The following extract was taken from Exponent's most recent Fund's PPM. It is worth noting that certain policies and procedures have evolved since this was created, as part of our aim for continuous improvement. The final part of the ESG section contains examples from the portfolio which are representative of how ESG informs Exponent’s due diligence approach and investment decision making and of how Exponent drives the ESG agenda within its portfolio companies. Unfortunately there wasn't the word count available to include this section.
Responsible investing and environmental, social and governance (“ESG”) considerations are fully incorporated into Exponent’s investment and portfolio management processes. Exponent has developed an internal policy on Responsible Investing that will help to guide the investment activities of the Fund. As part of its policy on Responsible Investing, Exponent has developed a non-exhaustive set of exclusion criteria that will govern the type of companies in which the Fund will not invest.
Exponent’s approach to ESG due diligence and portfolio management is constantly evolving and improving as it seeks to remain up to date with best practice.
Deal teams are expected to identify and raise any potential ESG issues early in the transaction process so that these can be discussed with the Investment Committee and appropriate due diligence can be carried out. Any obvious ESG issues will therefore be considered at the Briefing Note stage. To the extent that any ESG issues are considered material then, if appropriate, advisers would be appointed to review the particular issue and to present recommendations. Such issues would be covered in interim Investment Committee discussions. Each Final Investment Paper has a section headed ‘Responsible Investment’, which considers the ESG issues that are relevant to the particular business, Exponent’s judgement of their significance, any due diligence that has been carried out and, where necessary, a description of how the Manager plans to address any issues post-investment.
Post-completion, Exponent commissions an independent ESG review designed to identify the relevant ESG factors for the respective portfolio company. This report forms a basis for raising ESG awareness within each portfolio company, and it is the responsibility of the lead Exponent Partner to bring this to the attention of the board and ensure that ESG metrics are reviewed by the board on a regular basis. Accordingly, it is also a requirement that a senior executive within each portfolio company is nominated to take ultimate responsibility for ESG. This independent review is repeated every three years so that progress can be monitored against the ESG-related risks and opportunities that were identified in the initial report and any new risk or opportunities can be identified. The reports are made available on the investor zone of the Firm’s website. In addition, in its quarterly reports to investors Exponent makes a specific statement about whether any ESG-related issues have arisen or are likely to arise.
Exponent reviews the ESG metrics across its portfolio on an annual basis to assess progress against agreed KPIs. These KPIs consist of general KPIs that apply to all companies and specific KPIs that are relevant for each particular portfolio company.