Sustainability report 2020 - 3i Group plc
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3i Group plc Sustainability report 2020
3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
02
Contents
About this report
This report aims to provide the information that is
material and relevant for our stakeholders to form
a view on how 3i Group plc (‘3i’ or ‘the Group’)
is performing on environmental, social and
governance (‘ESG’) matters. There have been no
significant changes from previous reporting periods
Introduction03 in the material topics we are reporting on and
no comparative information has been restated.
A responsible investor 10 The report relates to the financial year to
31 March 2020.
A responsible employer 24
We have chosen to report in accordance with
A good corporate citizen 35 the Global Reporting Initiative (‘GRI’) standards.
Global Reporting Initiative 56 Global Reporting Initiative page 56
Please note that this document is electronic only
Contacts61 and is not printed.
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3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
03
Introduction
Our purpose Our business at a glance 04
Message from the Chief Executive 05
Our purpose is to generate attractive returns for Responsibilities and accountabilities 07
our shareholders and other investors by investing Our values 07
in private equity and infrastructure assets. Governance framework 08
As proprietary capital investors we have External benchmarking 09
a long-term, responsible approach.
We create value through thoughtful origination,
disciplined investment and active management
of our assets, driving sustainable growth in our
investee companies.
3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
04
Our business at a glance
Founded in 1945, 3i is an investment Proprietary capital Assets under management
company with complementary businesses,
Private Equity and Infrastructure, specialising £6.6bn £8.8bn
in core investment markets in northern
Private Equity Private Equity
Europe, the UK and North America.
£1.1bn £4.4bn
Our Private Equity and Infrastructure
businesses manage a mix of proprietary
and third-party funds. We generate
£8.1bn Infrastructure £13.6bn Infrastructure
a capital return from our proprietary capital
investments, as well as fee income from the
£0.4bn £0.4bn
funds we manage on behalf of third parties. Scandlines Scandlines
Scandlines is an investment held to generate
cash income with the potential for further
capital returns.
3i listed on the London Stock Exchange
in 1994 and has no controlling shareholders. Employees Office Number of employees
240
London (head office) 151
Amsterdam 14
from 22 different Frankfurt 18
nationalities Luxembourg 6
New York 23
Offices Paris 21
Mumbai 5
8
1
Singapore1 2
Data as at 31 March 2020
Our business model is described 1 We no longer make new investments in Asia, and our Mumbai and Singapore offices are responsible for managing our legacy portfolio in that region.
in detail in our Annual report At 31 March 2020, only 7 of our employees were located outside of Europe and North America and only c.1% of our AUM was invested outside of those regions.
3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
05
Message from the Chief Executive
3i has built a strong reputation and Our sustainability strategy is defined by three key priorities
track record as an investor by investing
1
responsibly, managing its business and Invest We believe that a responsible approach to investment
portfolio sustainably and by carrying out responsibly will add value to our portfolio. Our Responsible
its activities according to high standards Investment policy is embedded within our investment
of conduct and behaviour. This has allowed and portfolio management processes. It informs
us to earn the trust of our shareholders, our investment decisions and our behaviours as a
other investors and investee companies, responsible manager of our assets. We are rigorous
and to recruit and develop employees in assessing and managing sustainability-related
who share our values and ambitions for the risks in our portfolio. Equally, we are keen to invest in
future. We have achieved this through a opportunities arising from the development of solutions
relentless focus on upholding the highest to global sustainability challenges and to contribute to
levels of governance, both at 3i itself and making the world more sustainable. We make a limited
in our investee companies. number of investments each year, allowing us to be
Maintaining a strong reputation requires very selective in our approach to new investment.
us to adopt a transparent approach to
We invest with the objective
of generating attractive returns
corporate reporting, including on our
progress on driving the sustainability
agenda through our operations and
2 Recruit and
develop a
diverse pool
Our people are our main asset and recruiting, retaining
and developing our talent is one of our most important
priorities. We promote an open communication culture
of talent and provide an inclusive and supportive working
through the cycle for our portfolio. We are committed to
environment with opportunities for training and career
communicating in a clear, open and
shareholders and other investors. comprehensive manner and to maintaining
development. We value diversity and our employees
We aim to achieve this objective an open dialogue with stakeholders.
are recruited, promoted and rewarded on the basis
of merit, ability and performance. We are an equal
sustainably by behaving responsibly This report is important in ensuring opportunities employer and prohibit all forms of
as an investor, an employer that transparency. It should be read in unlawful or unfair discrimination.
and as an international conjunction with our 2020 Annual report,
corporate citizen.
Simon Borrows
which also contains our TCFD disclosures.
3 Act as a good
corporate citizen
We strive to embed responsible business practices
throughout our organisation. We do this by having robust
policies and processes in place and by promoting the
Chief Executive right culture among our staff. We expect our employees
to act with integrity, to be accountable for their behaviour,
and to approach their roles with ambition, rigour and
energy. All employees are evaluated annually against
our values as part of our formal appraisal process.
A responsible investor page 10
A responsible employer page 24
Download our
Annual report A good corporate citizen page 35
3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
06
Message from the Chief Executive continued
Our approach to COVID-19 employees have been provided with portfolio companies are able to comply from the worst impacts of the pandemic
additional equipment to work effectively with evolving regulations in this area in and of living under lockdown. The increase
As we publish this report, many countries
from home. All business meetings have all the regions they operate in. in the charity budget has also been used
around the world are battling the been held virtually and international travel to fund COVID-19 focused donations to
COVID-19 pandemic. The policy response The other key area of focus has, of course,
has been cancelled. local charities chosen by our overseas
to limit the spread of the virus and been the liquidity and financial health of
offices. In addition, we have encouraged
contain the resulting economic damage Maintaining staff engagement has gained our portfolio companies. Because of the
our employees to volunteer their time with
new importance while working remotely, prudent management of our own balance
is affecting many lives. Throughout this nationally-sponsored schemes or with local
and senior managers and team leaders sheet, we have the resources necessary
outbreak we have focused on protecting charities to provide assistance to vulnerable
have made a particular effort to keep staff to support the portfolio financially in this
the wellbeing of our own employees groups throughout this difficult period.
informed through regular updates and crisis should the need arise. For example,
and those of our portfolio companies. virtual meetings. In recognition of the in April 2020 we provided an equity injection Finally, we have set up a £5 million
We have also supported our portfolio potential mental health consequences of €23 million to support Hans Anders, a charitable fund to help alleviate the impact
companies to ensure that they remain of working remotely through a prolonged value-for-money optical retailer with shops of COVID-19 by supporting charities and
able to operate and contribute positively period of lockdown, we have engaged across the Benelux and Germany, which has communities affected by the pandemic.
to the communities in which they operate. a specialist mental health and wellbeing been impacted significantly by the closure Through this fund, we will focus our
consultancy to run a series of webinars of its stores as a result of the pandemic. support on organisations helping the most
While our primary focus is to generate and virtual workshops on how to deal Ensuring that our portfolio companies vulnerable in those countries in which we
attractive returns through the cycle for our with issues like sharing spaces at home, remain financially sustainable through the and our portfolio companies operate.
shareholders, delivering attractive returns having limited opportunity to go outdoors, crisis is the right thing to do over the long
is not, in itself, sufficient, and we strive to We are proud of the hard work, ingenuity
general anxiety, working at home with term for all stakeholders involved, including
achieve that by managing our business and and community spirit displayed by our
young children or while home schooling portfolio company employees, those
portfolio activities sustainably, with due employees and those of our portfolio
older children, worrying about elderly of their supply chains, the communities
regard to the interest of all stakeholders companies throughout this crisis. For 3i
relatives and living and working alone. in which they operate, as well as our
involved. 3i’s approach to the pandemic and many other businesses, the next
The usual bi-weekly fitness and nutrition own shareholders.
has been driven by the following priorities: 12 to 24 months will be among the most
consultations available to London-based
employees have been streamed live via Support the communities in which challenging periods historically in which
Protect the wellbeing a video conferencing service. we and our portfolio operate to operate. Despite the difficulties we are
of our employees We have increased our charity budget
likely to encounter, we do not intend to
Our focus has been on keeping our Support our portfolio by approximately 35% to respond to
change our approach and will continue
employees safe, motivated and able to operationally and financially to conduct our business in accordance
the additional demands on the charities with our purpose and values, with a focus
fulfil their roles effectively. All 3i offices Our investment teams have been engaging that we support arising as a result of the
have been closed in accordance with on the interests of the broader group of
actively with our portfolio companies in pandemic. We focus our charitable activities stakeholders that we serve.
local restrictions and our employees have order to manage a range of operational principally on the disadvantaged, the
been working from home. We have been issues and problems that have arisen as elderly, on young people and on education Simon Borrows
able to achieve the transition to remote a result of COVID-19, including making and therefore most of the charities that we Chief Executive
working seamlessly by activating existing sure that portfolio company employees support have played a key role in protecting May 2020
business continuity plans. Where required, remain safe and healthy and that our a range of different vulnerable groups
3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
07
Responsibilities and accountabilities
The Board of Directors as a whole Our values
is responsible for sustainability. It has
adopted and promotes corporate
values and Group standards which
set out the behaviour expected of
all employees in their dealings with Ambition Rigour and energy
shareholders, other investors, existing Focus on generating value Clarity of vision supported
and potential portfolio companies, for all our stakeholders by practical execution
colleagues, suppliers and others Strive for excellence and Thorough analysis leading
who engage with 3i. continuous improvement to clear decision making and
effective implementation
The Executive Directors and business and High levels of energy, a strong
functional leaders (together, the ‘Executive work ethic and effective
Committee’) are responsible for ensuring team working
compliance with 3i’s corporate values and
standards. Our values and corporate culture
promote accountability and, together with
our compliance, behaviour and environmental,
ethical and social policies and procedures,
they are designed to ensure consistent
standards of conduct.
All employees are required to be aware of,
Accountability Integrity
and abide by, 3i’s policies and procedures.
These are available to all staff through Personal collective responsibility Doing the ‘right thing’
the intranet portal and reinforced through for protecting and enhancing even when difficult
3i’s assets and reputation
regular training. Employees are encouraged Relationships built on trust,
to make suggestions to improve them. An ownership mentality candour and respect
in managing costs, resources
and investments
An aversion to building hierarchy
Governance framework page 8
3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
08
Governance framework
The Board of Directors and its
Board of Directors Chief Executive
Committees review our approach Ownership and oversight of sustainability approach and policies Day-to-day accountability for sustainability
to sustainability, corporate
responsibility and related policies
Principal Board Committees Chief Executive Committees
and address specific issues if
they arise. Audit and Compliance • Financial reporting, risk and Executive Sustainability responsibilities include:
Committee internal controls Committee • Assisting the Chief Executive in setting
Day-to-day accountability for sustainability Met six times in the year • Oversees the assessment and Meets monthly the Group’s strategy, including its
rests with executive management and, management of ESG issues Assists the sustainability aspects
in particular, the Chief Executive. The Chief and risks, including those related Chief Executive • Human rights and employment legislation
to environmental legislation in managing
Executive has also established a number and regulation, climate change, • Employee incentives and remuneration
the business
of committees to support him in overseeing governance and compliance and
and monitoring policies and procedures reputation, delegating day-to-day Investment Sustainability responsibilities include:
and to address issues if they arise. responsibility to the Chief Executive Committee • Implementation of the Responsible
• Oversees the approach to tax Meets frequently Investment policy
Our governance framework is outlined as required
policy and strategy • Assessment and management of ESG risks
opposite and more information is Acquisition, and opportunities in the portfolio, including
provided in our Annual report. Remuneration Committee • Director and senior management management the management of risks resulting from
Met seven times in the year remuneration and Group and disposal COVID-19
remuneration structure of investments
• Due diligence of ESG risks and opportunities
• Oversees the implementation of
in the investment process
fair remuneration for employees
• Compliance with applicable ESG regulation
Nominations Committee • Diversity and composition in the portfolio (eg Modern Slavery Act,
Met two times in the year of the Board environmental regulations)
Valuations Committee • Valuation policy Risk Committee Sustainability responsibilities include:
Met four times in the year • Valuation of the investment portfolio Meets four times • Oversight of the Responsible Investment policy
per year
• Responsibilities includes the • Oversight of relevant environmental legislation
consideration of the valuation impact Oversees the and regulation
of sustainability-related matters Group’s risk
• Assessment of ESG risks for the Group and
management
the portfolio
framework
• Assessment of regulatory and compliance risks,
including financial crime and bribery
• Assessment of operational risks, including
cyber security and people risks and recently
COVID-19
• Review of incident management, business
continuity and disaster recovery plans
Download our Annual report
3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
09
External benchmarking
We believe that it is important
to evidence our commitment Sustainability indices CDP
We have been a member of the Dow Jones Sustainability CDP (formerly Carbon Disclosure Project) is an international,
to operating sustainably and to Europe Index and of the FTSE4Good Index Series since not-for-profit organisation providing a framework which
show how we are performing. 2002 and 2011 respectively. In addition, 3i became a member enables businesses to disclose their greenhouse gas emissions
Accordingly, we provide a of the Ethibel Sustainability Index (‘ESI’) Excellence Europe and other metrics voluntarily. 3i has been making annual
wealth of relevant information in September 2016 and was reconfirmed as a constituent submissions to CDP since 2006.
of that index in May 2020.
to shareholders and other 3i’s score in the 2019 CDP assessment was B.
interested stakeholders. www.sustainability-indices.com
www.ftse.com/products/indices/FTSE4Good
www.forumethibel.org www.cdp.net
Tortoise Responsibility Index UN Principles of Responsible Investment
The Responsibility100 Index is a ranking of the FTSE 100 Since 2011, we have been signatories to the UN Principles
companies on their commitment to key social, environmental for Responsible Investment. For more than a decade, we have
and ethical objectives, inspired by the UN Sustainable been investing under a clear and comprehensive Responsible
Development Goals. Investment policy which is embedded into our investment
3i ranked 32nd in the March 2020 release of the and portfolio monitoring processes.
Responsibility100 Index.
www.unpri.org
www.tortoisemedia.com/intelligence/
responsibility/ A responsible investor page 10
3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
10
A responsible investor
With fewer than 250 employees globally, 3i has a relatively Our approach to responsible investment 11
small direct impact in terms of the environment and other Our Responsible Investment policy 12
sustainability issues. However, with assets under management
Our RI policy and the Sustainable
of £13.6 billion, we have the influence and opportunity to Development Goals13
have a greater positive impact through the decisions we
Governance framework and
make within our portfolio. implementation of the RI policy 14
Our ESG assessment tool 15
Opportunities from sustainability-related
challenges16
Portfolio Plastics Roundtable 18
Private Equity case study – Havea 20
Infrastructure case study – ESVAGT 22
Modern slavery risk in 3i’s portfolio 233i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
11
Our approach to responsible investment
We believe that a responsible We are uniquely well positioned to make We are committed to evolving our • the climate crisis: representatives of
a difference as a responsible investor: approach to responsible investment Deloitte led a seminar focused on the
approach to investment is a
• for more than a decade we have carried continuously, and have an interdisciplinary environmental and societal implications
material lever for value creation out our investment activities under our sustainability project team devoted to from the increase in global temperatures,
in our portfolio. rigorous Responsible Investment policy, that task. In FY2020, this team presented on how the world is responding to this
which is embedded in our investment to the Board on a number of initiatives challenge, the evolution of stakeholder
In particular, we believe that: we are undertaking to improve our expectations and the impact on the role
and portfolio management processes.
• the effective assessment of ESG risks It informs our investment decisions consideration of sustainability risks and of an investor.
and opportunities has a positive effect and our behaviours as a responsible opportunities within our investment
In addition, the development of our
on the value of our investee companies manager of our assets. We have also and asset management processes.
portfolio sustainability strategy is an
and of 3i Group itself; been signatories to the UN Principles We have also intensified the training and important agenda item for our Private
• compliance with local laws and regulations of Responsible Investment since 2011; development of all staff on sustainability Equity and Infrastructure annual
may not be enough to meet global • we have a medium to long-term issues. In particular, during the year we staff conferences.
expectations, deliver value and enhance investment horizon, typically buying organised training sessions on:
our reputation and licence to operate; and majority or significant minority stakes in • green/sustainable finance:
• it is vital that we seek to identify all our portfolio companies and, since 2012, representatives of Rabobank hosted
material ESG risks and opportunities always being represented on their boards. a webinar for our investment teams
through our due diligence at the point We are therefore well placed to drive on developments in the integration
we invest and manage those risks and sustainable growth in our portfolio. of climate-related risks in their lending
opportunities effectively during the This involves the continuous assessment, activities and shared their thinking on how
period of 3i’s investment. monitoring and management of ESG risks, they set and monitor ESG-related KPIs;
as well as targeted investment through
• GHG emissions measurement and
new or existing portfolio companies in
reporting for our portfolio companies:
opportunities arising from developments
representatives of Carbon Intelligence,
such as climate change regulation,
our sustainability partner, hosted a
changes to consumer preferences in
webinar for all staff on the strategic
response to environmental issues and
importance of GHG footprinting and
the development of business solutions
educated our teams on the practical
to global sustainability challenges; and
steps to improve the measurement
• we make a limited number of new and reporting of relevant data in our
investments each year, allowing us to portfolio companies; and
be very selective in our approach to
investment and to screen out companies
that have an unsustainable impact on
the environment and societies in which
they operate.3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
12
Our Responsible Investment policy
We have a clear and comprehensive Our RI policy has been integrated into Objectives of our RI policy
our investment and portfolio management
Responsible Investment (‘RI’) 3i’s objectives as set out in the RI policy are to invest
processes and procedures and is supported only in businesses which are committed to:
policy which is embedded into by detailed guidance notes, external
our investment and portfolio advisers and dedicated internal resource.
monitoring processes. In our The environment Fair and safe
3i commits to use its influence as an investor
experience, companies with high to promote a commitment in its investee A cautious and responsible approach working conditions
companies to: to the environmental management of Respecting the human rights of their
ESG standards are typically better their business operations by making workers; maintaining safe and healthy
run, better at identifying and • comply, as a minimum, with applicable
efficient use of natural resources working conditions for their employees,
local and international laws and and mitigating environmental risks
managing their business risks regulations and, where appropriate,
contractors and suppliers; treating their
and damage. employees fairly; upholding the right
and opportunities for growth and relevant international standards
to freedom of association and collective
generate better earnings growth. (such as the IFC Performance Standards
bargaining; and respecting the health,
and the ILO Fundamental Conventions),
safety and wellbeing of those affected
This policy sets out the businesses where these are more stringent than
by their business activities.
in which 3i will not invest, as well applicable laws;
• mitigate any adverse environmental
as minimum standards in relation
and social impacts and enhance positive
to ESG matters which we expect effects on the environment, workers
new portfolio companies to meet, and relevant stakeholders; and Business integrity Good governance
or to commit to meeting over • uphold high standards of business Upholding high standards of business Establishing clearly defined
a reasonable time period. integrity and good corporate governance. integrity, avoiding corruption in all its responsibilities, procedures
forms, and compliance with applicable and controls with appropriate
The policy applies to all our anti-bribery, anti-fraud and anti-money checks and balances in company
laundering laws and regulations. management structures.
investments, irrespective of
their country or sector.3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
13
Our RI policy and the Sustainable Development Goals
Our RI policy pre-dates the publication of the
Systematic screening
United Nation’s Sustainable Development Goals
The systematic pre-investment screening of
(‘SDGs’) and was therefore not designed to align opportunities, which ensures that we only invest in
with that framework. In practice, however, we companies that commit to adopting a responsible
believe our approach aligns with the achievement approach to the environment, to respecting the
of the goals through: rights of their workers and to engaging fairly with
all stakeholders.
Investment in growth
Our emphasis on generating returns by driving
long-term, sustainable growth in our portfolio
companies, creating value through investment in
innovation, international expansion and buy-and-
build acquisitions, while considering the interests
of all stakeholders.
Strong governance
Our engaged management of portfolio companies
through active participation on their boards and
in strategy-setting, supported by our influence
as majority or significant minority shareholders,
combined with our emphasis on upholding the
highest levels of governance at 3i itself and in
the companies that we invest in.3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
14
Governance framework and implementation of the RI policy
The Board of Directors is Investment screening Ongoing portfolio monitoring Risk management
responsible for the RI policy, All new investment opportunities that Every six months, our investment teams The 3i Board has delegated day-to-
for ensuring it is implemented reach an advanced stage in 3i’s investment carry out detailed reviews of each of their day responsibility for risk management
process are subject to a high-level review portfolio companies. These reviews are to the Chief Executive who is assisted
across the organisation and for of their ESG risk profiles and potential typically attended by members of the by the Group Risk Committee (‘GRC’)
the review and approval of any ESG opportunities prior to commissioning Investment Committee, which includes which includes the heads of 3i’s Private
material changes. comprehensive due diligence. For Private the Group Finance Director and Group Equity and Infrastructure businesses.
Equity investment opportunities, this review Strategy Director and is chaired by The GRC maintains the Group’s risk review,
The Investment Committee is is carried out by an external specialist firm. the Chief Executive, as well as by senior which identifies the principal risks and
responsible for the implementation For Infrastructure investment opportunities, members of the investment teams and new and emerging risks facing 3i as
the investment team will be responsible some Directors. The reviews in March well as the associated mitigating actions
of the RI policy, and for ensuring for the assessment early in the process of each year include a detailed ESG and key risk indicators. The risk review
that it is executed in a meaningful and will consider appointing a specialist assessment which seeks to track progress is updated quarterly.
way by 3i’s investment teams if required for further due diligence. in relation to existing, identified ESG
Following the six-monthly portfolio
risks as well as identifying potentially new
in all investment and portfolio In both cases, the exercise will typically
and emerging risks and opportunities.
review, detailed reports are prepared
management processes. result in recommendations as to which issues by the Private Equity and Infrastructure
This assessment was significantly enhanced
should be subject to more comprehensive, businesses and the managers of Scandlines,
last year as part of our broader portfolio
The management of ESG risks and ‘deep-dive’ due diligence pre-investment which summarise the short, medium and
sustainability project.
and which should be progressed long-term ESG risk profiles and trends
opportunities is key to driving value post-investment. Our main contribution Any material ESG issues are discussed at across their respective portfolios as well
from our investments. We therefore is in the area of governance where we the six-monthly review meeting and relevant as detailed summaries of the specific
have robust processes in place to aim to ensure that the potential investee action points are minuted, followed up by ESG risks and opportunities relevant to
ensure that these are adequately company’s management team contains the investment teams and reviewed at the each material portfolio company and
the talent, knowledge and experience following six-monthly meeting. any material ESG incidents in the period.
assessed and acted upon. necessary to manage the particular The reports are presented to the GRC
In addition to the company specific actions
risks facing that company, including by the Private Equity and Infrastructure
identified we use the data collected through
the relevant ESG risks. businesses and the managers of Scandlines
this assessment to:
and an overview of the findings is presented
The key findings from the high-level • identify key trends and opportunities to the Board.
review are summarised in the body of the across the portfolio on which to build;
investment paper along with the results of
• enhance our decision making
any ‘deep-dive’ due diligence. The material
process for new investments; and
due diligence issues (including ESG risks
and opportunities) are considered by the • provide a positive feedback loop
Investment Committee, which may raise to further develop and enhance our
questions with the investment team and/ management of future ESG risks.
or require further work to be done as part
of its overall investment decision.3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
15
Our ESG assessment tool
Developed over a number of years, and
subject to annual review and refinement,
our proprietary ESG assessment tool
provides a framework for our investment
teams to consider the inherent ESG risks
and opportunities in each new investment
under assessment and to develop detailed, Assessment Action plan and strategy development
company specific, remediation and value completion
creation plans. Following the completion
of an investment, the ESG assessment
is revisited every six months for each of Deal team
our portfolio companies as part of our
regular monitoring. Portfolio company Proprietary Aggregation Output
management Assessment Tool & Analysis Engine
Last year, the assessment tool was expanded Developed over the last Developed and calibrated
and its scope updated to look more deeply eight years. Regularly refined and against historic portfolio
at the policies, procedures and targets that benchmarked against external performance
Asset review dashboard
tools and research
our portfolio operates with. As a result of this
more granular review we have identified a
Comparison to 3i
number of themes across the portfolio which Environmental questions
minimum standards
Action log
will allow us better to manage the various sub
categories of ESG risks. We have also focused
Social and Policy questions Trend analysis Portfolio dashboard
our investment teams on a number of new
value creation opportunities which can be
explored. Among these is the development Risk scoring and
Governance questions 3i-wide output
Assessment categorisation
of a circular economy for plastic materials,
databank
which led us to organise a Plastics Roundtable Investment decision
in June 2019 which brought together a support Feedback loop
number of a portfolio companies active
Investment case Opportunity tracking
at different stages of the plastics lifecycle
and representatives of leading fast-moving and monitoring
consumer goods companies. Risk log
In March 2020 this assessment also included
a detailed survey of the activities undertaken Historic assessment
by each portfolio company to measure its responses
environmental impact (eg GHG emissions,
waste production), with a view to putting in Risk weighting/analysis
place consistent protocols and procedures
across the portfolio to improve the accuracy
and comparability of the data that we receive.3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
16
Opportunities from sustainability-related challenges
Our ambition is to make a limited Private Equity Infrastructure
number of new Private Equity and We have been developing an expertise in Our Infrastructure business is heavily
Infrastructure investments each outsourced medical device manufacturing, exposed to opportunities arising from
completing two investments in this sector climate change. We previously profiled the
year, selected within our target over the past six years: in Q Holding and investments made through a number of
sectors and geographies on the Cirtec Medical. Technological developments our Infrastructure investment vehicles in
basis of their compatibility with are opening up increasing opportunities Offshore Transmission Owners, which own
our return objectives. We do not to treat life threatening illnesses or critical infrastructure connecting offshore
chronic conditions with interventional or wind farms to the onshore grid in the UK,
manage thematic ESG funds and implantable medical devices. The use and are therefore key to the roll-out of
we have no plans to do so, but we of such devices results in better patient offshore wind power generation.
Our Plastics Roundtable is profiled
have long believed that good ESG outcomes than traditional drug therapies
Renewable power generation remains one on pages 18 and 19 of this report
or invasive surgeries, resulting in fewer side
performance is an integral part effects and shorter recovery times. The
of the areas of focus for our Infrastructure
of good investment performance. business, as most countries across the
development and use of such devices
world try to increase the proportion of
is therefore increasingly important in the
We believe that investing renewables in their electricity generation
context of a global ageing population and
mix. In FY2017, 3i Infrastructure plc (‘3iN’),
responsibly and screening potential the growing prevalence of chronic diseases
an infrastructure investment company
and existing investments for ESG driven by poor lifestyle choices and diets,
managed by 3i, made two investments in
and by deprivation. We have continued to
indicators can help us to manage support both Cirtec and Q Holding through
this sector: in Infinis, the leading generator
risks, but importantly also to bring of electricity from landfill gas in the UK,
a number of bolt-on acquisitions.
and in Valorem, a leading independent
about opportunities for new or We have been investing in a number of renewable energy development and
further investment in our portfolio. businesses connected to the drive towards operating company in France. In FY2018,
We invest in businesses that benefit decarbonisation in the automotive industry. 3iN funded Infinis’ acquisition of Alkane Our investment in Havea is profiled
One such investment was in ATESTEO Energy, an independent power generator on pages 20 and 21 of this report
from sustainable growth trends,
(invested in 2013 and realised in 2017), from both coal mine methane and reserve
and many of our businesses already a market leader in independent automotive power operations and the largest generator
make significant contributions drivetrain testing services. ATESTEO from coal mine methane in the UK.
towards finding solutions to developed the first endurance test of a
complete hybrid drivetrain in 2008. During
sustainability-related challenges, our period of ownership, we supported
or making a positive impact on investments that led to a more than five-
the themes highlighted by the fold increase in the share of e-mobility as
UN SDGs. a percentage of ATESTEO’s total testing
business, which reached c.25% at the time
of exit.
3iN’s investment in ESVAGT is profiled
on page 22 of this report3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
17
Opportunities from sustainability-related challenges continued
In FY2019 3iN also invested in Attero, Increasing the importance of renewable The development of more sustainable Scandlines
a Dutch company which owns two power generation within the overall power cities and communities is also an area In our 2016 Sustainability report we profiled
energy from waste plants, two sorting generation mix requires the development we have been researching. In May 2019, 3iN the investments made by Scandlines, a ferry
and pre-treatment facilities, six anaerobic of broader, supporting infrastructure. completed an investment in Joulz, a Dutch operator in the Baltic sea and one of our
digestion facilities, seven composting ESVAGT, a company in which 3iN invested company which, among other services, largest portfolio companies, in a cleaner
facilities and 10 landfill sites. As an in 2015, is a leading provider of emergency also designs, installs, leases and maintains fleet of vessels, and in particular in hybrid
important player in the recycling of plastics rescue and response vessels and related medium voltage electricity infrastructure propulsion and sulphur emissions reduction
in Europe, Attero can also make a significant services to the offshore energy industry and charging infrastructure for electric technology. 3i, as a significant shareholder in
contribution to the development to a in and around the North Sea and the vehicles. This is a growing business for Joulz, Scandlines, encouraged these investments,
circular economy for plastics. Barents Sea and the market leader in the which 3iN is supporting, notably through and six out of Scandlines’ eight ferries have
fast growing segment of service operation the acquisition, announced in April 2020, hybrid propulsion technology and all are
The installed capacity across these
vessels for the offshore wind industry. of GreenFlux’s electric vehicle charging equipped with state-of-the art scrubbers
three businesses is now 993MW. This is
The further development of services for station business, with over 3,000 charging to reduce particulates emissions. Scandlines
set to grow as we have a long pipeline
the offshore wind industry is a key plank points across the Netherlands. continued to invest in its fleet in 2019, as it
of new potential generating capacity
of our investment case for ESVAGT and installed new thrusters on one of the ferries
for future development.
this segment is forecast to contribute operating its Puttgarden-Rødby route and
c.55% of ESVAGT’s 2020 proforma EBITDA prepared the fitting of a custom-made,
compared to c.16% at the time of acquisition 30-metre high rotor sail on another of its
in 2015. The investment in ESVAGT is ferries, to harness wind power and provide
profiled on page 22. supplementary propulsion while reducing
CO2 emissions. 3i is supportive of these
investments and of Scandlines’ ambition
to make its Puttgarden-Rødby route a zero-
emissions crossing in the foreseeable future.
Our responsible investment case studies
are available on our website3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
18
Portfolio Plastics Roundtable
In June 2019 3i held a Plastics Roundtable, The challenge Private label and contract manufacturing
bringing a number of portfolio companies Plastic materials have developed a negative producer of personal care products
together to discuss the challenges involved reputation due to very low recycling rates
and their leakage in the environment.
in the design, use and recycling of plastic Unfortunately, alternatives to plastics
packaging and any opportunities arising are not always sustainable. Ensuring the
from the development of potential solutions responsible use of this important material
to the issue of plastic waste. Representatives therefore requires a coordinated response Waste treatment and processing facilities
from everyone involved in the lifecycle
of WP, Havea Group, Royal Sanders, of plastics, increasing the number of
Action, Attero, and HERAmbiente attended products made from recycled materials
the event as well as experts from two major or, where this is not feasible, designing
products that can be processed efficiently
fast-moving consumer goods companies. to maximise material recovery through
All of these companies operate at different waste management and recycling. Manufacturer of natural healthcare
stages of the plastics lifecycle and contribute If managed correctly plastics compare
and cosmetics products
significantly towards the development of a favourably from a sustainability perspective
sustainable circular economy. with other available alternatives like glass,
metal and paper, which can have extensive
production processes that incur higher
Supplier of plastic packaging solutions
greenhouse gas emissions rates.
Governments throughout the world
are developing strategies to tackle the
environmental impact of plastic materials
and have taken steps to promote a circular
economy and reduction of single-use General merchandise discount retailer
plastic packaging as well as committing
to recycling targets. For instance, the
EU proposed a recycling target of 55% for
plastics by 2030, the achievement of which
will require the development of a strong Waste treatment and disposal
circular economy throughout Europe.3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
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Portfolio Plastics Roundtable continued
The opportunity
The plastics circular economy
model encourages the manufacture Product manufacturers Retailer
of re-usable plastics materials and Manufacturers are expected to Retailers need to consider the sustainability
increased recycling efforts. • Increase their use of recycled and of product and transit packaging.
Our Plastics Roundtable gave our sustainable packaging The use of recyclable materials becomes
portfolio companies a forum to discuss • Redesign products to increase the life increasingly important, as well as a reduction
their circular economy strategy and of packaging (eg refill models) in single-use plastic.
to share valuable ideas for innovative Havea and Royal Sanders are working with Action has implemented a responsible
solutions to this challenge. We will packaging manufacturers to develop products packaging policy, recycles its transit packaging
ensure that this knowledge sharing in refillable packaging and increase the use and has banned the sale of single-use plastic
continues over time, as our portfolio of recycled materials. products in its shops.
companies continue to innovate in
this field, creating synergies over time.
The findings of this roundtable were
also discussed at our annual portfolio
company Chairmen and CEO forum
to raise awareness and ambition
across the portfolio.
Packaging manufacturer Waste management and recycling
Investment in new packaging designs and The sustainable circular economy will bring
technologies is an essential part of the change. increased demand for waste management
There is an increased focus on producing and recycling technologies and capacity.
recyclable plastic packaging. Attero and HERAmbiente, our waste
WP is investing in R&D to increase its use of management portfolio companies, are
recycled materials in the packaging it produces developing more efficient ways of sorting
for its customers and to design good quality plastic waste from other waste and more
recyclable and re-usable materials. innovative recycling solutions.3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
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Private Equity case study – Havea
Headquartered in France, There is a growing global consumer A supportive shareholder
Havea is a leader in the natural trend towards natural healthcare 3i has supported Havea’s development since it first invested, notably through a number
and personal care products. This is
consumer healthcare industry of bolt-on acquisitions, which have increased the business’s critical mass and its ability
driven by multiple factors, including: to develop and market more sustainable products.
in Europe. It manufactures,
• an increasing awareness of the
designs and distributes a wide issues posed by the use of certain
range of products from functional 2017 France Designer and distributor of
synthetic chemicals in some products; premium pharmaceutical food
and natural food supplements, • a desire for accountability and supplements
to natural personal care products transparency in ingredients,
for babies and women in its packaging and sourcing;
world-class plant in France. • a rising incidence of allergies; and 2018 France Natural food supplement
• an ageing population and the laboratory specialising in
Its key brands include Aragan, ophthalmic solutions
promotion of healthy lifestyles
Vitarmonyl, Dermovitamina, and nutrition by health authorities.
Biolane and Naturé-Moi.
As consumers become more informed
and aware, they increase their consumption 2019 Italy Develops and commercialises
of natural and organic products that contain medicated skincare and natural
fewer potentially harmful ingredients and food supplements
are more sustainable, in terms of sourcing,
manufacture and packaging.
3i’s consumer and healthcare teams have
devoted significant time to understanding
the drivers of this important shift in
consumer preferences and are supporting
its development through our 2017
investment in Havea.
www.havea.com3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
21
Private Equity case study – Havea continued
Sustainability is at the core of Havea’s business
Safe products Havea has best-in-class in-house R&D capabilities, working on all aspects
of product development.
The business operates in a highly regulated environment with strict health,
safety, health and quality standards under the European Food and Safety
Agency (‘EFSA’), which checks all products and validates their health claims.
Sustainable, Havea recently implemented a raw materials sourcing policy, to ensure that all
ethically sourced ingredients are ethically sourced from sustainable sources, where possible from
ingredients France (to reduce its carbon footprint).
In compliance with EFSA guidelines, the business uses organic ingredients in
most of its formulations (eg 95-100% of ingredients for Biolane and Naturé-Moi).
All controversial ingredients (eg paraben, alcohol, titanium dioxide) are banned
from its products.
Sustainable Havea is progressively replacing existing packaging with sustainable packaging
packaging made from bioplastic, cardboard and other recycled materials, and using
vegetable-based ink. It is also introducing eco-refills for its shower gels.
All of the packaging for Biolane, Naturé-Moi and Vitavea products is recyclable and
includes guidelines for recycling.
State-of-the-art A significant part of Havea’s products is manufactured in France in state-of-the-art
production facilities facilities, with a strong focus on employee engagement and wellbeing.
in France
Reducing Havea is on a journey to reduce the environmental footprint of its operations through:
environmental • energy-efficiency upgrades to its headquarters and production facilities
footprint (using 100% of renewable energy and recycled paper);
• the reformulation of certain products to reduce their overall environmental impact
and introduction of biodegradable personal care products (eg wipes); and
• increased waste management and recycling.3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
22
Infrastructure case study – ESVAGT
3i Infrastructure plc (‘3iN’), an ESVAGT is an innovative operator in The offshore wind opportunity For example:
investment company for which the offshore wind sector, with its highly During 3iN’s ownership, we have supported • the business has started to offset its
specialised vessels providing maintenance emissions by encouraging employee
3i acts as Investment Manager, the company on its journey to become
support to this fast growing segment. the market leader in the offshore wind engagement around sustainability
invested in ESVAGT in 2015. ESVAGT’s SOVs provide full time segment with approximately a 40% market through large scale tree-planting
ESVAGT is a leading provider of accommodation to wind farm engineers, share today. projects and recycling incentives where
allowing safe and efficient conduct of the proceeds from waste disposal will
emergency rescue and response continuous maintenance programmes The offshore wind segment is forecast to fund projects in local communities;
vessels (‘ERRVs’) and related which maximise electricity generation contribute almost 55% of ESVAGT’s 2020
• ESVAGT is developing battery and
services to the offshore energy from turbines, improving overall uptime, proforma earnings compared to around
16% at the time of acquisition in 2015. hybrid technologies, including using
industry in the North and Barents and ensuring operational robustness of
low emission bio fuels, for its vessels
Seas and the market leader in the the wind farms for the long term. This is ESVAGT is well positioned to benefit from
the continued rapid growth in offshore that will not only be better for the
increasingly important for the offshore
fast growing segment of service environment but also reduce the
wind industry as operators are focused on wind development in the North Sea, where
operation vessels (‘SOVs’) for their ability to lower the total cost of energy almost 30 new wind farms are forecast to overall cost for the company; and
the offshore wind industry. produced in order to reduce dependency come online in the next five years. • ESVAGT, Siemens Gamesa and Ørsted
on Government support schemes. are together developing a drone-based
ESVAGT is investing in becoming solution for the delivery of spare parts
and tools from a vessel to an offshore
a low emission operator wind turbine. This will reduce fuel
Transitioning to a low to zero-emission consumption and improve the overall
world requires engagement from operation offshore.
everyone involved in the energy sector.
ESVAGT started its accelerated journey Offshore wind will play an important
SOV and ERRV share of earnings towards becoming a low emission operator role in the ongoing energy transition
over time % when we acquired the business in 2015. and it will continue to drive our growth
The management team has also set strategy for ESVAGT.
84 73 57 50 47 46 challenging targets for its future operations,
aiming to be carbon neutral by 2035 and
emissions-free by 2050. ESVAGT has a
number of initiatives to reduce its impact
50 53 54 on the environment and to support
43 local communities.
27
16
2015 2016 2017 2018 2019 202011
SOV share ERRV share www.esvagt.com
1 Budget.3i Group plc Sustainability report 2020
Introduction A responsible investor A responsible employer A good corporate citizen Global Reporting Initiative
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Modern slavery risk in 3i’s portfolio
As a responsible investor, 3i 3i’s approach to modern slavery in 3i specialises in its core investment Any material issues identified are discussed
the context of its investment portfolio markets in northern Europe, the UK and during the meeting, any relevant action
commits to invest in companies
is incorporated within its RI policy, which North America, which have a relatively points are minuted, followed up by the
that are committed to ensuring is described in detail in this document. low potential risk of slavery according investment teams and reviewed at the
that there is no slavery or human 3i’s policy has, for some time, been to avoid to the Global Slavery Index (‘GSI’). following six-monthly meeting.
trafficking in their businesses investing in certain businesses which we
Our Modern Slavery Statement includes We will continue to monitor our portfolio
view as unethical, including those which
or supply chains. do not respect the human rights of their
detailed information on 3i’s assets under in relation to slavery and human trafficking
management and portfolio turnover by through our portfolio company reviews.
workers. We published our statement
geography. For the year ended 31 March
under the Modern Slavery Act for FY2019
2019, 97% of 3i’s AUM was in northern
in September 2019 and an updated
Europe and North America, while 92%
statement for FY2020 will be published
of portfolio turnover was generated in
in September 2020.
those regions.
With particular regard to modern slavery,
However, we are aware that many of the
one of the specific objectives set out
companies we invest in have operations
in our RI policy is that 3i will only invest
and/or supply chains based outside
in businesses which are committed to:
northern Europe and North America,
• respecting the human rights including in countries which have a relatively
of their workers; higher potential risk of slavery according
• maintaining safe and healthy working to the GSI. These risks are assessed for
conditions for their employees each portfolio company in our six-monthly
and contractors; detailed portfolio company reviews.
• treating their employees fairly; For example, in relation to certain relevant
portfolio companies (eg retail companies
• upholding the right to freedom
with supply chains in Asia) there is an
of association and collective
increased focus on the extent to which:
bargaining; and
• the company has a supply chain
• respecting the health, safety
policy/code of ethics in place;
and wellbeing of those adversely
affected by their business activities. • who at board level has responsibility
for monitoring supply chain issues;
• the extent to which supply chain audits
are carried out, and by whom; and
• whether there have been any material
issues in the supply chain in the past
12 months.
Our Modern Slavery statement
is available on our websiteYou can also read
