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Gresham House plc

PRI reporting framework 2020

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Pre-Investment (Selection)

INF 05. Incorporating ESG issues when selecting investments

05.1. Indicate if your organisation typically incorporates ESG issues when selecting infrastructure investments.

05.2. Describe your organisation`s approach to incorporating ESG issues in infrastructure investment selection.

We have a mandate to invest in projects which generate job creation, education and training, health and social care, financial inclusion, community-based asset development, environmental benefits and community driven environment. However, as part of Gresham’s sustainability commitments made at a firm level, we endeavour to understand the views, concerns and ambitions of our stakeholders in seeking sustainable outcomes from the investments we are involved in and therefore could consider incorporating client preferences at the pre-investment stage.

We have a content-rich expert ESG asset management tool which guides our team in terms of identifying potentially material issues (both short- and long-term) and impacts (both positive and negative), and finding means by which these can be optimised, managed or mitigated. This includes:

  • Prompts to evaluate the potential deal based on Gresham House's experience in the sector previously (i.e. lessons already learned and capability to yield maximum positive impacts);
  • Mind map based prompt tools to show the potential areas for consideration within our Sustainable Investment Framework, expanded into relevant subsets to provide more granularity
  • Structured questions to help our team evaluate which ESG and impact topic areas could be potentially material within the context of our proposed investment;
  • The workstreams that will be needed to clarify potentially material issues and opportunities (e.g. further management meetings, focused due diligence etc).
  • The outcomes of this assessment are presented on our evaluation matrix, with accompanying commentary, which is then considered explicitly at Investment Committee Meetings
  • Development of project specific Key Performance Indicators (which vary on a project by project basis)

Our key focus areas are set out in Gresham House’s Sustainable Investment framework and comprise: governance, compliance & risk management; staff care; customer care; supply chain management; marketplace responsibility; pollution, waste and carbon; and resource efficiency. Given we are currently solely focused on the UK, we would not expect our approach to differ between geographical regions and similar infrastructure types.


INF 06. ESG advice and research when selecting investments (Private)


INF 07. Examples of ESG issues in investment selection process

07.1. Indicate which E, S and/or G issues are typically considered by your organisation in the investment selection process and list up to three typical examples per issue.

ESG issues

List up to three typical examples of environmental issues

          Carbon dioxide emissions
        
          Energy use/ stored (displacement of non-renewable power (MWH))
        
          Pollution risks (air, water, land)
        

List up to three typical examples of social issues

          Community engagement/impact
        
          Marketplace responsibility – quality management and quality ethos
        
          Health & Safety
        

List up to three typical examples of governance issues

          Compliance management (including license to operate, wider industry regulation - breaches of agreement)
        
          Corporate compliance policies (e.g. anti-bribery, Modern Slavery etc)
        
          Engagement / appointment of independent NEDs/ Chairs to Boards
        

07.2. Additional information. [Optional]

Our Gresham House Sustainable Investment Framework to help us define relevant thematic areas of each investment across the range of Environmental, Social and Governance topics, specifically:

  • Environment:  carbon, emissions & pollution, including climate change impacts; natural resource management; and waste management;
  • Social:  employment, health, safety & wellbeing; supply chain sustainability; community care & engagement; and marketplace responsibility; and
  • Governance:  governance & ethics; risk & compliance; and commitment to sustainability. 

Each of these sub-themes themselves cover a wide range of potentially material issues which could be relevant to an investment we are considering.  We have therefore worked with expert external advisors to develop an asset class-specific tool to help us systematically identify and assess potentially material risks and opportunities which may be relevant to a particular investment.  The tool is content rich and includes:

  1. A series of detailed mind maps which build more context and relevance around the E, S and G themes and sub-themes identified in Gresham House’s Sustainable Investment Framework.  This helps our team quickly navigate which of the wide-ranging ESG issues may be most relevant to a proposed transaction; and
  2. A series of structured questions which assess a business’s performance against material areas, allowing us to further refine likely areas of material ESG risk, supported by guidance notes which cover a UK and a global context in recognition that ESG issues may manifest themselves in different ways across different geographies.  These guidance notes provide further context on why a particular area may be of risk to an investment, areas of focus in order to delineate risk further and best practice considerations (including reference to key UK and international legal requirements, global compacts and codes of conduct etc).  The tool is updated on a periodic basis to ensure that it remains up-to-date and relevant. 

Our aim is to use our tool iteratively throughout the pre-investment process, starting our assessment early in order to help us screen in and out the potentially material considerations which our due diligence needs to assess further.

Our processes and tools help us apply a rigorous and replicable assessment of risks and opportunities at the pre-investment stage, identify whether/how these can be addressed and ultimately monitor progress in closing specific items out.

The nature of our investments means that material ESG issues vary (often considerably) from transaction to transaction.  However, generally the following areas are more commonly material considerations:  


INF 08. Types of ESG information considered in investment selection (Private)


INF 09. ESG issues impact in selection process (Private)


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