Merchant Banking Responsible Investment Policy 2020
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Merchant Banking Responsible Investment Policy 2020
Merchant Banking is the investment
arm of Rothschild & Co
Merchant Banking deploys the firm’s capital, alongside that
of a select set of leading institutional and private investors.
With global commitments in excess of €14 billion, Merchant
Banking manages a series of funds dedicated to corporate
and secondary private equity, multi-manager funds and
co-investments, as well as senior and junior credits.
Our multi-national, multi-lingual team of 150 professionals
is based in London, Paris, Luxembourg, New York and
Los Angeles. Together they bring a wide range of expertise
and a strong depth of experience across Private Equity
and Private Debt.
We have built our reputation on providing the highest
levels of excellence. To maintain this we have defined
our guiding principles to encompass a responsible
and sustainable approach to Environment, Social and
Governance (ESG) standards.
Our guiding principles have been established in line
with the UN Principles for Responsible Investment
(“UN PRI”) which Merchant Banking became a signatory
in September 2012.
This policy statement sets out the principles and
commitments of our approach to ESG.
Merchant Banking Responsible Investment Policy | 2
The 7 Pillars of our ESG policy
Principle 1 Principle 4
Taking ESG criteria into account during Adopt a responsible and ethical
the analysis and decision making approach to governance including:
processes for investments, including: • R
emuneration of senior management
• A
nalysis of the non-financial and a policy on bonuses that is
performance of target companies: compliant with international standards
governance, social, environment • Implementation of compliance
• C
onsideration of whether the policies and procedures and on-going
investment is ethical monitoring of the Group’s systems
and controls
• Implementation of rigorous risk
Principle 2 controls throughout the business
• C
onsideration of our ethical
Disseminate the UN PRI and ensure obligations in all business conduct
the application of these principles, (anti-money laundering, anti-
including: corruption, reputational due diligence)
• Request all entities in which we
invest to communicate, promote ESG
standards within their business Principle 5
• Provide support to senior management
in developing mid to long term Encourage a human resources
strategies ensuring a sustainable policy which values and respects
and trustworthy partnership all employees through:
• O
bjective criteria to measure
performance and competencies
Principle 3 • S
upport programmes requiring senior
management involvement in all
Inform our investors of this ESG policy employees’ career progression
and provide them with information • E
quality across all staff irrespective
on our approach to ESG initiatives of role, gender, race, age, religious
on a regular basis through: belief or sexual orientation
• P
rovision of adequate, transparent
and objective information in
documents and during our annual
Investor Day
Merchant Banking Responsible Investment Policy | 3
The 7 Pillars of our ESG policy
Principle 6 Principle 7
Reduce the environmental impact Promote employees’ commitment
of our activities: to society:
• In line with Rothschild & Co’s • Partnership with Epic Foundation
approach to environmental • R
othschild & Co’s community
management we look to minimise, investment programme combines
wherever practicable, the negative long term partnerships and
environmental impact of our business employee volunteering with
including the impacts associated strategic charitable giving
with energy, water and materials use,
• E
ncouragement for employees to
waste production and CO2 emissions
become involved in one or more of
• O
ffset our carbon footprint through a the 250+ volunteering commitments
partnership with Up2Green. In 2019, that the Management Company,
we have committed to plant 50,000 through the Group, is involved in.
trees in the Nariño area of Colombia
• A
im to recycle and reuse as much
as practicable
• A
lign with responsible purchasing
practices and encourage our suppliers
to respect sustainable development
criteria
• B
ecame a Signatory of Initiative
Climate International (ICI) in 2018.
We are committed to integrating tailored ESG initiatives into all our investment
activities taking into consideration the specifics of our investment strategies and
our level of ownership and control.
The ESG Policy is implemented across our various investment strategies:
• Corporate Private Equity
• Multi Strategies (secondaries, fund of funds and co-investments)
• Direct Lending
• Credit Management
Merchant Banking Responsible Investment Policy | 4
Our ESG Journey
2019
• Offset our carbon
2017 footprint through
a partnership
• Integration of
with Up2Green
2017 ESG criteria into
our pre-investment
processes
• Creation of the
Merchant Banking
2013 ESG Committee
• Formalised our
• Appointed dedicated
engagement with
ESG resources
portfolio companies
at Management
through our ESG
Company level
Monitoring Programme
• Disclosure of ESG
• PRI reporting
relevant information
completed for
to investors on our
the first time
website and annual
reports
2018
2016 • Became member of
the Initiative Climat
International to
• Appointed ESG
contribute to the fight
Champions in each of
against climate change
our funds’ investment
teams
2014 • Training through the
PRI Academy
• Became a signatory to
2012 the France Invest ESG • Partnership with Epic
Foundation
Charter and member of
• Defined the 7 pillars their ESG Commission
of our ESG Policy
• Became a signatory
of UN PRI
Merchant Banking Responsible Investment Policy | 5
ESG in our Investment Process
We strongly believe in the benefits of responsible investing for
long-term value creation. Our ESG initiatives are implemented by
dedicated ESG Champions within each of our Investment Teams.
We have developed proprietary ESG tools tailored to each of our
investment strategies.
We try to promote the principles of responsible investment within
our investments and strongly encourage portfolio companies and
fund managers to consider ESG criteria in their activities.
Due Diligence
Pre-investment
& Investment Decision
In line with each investment strategy, Our due diligence is based on a
the investment team invests across dialogue with the management team
a set of carefully chosen sectors. (of companies or fund managers where
We ensure that we do not invest in relevant) and onsite visits in order to
sectors we consider unethical and identify and assess the management
which are explicitly listed as banned of key ESG issues.
by the Five Arrows Managers The ESG review focuses on the
Investment Exclusion Policy. availability of ESG related information
and is used to identify whether there
We will not invest in: may be any significant issues, that
• Companies (or portfolio companies)
require either more detailed technical
whose core business is engaged
in activities in severe breach with assessment or need to be managed
international conventions; post-investment.
• Companies (or portfolio companies)
An ESG analysis is a necessary part
that engage in material or systematic
corruption evidenced by an official of our investment process (for direct
source such as Courts, the UN, OECD, private equity funds).
governments, etc.;
• Companies (or portfolio companies)
that deliberately and repeatedly violate
law the which they operate;
• Companies (or portfolio companies)
that export certain goods and services
targeted by trade embargoes imposed
by the UN or the EU; and
• Companies (or portfolio companies)
that are involved or derive the majority
of their revenue from the production,
trade and/or distribution of controversial
weapons and munitions, tobacco,
prostitution, pornography or thermal
coal-based activities.
Merchant Banking Responsible Investment Policy | 6
Monitoring / Post-investment
Our Investment teams maintain an report on their approach and on
on-going dialogue with the portfolio pre-defined key ESG indicators
company’s management teams or either through the Annual Monitoring
fund managers (where relevant) and Questionnaire.
encourage them to identify and raise We also use the support of external
material ESG issues. consultants to carry out an ESG review
We also request that our portfolio of our portfolio companies (for direct
companies or fund managers a private equity funds).
Transparency for our investors
We communicate with our investors on our responsible investment
approach on a regular basis through the provision of transparent,
objective and adequate information:
• In the funds’ Annual Reports
• At our Annual Investor Days
• UN PRI Transparency Report, publicly available
• The Merchant Banking Responsible Investment Policy,
publicly available on our website
• Our ESG commitment, publicly available on our website
Merchant Banking Responsible Investment Policy | 7Community Investment
In line with the Group’s Community Investment programme,
Merchant Banking has decided to support non-governmental
organisations and social enterprises that focus on enhancing the
prospects of economically disadvantaged young people globally
through a partnership with the Epic Foundation.
This partnership is based on individual social organisations tackling youth
commitments from our employees and child issues globally. Epic strictly
combined with a matching scheme. partners on a pro bono basis so 100%
Founded in 2014, Epic is a global of the money received is sent to the
non-profit organisation which provides Epic portfolio organisations.
solutions to make “giving the norm”. Since 2016, Merchant Banking has
Epic leverages volunteering and supported eight non-governmental
giving solutions for individuals and organisations and social enterprises by
corporations to support high-impact raising more than €150.000 per annum.
Our impact
€720k 8 projects supported since 2016
donated by
our teams
since 2017
Simplon. The Brilliant Club Gastrovotiva Prerana (India)
co (France) (UK) expands (Brazil) seeks to end
100% empowers young
people from
low-income
access to
highly selective
universities for
prepares youth
for a career in
the culinary
the cycle of
intergenerational
trafficking in
directly to communities students industry Mumbai
organisations through training
in programming
Agir pour l’école Duo for a Job Educate Sport dans la
(France) developed (Belgium) (Uganda) Ville (France)
a reading matches young supports promotes social
programme immigrant job education and professional
based on seekers with programs to integration of
scientific research experienced develop young disadvantaged
combating failure professionals leaders and young people
at school over 50 years old entrepreneurs
in Africa
Merchant Banking Responsible Investment Policy | 8Environment
We are committed to managing and taking action to reduce our
negative environmental impact and to being actively engaged with
environmental issues.
Our Environmental Pledge: Going “Carbon Neutral”
We are committing to actively reducing our carbon footprint
Waste Individual
management behaviours
Supplier Employee
reviews engagement
Facility Portfolio
management companies
For our remaining carbon footprint, we plan to offset it
Fund 50,000 trees Work side by side Target a region Biodiversity as
to be planted with l’Agence where the need a core pillar
over five years in Française de for trees is critical: of our action,
Columbia développement the Nariño area of working with local
1 tree offsets and Up2Green Colombia communities
150kg of carbon
in 12 years1
1
Based on Ecocert
Merchant Banking Responsible Investment Policy | 9Initiative Climat International
In 2018, we became a signatory of iC International to contribute to the
fight against climate change.
The initative Climat International was This approach is in line with the Task
launched in 2015 by a group of French force on Climate-related Financial
GPs. iC International is a collective Disclosure recommendations (“TCFD”)
commitment to understand and and the expectations of Article 173 of
reduce carbon emissions of private the Energy Transition for Green Growth
equity-backed companies and secure French Act regarding climate risks
sustainable investment performance. and transparency.
iC International’s clarion call is clear:
namely, that the global private equity
industry do its part by leveraging tried-
and-tested methodologies to analyse
and mitigate carbon emissions and
exposure to climate-related financial
risks in their portfolios.
Our Commitments
Recognise that Join forces to Actively engage
climate change contribute with portfolio
have effects on the to the objective of companies to reduce
global economy, COP21 limiting their greenhouse
which presents global warming gas emissions,
both risks and to well-below two contributing to an
opportunities for degrees Celsius overall improvement
investments in sustainability
performance
iC International partners
Merchant Banking Responsible Investment Policy | 10ESG in the way Rothschild & Co
operates its business
Social Criteria Ethical criteria
Equal Opportunities Policy Anti-corruption statement
• We are committed to providing Rothschild & Co takes a zero tolerance
equal opportunities in employment policy approach to corruption and bribery.
and aim to ensure we do not unlawfully Employees must at all times:
discriminate in employment due
to race, colour, religion or belief, • Act honestly.
gender, national or ethnic origin, • Comply with the local law of any
disability, age, nationality, marriage country in which they operate together
or civil partnership, pregnancy or with our group policy, or whichever has
maternity, sexual orientation or provided for the highest standard of
gender reassignment. anti-corruption behaviour,
• We believe we can contribute to the • Avoid offering, giving or receiving
diffusion of our employees’ welfare an advantage (whether financial
by applying Group standards on a or otherwise) in return for improper
global basis. This is particularly true conduct.
in the following areas: parental leave,
sabbatical leave and flexible working. Involvement in any form of corruption
For this reason we have devised a has serious consequences, including
global Human Resources policy. dismissal or termination of employment.
Money laundering and reputational
Plan of Action on Senior Employment due diligence
We are committed to guaranteeing
• Rothschild & Co has a Group policy
job security and career development
on client acceptance, which includes
opportunities for senior staff members.
the requirement to complete anti-
Rothschild & Co is particularly
money laundering and reputational
involved in:
due diligence on prospective new
• The fight against discrimination clients. This due diligence includes the
towards older employees, within requirement to conduct enquiries on
the company, during recruitment prospective new clients to determine
processes and ensuring access whether they have ever been convicted
to training. of a crime relating to bribery or
• Highlighting and facilitating the corruption.
transmission of experience from • Where any such conviction is identified
the oldest employees. (current or historic), it must be fully
• Implementing working conditions disclosed to the relevant client
adapted due to age. acceptance committee.
Merchant Banking Responsible Investment Policy | 11Environmental Criteria 56%
of the group’s
electricity is
Rothschild & Co recognises its environmental generated from
responsibilities and the importance of being certified renewable
actively engaged with environmental issues. sources
To maintain a consistent, focused Green House Gas (GHG) emissions
approach on the most material and climate change
environmental impact areas of the
limate change is a serious risk to
C
Group’s locations, Rothschild & Co has
our environment, to society and to the
implemented a continuous improvement
global economy. We proactively manage
programme called the Environmental
our GHG emissions to take on our
Management Action Plan (EMAP).
share of responsibility to combat
The EMAP is aimed at reducing the
climate change.
negative environmental impact of
the Group’s operations. In recognition of the effects of climate
change and its potential impact, we
In 2017 it adopted the Group
continuously seek to improve our
Environmental Policy (applicable and
operational practices to limit and reduce
adopted by all group entities) and
the direct and indirect impact of our
together with its guiding vision:
business operations and, in particular,
business travel.
“Through our operations, products
and services we will aim to add Responsible consumption
value to our and our clients’ and engagement
businesses in a sustainable, • As part of our business culture we
environmentally responsible champion responsible consumption
way, to conserve and protect of resources and materials, such as
the world’s natural resources.” energy, paper and water. We procure
resources responsibly and from
The Group Environmental Policy and sustainable supply chains.
vision are underpinned and aligned with
the six most relevant United Nations Resource management
Sustainable Development Goals1 (‘SDGs’)
• We champion reducing waste,
for the Group, from the 17 SDGs defined
encouragement of circular economic
by the United Nations. Whilst the Group
practices and recycling.
recognises the importance of all the
SDGs, it has specifically aligned itself
with those it feels most relevant
to the environmental management
of our business operations.
1
SDG 6, clean water and sanitation, SDG 7 - affordable and clean energy, SDG 8 - decent work and economic
growth, SDG 12 - responsible consumption and production, SDG 13 - climate action, SDG 15 - life on land
Merchant Banking Responsible Investment Policy | 12www.rothschildandco.com/en/merchant-banking
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