Responsible Investment Policy¹
GEF Capital has adopted a Responsible Investment (“RI”) strategy to make and manage our investments. The incorporation of environmental impact and ESG factors into our investment processes is one that is integral and not separated from our investment analysis and investment activities. We believe that this will generate superior risk-adjusted returns and support us in achieving our goal of being advocates for, and actively influencing the behavior and performance of our portfolio companies. We firmly believe companies with improved management of ESG practices can optimize their business models, thereby increasing productivity and customer confidence, and creating a distinct competitive advantage leading to sustainable value creation. It also presents an avenue to effectively manage risks as well as capitalize on opportunities.
GEF Capital’s Responsible Investment strategy is comprised of three core tenants:
Integration: We seek to integrate material environmental impact and ESG considerations within the investment underwriting process;
Engagement: We fulfill our fiduciary obligations as equity owners and stakeholders in our companies and strive to actively promote positive ESG practices; and
Collaboration: We work collaboratively with our ecosystem of portfolio companies and third-party groups to create a supporting system for responsible investment.
Responsible Investment Process
GEF Capital, within each of its funds’ strategies, actively assess environmental impact and ESG factors as part of a comprehensive process beginning at an investment’s origination through due diligence and during our tenure as a shareholder of the portfolio company. Utilizing our assessment methodology, we work collaboratively alongside our partners and companies seeking to map risks and capture long-term value.
As a thematic-focused investor across the climate, sustainability and environmental sectors, GEF Capital’s strategy focuses on businesses catalyzing a positive environmental impact.
In the very early stages of our investment cycle, we apply the United Nations Sustainable Development Goals (“UN SDGs”) framework to evaluate the alignment of the investment opportunity with the UN SDGs. This helps us to further evaluate a prospective portfolio company’s commitment and ability to address the larger sustainability goals of the planet.
Once we have established that a prospective investment has met the criteria to advance in our investment process, we initiate a thorough and multidisciplinary due diligence. One of the key aspects assessed at this stage is the business’ performance against material ESG factors which can impact the long-term performance and sustainability of the company. This analysis is intended to identify risks and opportunities, potential red flags and required actions. The ESG diligence is conducted in line with the principles and standards of internationally accepted frameworks. As necessary, we also rely on third-party experts, though applicability may vary across geographies and funds.
Gaps, opportunities, and risks that arise from the ESG diligence, as well as the company’s capacity to address such items, help shape an “Action Plan”, which serves as a value-creation strategy for the business post-closing. This Action Plan is often codified in the transaction documentation to ensure accountability from all parties.
GEF Capital believes that active and collaborative partnership with our investee companies is a key driver of an investment’s success. Each of our funds uses varying portfolio and ESG management strategies, but our firm always seeks to work closely with the management teams to share our collective experience in building sustainable businesses. As part of the Action Plan, and depending on the fund strategy, GEF Capital may formulate an ESG committee within the Board of Directors at the portfolio company level and may implement legal and/ or other instruments, amongst other ESG accountability initiatives.
Commitment to Responsible Investment
At GEF Capital, we believe that we can promote the pragmatic implementation of environmental and sustainability investing through our investment activities.
Signatory to the United Nations Principles for Responsible Investment (“UN PRI”)
GEF Capital Partners is a signatory to the UN Principles for Responsible Investment, a network of like-minded investors that work to promote sustainable investment through the incorporation of ESG factors into their investment decision making and ownership practices, in line with six core principles.
Signatory to the Task Force on Climate-Related Financial Disclosure (“TCFD”) Framework
GEF Capital Partners is a supporter to the Task Force on Climate-Related Financial Disclosures Framework, the emerging primary framework to improve and increase reporting of climate-related financial information.
Transparency and Reporting
GEF Capital is committed to the same level of transparency and reporting that we require of our portfolio company investments. We typically produce an annual impact report that outline the important environmental investing and ESG policies and goals for our funds. We are committed to providing detailed and updated data on our portfolio to our investors and external stakeholders as part of the regular investment reporting process.
Every member of GEF Capital believes in the importance of building a more sustainable future. GEF Capital has appointed a global ESG team which consists of an ESG team leader and a Partner from each regional office. This global ESG team convenes regularly to set and ensure accountability towards the firm’s impact and ESG policies. At the regional level, the ESG team leader and the Partner then work to adhere each fund’s investment strategies and portfolios to the firm’s policies.
¹While GEF seeks to integrate certain ESG factors into its overall investment management processes, including certain of the standards and strategies described herein, there is no guarantee that GEF will be able to successfully apply such strategies or will be able to successfully implement its ESG policy. Applying ESG factors to investment decisions is qualitative and subjective by nature, and there is no guarantee that the criteria utilized by GEF, or any judgment exercised by GEF, will reflect the beliefs or values of any particular investor.