RESPONSIBLE PRIVATE EQUITY POLICY
This document was prepared in collaboration with:
a consultancy in CSR and SRI strategy and implementation.
CONTENTS
Introduction
pg. 3
The 6 basic principles of our Responsible Private Equity policy
pg. 4
The basis of our approach to Responsible Private Equity
pg. 6
INTRODUCTION
Idinvest Partners has been engaged in an initial consideration of Socially Responsible Private Equity (SR-PE) since 2002, and we believe strongly in the need to incorporate extra-financial factors (Environmental, Social and Governance, or ESG) in our business lines (funds of funds, secondary transactions, growth capital and debt/mezzanine), while at the same time maintaining a high level of performance.
We work closely with our investee companies and funds and would like to strengthen this partnership by maintaining an active dialog with them on the importance of implementing these new extra-financial criteria in their operations. This is because we believe that extra-financial issues merit close attention from both a strategic and an operational perspective, since they may serve to create value and manage risks more effectively.
In 2007, Idinvest began to include these concerns in its operations, with a view to increasing ESG awareness:
In our funds of funds business: where we assess the SRI vision of selected investee funds with a questionnaire during due diligence,
In the companies in which we invest directly: by talking with their senior managers to learn about their environmental, social and corporate governance practices. This enables our investment team to verify first of all that these companies observe major international standards based on the United Nations Global Compact, and secondly that they have identified their extra-financial risks and incorporated them in their risk management process or intend to do so.
As a signatory of the UN-PRI since March 2011, we have launched a continuous improvement process to address ESG considerations throughout the life cycle of our investments. Our objective is to progressively optimize the incorporation of ESG criteria into investment processes in all our business lines, and so comply with the new standards for which our French and European partners are preparing.
THE 6 BASIC PRINCIPLES OF OUR RESPONSIBLE PRIVATE EQUITY (RPE) POLICY:
Shareholder engagement and responsibility=> Fully and actively exercising our responsibility as a shareholder in every company in which we invest:
o In a constructive and progressive spirit of partnership
=> to develop lasting relationships with our portfolio companies, based on absolute trust => to closely monitor our portfolio companies and help them continuously progress towards a well-balanced and effective CSR approach that matches their needs
=> to implement an Idinvest Partners Voting and Engagement Policy that includes ESG criteria
o To comply with current and future regulations, including: French and European SRI and CSR regulations
=> French regulations—Grenelle 1 and 2 environmental legislation (e.g. Art. 224, 225 and 75) => European regulations—the European Commission’s 2011-2014 CSR strategy and associated directives
Relevant international standards:
=> the United Nations Global Compact, UN-PRI, Global Reporting Initiative, ILO conventions, OECD Guidelines, OECD and United Nations conventions against corruption, and the Universal Declaration of Human Rights.
Incorporating CSR in our value-creation strategy=> Encouraging our portfolio companies to include concrete ESG performance criteria in their operations, which will ultimately enhance their value at exit.
Securing our investments => Offering our clients robust and effective investment processes and helping our institutional clients meet their fiduciary obligations:
o by operationalizing the values, duties and commitments of the AFIC’s Private Equity Charter, of which we are a signatory,
Strict guidelines for exclusion and enhanced monitoring in connection with extra-financial risks => Idinvest Partners’ investment sourcing process includes two types of exclusion criteria:
o companies with business activities that carry high reputational risk o companies with business activities that carry high ESG risk
ACTIVITIES WITH HIGH REPUTATIONAL RISK ACTIVITIES WITH HIGH ESG RISK Gaming/gambling
Pornography and prostitution Alcohol
Tobacco GMOs
Arms dealing (including anti-personnel mines and cluster munitions)1
Potential investees may be excluded or special inclusion criteria may be required
Industries:
Agriculture, fishing, forestry, mining, oil & gas, energy production (including nuclear) and chemical industries =>Identified labor/social risks:
corruption/tax havens/money-laundering, human
rights violations, adverse impact on local communities/
indigenous peoples, labor rights/child labor/forced
labor, activities in conflict zones, toxic products.
=>Identified environmental risks:
biodiversity, climate change, pollution
ESG analysis
Ask for more information and detailed reporting Ask for corrective action
Exclusion is decided on a case-by-case basis
=> These activities or risks will result in Idinvest Partners’ systematic exclusion of these direct investments at the pre-investment stage. Corrective actions will be asked to be taken by a portfolio company or fund/General Partner if they are seen to be involved in controversial
activities or practices.
Setting the standard for excellence => For our portfolio investments, clients and investment partners, by applying our own CSR approach at Idinvest Partners:
o Responsible governance (professional and business ethics, voting policy, internal control and risk control)
o A culture of partnership with our clients (to ensure transparency and investment security)and our portfolio companies(with customized monitoring and support, and investment over the medium to long term)
o HR policy(retaining high-quality staff, compensation policy, etc.)
o Managing our impact on the environment (using resources sustainably and reducing our environmental footprint)
o Engaging with our stakeholders and being a good corporate citizen (making an active contribution to economic and social development in the regions where our portfolio companies do business, community outreach).
Ensuring ESG and CSR traceability => Including ESG issues in current and future disclosure and communication documents, and regularly updating this information.
o Internal traceability : Traceability and progressive update of our investments’ ESG profile, ESG integration in Idinvest Partners’ process, tools and internal and contractual documents
o Targeted communication : Communication of Idinvest Partners responsible Private equity policy and approach with its partners (LPs, GPs) and portfolios holdings (companies)
o ESG Reporting from the portfolios holdings (direct investments) and of the General Partners (fund investments) : 2 environmental indicators, 4 social indicators and 1 corporate governance indicator. o 3 levels of reporting from Idinvest Partners :
First CSR report 2013 (2012 exercise) to its mother company, the IDI Group UN-PRI annual reporting 2014 (exercise 2013)
ESG Annual Report (exercise 2013) planned for 2014
THE BASIS OF OUR APPROACH TO RESPONSIBLE PRIVATE EQUITY
Our process of including extra-financial criteria in our investment decisions is guided by one objective: helping us get the managers of our portfolio companies and our co-investor partners to engage with us and adhere to our principles.
To achieve this objective we base our ESG actions on the following four pillars:
Promoting ESG awareness and knowledge
Listening to our partners (senior executives, LPs, GPs, and third-party investors), getting their opinion and fostering cooperation
Incorporating ESG principles in a pragmatic, rational and concrete manner
Ensuring that Idinvest Partners is an engaged and responsible shareholder: dialog and active promotion of progressive and traceable ESG practices.
OUR KEY AREAS OF ESG ANALYSIS AND DIALOG/ENGAGEMENT
In addition to observing the principles of international standards, which are the bedrock of its RPE2 policy, Idinvest Partners pays close attention (from when it reviews an investee’s ESG risks to when it deploys a continuous improvement process to mitigate them) to the following:
Workforce
=> Employees considered to be the company’s most precious asset => Promotion of labor-management dialog
=> Job creation
Social and relations with stakeholders
=> Partnering with customers and suppliers to promote the use of ESG criteria
=> Taking into consideration how our activity affects our stakeholders (individuals and communities, the natural environment)
Environmental
=> Using resources in a sustainable manner => Reducing adverse impacts on the environment
Governance
=> Transparent and effective corporate governance => Forward-looking management
In keeping with the example it must set and what it requires of its investees, Idinvest Partners will implement these criteria for extra-financial performance within its own organization as part of its internal CSR process.
