Embedding ESG into the investment lifecycle
Cinven’s goal is to build stronger companies thereby creating value for its investors, portfolio companies and wider society. As part of this, Cinven is committed to embedding all relevant matters relating to Environmental, Social and Governance (ESG) throughout the investment process, supporting its portfolio companies to become more sustainable during Cinven’s ownership and to build a strong platform to continue improving their sustainability performance post-exit.
Cinven has established appropriate processes, frameworks and governance models to support the incorporation of ESG factors throughout all stages of its stewardship of an investment.
Cinven’s approach to embedding ESG into the investment cycle is summarised in the diagram below.
Designated Board member
responsible for ESG
Cinven’s Portfolio Companies’ introduced to ‘ESG Guidelines for Portfolio Companies’ to explain ESG and cyber questionnaires, ESG policy and KPI reporting.
Cinven and its external advisers review the company’s ESG and cyber questionnaires and pre-investment ESG diligence; materiality/reporting and disclosure assessment undertaken.
Cinven and the company agree ESG priorities, ESG KPI reporting and timetable and discuss resourcing/external advisery support.
Company to provide quarterly ESG KPI data; ongoing dialogue/updates; Value Creation Plan update (where relevant); ongoing peer comparison.
Cinven annual ESG portfolio conference; regular access to Cinven ESG advisers; portfolio company networking.
Cinven and the company undertake an ongoing review of ESG KPI data and progress; redefine priorities; and support requirements.
Cinven’s approach to ESG
After more than a decade of integrating ESG into its investment lifecycle, Cinven has developed a formalised approach to ESG. A summary of Cinven’s approach with respect to core ESG topics is outlined below.
Climate change poses a significant challenge to our society today, and in the coming decades. The impacts of climate change are being experienced around the world and require all stakeholders - including financial institutions - to act.
Private equity firms have an important role to play in supporting their portfolio companies to understand the potential impact of climate change on their businesses, and the potential impact of their businesses on climate and the environment. The transition to a net zero economy also presents opportunities to invest in businesses mitigating and adapting to the effects of climate change.
As outlined in Cinven’s most recent ESG Review, climate change is a high priority area of focus for the firm. Cinven is committed to:
- Continue integrating climate-related financial risks and opportunities into its investment process, including supporting portfolio companies to undertake climate-related financial assessment aligned to the Task Force on Climate-Related Financial Disclosures (TCFD)
- Supporting Cinven’s portfolio companies to successfully transition to a low carbon economy
- Actively monitoring carbon emissions of Cinven’s portfolio companies on a quarterly basis alongside other environmental KPIs that are material to its portfolio companies such as energy consumption (including percentage renewables), water consumption, and waste generated that is not recycled.
- Undertaking a review of its operational and financed emissions with a view to aligning its funds with decarbonisation targets.
Inclusion & Diversity (I&D)
Inclusion & Diversity (I&D) is a hugely important area of focus for Cinven’s employee engagement, its own firm performance and its engagement with its portfolio companies and other stakeholders.
Inclusion & Diversity has been shown to be a critical component for improving individual, team and company performance. The approaches and perspectives of diverse team members from different backgrounds, identifies and personality traits contributes to stronger solutions and decision-making. And in environments where diversity is clearly valued, those different solutions are more likely to materialise.
Additionally, Inclusion & Diversity is an essential aspect of human rights that must be respected. Private equity firms have a role to play in supporting underrepresented groups who face structural and cultural inequalities to access opportunities and be treated fairly.