Proactive engagement with our portfolio

Once invested, we use our influence with portfolio companies to ensure that they consider the ESG and sustainability factors that have the potential to impact their business and provide support in the evaluation and delivery of specific projects, ensuring that these are resourced adequately. We leverage our knowledge and expertise across our portfolio and facilitate the sharing of best practice.


Greenhouse gas emissions

In March 2021 we held a Carbon roundtable with representatives from 23 of our portfolio companies with the aim of demonstrating the broader commercial benefits of measuring a carbon footprint and taking steps to reduce it, including better employee engagement or customer sentiment, as well as cost savings. The event, facilitated by specialist consultancy Anthesis, also delivered practical advice on how to measure a carbon footprint and improve the quality of carbon reporting.

Many of our portfolio companies have put in place realistic and achievable, and in some cases ambitious, emission reduction targets, some targeting specific aspects of their business, other more comprehensive. For example:

  • ESVAGT, which provides service operation vessels to the offshore wind industry and emergency rescue and response vessels to the offshore energy industry, has set a target of zero CO2 emissions by 2050 and carbon neutrality by 2035 and announced the first green service operation vessel for Ørsted;
  • Audley Travel, a leading provider of tailor-made experiential travel, has a target to reduce its Scope 1 and 2 emissions by 68% by 2030, from a baseline year of 2019, in line with the Paris Agreement 1.5°C target. The company plans to submit its measurements and targets to the Science Based Target initiative in the second half of 2022;
  • Action a pan-European discount retailer and our largest portfolio company, set a target to reduce its emissions from its own operations by 50% by 2030, compared to a baseline year of 2020. It also has an objective to reduce significantly the CO2 emissions of its outbound transport;
  • Scandlines, which operates ferry services between Germany and Denmark, has set an ambitious target to ensure emissionfree operations on its Puttgarden-Rødby route by 2030 and for Scandlines by 2040, supported by significant investments in its fleet. Since we first invested in 2007 the company has made more than €300 million in green investments for its fleet. All six of its passenger ferries are now powered by hybrid propulsion technology. It plans to increase this investment level to approximately €400 million by 2024 and in 2021 it commissioned an emission-free freight ferry with the world’s largest battery installation for delivery in 2024; and
  • Ten23 health, which 3i set up in partnership with Hanns-Christian Mahler, an expert in life sciences, is strongly purpose-driven. It puts Patients, People and Planet at the centre of its decisions and actions. It monitors its emissions, both related to greenhouse gases and plastics, takes actions to reduce these and mandates itself to offset any unavoidable emissions, in partnership with certified organisations.

Data and disclosures

We have made significant strides in the assessment of the environmental impact of our portfolio and collect data on a number of environmental indicators. Over the last two years, we have focused specifically on improving our collection of GHG emissions data, to satisfy both regulatory and commercial demands. We currently collect GHG emissions data from over 70% of our Private Equity portfolio companies and over 80% of our economic Infrastructure investments. Most of the companies that do not already supply us with this data are new investments, which will be expected to measure and report their emissions to us within the first year of investment. Once Scope 1 and 2 data is in place, we will also begin collecting Scope 3 data
systematically. This portfolio baseline will allow us to:

  • improve our engagement with each of our portfolio companies to devise specific emission reduction strategies;
  • assess relevant targets; and
  • make TCFD aligned disclosures by the FY2024 deadline imposed by the FCA for asset managers such as 3i.

We are also improving the data we collect on waste produced and materials consumed by portfolio companies, which will allow us to enhance our engagement with the portfolio on resource efficiency over time.

Waste and circular economy

We encourage our portfolio companies to treat their waste sensitively, minimise packaging, maximise recycling and optimise their processes to reduce waste. The topic of circularity and resource efficiency also provides significant commercial opportunities for our portfolio companies. We are very pleased with the progress made in this area. For example:

  • WP has an ambition to make all the packaging it produces to be recyclable, reusable or refillable by 2025. It is using its innovation capabilities to develop more sustainable packaging solutions that support the circular economy. Last year, it introduced a 100% recyclable valve for dispensing closures;
  • Havea has placed eco-design at the centre of each of its brands and considers the environmental impact of its products throughout their lifecycle. The company has already reduced its reliance on virgin plastics by introducing plant-based and recycled plastic bottles across several of its brands including Biolane and NaturéMoi. In addition, it aims for 25% of the cosmetic ingredients used in its skincare range to be ‘upcycled’ by 2022, a practice that recovers waste in order to turn it into new resources. For instance, Havea has developed a process to treat grape seeds discarded by the food industry to produce a cosmetic ingredient with anti-ageing properties;
  • Mepal’s food and drink storage containers are a sustainable solution to reduce food waste and the use of single-use packaging. Most Mepal products are made from 100% recyclable plastic, are of a high quality and have a long useable life. Mepal also offers a replacement parts service to consumers to prolong the useful life of its products;
  • Evernex works with its clients to maintain, repair and reuse their IT assets and recycle used IT equipment. In total, 15% of the components installed in the discarded IT equipment that Evernex receives as ‘IT waste’ can be reused. This is more than 50,000 spare parts every year. The remaining 85% contains valuable minerals, rare earths and gold, as well as other metals and raw materials that are separated and made into secondary raw materials which re-enter the production cycle;
  • Action has stated its ambition of completing circularity assessments for all 14 of its product categories by the end of 2022. In 2021, Action completed such assessments for half of its product categories using the Circular Transition Indicators framework; and
  • Attero, which offers waste management services and produces energy from waste, is working on a number of projects to increase the capacity for post-separation of residual waste from household and commercial waste and increase the capacity for recycling. The business produces 3.6 million tonnes of waste every year and uses it to produce 25 million cubic metres of green gas, 318,000 tonnes of compost, more than 700,000 tonnes of other recycled materials and 900GWh of electricity, generating sustainable power for 363,000 households.


Supply chain transparency and ethical sourcing

We are intensifying our focus on supply chain management and transparency in our portfolio as we believe that there are high rewards from building trust with consumers and other stakeholders on these issues.

We ensure that, where relevant, our portfolio companies have policies and procedures in place to monitor their supply chains, and make adequate disclosures on this topic to satisfy their stakeholders. For example:

  • Action has set a target of achieving 100% transparency on labour conditions in its supply chain by 2025 and to purchase 100% of the cotton and timber used in its products from sustainable sources by 2024. In addition, it requires all its suppliers to sign up to its Ethical Sourcing Policy and it audits its supply chain periodically;
  • All BoConcept suppliers must follow its code of conduct in order to ensure that all its products are manufactured in a manner that respects the rights of their employees. The company applies its Danish background in setting out expectations from its suppliers when it comes to quality, environment and work processes;
  • Audley Travel has launched ‘Athari’, a travel product which supports its clients to easily identify sustainable experiences that have a particularly strong, positive impact on the local economy and environment. This type of experience puts a purposeful focus on supporting local businesses, educating staff, challenging local norms or positively impacting conservation and biodiversity efforts. Highlighting these experiences encourages Audley’s clients to consider sustainable choices when planning their trip with their specialist, and gives an incentive to Audley’s other partners to offer similar options; and
  • Royal Sanders has an ambition to increase its use of certified sustainable palm oil across the group from c.90% to 95%. The Roundtable on Sustainable Palm Oil (‘RSPO’) has developed a set of environmental and social criteria which companies must comply with in order to produce certified sustainable palm oil. When properly applied, these criteria can help to minimise the negative impact of palm oil cultivation on the environment and communities in palm oil-producing regions. Demand for RSPO palm oil has increased significantly over the last few years, resulting in limited supply and high prices for this sensitive resource.

Diversity, equity and inclusion

Academic research shows that diverse and inclusive companies are likely to outperform less diverse peers. Where appropriate, we have been making this case with our portfolio companies through our board-level engagement.

We monitor diversity and inclusion in our portfolio closely through our semi-annual portfolio company review process and have improved the quality of our data collection and engagement on this topic over the last few years. A number of our portfolio companies are sponsoring initiatives to improve diversity and inclusion across their organisations. For example:

  • Gender diversity
    Shipping is a notoriously male-dominated industry. Both ESVAGT and Scandlines signed the charter on women in shipping launched by Danish Shipping in early 2020 and have increased their efforts to improve the hiring of women. ESVAGT has initiated collaborations with educational and training institutions offering employment to women. Technology has also traditionally been a male-dominated industry. Tampnet is developing a ‘Women in Technology’ programme and has set up targets to improve the representation of women in its workforce overall and in its management team. Many of our portfolio companies have set targets for improved gender diversity.
  • Inclusion of parents with young children
    After establishing a working group aimed at supporting young parents among its employees, in 2022 Havea opened an inter-company crèche at its headquarters. This facility provides a flexible childcare solution for Havea’s 400 employees in Boufféré where both production and HQ staff are based. In particular for production staff, the facility provides childcare support based on their atypical shift working patterns which can involve early morning or late evening working. To deliver this, Havea approached a local eco-network made up of industrial companies undertaking joint initiatives to provide solutions to the societal and environmental challenges they face. In total, five companies collaborated with a childcare provider to provide a solution aimed at attracting and retaining young parents.
  • Inclusion of people who have long been unemployed
    Action partners with initiatives across a number of its markets to reintegrate people distanced from the labour market or who do not have the skills and training to participate in the workforce.
  • Inclusion of people with disabilities
    Mepal’s products are manufactured primarily in sheltered workshops in the Netherlands, which provide access to employment for individuals with disabilities

This topic can also provide commercial opportunities for our portfolio companies. For example, WilsonHCG, which works with companies to help them plan and execute talent acquisition programmes globally, has also developed a Diversity, Equity, Inclusion and Belonging service for its clients. With this service, the business helps companies to diversify their talent pools by accessing candidates from diverse communities, leveraging its relationships with hundreds of diversity-focused organisations. Through this service the business also creates guidelines and standard operating procedures for diversity hiring that can be tracked and measured to ensure clients comply with internal guidelines and government regulation. In addition, its talent consultants host training sessions with hiring managers to reduce bias.


Robust governance of ESG risks and sustainability

We engage with our portfolio company management teams so that they assess and mitigate the relevant ESG risks for their business and embed long-term sustainability considerations in their strategy. A significant proportion of our portfolio companies have put in place and published comprehensive sustainability strategies and in many cases set targets to measure their performance across a number of relevant indicators. We are working with the remainder of our portfolio to ensure that they have a suitable strategy in place.

Cyber security

Cyber security remains an important area of attention. As significant shareholders in our portfolio companies we have supported material investment in IT and security infrastructure to ensure this risk is mitigated appropriately. We raise cyber risk awareness with our investment teams and our portfolio through regular training and forums and periodically conduct cyber audits of our portfolio through an external network security consultancy.

In November 2021, we facilitated a CIO Virtual Forum, hosted by a specialist consultancy, which brought together 30 of our portfolio companies. The purpose of the event was to highlight the current cyber security threats and best practice to address them, discuss portfolio companies’ cyber security maturity and share the experiences of cyber security strategy implementation.

ESG-linked funding

Most of our portfolio companies have bank funding in place. As these facilities are gradually refinanced, we have been considering linking them to ESG targets. This has both financial and commercial benefits. ESG-linked banking facilities tend to have lower costs and attract a broader range of lenders. The commercial benefits are less immediate, but as public demand for progressing sustainability agendas becomes clearer, being able to show a commitment to deliver on a number of quantifiable EGS KPIs can have benefits in terms of perception with customers, governmental actors or regulators, among others.

To date, 3iN, ESVAGT and Royal Sanders have put in place specific ESG-linked bank facilities. As more of our portfolio companies’ bank debt is refinanced, we are considering implementing ESG linkages at other companies.

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