Equity Flare’s proactive approach to addressing ESG issues begins pre-acquisition with robust diligence on industry-specific ESG issues. After acquisition, Equity Flare takes a strategic approach to ESG engagement and reporting. Upon establishing a company’s baseline ESG Performance during its first reporting year, Equity Flare uses this information to tailor both company-specific and portfolio-wide engagement initiatives, which, in turn, lead to more robust reporting to Equity Flare and its investors.
Enviromental and social governance
We recognize the importance of environmental, social and governance issues, and we have a long history of taking these into account. For our communities and our employees, we promote diversity, sound practices, and public engagement.
Why is ESG Investing Compelling?
Sustainable, ESG and Impact Investing are growing due to:
- Supporting research showing performance benefit when companies manage ESG risks
- Investor belief that ESG related information enhances investment decision making
- Investors' desire to mobilize capital to address global problems
- Investors' desire to align value into portfolios
- Interest in improving corporate responsibility and transparency
Our ESG investment approach incorporates:
- Consideration of material ESG issues
- Use of specialized ESG research, in addition to our proprietary research
- Thematic Investments
- Customized social screens
- Connection to financial impact and portfolio decision
- Custom values alignment since 1987
Responsible to Our Investors
Over a Decade of Responsible Investing
portfolio companies have participated in Equity Flare’s ESG Reporting Program
portfolio companies site visits
portfolio company ESG reports submitted to Equity Flare
of waste recycled by portfolio companies
donated to charitable organizations by portfolio companies
hours volunteered by portfolio company employees
As a value investor, Equity Flare believes that careful attention to ESG factors makes good business
sense, and accordingly, ESG considerations are at the core of what we do. They can offer potential
sources of value, or insight into extra-financial risks, across all our asset classes—private
equity, credit, and real estate.
Before investing, the Equity Flare team conducts ESG diligence, consulting with outside advisors to identify ESG risks, risk mitigants and ESG opportunities. Information gained from ESG diligence informs the collective understanding of a company’s baseline performance relating to material ESG issues, and helps to inform Equity Flare’s engagement with a company post-acquisition.
Where Equity Flare-managed funds have sufficient influence or control, Equity Flare can help drive value by engaging with companies to encourage them to continuously measure, manage, and improve their ESG performance.
At events like our quarterly ESG webinars and Equity Flare’s Portfolio Company Conference, companies have the opportunity to learn from one another and from expert advisors about how to make progress on ESG issues.
Equity Flare is a leader in ESG reporting. We ask portfolio companies to report on more than 30 quantitative ESG key performance indicators and to provide qualitative information on portfolio companies’ initiatives in 15 general ESG-related categories. We compile and analyze these data, follow up with portfolio companies as necessary, report the results to our investors in our annual Responsible Investing Report, and use ESG data to inform company engagement. Our RI and ESG Reporting Programs are important to Equity Flare and our investors, not only to avoid costly liabilities and drive better returns, but also because we see it as part of our mission to be responsible stewards of the environment and of society for future generations.
Equity Flare Advantage
Our involvement in socially responsive investing started in 2016 and we understand the needs and objectives of such investors
- Experience in responsible investing dates back to 2016
- Fundamental research driven culture along core competencies
- History uncovering trends and long term investment opportunities
- Long term investment horizon with low turnover
- Investment process includes meeting regularly with companies
- Active voice on certain governance issues
The focus on ESG investing is intensifying
Equity Flare recently surveyed some of the world’s leading institutional investors to understand their approach to applying ESG factors as part of their investment decision-making.
The responses from 150 global investors show that their focus on ESG has been growing and is intensifying. 58 per cent of investors have increased their ESG focus in the last five years, and 91 per cent expect to increase it further in the next five years.
Equity Flare’s proactive approach to integrating ESG issues begins with identifying ESG risks and ensuring they are appropriately addressed and documented throughout our diligence and pre-investment decisionmaking. Our investment professionals, together with third-party advisors, apply their expertise and an industryspecific approach to potential ESG risks. They assess potentially material risks and identify ways to minimize or eliminate them, at the same time seeking out potential ESG-related opportunities to engage with management teams post-acquisition.
Once a transaction has closed, our approach to engagement across ESG issues focuses on improving a company’s long-term sustainability and increasing benefits for all stakeholders. Specific engagement topics are often tailored to a particular company’s circumstances, based on the findings of our pre-investment diligence process. We also engage companies on topics that apply across industries and geographies, such as ensuring governance structures are implemented that provide appropriate levels of oversight, and internal processes for collecting and monitoring key ESG performance indicators. More generally, Equity Flare acts as a resource for company management teams on all ESG matters and provides programming to share best practices alongside operational assistance on environmental, health, safety, workforce, and governance issues.
We believe that being transparent about the ESG performance of reporting companies is an integral and essential element of a comprehensive ESG program, and we provide periodic reports to both limited partners and the public. We encourage companies to adopt this approach through compliance with applicable ESG regulatory regimes, and by voluntarily disclosing ESG data and information on their historical performance and future goals.
Understanding opportunities for better nutrition and other key ESG issues in food
We are believers in being a catalyst for good in all of our investments and are infusing ESG across our investment philosophy and private equity business practices. We view it as a horizontal capability across all of our portfolio companies and that it is a critical enabler of our ability to achieve our goals. It is an important initiative for us, our investors and our management partners.
As active managers engage with sponsoring issuers or companies to gain a better understanding of ESG practices, there are often opportunities to effect positive change, and potentially pave the way for stronger performance over time.
Something palpably changed in 2020. Against the backdrop of a global pandemic, increasing health and economic inequality, social justice issues and a continuing climate crisis, a renewed sense of commitment and urgency informed our thinking and approach
The core of our DEI framework is to make datadriven decisions, set measurable goals and hold ourselves accountable through KPIs
We are determined to re-imagine ESG in credit, challenging conventional wisdom on the limits of a lender’s ability to drive ESG progress.
A passive approach to ESG is a thing of the past. The truly ESG-integrated lender understands how these issues affect value and manages accordingly throughout the life of a loan
Progress Through Partnerships
Our one-firm approach guides all that we do and ensures that members of various teams are involved throughout our efforts. Working together, team members collaborate with external experts to provide resources and tools to our companies when they identify issues or opportunities.
To extend our platform of expertise, and to ensure that we are on the leading edge of emerging issues and expectations, we have established a network of external partners, including non-governmental organizations. These partners help us and our portfolio companies understand and address various ESG issues. We have worked with various partners and organizations since 2008 and a few of them are listed below.
Thematic investing companies that connect to a specific environmental or social investing theme. Examples are investing in companies whose products or service target solutions to alternative energy, water scarcity, sustainable agriculture or educational development.
Thematic allocations and ESG-related exclusions actively used in investment decisions
Although nearly two thirds of investors surveyed are not yet using active ESG assessment in their investment decision-making, over 90 per cent are making thematic allocations and using ESG-related exclusions to achieve their ESG investment objectives.
Responding to our investors
The benefits of integrating ESG factors into investment decision are increasingly clear, and feedback from 150 investors demonstrates the growing importance of ESG mandates in the future.