Responsible Investment and the IK Way
Funds advised by IK Investment Partners Ltd (together referred to as “IK”)1 have a mission to invest in, and work with the management teams of, mid-sized companies which have strong improvement potential. These companies are typically operating in the business services, care, industrial and consumer goods sectors. The IK Funds aim to build lasting value in businesses they invest in by fostering fundamental performance improvements through their active board engagement.
Responsible investment (“RI”) is key to the IK Way of conducting business. It involves supporting portfolio companies to recognise and manage the opportunities and risks that are associated with inter alia environmental, social and governance (“ESG”) factors2, which may materially affect the reputation and value of both IK and our portfolio companies.
Investing responsibly is in line with IK’s core values, in particular in our drive to institute and maintain high standards of governance and business ethics within IK and our portfolio companies. IK is well positioned to invest responsibly because of:
The detailed due diligence we perform and commission before acquisition;
Our majority ownership of portfolio companies;
Our active board representation in portfolio companies;
Long holding periods of investments, on average 4 years.
Responsible Investment – Principles and Commitments
IK’s RI commitments are based on the following principles:
Respect for the internationally proclaimed human rights principles;
Equal opportunity independent of gender or race;
Freedom of association and the right to bargain collectively;
Working conditions which meet basic health and safety standards;
Promotion of environmental responsibility; and
Implementation of anti-corruption guidelines.
IK commits to:
Integrate the above principles into our decision-making processes;
Assessment of ESG factors during the due diligence process for potential investments;
Encourage portfolio companies to follow the above principles and relevant ESG-related, international conventions and standards;
Provide relevant ESG training and support to IK employees involved in the investment process enabling them to work in accordance with the above commitments.
The sectors listed below are considered potentially sensitive from an RI viewpoint and are not areas in which IK would contemplate direct investment. Referral is required to the IK Executive Committee for approval in principle, at the earliest opportunity, where investment is contemplated in a company which touches one of the following activities:
This list is not exhaustive – referrals will also be made where investments associated with similar risks are contemplated.
IK will not invest in companies that:
Have contributed to systematic denial of basic human rights;
Demonstrate a pattern of non-compliance with environmental regulations; or
Show a pattern of engaging in child labour or forced labour.
Responsible Investment – Integration into the IK Way
Resources: This RI policy statement is an important document in supporting our employees to perform their investment activities in line with the IK Way. Employees are trained to ensure that they work in accordance with the IK way and know what is expected of them with regard to executing their work in accordance with this RI policy.
Acquisition: IK takes into account relevant ESG factors during its analysis of an investment opportunity. IK’s approach and ambition is not only about mitigating risks but also about adding value by using, for example, ESG factors to improve business practices. Portfolio company ESG risks and opportunities are analysed and summarised in the materials presented to the IK Investment Committee, and are considered under a specific section in the overall review of the investment opportunity.
Active ownership: IK believes that the ESG interests of its investors are aligned with those of the portfolio companies, their customers, their employees and the communities in which they operate. Central to the IK way of investing is the introduction and implementation of a strong governance and management structure for each of the portfolio companies. In addition to the portfolio company boards’ responsibility to define overall strategy and policy, IK is also, through its board work, committed to supporting portfolio companies to meet the commitments and principles set out in this policy. IK requires that the board of every portfolio company discusses the respective company’s performance on ESG factors at least once a year, as part of the annual review process, and also to share the outcome of such discussions with the ESG representative at IK. IK encourages continuous ESG performance improvement at all portfolio companies.
Policy governance arrangements
The Chairman of the Executive Committee, with support of the other members of the Executive Committee, owns this policy. The Chairman is responsible for overseeing its implementation. The effectiveness of policy implementation will be monitored through an annual review.
This policy is effective from 1 October 2012 and will be reviewed and amended as appropriate from time to time.
1 For more details on IK, the European private equity firm and its funds, focused on investments in the Nordics, Germany/CEE and France/Benelux, please visit www.ikinvest.com.
2 Definitions of ESG factors:
Environmental factors: the pollution and contamination of land, air and water, and related legal and regulatory compliance; eco-efficiency; waste management; management of scarce natural resources; climate change impacts; and the development of new technologies, products and markets e.g. ‘green’ / sustainable products and services.
Social factors: the treatment of employees including their pay; health and safety; labour conditions; human rights; supply chain management; and the treatment of customers and communities.
Governance factors: anti-bribery and corruption measures, business ethics, accountability, transparency, and the governance of environmental and social factors.