Sustainability

Assessment and management of ESG factors

The active management of ESG risks and opportunities is key to our value creation process and to maintaining our reputation as a responsible investor. We embed an assessment of the long-term sustainability of existing and new investments in our processes.


Once invested, we support companies as they develop strategies and respond to stakeholder expectations, and we gather data to measure progress against ESG objectives. This enables us to prepare companies ahead of any exit  opportunity.

Pre-investment

During investment

Exit

Assessment and action planning

Use of influence and engagement

Data collection and monitoring

Preparation and communication
  • Screen each opportunity against the requirements of the RI policy at the first stage of our process.
  • Identify and assess the most material ESG risks inherent in each investment opportunity.
  • Commission specialist due diligence on ESG matters where required.
  • Include ESG considerations (both risks and value creation considerations linked to the investment case) in the Investment Committee materials.
  • Integrate relevant action points into the 180-day post-investment plan.
  • Implement robust governance and procedures at the portfolio company to ensure that ESG risks and opportunities are assessed regularly and managed carefully.
  • Use active participation and influence on portfolio company boards to ensure they are addressing the ESG factors impacting their businesses.
  • Leverage the 3i portfolio and network to provide introductions to other companies, useful contacts and advisers and share best practice, sometimes through dedicated forums such as the plastics, carbon and CIO roundtables we held for portfolio companies in recent years.
  • Provide a sounding board and support to portfolio companies as they devise their sustainability strategies and implement and deliver sustainability projects.
  • Collect ESG data from portfolio companies on an annual basis
    to understand the baseline and measure progress.
  • Prepare detailed quantitative and qualitative ESG assessment as part of the March semi-annual portfolio company review process.
  • Discuss ESG assessment during semi-annual portfolio company review meetings, involving investment teams as well as Investment Committee members and selected 3i Board members.
  • Set and monitor progress with portfolio-wide objectives (eg for portfolio companies to produce a carbon emissions baseline and implement a sustainability strategy).
  • Consider the data and governance structures which may be required in advance of a sale process.
  • Work with advisers to communicate relevant sustainability information to potential buyers.

 

Objectives

 

The Investment Committee may decline investment opportunities where red flags are raised in the pre-investment ESG risk assessment that it does not believe can be remedied post investment or commission further specialist due diligence to assess whether a situation can be remedied.

We use our influence to assess and mitigate risks and ensure value creation opportunities are captured.

Data is used to develop our understanding and management of ESG matters, to enhance our decision making, to facilitate better financing opportunities and to identify key themes, trends and opportunities across the portfolio.

Good ESG performance can protect and potentially enhance the value achieved in an exit.
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