Responsible investment policy
At ICG we believe that environmental, social and governance (ESG) factors can positively contribute to investment performance, as well as contributing to help build a more stable, sustainable and inclusive global economy. This Responsible Investment Policy outlines the principles for responsible investment and ICG's approach to responsible investment.
PRINCIPLES FOR RESPONSIBLE INVESTMENT
ICG has been a signatory to the United Nations Principles for Responsible Investment (UNPRI) since 12th April 2013. The aim of the UNPRI is to ensure that ESG issues are considered during the investment process and in subsequent management investments. ICG acknowledges that ESG issues can affect the performance of investment portfolios. Investing practices which incorporate ESG issues can be both financially profitable and profitable for society as a whole. ICG incorporates ESG policies where appropriate in the investment process. This includes discussions with the businesses that we invest in, about how they deploy ESG practices and policies, and understanding the ESG impacts of our entire portfolio.
The UNPRI was launched in 2006 and has become the standard for global best practice in responsible investing. The framework is voluntary for incorporating ESG issues into mainstream investment practices.
As a signatory of the UNPRI, ICG is committed to the following six principles:
- Principle 1: Incorporating ESG issues into investment analysis and decision-making processes
- Principle 2: Being active owners and incorporating ESG issues into ownership policies and practices
- Principle 3: Seeking appropriate disclosure on ESG issues by the entities in which investments are completed
- Principle 4: Promoting acceptance and implementation of the principles within the investment industry
- Principle 5: Working together to enhance effectiveness in implementing the principles
- Principle 6: Reporting on our activities and progress towards implementing the principles
Implementing UNPRI Principles means that ICG:
- Promotes responsible, sustainable business practices and investment strategies in all our business decisions and the companies that we invest in
- Delivers social, environmental and economic benefits, that enhance long-term performance through an understanding of how ESG issues affect our business and our investments
- Mitigates potential risks and liabilities, as well as identifies opportunities
- Measures and reports on these benefits to our investors and stakeholders
- Encourages the companies we invest in to be responsible towards their own stakeholders
For more information on UNPRI please visit www.unpri.org
ICG'S APPROACH TO RESPONSIBLE INVESTMENT
ICG's Responsible Investment Policy has been expanded throughout FY2016 and now covers European mezzanine, Asia-Pacific Mezzanine, European Senior Direct Lending and European Credit Fund Management. It is the intention, through FY2017, for the policy to cover additional AUM, including ICG-Longbow, our Real Estate Division, and North America.
ICG's approach to Responsible Investment is outlined in more detail below:
At ICG the opportunity to fully understand the ESG implications of an investment and exert influence are largely at the time of initial investment. Through various training modules and input from the Responsible Investment Committee, ICG's investment executives are provided the skills necessary to identify and investigate ESG issues during the pre-investment stage of an investment, specifically through:
- ESG checklists provided to the investment teams for completion during the early stage of investment due diligence
- ESG sections have been incorporated into all Investment Proposals (and NDS/PICA where appropriate) so the Investment Committee is able to make a judgement on ESG considerations during the investment process
- Specialist ESG due diligence can be carried out by third party consultants as and when further investigation is needed
- In certain cases ICG’s Responsible Investment Committee will require investment executives to complete ESG case studies following an investment
Where ICG has significant influence in the ownership structure or capital structure of companies we'll engage with them to ensure they deliver high levels of corporate responsibility. Where appropriate we'll also exercise our influence at the board level and engage with companies on strategy, risk, performance and governance. There are a number of ways investment executives help portfolio companies focus on ESG issues, including:
- Ongoing discussion with management about ESG issues within the business, or potential ESG issues in the future.
- ICG ask investee companies to disclose to us how they factor ESG into their day to day business activities.
- Ongoing monitoring of ESG risks within a business through ICG’s annual ESG questionnaire.
- Adding ESG to the agenda of board meetings.
Following an investment it is important that ESG remains part of portfolio monitoring, and this is achieved in two ways: through external engagement with portfolio companies and through internal training to ensure staff have the skills and understanding to monitor ESG issues.
External engagement with portfolio companies is achieved through the strong relationships our investment executives have with management at portfolio companies. These relationships assist in maintaining an ongoing dialogue around ESG factors impacting a business and allows ICG to exert influence and react to findings, particularly following the annual ESG survey.
Internally, the Responsible Investment Committee aim to ensure investment executives have the skills required to engage with portfolio companies on ESG factors. Through ongoing training, communication and support, ICG has demonstrated an improved approach to ESG throughout the investment process.
Managing Conflicts of Interest
ICG will always manage conflicts of interest to ensure investors and the business as a whole are not negatively impacted. A number of factors are taken into account to ensure conflicts of interest are minimised, including;
- Ensuring portfolio companies have an empowered and effective Board,
- There are appropriate checks and balances in company management systems,
- There are effective systems for internal control and risk management covering ESG issues,
- There is transparency and accountability, and,
- Risk and reward are in balance and in-line with stakeholder interests.
Where there is a conflict of interest we'll take advice from our Investment Committee, external counsel and ICG's Legal and Compliance department to ensure that the course of action is both in the interests of investors, companies and follows the correct legal path. As a listed company on the London Stock Exchange, ICG subscribe to a variety of stringent regulations which further reduces the risk of conflicts of interest arising.
More details of ICG's progress with Responsible Investment can be found in the Responsible Investment Report for FY2016, available below.
Download our ESG Checklist 2017
Download our Responsible Investing Report 2015-2016
Download our Responsible Investing Report 2014
Download our Responsible Investing Report 2013