Responsible Investing
Integrated Approach to Responsible Investing
Investindustrial follows a systematic approach to incorporate sustainability throughout the investment period, from pre-investment due diligence to realisation. The driving factor behind this approach is to maximise stakeholder value by identifying material risks and opportunities associated with sustainability matters and to prioritise and allocate the appropriate focus and resources to address any risks and capitalise on potential opportunities. This approach is underpinned by Investindustrial’s Responsible Investment Policy and Environmental, Social, Governance Policy, first issued in 2009. Both policies were reviewed and updated in late 2021/ early 2022, to reflect the inclusion of an EU Taxonomy assessment in the Firm’s due diligence review as well as an updated list of ‘Excluded’ or ‘Sensitive’ sectors. In addition, the revised policies incorporated, for the first time, a positive screening of industries to better align with Investindustrial’s commitment to become Net Zero by 2030 and to reflect ESG risks in alignment with Investindustrial’s investment ethos.
Investindustrial’s dedicated Sustainability team works closely with the Investment advisory team to support pre-investment due diligence and exit preparation and outcomes. The combined impact of sustainability, climate, governance, supply chain and corporate culture initiatives on the value of each portfolio company is assessed against revenue, cost, risk and reputation.
Post-investment, Investindustrial’s Sustainability team continues to work closely with the Investment advisory team on sustainability matters and provides support to portfolio companies as they adopt Investindustrial’s sustainability framework and integrate it into their own sustainability strategies, planning and implementation. This approach is an integral way of Building Better Companies. It will typically take place over a three to five year period, depending on the sophistication of each business and the maturity of their existing sustainability programmes and initiatives and whether sustainable transformation is core to the value creation plan.
Assessing Impact
All portfolio companies are required to report on key ESG KPIs on a quarterly and annual basis. The Investindustrial's annual ESG questionnaire has developed over a number of years and reflects those metrics that allow the Firm to better monitor risks and Firm-level objectives as well as to meet investor requests and regulatory requirements. The quarterly questionnaire is focused on questions that are valuable to track with greater frequency in order to monitor ongoing ESG performance. It forms the basis for discussion during quarterly calls between Investindustrial’s Sustainability team and portfolio companies, and for quarterly dashboard reports which evaluate performance against Investindustrial’s sustainability framework and are shared with Investindustrial Investment advisory teams and senior management.
Many initiatives can be tracked by assessing intangible outcomes, such as influencing the company culture and business practices through indirect business metrics such as improved staff retention or net promoter scores, and a reduction in accidents and injuries as examples.
The impact of other initiatives can be measured based on de-risking the organisation from liabilities and potential fines or making the business more resilient. Most sustainability initiatives undertaken by portfolio companies can be tied to quantitative metrics, such as direct and indirect cost reduction as well as preferred access to capital markets through ESG-linked loans and green bonds. These initiatives will have a defined business plan with ROI (Return on Investment) projections and the savings from these projects can be tracked quarterly. Whereas ESG-linked loans will typically provide interest rate reductions based on meeting pre-defined ESG criteria relating to, for example climate, diversity, supply chain and governance. The impact of new products and services that are derived from a sustainability initiative, can be tracked traditionally by monitoring revenue growth and margin contribution.
