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Qualium Investissement

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.

ESG aspects are taken into account in the selection and investment process:

Initial screening:

No branch of industry is favoured but sector exclusion policy applies to three sectors: alcohol/tobacco, weapons, gambling, pornography clonage. Screening exclusion concerns companies having material negative impact on the environment, in particular through their contribution to the climate change, the water pollution, or the diminution of biodiversity. Every week, the investment team screens target companies in meeting. A first ESG screening is operated during these meetings. Further analysis can be performed if necessary and discussed by the Investment Committee.

Due Diligence:

ESG Due Diligences are systematically carried out prior to any investment in order to identify potential risks and / or value creation opportunities. They deal with environmental, social, governance and external stakeholders aspects. Qualium Investissement does not focus on pre-established environmental, social or governance criteria but assesses all relevant criteria depending on the company’s size, activity, implantation and specificities (context). The results are incorporated in the investment memorandum.

Investment decision:

The ESG Due Diligence results are discussed by investment team and presented to the Investment Committee. In case an alarming point is perceived (major risk on product, major risk and / or controversy regarding ethics, etc,) the investment process will continue only if there is a possibility to improve the situation during its shareholding period or prior to the investment. 

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.

During private equity investment selection process, Qualium Investissement usually mandates external consultant firms to assess target companies' ESG performances.

These firms conduct their analysis against a framework tailored for small and medium companies, taking into account sector, implantation and products/service specificities. Relevant environmental, social, governance and relations with external stakeholders issues are assessed. Levels of materiality are defined, depending on sector and location specificities.

The information used in the ESG analysis are based on the answers provided by the target company, listed in customised questionnaires created by the consulting firm and on raw data from the data room (internal policies, scorecards, charter, etc.). Interviews are conducted whenever possible with the target company’s management. The ESG due diligences analyse target companies performances against country standards and legal thresholds, and can display benchmarks against other companies to compare with relevant actors and industry best practices

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

For each company, Qualium Investissement strives to undertake tailored management practices and systematically adjusts to company’s context. The ESG due diligence phase enables Qualium to identify potential need for adjustments and to discuss these points with the management during deal structuring. Post-acquisition, Qualium team makes all the necessary efforts to best implement any recommendation that audit findings might have identified. An action plan is discussed with the portfolio company management. It can include actions to be implemented related to ESG issues.

Examples : 

- In chemical industry: following a solvent leakage on a tank in August 2019, the environmental authorities were informed and an impovement action plan was taken, while the company actively monitored the ground water. A new visit made in January 2020 by environment authorities considered the incident well managed

- In retail : key projects as regards goods transportation : testing rail transport for imported products from China, with the aim of regularly using this new transportation by 2020 as well as testing coupled rail / road transport to supply stores

- In biotech (insemination) : development of new products to improve animal well-being and commitment to the preservation of biodiversity (help preserve endangered species)

07.3. Additional information. [OPTIONAL]

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