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PAI Partners

PRI reporting framework 2020

You are in Direct – Private Equity » Pre-investment (selection)

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.

Our due diligence process involves systematically assessing companies on ESG risks and opportunities which may have an impact on potential investments. Analyses are carried out using internal resources and, where necessary, external consultants.

To that purpose, the PAI investment teams collaborate with our ESG team to define the indicators which have the highest potential impact on business. The indicators selected for each company depend on their materiality. Materiality level is determined thanks to the investment and ESG teams' understanding of the business, with the help of the materiality map developed by the Sustainability Accounting Standard Board (SASB).

Using the list of ESG key indicators, investment teams identify a set of priority items to be addressed in the due diligence analysis. The related questions are embedded in the general due diligence process and the interactions with management.

At the end of the due diligence process, an ESG memo is systematically presented to the Investment Committee prior to the final investment decision. This memo includes a comprehensive list of all relevant risks and opportunities linked to the potential acquisition. The outcome of the ESG analysis can influence the final investment decision positively or negatively.

Climate risks are integrated into this overall analysis by integrating physical, transition and financial risks.

 

 

 

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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.

At the end of the due diligence process, an ESG memo (including all considered ESG information) is systematically presented to the Investment Committee prior to the final investment decision. This memo includes a comprehensive list of all relevant risks and opportunities linked to the potential acquisition. The outcome of the ESG analysis  can influence the final investment decision positively or negatively: for example, ESG-related conditions can be applied from the signing to the closing period of a deal.


PE 07. Encouraging improvements in investees

07.1. During deal structuring,what is the process for integrating ESG-related considerations into the deal documentation and/or the post-investment action plan?.

If yes

07.2. Describe the nature of these improvements and provide examples (if any) from the reporting year

The nature of the improvement depends on the material ESG issues impacting the company.

Post-acquisition, as part of our value creation plan, an ESG action plan is agreed on by the PAI investment and ESG teams, as well as the Management of the portfolio company. It can be based on post-acquisition ESG audits performed on the company by external consultants.

The ESG action plan incorporates clear objectives, precise KPIs, a timeline, and is discussed annually at the portfolio company's board.

An action plan for a portfolio company would typically include environmental (reduce water consumption by x% for a certain plan/country/BU etc ...), social (reduce injury frequency rate by x% etc...), governance (trainings on the new code of conduct for all employees etc...) and external stakeholders (include ESG aspects in supplier selection and monitoring criteria/ set up new contract clauses) objectives

07.3. Additional information. [OPTIONAL]


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


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