Idinvest Partners has determined several processes aiming at integrating ESG considerations into traditional financial analysis and throughout the investment life cycle.
Private debt analysts systematically conduct a first assessment of the ESG and impact stakes of investment targets. The results are consolidated into an ESG and impact profile, which includes an initial score that is to be monitored throughout the investment lifecycle. This Profile is further discussed at the Investment Committee and integrated in investment documents such as the Investment Memorandum. This step is a requirement for the validation of the investment.
The initial review allows to identify potential ESG risks and improvement areas. When high ESG or reputational risks are identified, the investment may be dropped. Specific ESG due diligence may be conducted to assess whether the identified ESG risks may result in impacting the relevance of the business model, and hence the financial performance of the company (e.g. reputation risk, market risk - change in consumer demand, regulation/ taxation) and if these risks are mitigated.
Idinvest Partners has put in place a comprehensive process to monitor ESG risks and opportunities during the holding period:
Direct lending legal documentation includes an information on Idinvest's ESG commitments and ESG reporting requested to portfolio companies annually.
Idinvest Partners monitors the ESG performance of portfolio companies through this annual ESG reporting. In its role as a responsible investor, Idinvest provides KPI dashboards with improvement recommendations to portfolio companies. The objective is to further empower them on the management of ESG issues.
When appropriate, specific ESG audit/ reviews may be conducted on some portfolio companies.
ESG matters are expected to be discussed at least once a year within portfolio companies at Board level.
Every year, ESG best practices identified at portfolio companies are highlighted within the Idinvest Partners' annual ESG report.
In addition, together with a strategy advisory firm, Idinvest Partners has developed in 2018 a proprietary Sustainability & Impact matrix aiming at identifying its portfolio's impact on the achievement of the Sustainable Development Goals. The matrix is reviewed on an annual basis and allows for the identification of companies contributing most/ having a negative impact on these SDGs. This mapping also serves as an educational tool for companies that are not fully aware of all the potential impacts their activity may have on society.