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Pentalpha Global

Service Providers Framework 2020

You are in Strategy and Governance » Policy on ESG beliefs

Policy on ESG beliefs

SG 01. Responsible investment policy

01.1. Describe how your organisation’s philosophy incorporates environmental, social and governance factors, and the link to your business offerings.

Pentalpha has positioned itself in the capital markets industry as a third party oversight firm performing governance services for the ultimate benefit of investors and operating parties within the industry. By providing oversight services, the end result of our actions include; (i) participating in the creation and structuring of transactions where PentAlpha’s governance protocols benefit the capital markets industry (ii) providing positive reinforcement through confirmation of adherence to prescribed standards of securitization parties and (iii)observing, reporting, and identifying the root cause of non-compliance to prescribed standards.

We have deliberately positioned our firm to provide this governance in such a manner as to ensure we are viewed as a neutral party with no allegiance to any specific deal party including those who have selected us to be a party to each securitization. In order to do this, we have painstakingly created very clear guidelines and documentation within deal infrastructures to leave as little room for interpretation as possible. Our responsibilities and deliverables are clearly articulated to minimize and interpretational issues that could arise from us performing our contracted governance services.

Over our long history, we have deliberately avoided potential engagements that could tarnish our reputation as being independent. Although this has resulted in having to pass upon, or not being considered for some opportunities, we believe that, in the long run, this has bolstered our reputation among industry participants as a go-to firm for objective governance oversight.

Supporting this philosophy are extensive documents used to internally address non-disclosures, code of ethical conduct, and IT security matters. Internal training and weekly team meetings are also tools used to routinely communicate the organization's philosophy on a routine basis.


01.2. Indicate whether you have policies that formalise the incorporation of your ESG beliefs in your business offerings.

01.3. Indicate the components/types of your internal policy and provide the URL and/or an attachment of the document/s if they are publicly available.

Policy components/types

Public availability

01.4. Indicate how these are put into practice internally across the organisation.

          Annual charitable contribution awards to staff, community service activities, and routine professional skills training classes.

01.5. Additional information [OPTIONAL]

SG 02. Norms used to develop policies

02.1. Indicate what frameworks and guidelines you have used to develop your organisation’s policies. Tick all that apply.

02.2. Additional information. [OPTIONAL]

SG 03. Policy offerings to clients

03.1. Indicate whether you offer standard, off the shelf, policies to clients as part of your product offerings, and/or whether you create tailored versions for individual clients.

Off the shelf
Asset class-specific RI guidelines
Sector-specific RI guidelines
Screening/exclusions policy
Engagement policy
(Proxy) voting policy
RI guidelines set out within the Investment Policy Statement (IPS)
RI guidelines set out in a freestanding RI policy
Multi-year RI implementation project plan
Conflict of interest management policy
Stockbroker allocation policy
Securities lending policy
Other, please specify (1)
Other, please specify (2)
Other, please specify (3)
None of the above

03.2. Provide a brief description of the key elements, any variations, or exceptions applying to these policies.

Very often, our engagements are tailored to specific client needs and then repeated as distinct assignments thereafter. While some of those repeat assignments may have modest changes, in other cases the changes required stem from changing guidelines, asset types, or other factors that contribute to more significant customization. In most cases, we are instrumental in helping to design the transactions at their inception and our involvement and changes become required for future engagements becomes less intensive. As additional clients come to markets, however, we are often following similar practices in helping them establish proper protocols at the inception of their securitizations.

03.3. Additional information. [OPTIONAL]

SG 04. ESG/RI in business offerings (Not Applicable)

SG 05. Outsourcing of services (Private)

SG 06. Providing training/education

06.1. Indicate whether you provide training/educational services on ESG/RI. Tick all that apply.

          We provide internal guidance/training by way of weekly team meetings, distribution of requisite documentation, and compliance-related reviews of staff activities.

06.2. Describe the main components of your training/educational services on ESG/RI and any variations depending on the group you provide training/education to.

By way of routine weekly staff meetings as well as other ad-hoc sessions Sr. Mgnt routinely communicates undertakings of the company and the ESG impact of those initiatives.  This is also reinforced as we engage in new transactions with new and existing clients and continually focus upon our perceptions of what we believe the greater investment community would accept as acceptable operating procedures for the oversight we perform.

06.3. Describe whether these training/educational services include any commercial elements.

          These services are tailored for internal purposes and not for commercial reasons.

06.4. Additional information. [OPTIONAL]

SG 07. Applying, advancing and promoting the PRI principles

07.1. Describe how your organisation applies, advances and promotes the PRI Principles.

Our institutional and regulatory constituents are constantly updating their ethical demands of us. In many respects, they act as our "Board". They demand high ethical operating practices that act as supervision of operating management. We benefit from the ethical best practices of government agencies who audit our staff privately and us corporately, clients who audit us, rating agency assessments and outside accountants making SEC level attestations on our own compliance to internal practices.

07.2. Highlight whether there are any ways that your organisation would like to engage further with the PRI. [OPTIONAL]

We believe there is significant opportunity for the structured finance capital markets arena to formally recognize the services we provide in performing governance oversight.  Ratings agencies, issuers, investors, and other parties need to understand that our presence in providing these governance services adds a level of protection that is not necessarily being fully recognized today in terms of deal ratings or by bond trading prices. Pentalpha looks forward to being an instrumental part in furthering this cause so that all parties can benefit from participating in and investing in these transactions where added governance exists. 

SG 08. Actions taken to promote responsible investment

08.1. Indicate which of the following actions your organisation has taken to promote responsible investments during the reporting year, independently of collaborative initiatives.

          Met with regulators and others who are instrumental in helping to drive PRI within the capital markets industry.

08.2. Additional information. [OPTIONAL]

We have been represented as speakers/moderators at Structured Finance Industry Group conferences as well as at other industry-related events and forums.  Meetings have taken place with particpants from tthe SEC, representatives of Congress and Senate, FDIC, and other key investors who can materially influence the direction of future governance in the capital markets industry.

SG 09. Long term trends

09.1. Indicate which of the following long-term trends are addressed in your product outputs.

          Our product outputs focus upon trends related to governance related matters in the capital markets sectors.

09.2. Explain how this long-term trend affects your product outputs.

Our involvement in performing governance-related services affords us the ability to provide both feedback and influence upon future directional changes in the structured finance arena. One example of this is the fact that we were performing services similar to what later became mandated by the Securities and Exchange Commission as part of Regulation AB oversight. In developing our processes and procedures, much of them and the overall construct, were ultimately deemed necessary in publically issued securitizations.

SG 10. Interaction with asset owners (Not Applicable)

SG 11. Aligning approach with investor goals

11.1. Describe how you typically align your organisation’s philosophy and approach to ESG/RI with your investor clients’ goals.

11.2. Additional information. [OPTIONAL]

SG 12. ESG recommendations not aligned with investor goals

12.1. Describe what steps you take, if any, when your ESG recommendations are not in line with your investor clients’ goals.

12.2. Additional information. [OPTIONAL]

SG 13. Seeking feedback from clients

13.1. Indicate whether you seek feedback from clients on your RI/ESG services and product offerings

13.2. Describe how you use this feedback in your RI/ESG services and product offerings.

Our clients and the investor community who participate in the transactions where we are awarded an assignment are actually the recipient of output of our efforts on governance oversight roles that we have been awarded. That feedback helps them ascertain where potential fine-tuning should be performed in their future capital markets endeavours.

SG 14. Managing conflicts of interest

14.1. Indicate whether your organisation has a policy for managing potential conflicts of interest.

14.2. Describe how you manage potential conflicts of interest.

Before engaging in any assignments, or even considering them, the subject of conflicts of interest is part of our upfront analysis.  When we believe that, even the perception of such conflicts could exist, we go to great lengths with our clients to address how to mitigate them.  When in doubt, we have and always will err on the side of passing on such opportunities.  We take great pride in our “neutrality” in providing our governance services and are very aware of the importance of retaining that status. 

In many cases, our engagement agreements actually require statements addressing potential conflicts and other parties to those engagements as well as potential investors can assess them for themselves.  

14.3. Describe how you ensure that company employees do not derive any personal gain from the use of information collected during your work process.

We have numerous internal controls as well as third party oversight tools in place for our staff. Those include our Code of Professional Conduct, non-disclosure agreements that are effective at the time of hire, IT Security manual, and many online training tools we deploy. Furthermore, all email activity is memorialized using Smarsh archiving technology and our online systems logs include detail on user activity including accessing, printing, and saving any network files.

We are also subject to regular scrutiny that is performed by a number of third parties including our clients and third party rating agencies. Also, our audit firm performs a platform-level audit of our operations for publically issued securitizations where Regulation AB attestations are required which was in excess of 143 assignments in 2019. Finally, we are examined by our clients, FINRA, and the CT State Banking Commission because of our broker dealer affiliate. We manage all Pentalpha entities to the highest standard of the collective whole.


14.4. Additional information. [OPTIONAL]