As long-term investors on behalf of our stakeholders, accounting for environmental, social, and governance (ESG) risks and opportunities helps us provide sustainable value to our clients and community.
This document details our firm-wide commitment to integrate ESG information into all our investment activities, and outlines the foundation, ownership and oversight mechanisms that underpin our approach. ESG integration is the practice of incorporating ESG information into investment decisions with the objective of improving the long-term financial outcomes of our portfolios, consistent with our investors’ objectives. We are doing this across all our active portfolios, seeking to enhance long-term value for our investors and investees. This Statement applies to all of SFC’s investment divisions and investment teams, and is reviewed at least annually to reflect changes within our business. As a venture capital firm, we recognise our responsibility to facilitate a resilient entrepreneurial network. We aspire to be an industry leader in how we incorporate sustainability into our investment research and management, our sustainable growth solutions, and the operations of our own business.
SFC follows the UN Principles for Responsible Investment (the “Principles”). These cover six high-level principles which SFC is fully incorporating in its investment processes and decisions:
ESG principles are applied in three ways to SFC’s portfolio:
SFC will not invest in companies in which the core business is based on/provides/promotes:
SFC Capital will prioritise and offer an increased amount of time and attention to businesses that bring practical solutions to the environment, society and governance.
Positive screening will be employed to increase our exposure to these investment themes, subject to existing concentration limits.
Where appropriate and practically possible, SFC will include ESG compliance into our investment terms.
Investment terms shall include covenants or repeated representations to ensure that investees comply with their stated ESG objectives and to encourage them to improve their standards over time.
These could include:
SFC will incorporate market-accepted ESG scoring methodologies into our due diligence.
As the very first investor in businesses, we will include into our mission the introduction of the ESG concept and guidance, as we already do with corporate governance and performance monitoring. As soon as reasonably possible, we will introduce an ESG check in our quarterly reporting and encourage portfolio companies to submit an annual ESG report via a simple questionnaire. We will promote ESG good practices as part of our post-investment support.
Where appropriate, investees will be asked to complete annual post-investment ESG questionnaires. These will cover quantifiable ESG metrics/KPIs where appropriate – such as Health and Safety records, ethnic diversity, gender pay gap, and confirmation of the investees’ overall ESG policies and procedures.
ESG performance and credentials will be monitored regularly for each investment in the annual monitoring process. If investees' ESG scores deteriorate, SFC will contact their management teams and help to determine a strategy to improve their performance.
SFC will not reinvest in companies that have not introduced ways to comply with ESG good practices or that do not pass the positive and negative screenings. As soon as reasonably possible, we will include in our re-investment strategy and Due Diligence a scoring check on ESG compliance.
SFC will encourage sustainability in the workplace through a range of initiatives, including these set out below: