Our ESG principles are embedded throughout our operations and help us ensure that our business model will be sustainable well into the future. As a Tsunami of investor seeks sustainable assets, there will be ample supply of capital for companies that are seen as sustainable or becoming more sustainable. Sustainable investments in 2022 account for a third (USD $35.3 trillion) of all investments in the world’s five largest markets, according to the Global Sustainable Investment Alliance.
Capital Innovations ESG Due Diligence™
Capital Innovations fundamentally believe that the integration of environmental, social and governance considerations (“ESG”) in the investment process, both pre and post-investment, will lead to improved and sustainable risk-adjusted returns. ESG not only presents risks to be mitigated, but value creation opportunities. As such, Capital Innovations have fully integrated an ESG process across all asset classes and strategies. ESG is not a separate or stand-alone investment strategy. ESG diligence is incorporated into the investment decision process and the ongoing monitoring and management of investments.
Capital Innovations has established an ESG due diligence process that is tailored for each asset class and strategy and incorporated into the broader business, financial, and operational diligence process for each primary, along with a distinct approach for co-investments and secondaries. This process includes a detailed and comprehensive set of ESG-related risk considerations, as well as value creation opportunities. Dedicated resources are allocated from Capital Innovations to oversee the ESG process in the evaluation and ongoing management of investments.
Capital Innovations has established an ESG due diligence process that is tailored for each asset class and strategy and incorporated into the broader business, financial and operational diligence process, detailing a comprehensive set of ESG-related risk and return considerations.
Capital innovations performs a review of each fund manager and fund’s responsible investment policy, implementation and monitoring framework. Key focus areas include:
- How the Investment Manager or investee company identifies and manages ESG risks and opportunities;
- Has the Investment Manager or investee company clearly identified a responsible person for ESG policy;
- The skill set of the managing partners and/or board and the ESG committee (if ESG responsibility has been delegated);
- The level of involvement of Partner or C-level management, and the level of leadership driving the ESG culture;
- Approach to ESG training and priority of maintaining current best practices; and
- Monitoring and reported of ESG compliance.
These topics are incorporated into the investment decision process and the ongoing monitoring and management of investments.
Ensure the well-being and safety of employees:
Employee Well-Being: Meet or exceed all applicable labor laws and standards in jurisdictions where we operate, which includes respecting human rights, offering competitive wages and implementing nondiscriminatory hiring practices.
Health & Safety: Aim to have zero serious safety incidents within our businesses by working toward implementing consistent health and safety principles across the organization.
Be good stewards in the communities in which we operate:
Community Engagement: Engage with community groups that might be affected by our actions to ensure that their interests, safety and well-being are appropriately integrated into our decision-making.
Philanthropy: Encourage our employees to participate in the communities in which we operate.
Mitigate the impact of our operations on the environment:
Environmental Stewardship: Strive to minimize the environmental impact of our operations and improve our efficient use of resources over time.
Conduct business according to the highest ethical and legal/regulatory standards:
Governance, Ethics, and Fairness: Operate with high ethical standards by conducting business activities in compliance with applicable legal and regulatory requirements, and with our Code of Business Conduct and Ethics.
Transparency: Be accessible to our investors and stakeholders by being responsive to requests for information and timely in our communication.
Sustainability is about doing more with less, whether energy, water, food, or any other critical resource:
Including battery storage; community, commercial and industrial solar; energy efficiency; electric vehicles; fuel cells; wastewater treatment; distributed desalination; and organic waste management.
Sustainable Water, Waste & Agriculture
Capital Innovations was one of early signatories of the Principles for Responsible Investment (PRI), formally demonstrating our ongoing commitment to responsible investment and environmental, social and governance (ESG) best practices. Based on our heritage as an owner and operator, we have a long history of embedding ESG considerations into our operations. Michael Underhill is Chairman Emeritus of the UNPRI Infrastructure Workstream. He was elected to the position in 2011.
During Michael Underhill's leadership at UNPRI, he led creation of an investment scoring compendium. The scores produced can be turned into investment decisions through an economic cost/benefit analysis to create a framework that can be calibrated according to business needs. This tool allows the investment teams to screen a larger pool of potential opportunities and focus more on value-creating activities in the ESG space. Mr. Underhill and Capital Innovations maintains ownership of the intellectual property.
The PRI is one the world’s leading proponents of responsible investing, with an emphasis on understanding the investment implications of ESG factors and supporting an international network of investor signatories in incorporating these factors into their investment and ownership decisions.
Integrating ESG considerations into our investment process.
In our due-diligence process for all of our potential investments, we use both internal experts and outside consultants as well as different ESG frameworks to identify material ESG factors. This analysis includes everything from ensuring environmental, legal, and regulatory compliance to the identification of opportunities to add value and mitigate risk in our portfolio of companies. Our investment teams are using an ESG due-diligence questionnaire to ensure that all potential risks and opportunities have been considered.
All investments made by a Capital Innovations fund must be approved by the fund’s Investment Committee. Investment teams provide a detailed memorandum to the committee that outlines the merits of the transaction, as well as disclosures relating to risks, including any material ESG issues and potential mitigation strategies.
Once a company is acquired, we create a tailored integration plan to ensure that all material ESG-related matters are prioritized. ESG risks and opportunities are updated regularly and actively managed by the portfolio companies, with guidance from our in-house teams. This allows us to draw upon local expertise and share best practices across the organization.
As a 51% Female owned firm, embedded in our culture is a commitment to advancing diversity and inclusion across our organization. This begins at recruitment, continues in leadership training programs and is woven into our policies and procedures. As a global firm, we know that the best ideas come from having people from different backgrounds, perspectives, experiences and skills across all businesses, levels of seniority and offices.
Training programs set clear expectations for our leaders in terms of their role in helping all team members achieve their potential. The training emphasizes building trust with their teams, becoming aware of unconscious biases and provides guidance on how to add rigor to decision-making especially in recruiting, performance feedback and promotion, with the goal of creating a more diverse and inclusive environment.
Women’s networks in our various regions help our female colleagues connect with each other and provide support for career growth and leadership development.
Nothing on this website should be deemed to be investment advice. The views and forecasts expressed in any materials on this website are as of the date indicated, are subject to change without notice, may not come to pass and do not represent a recommendation or offer of any particular security, strategy, or investment. Capital Innovations, LLC has no obligation to provide revised assessments in the event of changed circumstances. There can be no assurance that the strategies described will achieve their objectives and goals. Capital Innovations® is a registered trademark of Capital Innovations, LLC. All content is subject to our terms and conditions of use policy.
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