robeco sustainable private equity program program... · public version responsible entrepreneurship...

Responsible Entrepreneurship Report 2010 | 1

Robeco Sustainable Private Equity Program

Public version

Responsible Entrepreneurship Report 2010

2 | Responsible Entrepreneurship Report 2010

The Investment Engineers

At Robeco, investing has been our profession for about 80 years. As asset manager with an active

investment style, The Investment Engineers have developed innovative, client-focused investment

solutions and products for both private and professional investors, covering areas including

emerging markets, fixed income and social responsible investing (SRI). Proprietary models,

a disciplined investment process and sound judgment help us to realize our ambition:

delivering superior performance for our clients.

Robeco is an independent asset manager, owned by the Rabobank Group. Rabobank has

the highest credit rating (AAA/Aaa), awarded by the top international rating agencies.

Rabobank CSR DepartmentSilva Dezelan

Martin Luijt

Robeco Private Equity Niels Bardelmeijer

Brian Frieser

Jesse de Klerk

Erwin Quartel

Ewoud van de Sande

SAM Private EquityErik ter Braak

Craig Cummins

Rhea Hamilton

Keimpe Keuning

Andrew Musters

Roland Pfeuti

Gert Wrigge


Executive Summary 4

1. Introduction 5

2. ESG Scores & Sub Scores 6

2.1 ESG sub scores in 2010 6

2.2 Determinants of ESG performance 7

3. ESG Ratings 8

3.1 ESG leaders 9

3.3 ESG followers 9

3.2 ESG laggards 9

4. Mainstream vs Clean Tech Private Equity Funds 10

5. Examples of Good ESG Practices 11

5.1 Apax 11

5.2 21 Centrale Partners 12

5.3 Climate Change Capital 12

5.4 Global Environment Fund 14

6. Concluding Remarks 15

Table of Contents


This report provides an overview of results of the ESG analysis of the

funds in the Robeco Sustainable Private Equity (RSPE) Program for 2010.

The results are based on the fund responses to the annual Responsible

Entrepreneurship Questionnaire. Since its introduction in 2006, both the

questionnaire and the engagement process around it have been adapted

and improved.

Overall, private equity funds in the RSPE Program showed a better ESG

performance in 2010 than a year ago and were able to provide numerous

examples of good ESG practices and improvements. The most important

results of the 2010 assessment can be summarized as follows:

– The average overall ESG score (68.5%) is higher than in 2009 (66.1%)

and the majority of funds has seen their ESG performance improving.

– The best performing fund has a higher overall ESG score than a year

ago. However, we cannot claim the same for the worst performing

fund in the program, as the minimum score decreased in comparison

with 2009.

– On average, both mainstream and clean tech funds improved their

environmental, social, governance and policy & strategy sub scores in

2010.

– Mainstream funds continue to be better ESG performers than clean

tech funds, although the difference between the two groups remains

approximately the same. The number of ESG laggards among

mainstream funds decreased from four in 2009 to two in 2010.

– Four clean tech funds rank among the ESG leaders in 2010 (two in

2009). The number of ESG laggards among the clean tech funds

increased from three to five.

– Mainstream funds generally scored better than clean tech funds

in terms of ESG policy & strategy and on social and governance

performance. However, the average environmental performance of

the two groups has been the same in 2010.

Further improvement in the performance of the ESG leaders in the RSPE

program in 2010 is largely related to their development of environmental,

social and governance monitoring systems and the implementation of

key performance indicators (KPIs) in their portfolio companies. A number

of funds can serve as examples of best practices for the ESG followers and

the laggards in the program. This report will highlight four private equity

funds with good ESG practices.

As part of our engagement approach, private equity funds in the RSPE

program received specific recommendations on how to improve their

ESG performance in the future. In addition, they were invited to discuss

the results and the recommendations with the Rabobank CSR team and

the investment managers of Robeco and SAM. The feedback sessions

contribute to a better understanding of ESG efforts on the side of the

funds and the determinants of their success. At the same time, these

sessions can contribute to improvements in our own ESG approach as

well.

The RSPE program shows that private equity funds can make substantial

steps towards developing and implementing an ESG strategy, irrespective

of the size, geographical focus or investment strategy. The most advanced

funds are forward looking and perceive the integration of ESG factors as

good business practice and not something extra that general partners

and their portfolio companies have to deal with. They see opportunities in

ESG integration, not the limitations.

Executive Summary


Robeco set up its Sustainable Private Equity program (RSPE) in 2004.

The Responsible Entrepreneurship Guidelines (REG) are the backbone of

this program and within the RSPE program Robeco only invests in private

equity funds that adhere to them. The REG are intended to support and

stimulate the incorporation of environmental, social, and governance

(ESG) factors in the pre- and post-investment process of the private equity

funds in the program. ESG integration can contribute to long-term value

creation for both the investors and society at large.

A vital part of the RSPE program is the ESG engagement overlay.

The starting point of the annual engagement process is the Robeco

Responsible Entrepreneurship Questionnaire that is sent out to the

participating funds in March. The questionnaire has been adjusted over

the years to better reflect the efforts of the leading funds and the changes

in the world of responsible investing. The focus of the 2010 questionnaire

has shifted more to providing evidence on ESG efforts and on the

identification and monitoring of environmental, social and governance

performance indicators (KPIs). KPIs can be used to translate long-term

corporate strategy into short-term performance.

The next phase in our engagement process is the analysis of the

questionnaires and communication of the results to the funds. Funds

receive an ESG profile reflecting their absolute and relative ESG

performance over time, and a set of recommendations as to how their

performance can be improved. The feedback sessions that take place

next, provide an opportunity for the funds and CSR specialists to clarify

the results and exchange ideas on the possible following steps. This report

completes the annual process.

The REG, the annual survey and the feedback sessions can be seen

as tools that can help private equity funds in the formulation and

implementation of their ESG strategy and in the integration of ESG

policies into the operations of their portfolio companies. The reporting

requirement within REG can be a trigger for the fund managers to

document the ESG performance of their portfolio companies. Reporting

and monitoring may benefit the funds as well. Eventually, a successful

incorporation of ESG aspects in their operations can make portfolio

companies more attractive and valuable to new investors. Such

companies may also be better prepared for the regulatory requirements

of the future.

The structure of the report is as follows. The ESG scores and ratings for

2010 are discussed in chapters 2 and 3. A comparison between the ESG

performance of clean tech and mainstream funds is made in chapter 4.

Chapter 5 provides four examples of good ESG practices and chapter 6

sets out our concluding remarks.

1. Introduction


2. ESG Scores & Sub Scores

The overall ESG score is comprised of two parts: (i) the fund ESG policy and

strategy, representing 40% of the score, and (ii) the environmental, social

and governance performance, each representing 20% of the total score.

In 2010, we see a further increase in the overall ESG score of an average

fund in the RSPE program (68.5%, compared to 66.1% in 2009).

This increase has also been due to the effort that funds put into the

introduction and monitoring of environmental, social and governance

KPIs; this effort contributed to higher average environmental, social and

governance sub scores (see Table 1).

Although the portfolio as a whole shows improved ESG performance,

there are a few funds that are lagging behind and have a negative impact

on the average and minimum scores. Most of these funds come from the

clean tech group and invest in venture companies that are typically more

resource constrained.

2.1 ESG sub scores in 2010Private equity funds in the RSPE program perform best on environmental

indicators, followed by corporate governance (see Table 1). Given that

half of the funds in the RSPE portfolio focus on clean tech companies, and

thus on environment by default, this result is not surprising. In addition,

the majority of the funds invest in the developed markets, where the

corporate governance standards are high.

The current level of social performance calls for future improvement, as

many funds still need to develop social policies and identify performance

indicators to be monitored within the portfolio companies. In addition,

many funds failed to report improvements or good practices with respect

to social performance. As the majority of them invest in developed

markets where workforce related policies, human rights, customer and

product responsibility are largely regulated, their social performance

should actually be better. We have to help them achieve that.

The RSPE portfolio produces a higher strategy & policy score each year.

However, with respect to following relevant international business

guidelines, codes or principles and ESG disclosure, many funds still need

to make progress.

2010 2009 2008 2007

Average 68.5% 66.1% 64.1% 63.9%

Maximum 91.0% 88.4% 89.1% 87.8%

Minimum 35.6% 37.3% 39.3% 28.6%

Source: Robeco Responsible Entrepreneurship Questionnaire 2010

Table 1: Overall ESG scores of RSPE program, 2007-2010

Environmental scores

Social scores

Governance scores

Strategy & Policy scores

2010 2009 2008 2007

Average 14.3% 14.0% 13.9% 13.0%

Maximum 19.3% 18.4% 19.4% 18.0%

Minimum 1.3% 7.6% 8.2% 4.7%

2010 2009 2008 2007

Average 12.5% 11.8% 10.8% 11.5%

Maximum 18.7% 17.8% 17.8% 18.4%

Minimum 0.7% 2.8% 1.9% 0.0%

2010 2009 2008 2007

Average 13.3% 13.0% 12.9% 13.1%

Maximum 19.9% 18.2% 18.6% 19.0%

Minimum 1.30% 6.6% 8.2% 0.0%

2010 2009 2008 2007

Average 28.4% 27.3% 26.5% 26.4%

Maximum 38.9% 36.9% 36.9% 34.4%

Minimum 13.1% 15.6% 15.6% 17.7%


2.2 Determinants of ESG performanceDifferent factors determine the success of private equity funds in the

integration of ESG in their investment process and in their portfolio

companies. Our sample of 26 funds is too small and the time series too

short to make a fully-fledged statistical analysis, but the assessments of

the questionnaires and the feedback from the funds in the RSPE program

point to the following factors:

– RSPE track record: The funds that have been in the program longer

seem to score better on ESG (see Figure 1). Robeco (in cooperation

with Rabobank’s CSR team) creates awareness among private equity

funds and helps them further develop their ESG policy, if necessary.

Many funds realize the importance of ESG themselves, however, and

make it part of their business strategy.

– The level of shareholding within the portfolio company (minority or

majority interests) determines how powerful the voice of the fund is

where ESG issues are concerned. ESG topics find their way onto the

board agenda faster when a fund has a representative on the board of

the portfolio company.

– Resources available: bigger private equity firms and more mature

portfolio companies typically have more resources available for ESG

issues. They tend to appoint dedicated CSR officers or teams, and that

speeds up the implementation of the ESG policy. Private equity funds

that invest primarily in venture companies typically don’t want to

burden the companies with ESG issues in the early stages. However,

some clean tech funds in the RSPE portfolio create ESG awareness in

their early stage companies as well.

– Sector focus: we observe that generalist private equity funds tend to

be more advanced in addressing ESG issues than sector focused funds.

– Exceptional events, such as a change of General Partners, can put ESG

integration off the fund’s agenda (temporarily at least).

By building the history of ESG assessments we gain a better understanding

of what drives the funds in the implementation of ESG and which

obstacles they face in the process.

0%2004 2005 2006 2007 2008 2009 2010 2011

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Figure 1: 2010 ESG performance depending on vintage year



3. ESG Ratings

In 2009 we introduced a letter rating for the ESG performance of private

equity funds in the RSPE program, in addition to their absolute ESG score.

We continue with this practice in this year’s report and divide the funds

based on their ESG ratings into three groups:

1) ESG leaders (A-, A, A+)

2) ESG followers (B-, B, B+)

3) ESG laggards (C-, C, C+)

ESG Rating

2010

ESG score

2010

ESG Rating

2009

ESG score

2009

ESG score

2008

ESG score

2007

1 A+ 91,0% B+ 76,2% 72,8%

2 A+ 90,5% B+ 71,8% 78,4% 71,6%

3 A 89,2% A 86,7% 81,1% 87,8%

4 A 88,5% A- 81,8% 89,1% 79,0%

5 A 86,7% B 63,4% 72,6% 71,6%

6 A- 84,5% B+ 78,3% 70,6% 42,6%

7 A- 83,3% A- 80,6% 74,8% 68,0%

8 A- 83,0% A 88,4% 86,0% 79,7%

9 A- 82,9% B+ 74,3% 48,9%

10 A- 82,6% B+ 71,2% 45,1% 28,6%

11 B+ 79,8% B+ 77,0%

12 B+ 78,0% B+ 72,5% 73,9% 69,9%

13 B+ 76,0% A- 84,4% 86,8% 77,6%

14 B+ 74,1% B- 59,7% 49,5% 32,3%

15 B+ 72,6% C+ 47,2% 52,0% 58,2%

16 B+ 71,9% A- 83,8% 84,0% 80,3%

17 B 65,5% B- 56,1% 56,0% 67,2%

18 B 65,0% B 64,5% 67,4% 68,7%

19 B 62,2% B- 55,3% 54,2% 59,2%

20 C+ 43,1% B- 56,3% 57,8% 66,7%

21 C+ 41,6% B- 56,1% 59,0% 59,4%

22 C+ 41,0% C+ 47,0% 44,9% 69,4%

23 C+ 39,8% B- 54,4% 57,0% 64,7%

24 C+ 37,1% C+ 48,1% 53,9% 66,0%

25 C+ 35,8% B- 54,5% 48,8% 53,2%

26 C+ 35,6% B- 57,9% 62,6% 69,8%

Average 68,5 66.1% 64.1% 63.9%


Leaders Followers Laggards

Table 2: ESG ratings & Scores, 2007-2010


According to the 2010 assessments, the number of leaders in the RSPE

program has increased to ten, four more than in 2009. This means that

almost 40% of the funds in the program now have good ESG practices.

The number of ESG laggards has grown from three in 2009 to seven in

2010. Most of the new laggards come from the clean tech group. Overall,

eleven funds received a higher letter rating than in 2009, seven funds

kept their rating from the previous year, and eight funds saw their 2010

rating deteriorate (see Table 2).

In the rest of this section we summarize the most apparent distinguishing

features of ESG leaders, laggards and followers.

3.1 ESG LeadersESG leaders are forward looking and see added value in the integration

of ESG into their business. Leaders typically use ESG expertise, often from

outside the fund, and set up a dedicated ESG committee or appoint a

dedicated ESG officer. They pay equal attention to environmental, social

and governance issues in their portfolio companies. In addition, they

identify a set of ESG performance indicators and monitor those across

all portfolio companies. They disclose information on their ESG efforts to

investors and engage with their portfolio companies on their ESG risks

and opportunities.

3.2 ESG FollowersESG followers typically have an ESG strategy that still needs to be

translated into corresponding policies and monitoring systems for

portfolio companies and to be fully integrated into their investment

process. ESG issues are often part of general board responsibilities. Most

ESG followers just need extra time to fully implement their ESG plans

across their portfolios, but are expected to become leaders in the future.

3.3 ESG LaggardsESG laggards are characterized by a weak or absent overall ESG strategy

and have a low ESG performance. They don’t subscribe to the relevant

international codes or guidelines and don’t monitor ESG indicators in their

portfolio companies. Laggards typically deal with ESG issues as and when

they become material to the financial performance of their portfolio. Most

of the ESG laggards in the RSPE program do, however, intend to do more

with ESG issues in the future.


There are two sorts of private equity funds in the RSPE program: clean

tech and mainstream. Clean tech funds focus primarily on companies

in environmental technology or services that are often still in the early

stage of their life cycle. Mainstream funds, on the other hand, apply more

traditional private equity strategies and typically invest in more mature

companies. As a result of these differences, clean tech funds usually have

lower overall ESG scores than mainstream funds. This doesn’t mean that

clean tech funds cannot have a good ESG performance (see top of the

clean tech funds in Figure 2).

In 2010, both clean tech and mainstream funds increasingly sought to

incorporate additional ESG aspects into their daily investment practice.

Hence, the improved overall ESG scores for both groups. However, there

are some obvious differences in their results.

Mainstream funds score better on ESG strategy and policy and have better

social and governance performance than clean tech funds (see Table 3).

However, their environmental performance in 2010 has been the same.

This comes not as a surprise as clean tech funds typically score relatively

well on environmental KPIs and their monitoring. The state of the art

methodologies that some clean tech funds apply for measuring their

direct and indirect impact on the environment are impressive.

Although clean tech funds might be limited in the extent to which they

can implement ESG policies and monitoring systems in their portfolio

companies, the clean tech leaders in the RSPE program show that it is

not impossible. By introducing ESG analysis to the companies in the early

stages, private equity funds can create awareness that goes beyond the

positive indirect impact on the environment and can reduce social and

governance risks in the future, or even provide pay-offs. The tools that

Robeco offers as part of its RSPE program provide guidance and assistance

in this process.

4. Mainstream vs Clean Tech PE Funds

Figure 2: Mainstream (upper bar) and clean tech funds (lower bar), sorted by their 2010 ESG scores

E S G Strategy & Policy

12

43

56

78

910

1112

1314

1615

1718

1920

2122

2324

2526

0% 20% 40% 60% 80% 100%



Totaal E S G Strategy & Policy

Mainstream 2010 74.8% 14.3% 14.8% 15.2% 30.5%

2009 72.6% 14.5% 13.9% 14.7% 29.4%

Clean tech 2010 62.2% 14.3% 10.3% 11.4% 26.3%

2009 60.1% 13.5% 9.9% 11.4% 25.3%

Table 3: ESG performance of mainstream and clean tech funds in 2009 and 2010


5. Examples of Good ESG Practices

In the 2010 assessment process we came across private equity funds

with excellent ESG practices. To help the funds that are still developing

their ESG policies and facing the challenges of their implementation,

this chapter provides four examples of good practices. We present two

clean tech funds and two mainstream funds that were able to fully

integrate ESG into their investment processes. Given the focus of the 2010

questionnaire, more attention goes to ESG performance indicators.

5.1 Apax Apax is an example of a mainstream private equity fund that has a very

rigorous ESG strategy. 2010 was a busy year in terms of their ESG efforts

as they formalized their approach and developed a structured process for

evaluation of new investments, named the Apax Value Programme.

The aim of the Apax Value Programme is to systematically assess each

company and quantify its ESG opportunities, as well as risks (see box).

In each case, the entire value chain of the business is reviewed as Apax

looks for efficiency in areas such as the reduction of transportation, waste

and pollution costs and optimum use of human resources and their

knowledge. After this rigorous assessment has been completed, areas for

improvement are identified and management is given targets on which

they will be monitored over the life of the investment.

For Apax, the sustainability screen is an extra management tool for

realizing the full potential of their businesses. It is a way of ensuring that

companies in the Apax funds are efficiently run, not just for the benefit

of the bottom line, but also for the benefit of the environment and the

communities in which they operate.

The Apax Value Programme consists of four parts1 Environmental– An overview of the office accommodation footprint and details of

any building environmental certifications in place

– Current energy consumption, data availability and any energy

efficiency measures, data center PUE metrics and energy

efficiency improvement.

– Office waste management and any recycling initiatives.

– Overview of current procurement/purchasing approach and

processes for office equipment, IT equipment

– Staff travel, video-conferencing

2 Social– Overview of legal requirements/labour laws relating to staff

health & safety, risk management arrangements.

– Discussion of any obligations relating to part-time/contract

personnel, immigration controls etc.

– Discussion of any existing employee engagement/incentivisation

or social/community programmes

– Freedom of association/workers unions

– Minimum age/minimum wage restrictions

– Gender/diversity/anti-discrimination

– Benefits/health insurance

3 Governance– Ethical conduct/Codes of Practice

– Bribery/Anti-corruption: policies, training, procedures, whistle

blowing hotline etc.

– Responsible marketing and sales policies and procedures,

training advertising standards etc.

– Contracting policies and procedures.

– Business partnerships/supply chain due diligence policies.

– Personnel – background checks/screening processes.

– Internal audit functions

4 Core business risks and opportunities from sustainability– Strategy to help customers’ capture values from sustainability

attributes of their products, corporate reputation

– Monitoring customer/product portfolio for reputational risk

– Strategy for responding to customer request on sustainability

strategy/performance


5.2 21 Centrale Partners21 Centrale Partners (21 CP) is an example of a mainstream fund that

signed up to the UNPRI and is active in professional private equity

associations. As part of their ESG policy, 21 CP has developed a very

advanced monitoring system that provides a good example of how ESG

performance indicators can be identified and monitored across portfolio

companies that are active in different industries.

21 CP applies a uniform method to collect ESG information across their

portfolios, especially with regard to their key performance indicators

(KPIs). 21 CP has created a monitoring form with separate sections for

environmental, social and governance indicators. Each year, portfolio

companies complete this form and set up their targets and planned ESG

activities for the coming year.

As companies in 21 CP’s portfolio operate in different industries with

different environments, they also face different ESG issues. To account

for this, 21 CP designed a table that indicates the relevance of different

ESG issues for each of their companies. Where the relevance of an issue

is low, companies provide less information in terms of KPIs. Companies

with highly relevant environmental, social or governance issues provide

detailed information on these issues in the appropriate sections (E, S or

G), together with specific examples to demonstrate their ESG approach

and the way they monitor the specific ESG indicators.

5. Good ESG Practices cont’d

Figure 3: 21 CP’s monitoring form

Question(s) Monitoring of environmental indicators

2 -5 Please fill in the below environmental performance measurements:

Indicators

Energy Consumption

(please refer to attachment

1 - Conversion chart)

2010 in GJ

2010 index

(/net sales)

2010 in line

with target?

(yes/no)

2011 target

(reduce/

increase/

maintain*)

Activities completed in 2010

2011 Planned actions

2a

Electricity

20.300

0.0445%

Yes

maintain

current

efficiency

periodic monitoring

continue monitoring

2b Diesel 0 n/a n/a n/a n/a n/a

2c Gasoline 0 n/a n/a n/a n/a n/a

2d Crude oil 0 n/a n/a n/a n/a n/a

2e Propane 0 n/a n/a n/a n/a n/a

2f

Natural gas

19.710

0.0432%

Yes

maintain

current

efficiency

periodic monitoring

continue monitoring

2g Other 0 n/a n/a n/a n/a n/a

Indicators

Water consumption

2010 in CM

2010 index

(/net sales)

2010 in line

with target?

(yes/no)

2011 target

(reduce/

increase/

maintain*)

Activities completed in 2010

2011 Planned actions

Source: 21 Centrale Partners


Figure 4: ESG assessment Climate Energy Ltd.

Source: Climate Change Capital

5.3 Climate Change CapitalClimate Change Capital (CCC) is a good example of how a clean tech

fund can integrate ESG into its investment process. CCC has developed

a systematic approach that helps portfolio companies assess the ESG

factors in their operations. Using this approach, companies can make

an assessment of the risks and potential impact of various ESG factors,

continuously monitor these risks and make improvements where

necessary. In the rest of this section we illustrate how a structured ESG

approach by Climate Change Capital led to changes in the portfolio

companies, using the example of Climate Energy.

Climate Energy Ltd has recently carried out an ESG assessment of its

business activities. Climate Energy is a multi disciplined energy agency,

which provides innovative advice on energy efficiency, funding solutions

and services to local authorities, registered social landlords, homeowners

and businesses. Figure 4 shows an example of the graphical output of

such an assessment.

Based on the assessment results, Climate Energy has placed

environmental communication with its stakeholders at the forefront of its

business operations, making it fundamental to its commitment to take

effective action regarding green issues. From raising awareness of their

environmental activities at different events to the establishment of a staff

environmental committee (the Green Team), Climate Energy has improved

its environmental corporate image with its stakeholders.

In addition, Climate Energy has established a Sustainable Procurement

Programme to ensure the use of 100% recycled and FSC materials.

Furthermore, Climate Energy now sources suppliers locally to reduce

the carbon footprint of its supply chain. Climate Energy has also

cascaded its environmental values throughout its installer network.

Every subcontractor working with Climate Energy has provided

an environmental policy and is monitored as part of the installer

management process. In this way, Climate Energy has established a

nationwide sustainable business network which considers environmental

issues of crucial importance in their day to day operations.


5.4 Global Environment FundThe Global Environment Fund (GEF) is a good example of how a clean tech

fund can incorporate ESG factors in its investment process. GEF invests

in businesses around the world that provide cost-effective solutions to

environmental and energy challenges. Its emerging markets clean tech

fund, GEEMF III, incorporates ESG issues in the investment memorandum,

in the covenants and in its due diligence process (see Figure 5).

Once an investment has been made, the Investment Team supports

the Company’s management in the implementation of any ESG Action

Plans, and further encourages the managers to work towards continuous

improvement in these areas, with accompanying targets.

GEF assesses the ESG impact of all new investments as an integral part of

its investment appraisal process. The monitoring form (see Figure 6) is

intended to gather the relevant information from each portfolio company

and helps GEF meet its monitoring and reporting obligations on ESG

issues towards their limited partners.

Figure 6: GEF monitoring form

Source: Global Environment FundSource: Global Environment Fund

The investment memorandum includes a section on the environmental rationale for the investment. GEF only makes investments that can be shown to have a positive impact on human health and the natural environment consistent with the Fund’s mandate.

All investments must include environmental, social and governance covenants that govern the companies’ behaviour in terms of the ‘negative check’ and in defining its ESG reporting requirements. Each GEEMF III portfolio company must comply with a pre-agreed international set of ‘best practice’ standards on environmental compliance, safety and relevant social metrics.

GEF performs environmental and social due diligence with outside consultants on all portfolio companies. In cases where there are deficiencies in compliance at the time of the investment, the company must agree to implement an Environmental and Social Action Plan providing a list of improvements and a timeline for the company to meet those improvements.

InvestmentMemorandum

Convenants

Due Dilligence

Figure 5: ESG in GEEMF III investment process

5. Good ESG Practices cont’d


6. Concluding Remarks

The 2010 assessment shows improved ESG performance on the part

of the private equity funds in the Robeco Sustainable Private Equity

Program. Some funds now employ very advanced systems for monitoring

the environmental, social and governance performance indicators in

their portfolio companies. In addition, there are clean tech funds that

attempt to estimate their net environmental impact, taking into account

the positive impact of products and services developed by their portfolio

companies and the potentially negative environmental impact of their

operations.

The assessment methodology has been further improved in 2010,

focussing more on evidence concerning implemented policies, including

key performance indicators and their monitoring. The RSPE portfolio

is very diverse in that respect, ranging from funds that apply very

advanced ESG practices to funds that are still struggling with the initial

steps of formulating their ESG strategy and approach. The first group

has shown continuous progress over the years, while the latter has been

characterized by the lack of it.

Most of the twenty-six funds in the RSPE program had higher overall ESG

scores in 2010. In eleven cases, a higher score also led to an improved

rating for ESG performance. Average performance improved across all sub

scores: environmental, social, governance and policy & strategy. While

the number of ESG laggards in the program has increased, the feedback

received from these funds indicates that they have every intention of

improving their ESG performance in the coming year.

The RSPE program shows that substantial steps can be made in

developing and implementing ESG analysis in private equity, irrespective

of the size, geographical focus or investment strategy. Funds that perceive

ESG as good business practice and not something extra that general

partners and their portfolio companies have to deal with because

investors ask them to, see the opportunities in ESG integration. At the

same time, they also face challenges.

One of the challenges that the funds are facing is how to implement ESG

policies and monitoring systems in their portfolio companies. In order

to help the funds that cope with these challenges, we plan to run a pilot

ESG assessment of portfolio companies in selected funds in the second

half of 2011. The goal is to collect ESG information from different sectors

for benchmarking purposes and to be able to better assist private equity

funds in their efforts to implement ESG strategy. Additional information

can contribute to a better understanding of ESG risks and opportunities

across sectors.


RobecoRobeco, established in Rotterdam in 1929, offers investment products

and services to institutional and private investors worldwide. It had

approximately USD 162 billion in assets under management as of June

30, 2009. The product range encompasses equity and fixed-income

investments, money-market funds, responsible investing and alternative

investments, including private equity, hedge funds and structured

products. The various strategies are managed from the Rotterdam

headquarters, Boston, Hong Kong, New York, Paris and Zurich. To service

institutional and business clients, Robeco has offices in Bahrain, Belgium,

China, France, Germany, Japan, Luxembourg, Korea, Singapore, Spain,

Switzerland and the United States. Robeco is a wholly owned subsidiary of

Rabobank.

SAMSAM is an investment boutique focused exclusively on Corporate

Sustainability Investing. The firm’s offerings comprise asset management,

indexes and private equity. Its asset management capabilities

include a range of single-theme, multi-theme and core sustainability

investment strategies catering to institutional asset owners and financial

intermediaries in Europe, the United States, Asia-Pacific and the Middle

East. Through its index activities, SAM conducts the research during

the construction of the globally recognized Dow Jones Sustainability

Indexes (DJSI) along with other customized sustainability benchmarks.

Furthermore, SAM is the center of expertise for Cleantech private equity

within Robeco. Based on its Corporate Sustainability Assessment, SAM has

compiled one of the world’s largest sustainability databases and analyzes

over 1,000 listed companies annually. SAM’s proprietary research and

sustainability data are fully integrated into its offering. SAM is a member

of Robeco and was founded in 1995. It is headquartered in Zurich and

employs over 100 professionals. As of June 30, 2009, SAM’s total assets

under management or under license amounted to USD 12.4 billion.

RabobankRabobank is an international financial services provider operating on the

basis of cooperative principles. It offers retail banking, wholesale banking,

asset management, leasing and real estate services. Focus is on financial

services in the Netherlands and on food and agribusiness internationally.

Rabobank is comprised of 152 independent local Rabobanks plus

Rabobank Nederland, their central organization, and a number of

subsidiaries. The group entities maintain strong mutual ties. Overall,

Rabobank has upwards of 60,000 employees (in full time equivalents),

who serve about 9.5 million clients in 46 countries and has assets of USD

870 billion as of June 30, 2009. In terms of Tier I capital, Rabobank is

among the world’s 25 largest financial institutions. Rabobank began as a

farmer’s co-operative bank in 1898 and green issues have been ingrained

in the culture since its founding. Rabobank has in the past decade

won many accolades for its sustainability management and reporting,

including the Royal Award for Responsible Investment in 2003 (a joint

award supported by the UN Environmental Programme (UNEP) Finance

Initiative and the Royal Award Foundation); the European Sustainability

Reporting Award 2005; and the highest ‘sustainable cluster score’ for

banks, from SAM Group in 2006. In June 2008, Rabobank was named as

the runner-up most Sustainable Bank of the Year at the 2008 Financial

Times and International Finance Corporation (IFC) Sustainable Banking

Awards.

About Robeco, SAM & Rabobank


Important Information

This document has been prepared by Robeco Institutional Asset

Management B.V. (‘Robeco’). Robeco is registered with the Netherlands

Authority for the Financial Markets (Autoriteit Financiële Markten) in

Amsterdam. Rabobank is a regulated entity as set out under the Dutch

Financial Supervision Act (Wet Financieel Toezicht). The information

contained in this document is intended solely for qualified investors

within the meaning of the Dutch Financial Supervision Act (Wet Financieel

Toezicht) or persons which are authorized to receive such information

under any other applicable laws.

There will be no public market for the interests in the private equity

funds contemplated in this document. The interests have not been

recommended by any U.S. Federal or state or any foreign securities

commission or financial regulatory authority or supervisor. The information

herein is not intended to be complete and should not be relied upon by any

person in evaluating the merits of the fund. This fund may not be offered to

the public, nor may this presentation be distributed in any jurisdiction. The

offering of the fund has not been submitted for approval by any regulator.

Any person who is interested in subscribing for an investment in the fund

must obtain his own legal advice.

Although this document has been prepared by Robeco with due care, and

the content is based upon sources of information believed to be reliable,

no warranty or declaration, either explicit or implicit, can be given as

to its accuracy or completeness. This document has been prepared on a

confidential one on one basis for private use by the recipient only, solely

for discussion purposes with respect to Robeco Alternative Investments’

specific capabilities. Any reproduction or distribution of this document, in

whole or in part, or the disclosure of its contents, without the prior written

consent of Robeco, is prohibited. By accepting this document, the recipient

agrees to the foregoing. No rights whatsoever are licensed or assigned or

shall otherwise pass to persons accessing this information.

This document is solely intended to supply the reader with information and

reference on Robeco Alternative Investments’ specific capabilities and does

not constitute an offer, an invitation to subscribe for or investment advice

in connection with any private equity funds. Investment decisions should

be based solely on the final prospectuses of such funds.

The information relating to performance is for historical information only.

The value of your investments may fluctuate. Results obtained in the past

are no guarantee for the future. Please note that the private equity funds

of funds contemplated in this document are not principal protected. As a

result, the investor may possibly lose his entire investment.

Robeco advocates Responsible Investing

Robeco advocates Responsible Investing because we are convinced

that solid corporate governance and corporate responsibility

increase shareholder value. Our definition of Responsible Investing

is based on international codes of conduct such as the United

Nations Principles of Responsible Investing (PRI).


1039

PV-0

9’11

Contact

Robeco Coolsingel 120

3011 AG Rotterdam

The Netherlands

T +31 10 224 1 224

E www.robeco.nl

Robeco advocates Responsible Investing

Sharing. Robeco shares its knowledge and expertise on responsible

investing with you.

Corporate governance. Robeco believes good corporate governance

is positive for shareholder value in the long run.

Costs. Robeco is open about costs. We show you what you pay for.

Reponsible Investing explained. www.robeco.com

robeco sustainable private equity program program... · public version responsible entrepreneurship...

Documents