitigation plan is proposed in the Investment Submission and these actions form part of the portfolio company’s “100-day” plan post-investment.

The SDG assessment is carried out in tandem and recorded prior to investment, forming part of the monitoring of new investee companies.

PE 07. Encouraging improvements in investees (Private)

PE 08. ESG issues impact in selection process (Private)