Environmental, Social and Governance Policy
Amberside Capital are committed to sustainable investment management which benefits people and the planet. To achieve this aim, we have developed ESG (Environmental, Social, and Governance) analysis, monitoring, and improvement processes which are integrated throughout our investment lifecycle. The overwhelming objective is to contribute to the following outcomes:
• Mitigating climate change, and in particular carbon reduction;
• Increasing biodiversity;
• Improving public health;
• Reducing inequality; and
• Improving education.
2. Background and Purpose
The purpose of the Amberside ESG Policy (the “Policy”) is to set out the ESG philosophy, commitments, values and approaches taken by the company which ultimately informs the Amberside ESG framework and ESG integration methodology. The Amberside ESG framework is the subject of a separate internal process document.
Amberside will be actively seeking investments in sectors that realise demonstrable impact on the outcomes identified in section 1. Amberside believes that a responsible investment approach that promotes the integration of Environmental, Social and Governance (“ESG”) issues is essential if the impact potential of an investment is to be fully realised, maintaining sustainable value over the long term.
This policy also serves as a method for transparent communication to the company’s stakeholders, in particular current and potential investors, in order that they can fully appreciate and understand the company’s strong commitment to promoting and integrating sustainability and ESG in its investments.
3. What is ESG?
ESG considerations are the range of environmental, social, and governance standards that can be used to assess the ethical performance of an investment. Examples of ESG considerations are shown below:
• Greenhouse gas emissions and other pollution
• Waste output
• Resource management
• Quality job creation
• Diversity and equality
• Impact on the local community
• Board and management structure
• Conflicts of interest
• Company policies and procedures
As managers of third party funds, we have a fiduciary duty to act in the interests of our investors. This duty extends beyond financial interests to ESG matters.
4. ESG Values and Commitments
The Amberside ESG framework and its integration approach are informed by the company’s own ESG values and its commitments made to uphold industry recognised principles.
4.1. ESG Values
Amberside has formulated a series of investment values that drive and inform its processes when an investment commitment is made as well as its ongoing asset management:
• Amberside will always act ethically and with integrity;
• Amberside will comply with relevant laws and regulations;
• Amberside will invest in transactions that contribute towards the outcomes identified in section 1 of this Policy;
• Amberside will respect all stakeholders impacted by our activities;
• Amberside will not tolerate discrimination and will actively promote diversity within its investments; and
• Amberside will not accept any form of modern slavery or human trafficking and will treat employees fairly and with respect.
4.2. Governance Policies
Amberside is committed to the implementation of all appropriate governance policies within its own company and within its investee companies. The current list of policies (not exhaustive) being drafted, to be agreed by the board and implemented are:
• Health & Safety
• Equal Opportunities / Diversity
• Anti- Corruption
• Code of Conduct
• Code of Ethics
• Cyber Security
4.3. Commitments to International Industry Initiatives
Amberside recognises the benefit of collaborating with international ESG focused initiatives promoting ESG interests to ensure that its approach continues to align with and to benefit from best practice.
4.3.1. Principles for Responsible Investing
Amberside is a signatory to the Principles for Responsible Investment (“PRI”). The PRI is an independent body which supports investors in managing risks by better incorporating ESG analysis into investment decisions. Staff are encouraged to regularly review the PRI framework and Amberside will keep its team informed of the steps being taken to meet these principles. The core principles of the PRI are listed below:
Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.
Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.
Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.
Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.
Principle 5: We will work together to enhance our effectiveness in implementing the Principles.
Principle 6: We will each report on our activities and progress towards implementing the Principles.
4.3.2. Paris Agreement and Net Zero
Key to Amberside’s ESG strategy are the goals of the 2015 Paris Agreement (COP 21) that aim to substantially reduce global greenhouse gas emissions and to limit the global temperature increase to 2 degrees Celsius compared to pre-industrial levels, while pursuing means to limit the increase even further to 1.5 degrees. The agreement includes commitments from all countries to reduce their emissions and work together to adapt to the impacts of climate change and calls on countries to strengthen their commitments over time.
The UK was the first major economy to announce that it is to bring all greenhouse gas emissions to net zero by 2050. Increasingly, the UK’s major companies are following suit and declaring the same ambitious target with (as of March 2021) 30 of the UK’s FTSE 100 companies having signed up to the United Nation’s Race to Zero campaign – the largest ever global alliance committed to achieving net zero carbon emissions by 2050 at the latest.
Amberside are committed to the net zero aim through implementation of its ESG policy and will be looking to join the recently launched Net Zero Asset Managers Initiative whose aim is ‘to galvanise the asset management industry to commit to a goal of net zero emissions’. This involvement would necessitate working collaboratively with other like-minded asset managers, establishing industry best practice, in order to achieve the ultimate aim of net zero emissions.
Ultimately Amberside is committed to benchmarking the ESG credentials of its investment portfolio companies against their peers, and intend to participate in the Global Real Estate Sustainability Benchmark, (“GRESB”) Infrastructure Benchmark at the appropriate time, should the mix of investments offer an appropriate comparison.
Amberside are committed to appropriate reporting of our activities and how they impact progress towards net-zero and climate change mitigation, in accordance with the recommendations of the Task Force on Climate-rated Financial Disclosures.
4.3.3. UN Sustainable Development Goals
Amberside’s strategy of investing for impact can be aligned to certain specific SDGs and Amberside’s ESG framework is intended to allow periodically reporting of contributions of its investments against them. The SDGs and their underlying goals identified as aligned with Amberside’s framework are:
SDG 3: Good Health & Well-being:
• By 2030, substantially reduce the number of deaths and illnesses from hazardous chemicals and air, water and soil pollution and contamination
SDG 4: Quality Education:
• By 2030, ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university
• By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship
• By 2030, ensure that all learners acquire the knowledge and skills needed to promote sustainable development, including, among others, through education for sustainable development and sustainable lifestyles, human rights, gender equality, promotion of a culture of peace and non-violence, global citizenship and appreciation of cultural diversity and of culture’s contribution to sustainable development
• Build and upgrade education facilities that are child, disability and gender sensitive and provide safe, non-violent, inclusive and effective learning environments for all
SDG 5: Gender Equality:
• End all forms of discrimination against all women and girls everywhere
• Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic and public life
SDG 8: Decent Work & Economic Growth:
• Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value added and labour-intensive sectors
• Improve progressively, through 2030, global resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation
• By 2030, achieve full and productive employment and decent work for all and equal pay for work of equal value
• By 2020, substantially reduce the proportion of youth not in employment, education or training
• Protect labour rights and promote safe and secure working environments for all workers
SDG 9: Industry, Innovation & Infrastructure:
• Develop quality, reliable, sustainable and resilient infrastructure to support economic development and human well-being
• By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes
• Significantly increase access to information and communications technology
SDG 10: Reduce Inequalities:
• By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average
• By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status
SDG 11: Sustainable Cities & Communities:
• By 2030, ensure access for all to adequate, safe and affordable housing and basic services and upgrade slums
• By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management
SDG 12: Responsible Consumption & Production:
• By 2030, achieve the sustainable management and efficient use of natural resources
• By 2030, halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains, including post-harvest losses
• By 2020, achieve the environmentally sound management of chemicals and all wastes throughout their life cycle and significantly reduce their release to air, water and soil in order to minimize their adverse impacts on human health and the environment
• By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse
SDG14: Life Below Water:
• By 2025, prevent and significantly reduce marine pollution of all kinds, in particular from land-based activities, including marine debris and nutrient pollution
5. Investment Screening and Due Diligence
Amberside’s team systematically screens new investment opportunities against the company values. The company typically targets companies with best-in-class ESG practices or with potential to improve ESG performance through its active ownership approach
Amberside then undertakes an initial ESG assessment based on its standardised ESG risk management based due diligence framework for all potential investments. The framework not only includes ESG aspects, but also identification and prioritisation of potential adverse impacts and assessment of sustainability risks on financial returns and how those risks are being mitigated.
The matters listed in section 3 are common across most asset classes and will typically form part of the ESG analysis and monitoring processes for all investments Amberside makes. However, this list is not exhaustive and the team responsible for performing due diligence on a potential investment will identify other ESG considerations associated with that particular investment.
The due diligence process may also involve the appointment of suitably qualified expert consultants as necessary. The outcome of the due diligence process is documented in the submission to the investment committee where the ESG risks and opportunities together with impact potential will be major factors in the decision to invest or otherwise.
6. Active Ownership
Following a transaction closing, Amberside establishes a management plan to address the key actions identified during due diligence ensuring that clear ESG accountabilities for individuals within the investee company structure are clearly established. The management plan may include targeted action plans with a clear formulation of strategic sustainability goals. Amberside may lead initiatives or support management on key ESG value drivers where considered necessary.
The ESG performance of the investee is monitored based on the relevant metrics and key performance indicators identified during the investment process and any additional areas identified by the investment management team. Performance is benchmarked against expectations set by the Investment Committee and the performance of other ESG focused companies in the sector. Staff should refer to the ESG framework for further details on this process.
Amberside will have governance rights at board level ensuring a consistent approach across the portfolio and adherence to this policy. Where decisions are made by shareholder vote we will engage with other shareholders to align their voting. Where we have invested alongside other parties we will apply a collaborative approach to influencing the investee to align with our ESG goals, to maximise the impact of our joint activities.
ESG performance is incorporated into the investment reviews undertaken by the Investment Committee. As well as assessing historic performance, these reviews seek to identify new areas for improvement with the aim that Amberside’s investees remain ahead of their sector on ESG matters. This platform is also used to share knowledge across investments.
We recognise that our own ESG performance must be well managed. Amberside’s own environmental impact, social responsibility, and governance procedures are reviewed quarterly by the Amberside Board.
6. Public Support
Amberside has a responsibility to encourage others to act in an ESG positive manner. As such, when making public statements, engaging with policymakers, or undertaking other activities which may influence the behaviour of others, we must always represent our commitment to responsible investment. The board will review any such activities prior to them being carried out.
8. Review and Compliance with the Policy
The Policy is subject to the approval of the Amberside ESG Committee and ultimately the Amberside Board. The Policy is subject to review on an annual basis or as required to ensure that it remains relevant and current. The Investment Committees is responsible for ensuring this Policy is considered to the extent relevant in all proposed investment decisions.