The Pollen Street Capital ESG policy Our Responsible Investing Principles
Pollen Street Capital (“PSC”) has a proud history of focusing on investors and delivering strong risk adjusted returns. Thinking, behaving and investing responsibly underpins this approach. Our investors expect PSC to deliver these strong financial returns – but not at the expense of the community, environment or market integrity.
As a responsible asset manager, we understand that it is important to integrate environmental, social and governance considerations (“ESG”) into our investing, operations and culture. ESG is multi-faceted and there are many ways to engage with it, but we try to focus on those ESG considerations that are most pertinent to our core business and where we feel we can have the most impact.
This policy sets out the key elements of PSC’s approach to managing ESG matters in its investment decisions and as a responsible company.
Authority and Responsibilities
PSC has established an ESG Committee which is responsible for setting the strategy, framework and processes for ESG integration across the investment process.
The Head of ESG, supported by the ESG Committee is responsible for:
- setting the strategic direction of ESG at PSC, in alignment with the Group strategy
- communicating and instructing relevant PSC staff on the contents of the Policy;
- advising and acting accordingly on any breaches of the Policy; and
- ongoing review and recommendation of amendments to the Policy.
The investment teams are responsible for:
- ensuring that ESG considerations are fully embedded within the investment process; and
- escalation of ESG issues identified as part of diligence and monitoring of investments, with appropriate follow-up with investee companies to ensure these are being addressed.
The Policy is designed to provide assurance to the Board of PSC, as well as to existing and potential investors and other stakeholders including regulators, that we look to invest in a responsible manner, minimising any potential damage to the environment and providing a positive contribution to our community. We adopt a zero-tolerance approach to corruption, human rights violations, abuses of labour standards and any other serious violations of fundamental ethical norms.
PSC assesses ESG factors and their impact on investments across the various assets in which it invests. PSC also seeks to improve upon the performance of investee companies and co-managers across a range of ESG factors. PSC expects this to be done in a manner which is consistent with its investment objectives and fiduciary duties. By encouraging responsible corporate behaviour, PSC seeks to protect and enhance the value of its investments in the long-term.
ESG initiatives at the asset level are reported to the ESG Committee, the PSC Board, and to investors.
ESG in the Investment Process
As an asset manager, we can have influence and impact through the companies and counterparties we invest in and with. This gives us an opportunity to promote ESG. We therefore integrate the following into our investment processes:
- Due Diligence: we conduct upfront diligence on ESG issues relevant to our investments based upon an ESG focussed questionnaire to understand what our potential investee companies and counterparties currently do.
- Engagement and embedding: we actively engage with management teams to set ambitions and achieve better ESG performance.
- Monitoring: we conduct regular monitoring and reporting of ESG risks and opportunities across our portfolio, with escalation of material incidents. This is built into the investment monitoring programme.
- Training: our team understands the reasons, issues and importance of ESG, and receives training on how they can incorporate it into what we do.
- Reporting: we report on ESG activity across our investments, to increase transparency and understanding of our impact
Principle Adverse Sustainability Impacts
Given PSC’s commitment to ESG, it confirms that it considers principal adverse impacts of investment decisions on sustainability factors.
PSC’s due diligence process includes consideration of ESG risks and opportunities using an ESG focussed questionnaire to understand and gather data on any sustainability impacts that potential investments may have across various assets. The scope of the due diligence depends on the industry, market risk exposure, and the jurisdiction in which the investment must be made. Pollen Street adopts a zero-tolerance approach to corruption, human rights violations, abuses of labour standards and any other serious violations of fundamental ethical norms.
Where adverse sustainability impacts are identified with respect to any potential investments in the due diligence process, the investment is escalated to, and is considered by, the Investment Committee. Should an identified ESG risk fall within the scope of activities excluded under Pollen Street’s ESG policy, the investment will not proceed. In cases where the ESG risks are potentially material, but not covered by exclusions, further consideration shall be given to the exposure of risks, and the likely impact that such risk could have on the performance of the investment. Should any impact be deemed to be potentially materially adverse to the performance of the investment or the reputation of Pollen Street, or its investors, or not be capable of remediation, the investment shall not progress.
In order to mitigate potential adverse impacts, Pollen Street works with the management team of investee companies to improve their performance across a range of ESG factors in line with a relevant fund’s investment objective. In addition, where we have identified ESG improvement areas during the due diligence process, which can be remedied post-investment, these can also translate into recommendations for post-investment improvements.
Responsible investment and management of sustainability risks are included in annual performance objectives, as relevant or as appropriate, for PSC employees, aligned to wider ESG goals. These are not currently linked to specific measures, however a review is underway and the Remuneration Policy will be updated accordingly.
Pollen Street ESG Impact Areas
From our strategic approach to ESG, we consider the following to be the areas which are most relevant to our investments. They provide the focus for the ESG aspects of our investment process, and guide our set of minimum standards:
- Marketplace: How do the products and services we provide benefit our end-customers, suppliers and investors, and how could they be detrimental to them?
- Treating customers fairly in all interactions
- Commitment to protecting customers
- Responsible marketing and customer service
- Financial inclusion
- Governance & Leadership: Are we appropriately accountable for our decisions?
- Focus business activity which builds shareholder value and fosters sustainable long-term investment.
- Appoint Boards with a diverse mix of gender, skills, experience and competency.
- Implement remuneration structures aligned to the delivery of company strategy, long-term performance and shareholder value creation.
- Identify and manage all material risk factors, including ESG risks.
- Implement and maintain robust AML and KYC processes, which are appropriate to identify and prevent proliferation of financial crime.
- Workplace: Have we created a positive working environment for our people at the Group and portfolio level, and what more could we be doing to engage and promote diversity and inclusion?
- Uphold labour laws and maintain fair employment conditions
- Respect the rights of workers and avoid being complicit in human rights abuses
- Maintain workplace health and safety standards
- Respect and promote diversity and inclusion and avoid discrimination in the workplace
- Community: How can we be strategic with our Social Investment efforts, to best leverage the skills and resources PSC and the portfolio has available? Are our efforts providing real benefits and are we focusing on the right issues?Supporting Regional economic development and prosperity
- Investing in impactful and measurable projects
- Environment: What do we do that harms our environment, and what can we do to protect it?
- Commitment towards resource efficiency (energy, water, waste) and greenhouse gas emission reductions.
- Identify the environmental impact of their operations and implement reasonable measures to minimise negative impacts.
- Identify climate change related risks and develop strategies for managing material risks.
We will adapt and update these issues as our strategic approach to ESG continues to develop.
Reporting and Governance
PSC will provide investors with more granular communication and insight into our responsible investment activity via investment reports, annual investment reviews and manager ESG questionnaires. We are also cognisant of the ESG priorities of our investors, and how they align with what we do. We therefore ensure that as a minimum our fund investment mandates meet those standards prescribed by our investors. How we do that in each case will be detailed in the constituent documents of those funds.
PSC became a signatory of the UN’s Principles of Responsible Investment in April 2019 and will participate annually in the PRI Reporting Framework.
PSC has also launched the Pollen Street Hub, a team which works across the portfolio to manage a series of value-add and best-practice initiatives. The Head of ESG sits within the Hub and provides dedicated resource to drive the ESG agenda both internally and throughout the portfolio.
To maintain the highest standards of ESG at PSC, we have committed to reviewing and updating our ESG Policy on an annual basis.