Sustainability Risk Integration
We use the definition of sustainability risk as described in Article 2 (22) of the Regulation: “an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of an investment”.
Integration of sustainability risk considerations in the investment decision-making process is an important part of risk management.
Sustainability risks include (but are not limited to) the following:
- Operational risks such as impacts of environmental events on operations.
- Governance risks such as inadequate management oversight of sustainability risks.
- Regulatory risks such as violation of labour laws and other ESG-related laws and regulations.
The above information shall be published on our website and will be periodically reviewed and revised. Records will be maintained to ensure version history is clear. As such, we will indicate the dates of publication, where applicable, identify which content has been updated.
Integration of Sustainability Risks in Investment Processes
We have fully integrated sustainability risk assessments into our investment decision-making and risk management processes, as further described below.
Initial Screening
Goodwell Investments conducts a pre-due diligence screening using our exclusion list to identify and avoid any investments which are currently, or likely to in the future, generate a significant share of their revenue from harmful activities/products. Following this, an assessment to ensure the potential portfolio company meets our impact mandate is done.
Due Diligence
Prior to investment, all potential portfolio companies are assessed using our IFC based ESG Risk Matrix as well as our sector focused gender forward due diligence checklists to assess whether the company meets our impact mandate. During this process the Investment manager identifies key priority areas regarding ESG, IMM and principal adverse impacts on sustainability factors. The investment manager ensures that there are no points of concern. A potential ‘ESG Action Plan’ is created alongside the company where all of the aforementioned factors are considered, and reporting processes are outlined. Should the investment be approved the investment team supports where gaps are outlined, whether it be governance, capacity building, access to networks or other areas to deepen the company’s impact.
Business Operations and On-Going Monitoring
Through the annual ESG review cycle, Goodwell Investments engages with the portfolio companies to gather data and perform analyses to identify and measure principal adverse impacts on sustainability factors. In addition, if an ESG Action Plan was put in place we monitor the plan. Actions taken will be commensurate with the estimated likelihood and severity of the impact on a sustainability factor.
Reporting
Investors in Goodwell’s funds are provided an annual Impact and Environmental, Social and Governance Report (Annual Impact Performance Report). The report highlights the key material Impact and ESG themes and the underlying portfolio companies’ performance on those themes. The reports are updated annually, to monitor progress and keep the portfolio company focused on achieving its goal to become a more sustainable and future proof company over time.
Voting and Active Governance
When voting as a shareholder, we vote in accordance with our Impact and ESG principles considering sustainability risks and opportunities. When necessary, we submit our own resolutions, which can be on specific sustainability-related subjects.
In addition, we often hold a board seat in our portfolio companies and we appoint our own representatives to the boards of portfolio companies, these board members guide the company’s governance in accordance with our Impact and ESG policies.