Our commitment to responsible investment is central to our investment objectives and to fulfilling our fiduciary duties towards our shareholders and beneficiaries. We believe that embedding environmental, social and governance(ESG) thinking into our investment decision-making is critical if we want to create positive futures and sustainable, superior, risk-adjusted returns for our clients. We have adopted an ESG and Impact Management Framework to achieve our vision of continual improvement in ESG performance.
VALUES & DRIVERS
CREATION OF POSITIVE FUTURES
We want to create positive futures for those affected by our investments, resulting in improved living standards, education, housing, employment opportunities and stewardship of ecosystems in which we operate. To achieve this, we must move beyond a narrow focus on commercial/financial returns and proactively seek investment opportunities that create value through positive sustainability outcomes.
SUSTAINABLE, RISK-ADJUSTED RETURNS
We undertake a holistic risk management approach by integrating ESG into our investment process. We strive for sustainable returns – returns that are achievable over the longer term; and we calibrate risk-adjusted returns – returns that have predicted and built in the cost of managing ESG risk and delivering improved ESG performance.
‘Green economic growth’ refers to an economic growth path that is profit-driven but also socially inclusive, resource efficient and low carbon. The term has been adopted globally as a counter-concept to traditional industrial economic growth, which focuses on increasing GDP above all other goals. We actively support investments into this Green Economy.
STANDARDS AND GUIDELINES
We are committed to implementing best international ESG practices. As part of the Old Mutual Group, we are a signatory to the United Nations Principles for Responsible Investment and implements the Old Mutual Investment Group Responsible Investment Guidelines
Other standards and guidelines which we adhere to include:
• IFC Performance Standards for Environmental and Social Sustainability;
• IFC Environmental, Health and Safety (EHS) Guidelines;
• International Labor Organization; United Nations Sustainable Development Goals; and
• Global Impact Investing Network IRIS+
OMAI is committed to applying these principles, standards and guidelines in our investments and ownership practices.
NEGATIVE vs POSITIVE
Management of negative and positive potential impacts is equally important. Management of potential negative impacts from our investments is undertaken through our ESG risk management practices. Management of potential positive impacts is undertaken through our ESG value creation and positive impact practices. Both are managed throughout the investment lifecycle, with risk management (‘do no harm’) being the foundation of every investment. Each of our capabilities has a fit-for-purpose environmental and social management system (ESMS). The ESMS is the system that drives the management of ESG risk and optimisation of positive impact. Impact measurement and management falls under the processes of the ESMS.
APPROACH TO IMPACT MEASUREMENT
The adage of ‘you cannot manage what you don’t measure’ also holds true in the ESG and impact investing practice. Investments that claim to result in positive outcomes require credible, robust measurement to evidence such impact.
The IFC has identified three dominant frameworks adopted for impact ‘measurement’ frameworks which they refer to as archetypes. These include:
1. Impact target archetype (actual measurement of defined metrics against a target/goal)
2. Impact rating archetype (a qualitative assessment of the significance of the impact)
3. Impact monetisation archetype (a quantitative calculation of the degree of impact)
It is critical to identify that there is a difference between ‘measurement’ and ‘rating’, and also that these are not mutually exclusive archetypes. Our primary approach is the impact target archetype. Measurement of relevant metrics is undertaken to assess progress or lack thereof. We now investigate applying an impact rating archetype approach in addition to the impact target archetype.
UN SDGs - THE TOP-LINE GOALS TO DRIVE TOWARD AND REPORT AGAINST
The United Nations Sustainable Development Goals (SDGs) is a set of 17 goals which act as a successor to the Millennium Development Goals. These goals were adopted at the Sustainable Development Summit on 25-27 September 2015 in New York, and are now considered the primary global benchmark for institutions seeking to achieve sustainable development in their business, activities and investments. Most of the targets specific to each SDG are set at national or governmental level. From a portfolio company perspective, ESG metrics and information can be mapped to the broad goals of an SDG. The official SDG goals and icons are shown below:
We have assessed the 17 SDGs in the context of our current and likely future set of portfolio assets. We have then selected those SDGs which we believe we are most likely able to influence in terms of outcomes across our broad portfolio and those that are also relevant within our context. Our guiding philosophy here has been to focus on where we can practically make a difference and consequently target our efforts in these areas. Within each of the SDG categories selected, we have chosen specific metrics that we believe can best guide our efforts in these areas.
We look at the full spectrum of ESG risk through our due diligence process, but have focused on certain key ESG themes to allow us to track and drive toward meaningful, positive impact outcomes for OMAI, our investors and our broader stakeholders.
Our investments are particularly aligned with the following SDGs, which we have chosen to focus on:
AIIM ALSO FOCUSSES ON:
IMPACT FUNDS ALSO FOCUS ON:
OMPE will specifically focus on SDG 5, 8, 9, 10, 12 and 16 in the above list.
Using the UN SDGs as the topline goals, OMAI has identified more specific OMAI level goals that it drives.
OUR ENVIRONMENTAL AND SOCIAL MANAGEMENT SYSTEM (ESMS)
We have developed and implemented an integrated ESMS as a robust and embedded approach to addressing environmental and social management requirements across our fund portfolios and a framework for more efficient and transparent ESG reporting to our stakeholders.
The ESMS is fit-for-purpose for each of our four capabilities; it is made up of a set of policies, procedures, tools and reporting guidance customised for the capability funds to help them identify, assess, manage and report on ESG risks associated with their assets and portfolio companies, and identify opportunities for positive impact. The ESMS is designed to fully integrate ESG into our investment lifecycle.
Overarching ESMS process for Competencies:
RAISE FUNDS/LP ENGAGEMENT
DECISION MAKING AGREEMENTS
MANAGEMENT & MONITORING
ES TERM SHEET CLAUSES
ES MONITORING TOOLS
ES VENDOR DD TOOLS
AGGREGATED OMAI ANNUAL REPORTING & MONITORING