Our client, Sustainable Development Capital LLP (SDCL), a specialist investment manager, has a long history of investing in sustainable energy companies and projects. However, they recognised that they needed to enhance their overall management of Environment, Social and Governance risks and opportunities across the investment lifecycle in order to stay ahead of investor expectations and meet regulatory requirements. They sought our support to integrate ESG issues in their investment analysis and decision making from pre-acquisition, through to active ownership, monitoring and reporting.
In line with heightened investor attention on social and human rights risks in the renewables sector, the client also asked us to develop guidance on how SDCL’s funds and their investments could align with core social and governance standards and how these should be embedded in contractual provisions with suppliers.
We began by developing ESG due diligence guidelines that enables the team to screen and evaluate projects to identify material issues that could influence the investment decision. The guidelines provided criteria to help the team determine engagement priorities to mitigate and monitor adverse impacts and drive and report ESG performance during the asset management phase. The guidelines were supported with a framework that set out what should happen at each stage of the investment cycle, why and by whom, to ensure effective and systematic management of ESG risks and opportunities.
To increase engagement with the topic and demonstrate how to apply the new guidelines in practice, Sancroft delivered a half day training workshop for the investment team which included an interactive case study. The session also set out the importance of ESG to the firm and its role in risk mitigation and value creation.
We also created a briefing note on core social and governance standards their investors expect alignment with, why they matter to SDCL’s funds and investments – including how they are being adopted in key incoming regulations, and how to align with them. This included specific guidance on how respect for human rights can be cascaded down the supply chain through contracts with key contractors and suppliers.
As a result of this the work, the client has a robust ESG management process which will enable them to identify, assess, manage, monitor and report upon key ESG risks and opportunities across the investment lifecycle.
Together the framework, guidelines and training will help the client to drive performance in line with their sustainable investment objective and meet the increasing needs and expectations of their investors and regulators.
