Sustainability and ESG
At Albion we stand by the principles of responsible investment in our internal and external processes and policies to ensure alignment with our fundamental commitment to pursuing long-term financial returns for our clients. We are signatories of UN Principles for Responsible Investment.
Our mission: is to deliver strong, consistent long-term returns across the funds we manage and align ourselves to the long-term objectives of our clients and shareholders.
Our investment process: we incorporate environmental, social and governance (ESG) considerations throughout the investment decision making process - we integrate ESG principles at the pre-investment, investment stage and exit stages. This forms part of our process to ensure an appropriate risk-return profile for our investments, and therefore creates value for our investors and helps our portfolio companies develop sustainable long-term strategies.
Our commitment: in making our commitment to responsible investment and sustainability we have aligned ourselves with the UN Sustainable Development Goals (SDGs). We believe that by focusing on a few specific goals - G13 Climate Action, G10 Reduced Inequalities, G16 Peace, Justice and Strong institutions - and actively monitoring them we are creating tangible positive action towards meeting of the global challenge by 2030.
Many investments within our portfolio also have good alignment with delivering a number of other SDGs, including G3 Good Health and Wellbeing, G5 Gender Equality, G8 Decent Work and Economic Growth, G11 Sustainable Consumption and Production ), which we continue to identify, optimise and evaluate.
SUSTAINABLE FINANCE DISCLOSURE REGULATION
Integration of sustainability risks: Albion Capital Group LLP (Albion Capital) is a signatory of United Nations Principles for Responsible Investments (UNPRI) and incorporates environmental, social and governance (ESG) considerations into its investment decisions. This forms part of our process to create value for investors and develop sustainable long-term strategies for our portfolio companies. We report against ESG criteria to UNPRI (annually) and to the boards of Albion Capital’s funds (quarterly).
We integrate ESG principles at the pre-investment, investment stage and exit stages.
Pre-investment stage: An exclusion list is used to rule out investments in high risk/ unsustainable areas. ESG due diligence is performed on each potential portfolio company to identify any sustainability risks associated with the investment. Identified sustainability risks are ranked from low to high and are reported to the relevant investment committee. The investment committee considers each potential investment. If sustainable risks are identified mitigations are assessed and, if necessary, mitigation plans are put in place. If this is not deemed sufficient, the committee would consider the appropriate level and structure of funding to balance the associated risks. If this is not possible, investment committee approval will not be provided, and the investment will not proceed.
Investment stage: An ESG clause is integrated into the pre-negotiation template shareholders agreement for all new investments. The clause outlines the portfolio company’s commitment to combine economic success with ecological and social success.
All new and existing portfolio companies are asked to report against an ESG Balanced Score Card annually. The ESG Balanced Score Card contains a number of sustainability factors against which a portfolio company will be assessed in order to determine the potential sustainability risks and opportunities arising from the investment. The score cards form part of our internal review meetings alongside discussions around other risk factors, and any outstanding issues are addressed in collaboration with the portfolio companies’ senior management. When follow-on investment is considered for portfolio companies, relevant ESG actions are identified, discussed at investment committee, and implemented as conditions of further investment.
Exit stage: We aim to ensure that good ESG practices remain in place following exit. For example, by ensuring that the portfolio company creates a self-sustaining ESG management system during our period of ownership, wherever feasible.
Principal adverse impact statement: The EU Sustainable Finance Disclosure Regulation (SFDR) requires us to make a “comply or explain” decision whether to consider the principal adverse impacts (PAIs) of our investment decisions on sustainability factors. Albion Capital has decided not to comply with that PAI regime at present. We are therefore required to publish and maintain on our website a statement to explain our reasons for not complying with the PAI regime, and information as to whether and when we intend to comply with such regime.
Albion Capital is supportive of the policy aims of the PAI regime, to improve transparency to clients, investors, and the market, as to how financial market participants integrate consideration of the adverse impacts of their investment decisions on sustainability factors. However, we have chosen not to comply with the regime for the time being. We manage funds that invest primarily in early-stage private companies and the data required to comply with the technical reporting requirements of the PAI regime is not readily available.
We will keep our decision not to comply with the PAI regime under regular review.
Remuneration policy statement: Albion Capital’s remuneration policies, procedures and practices have been designed to promote sound and effective risk management and do not encourage risk-taking which is inconsistent with the risk profiles or rules of the funds we manage. The polices are designed to encourage the alignment of the risks taken by staff with those of the funds, the investors in the funds and the firm itself and in line with the business strategy, objectives, values, and interests of the firm. Albion Capital also has policies and procedures in place to mitigate any potential conflict that may arise.
Annual staff appraisals are carried out to assess individual performance, both financial and non-financial criteria are considered when assessing performance.
We believe that sound and effective risk management will not encourage excessive risk taking with respect to sustainability risks. Our policies and procedures on mitigating conflicts are consistent with the integration of sustainability risk in the firm’s investment process. Further, the annual staff appraisals include a compliance review of any breaches or errors of any of our policies or procedures, including the ESG policy.