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Bridges Fund Management

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.

(1) SELECT: We invest exclusively in companies where impact and high-growth potential go hand-in-hand, with a focus on four main themes: Healthier Lives, Future Skills, Sustainable Planet and Stronger Communities. Certain sectors are excluded e.g. alcohol, gambling, arms and pornography.

(2) ENGAGE: We work with our investees to optimise their ESG impacts in ways that protect and improve commercial performance. This analysis begins pre-investment and informs our investment selection. Prior to making an investment, our investment team works with the management team of the prospective portfolio company to identify ESG risks. To guide this discussion, we have developed an in-house risk assessment screen based on global best practices but adapted to fit the needs of investees operating in our areas of thematic focus. Our emphasis is on making this ESG risk screen as practical as possible – on making it a conversation about operational excellence. We use a materiality lens to grade each risk as a high, medium or low priority and record the results on a risk register. For each material risk, we propose a mitigation plan in the Investment Committee paper, so that our investment decision is made with a holistic view of projected impact and a 100-day plan can be developed for immediately post-investment. We have also incorporated the use of a 3rd party tool, the B Impact Assessment, into our investment process. Each potential investee is asked to complete the ESG assessment which covers questions on Worker, Governance, Community, Environment as well as Impact business model. The results of this questionnaire are used to identify areas of ESG risk and inform a post-deal improvement plan should we decide to invest.

(3) TRACK: We track progress to inform timely management decisions, as well as report back to our investors. Each investment has a bespoke Impact scorecard, reviewed at least annually, and used to report to investors. As an impact-driven investment firm, ESG indicators form a seamless part of our performance management.

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.

Assessment of impact and ESG factors will be included as a key topic of discussion from the beginning of the investment decision process and will be included in all documentation that the Investment Committee reviews. Within the Pre-Approval Documentation, when a potential investment is first presented to the IC, the impact thesis will be presented, drawing on some or all of the information types above to support the argument. In more detailed presentations for the final IC, a section of the presentation is dedicated to impact and again, some or all of the information types outlined above will be drawn on to support the investment case.

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

          Through governance of the company, via the Board positions we hold in each portfolio company.

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

For each material risk identified in the due diligence process, we propose a mitigation plan in the Investment Committee paper, so that our investment decision is made with a holistic view of projected impact and a 100-day plan can be developed. Thereafter, ESG issues are reviewed regularly at Board meetings with investee companies, as well as at our own firm-level portfolio review meetings. Once a year, each investee provides a snapshot of any new or outstanding ESG issues, as well as progress against targets, through our Impact Scorecard. Case studies regarding our ongoing engagement with portfolio companies are available via our latest annual impact report: . Our Impact Report 2019/20 is soon to be published. 

07.3. Additional information. [OPTIONAL]

PE 08. ESG issues impact in selection process

08.1. Indicate how ESG issues impacted your private equity investment selection processes during the reporting year.

08.2. Indicate how ESG issues impacted your private equity investment deals during the reporting year.

08.3. Additional information. [OPTIONAL]