Asset selection and origination
Screening of ESG risks and opportunities begins during deal origination and continues through the pre-investment process.
Due diligence and deal execution
During pre-investment, ESG forms part of the due diligence carried out by investment teams. This involves considering ESG risks and opportunities, for example relating to regulatory compliance, potential liabilities reputational risks and sustainability macro trends.
Investment teams assess ESG risk (assigning ratings of red, yellow or green) according to a company’s sector of activity, its current ESG status and management capability. Investment teams discuss risk ratings with the Head of ESG to ensure that risk criteria are assessed consistently. If an investment proceeds past the Preliminary Investment Review (PIR) stage, the investment team will undertake work to further understand ESG risks and opportunities, such as revenue upside or cost reduction potential.
Depending on the nature of the investment, external consultants may also be employed to assist in ESG due diligence and understanding of ESG risks and opportunities.
Permira also uses RepRisk, a business intelligence tool which tracks ESG and business conduct risks, to support pre-investment checks on prospective investments. RepRisk is also used during the life of the investment to support ongoing portfolio company monitoring.
Investment teams are required to include a summary of ESG issues in their investment recommendations presented to the IC, typically at Updated Investment Review (UIR) stage. Where appropriate, the IC is also attended by the Head of ESG. ESG considerations vary by sector (e.g. material issues relevant for the Industrials sector are likely to be different to those for the Technology sector), and therefore the level of documentation also varies between deals.
The IC makes recommendations to the General Partner of the fund. Christopher Crozier, the firm’s Chief Risk Officer, sits on the board of the General Partner/manager, thereby bringing specific risk and ESG expertise to the governance body of the fund.
Material findings from the pre-investment process are integrated into 100-day plans and the value creation planning process, as appropriate.
Permira’s ESG Framework and an ESG template for IC discussions guide the pre-investment process, but they are not prescriptive, allowing investment teams to focus on the relevant aspects of ESG for a given sector or target company.