Responsible investment at Coller Capital
Coller Capital sees responsible investment as fundamental to its business – key to delivering long-term investment performance for our investors. We therefore integrate environmental, social and governance (ESG) factors into all stages of our investment process.
ESG in the Private Equity Secondaries Market
Adam Black, Partner and Head of ESG at Coller Capital, and Will Yea, Principal, explain how the firm influences the managers of the firms in which Coller’s funds are invested, through dialogue, exchange of information, and building trust with its partners.
Our ESG approach
Coller Capital’s approach to responsible investment has developed over several years. Since 2011: we have put an ESG policy in place; established robust processes for assessing and monitoring ESG risk; committed to encouraging all our managers to adopt a similar ESG policy; and created an ESG Committee to steer our firm-wide approach to responsible investment.
In August 2014, we became signatories to the United Nations-supported Principles for Responsible Investment (PRI). These voluntary principles provide a practical framework for incorporating ESG issues into mainstream investment decision-making and ownership practices.
Responsible investment, in Coller’s definition, is a process that takes full account of the environmental, social and governance factors that might materially impact the value of our investments or that conflict with our corporate values. Our policy therefore covers a broad range of ESG issues – from climate change to labour rights to farm animal welfare – and is implemented across our whole investment process, not just the investment decision phase.
We strongly believe that private equity’s model, which emphasises investor engagement and a long-term horizon, is well positioned to create value through responsible investment. Although secondaries market investments are by their nature often at a step removed, Coller Capital nonetheless uses its influence with GPs to encourage best ESG practice wherever possible.
In October 2018, we were delighted to receive the BVCA’s Responsible Investment Award. The rewards for our ESG efforts will be felt in the returns our funds make for our investors and the impact our investment has on the world in which we live. It is nonetheless pleasing when our ESG efforts are recognised in their own right.
In 2019 the firm achieved climate neutral status. Coller Capital had its direct and indirect emissions independently measured for the period 1st January 2018 to 31st December. 3,333 tonnes of greenhouse gas emissions have been offset by investing in a climate protection project which supports regeneration of Brazil’s Cerrado savannah.
Support for global responsible investment
It is clear that responsible investment is an issue investors take seriously – a recent Coller Barometer found that one quarter of private equity investors around the world see ESG considerations as an essential component of a decision to commit to a new fund. The proportion is even higher in Europe, with over a third of LPs taking this view.
Since we ourselves became PRI signatories in 2014, we have committed ourselves fully to implementing its guiding Principles. We are very pleased to have achieved an A+ rating for both the Strategy & Governance (2017, 2018, 2019 and 2020) and Indirect Private Equity modules in our last three PRI Assessment Reports (2018, 2019 and 2020).
The PRI's six principles of responsible investment
- We will incorporate ESG issues into investment analysis and decision-making processes
- We will be active owners, and incorporate ESG issues into our ownership policies and practices
- We will seek appropriate disclosure on ESG issues by the entities in which we invest
- We will promote acceptance and implementation of the Principles within the investment industry
- We will work together to enhance our effectiveness in implementing the Principles
- We will each report on our activities and progress towards implementing the Principles
We expect our responsible investment policy to be in harmony with our corporate values – which are the touchstone for everything we do – and we therefore monitor its implementation to check that this alignment is maintained in practice.
The future of ESG at Coller
We have been encouraged by the impressive progress made by the private equity industry in recent years – the proportion of our underlying fund GPs with an ESG policy rose from 16% at the closing of our fourth fund in 2002 to nearly 90% at the closing of our eighth fund in 2021. However, responsible investment is a complex area and we know we will need to continue developing and enhancing our approach.
Over the coming years we will work closely with portfolio GPs to do this, especially those managing our direct secondary portfolios, with whom we have particular influence. We are also convinced that meaningful change through ESG will only be achieved if the Limited Partner community works together, and we therefore welcome dialogue with our investors on this issue.
As the founder and initial funder of the Farm Animal Investment Risk and Return (FAIRR) Initiative, Coller promotes the consideration of ESG-related investment risks inherent in intensive livestock farming, including the threat of antibiotic resistance.
We also encourage ESG engagement at the underlying portfolio company level by our GPs. We believe that well-managed ESG issues can translate into better risk management and corporate governance, and can also help to identify additional company value at exit.