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Gresham House plc

PRI reporting framework 2020

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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.

Please refer to our Private Equity Sustainable Investing Policy for full details of our approach to ESG incorporation: https://greshamhouse.com/wp-content/uploads/2020/03/Private-Equity-Sustainable-Investment-Policy.pdf

Our Private Equity team has a good understanding of sustainability/ESG issues and opportunities as they apply to business sectors, operating models and the wider market. This is supplemented by the expert advice embedded within our asset management tools and through interaction with the Sustainable Investing Committee.

Fulfilment of our policy leads us to be aware of a series of ‘no go’ areas which help us screen deals at the earliest stage. In line with our sustainable investing commitments, we take steps to consult and understand the views, concerns and ambitions of our stakeholders in seeking sustainable outcomes from the investments we are involved in via:

  • Actively monitoring our clients' interests in making investments that take appropriate heed of sustainability factors;
  • Including sustainable investing as an agenda item on a periodic basis in VCT Board meetings, and with meetings with stakeholders
  • Following on from this, we use a content-rich ESG asset management tool, tailored to PE, which guides our team in terms of identifying potentially material issues, and in identifying means by which these can be managed or mitigated. Our team has been trained in the use of this tool, and the wider ESG context by our external ESG advisors.

Our PE ESG Asset Management Tool includes:

  • Prompts to evaluate the potential deal based on Gresham House's experience in the sector previously (i.e. lessons already learned);
  • Mind maps to show the potential areas for consideration at different layers within our Sustainable Investment Framework, providing more content around these to aid understanding and consideration;
  • Structured questions to help our team evaluate the ESG topic areas that could be potentially material within the context of our proposed investment, including not just their presence but how well they are managed;
  • Workstreams which will be needed to clarify potentially material issues (e.g. further management meetings, focused due diligence. etc).

The outcomes of this assessment are reviewed at our various Investment Committee stages.

Our investment selection process goes through two stages of profiling before a decision is made, each focussed on identifying material sustainability matters and how well they are managed:

  1. At stage one we will identify if there are any material ESG matters that are unlikely to be sufficiently managed or mitigated given what we know about the company and its management team, or where the business or its sector presents significant potential controversy risks, such that we will not proceed.
  2. At stage two we will make a wider assessment of potential ESG issues as well as where good ESG management has the potential to drive value, now or in the future.

During the stewardship phase our periodic engagement with the management teams of our investments includes discussion of ESG performance and progress with the aim of identifying key concerns and/or opportunities for value enhancement and to give us a clearer view of ESG management within our portfolio. We believe that by asking our stakeholders to assess their ESG performance on at least an annual basis we will encourage them towards more proactive management and accountability.

We will re-assess our ESG risk, opportunity and performance profiling periodically and will report this to the Gresham House Sustainable Investing Committee for evaluation and action as necessary.  This approach is adopted across all our investment funds within Gresham's Private Equity division.

 

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.

As our investments can span a number of sectors we maintain a wide lens to ensure we capture all potentially material ESG items. Our PE ESG Asset Management tool helps us to refine the likely material issues in a systematic and replicable way.

To evaluate the material issues, we draw on the following:

  • Sector-wide research and previous Gresham House experience (where relevant)
  • Information from the management teams, focused around  potentially material risks and opportunities;
  • Supplementary focused due diligence from technical experts as required e.g. lawyers, insurers, ESG thematic specialists, etc;
  • Information within our tools, props and prompts which have been prepared in conjunction with our external ESG advisors.

The outcomes of this process are incorporated into to the Investment Committee papers, and will be discussed at the final Investment Committee meeting such that ESG opportunities and risks are evaluated alongside other workstreams to create a balanced and holistic perspective on the potential investment. All ESG information in relation to the investment selection process is captured in our ESG asset management tool.


PE 07. Encouraging improvements in investees (Private)


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


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