There is a strong link between companies that have high environmental, social and governance (‘ESG’) standards and those that are able to achieve long-term sustainable business growth. This is aligned with the Company’s purpose and our experience.
Responsibility starts when we first consider investing in a company. The Investment Manager is a signatory to the UN Principles for Responsible Investment and has embedded responsible investing policies into its investment and asset management processes. This policy sets out the businesses in which the Company will not invest, as well as minimum standards in relation to ESG matters which we expect new portfolio companies to meet, or to commit to meeting over a reasonable time period.
For more information on the Investment Manager’s sustainability policies, please refer to the 3i Group website: www.3i.com/sustainability. The adoption of these policies by the Investment Manager meets the Company’s objectives in this area.
The Company has a long track record of investing in sustainable businesses and of working with portfolio company management teams to improve governance and operating standards and to develop growth strategies that align with long-term trends. Long-term trends such as the energy transition or climate change are considered both a risk and an opportunity for the portfolio, and are an increasingly important part of decision making for the Company.
Responsible Investment policy
3i Group is a signatory to the UN Principles for Responsible Investment (“RI”) and has embedded RI policies in its investment and asset management processes. The Investment Manager's philosophy on RI can be summarised as follows:
- The effective assessment and management of environmental, social, business integrity and corporate governance matters has a positive effect on the value of portfolio companies, and hence on 3i Infrastructure;
- Compliance with local laws and regulations may not be enough to meet global expectations, deliver value and enhance its reputation and licence to operate; and
- It is vital that the Investment Manager seeks to identify all material environmental, social and governance (“ESG”) risks and opportunities through its due diligence and effectively manages them during the period of the Company’s investment.
The Investment Manager's RI policy makes clear that it aims to use its influence to promote a commitment in portfolio companies to:
- Comply, as a minimum, with applicable local and international laws
- Mitigate adverse environmental and social impacts and enhance positive effects on the environment, workers and relevant stakeholders
- Uphold high standards of business integrity and good corporate governance.
The main features of the policy include:
- Clear statements of the commitment to mitigate adverse environmental and social impacts and uphold high standards of business integrity and good corporate governance
- An exclusion list of businesses and activities in which investment is precluded
- A referral list of businesses and activities which may be particularly sensitive and may require additional scrutiny
- A set of minimum ESG standards that portfolio companies should meet, either at the time of investment or within a reasonable period thereafter.
UN Sustainable Development Goals
In order to assess the impact of our portfolio companies on the environment and the communities in which they operate, the Board and the Investment Manager use a number of frameworks, including the UN’s Sustainable Development Goals (‘SDGs’).
During the year, the Board and the Investment Manager considered each of the portfolio companies against the SDGs. This process, alongside the conversations between the portfolio companies and the Investment Manager around sustainability, helps us to understand the impact that each of the investments makes, to identify improvements and to help develop their sustainability strategy and objectives.
We believe that each of our portfolio companies is able to make a positive contribution to one or more of the SDGs. In particular our approach to governance, and to labour and health and safety, makes a positive contribution to the employees, customers, suppliers and local communities in which they operate.
Additionally, through their operations, several of our businesses also make positive contributions to the provision of renewable energy, to development of infrastructure to support economic growth, managing and minimising the waste of precious resources and to providing high quality and safe healthcare. A summary of this assessment and mapping can be found in our annual report.
Low Carbon Energy
We support the transition to a low carbon economy, investing in businesses such as Valorem and Infinis which contribute towards sustainable energy generation. Our investment, Attero, is the leading Dutch player in the waste treatment market. This business sorts and treats waste for recycling, alongside composting and anaerobic digestion facilities, and produces sustainable electricity for 350,000 households by converting waste to energy.
Benefits for Communities
Investing in infrastructure assets has economic and social sustainability benefits for communities in ourtarget markets. We act as a conduit for institutional and retail savings into these assets, helping our shareholders to achieve their own return objectives in a sustainable way with low levels of volatility and little correlation to wider equity markets.
We govern the Company and, through the Investment Manager, the assets in which we invest so as to support our sustainability objectives. The Investment Manager's engaged asset management approach seeks to improve and enhance the governance of businesses that we acquire, through implementing and upgrading policies and procedures as a priority following a new investment, working with management teams to define long term sustainable business plans, and working with lenders and other providers of finance to put in place sustainable financing.
The Company does not offer, pay or accept bribes and is committed to working only with third parties whose standards of business integrity are substantively consistent with its own. The Company also expects the businesses it invests in to commit to avoiding corruption in all its forms and to comply with anti-bribery, anti-fraud and anti-money laundering laws applicable to them. The Company has an anti-bribery policy and is fully compliant with the provisions of the UK Bribery Act.
3i Infrastructure has developed policies and procedures in relation to the procurement of services received from third-party providers. As far as possible, the Company will work only with suppliers who support its aim to source products and services responsibly. 3i Infrastructure aims to have a collaborative relationship with its service providers and, wherever possible, will work with them when problems or issues arise to help them meet its requirements.
Prompt Payment Code
3i Group performs most payment and treasury functions for the Company and is a signatory to the Prompt Payment Code. The Code encourages and promotes best practice between organisations and their suppliers. Signatories to the Code commit to paying their suppliers within clearly defined terms, and to ensuring there is a proper process for dealing with any issues that may arise.
Modern Slavery Act
The Board is committed to investing responsibly and notes the statement made by 3i Group plc under Section 54 of the Modern Slavery Act 2015 (“MSA”), which applies to the Company’s Investment Manager. The Company itself is not subject to the MSA as it is a Jersey company.
Our Whistleblowing Policy sets out how to deal with any concerns
Equal Opportunities and Diversity Policy
The Company applies 3i Group’s Equal Opportunities and Diversity Policy in so far as it is appropriate to the non-executive Directors of the Company.