2. ESG in Argentum’s investment activities
Argentum places high demands on the funds in which we invest. In all investment processes, managers must disclose the assessments that have been made regarding ESG. If the manager’s ESG work is inadequate, Argentum can choose not to invest.
2.1. Argentum’s ESG process
2.1.1. New investments in a fund
Before we invest in a new fund (a primary investment), a separate analysis is made of the manager’s vision, guidelines and working methods within ESG. In addition to collecting information, we meet with the manager to learn how they gather relevant information before investing in a portfolio company and how investments are monitored and reported during the ownership period. We also include questions relating to ESG when conducting reference surveys among our managers. The findings and assessments from these preliminary investigations are presented in a dedicated section of the investment recommendation.
Argentum has systematised ESG-related assessments in such a way that they form part of the formal contractual framework for participating in new funds. Argentum has established a standard agreement in the form of a side letter, which all managers must endorse before committing capital to a new fund. This includes acceptance that:
- Argentum’s investment activities are based on the principles of the UN Global Compact.
- They have received Argentum’s ethical guidelines and are urged to develop similar guidelines.
- They will evaluate the social, environmental and ethical consequences of current and planned investments.
Argentum regularly reviews the ESG requirements in its standard side letter and makes adjustments if needed.
The contractual framework covers investment decisions and reporting relating to ESG for investments in new funds.
2.1.2. Investments in the secondary market
For secondary investments, Argentum will assess the manager’s ESG policy, investment restrictions, investment strategy and underlying portfolio before an investment decision. This is done because Argentum cannot influence the existing contractual framework, as the fund is already established.
Argentum focuses on obtaining a good impression of the manager’s ESG efforts, mainly if it is a manager that Argentum is not already familiar. The manager will be monitored the same way as primary investments (see above). In the future, Argentum will continue the work on ensuring that new managers are aware of ESG and supporting managers to develop their guidelines further should they seek our guidance.
2.1.3. Co-investments
In the case of co-investments, ESG is one of the points that is specifically examined before an investment decision is made. Before investing, we analyse the manager, the ESG risk and opportunities, and make a general assessment of the investment opportunity based on the main areas in the UN Global Compact. After investing, we will follow up on the investment through our annual portfolio monitoring.
Argentum works continuously to develop its ESG efforts further and will continue to develop processes ahead of new investments and in the monitoring of managers. In connection with the implementation of SFDR, we have strengthened our processes linked to integrating sustainability risk in investment decisions.
2.2. New commitments in 2021
During 2021, Argentum committed capital to 18 new funds in the primary portfolio: Cow Corner 1, DevCo Partners IV, DN Capital – Global Venture Capital V, Elvaston Capital Fund V, Excellere Capital Fund IV, H2 Equity Partners Fund VI, Hadean Capital II, Horizon Capital II, Incline Ascent Fund, Incline Elevate Fund II, Inflexion Buyout Fund VI, Main Capital VII, Main Foundation I, NewPort Buyout Fund II, Nordic Capital Evolution Fund I, PSC IV, Verdane Idun I and one additional fund.
Argentum has committed NOK 2.2 billion to these funds, and all managers have accepted our side letter. They have committed to submitting annual reports on their ESG efforts to Argentum or established internal ESG procedures that cover our reporting.
Four managers are new to the Argentum portfolio: Cow Corner, DN Capital, Excellere Capital and H2 Capital. Before Argentum invests with new management groups (primary investments), a detailed assessment is made of the fund’s ESG work. All new managers have established acceptable ESG guidelines or are in the process of doing so.
Above: The investment focus of Argentum’s new commitments in 2021.