Review of the Portfolio in 2023
Argentum conducts an annual review of the status related to ESG for the funds in the portfolio. This is partly a review conducted by Argentum's ESG team and partly self-reporting from the managers themselves. All managers in Argentum's portfolio are invited to respond to an ESG survey, where we ask them to evaluate the risk in the underlying portfolio in line with the UN Global Compact. Additionally, we ask the managers to report with the EDCI. In 2023, Argentum's portfolio consisted of 94 different external management environments, and we received responses from 86 managers.
Background for this year’s questions
When collecting data for the financial year 2023, we used PositionGreen's platform for the first time. Previously, the managers received questions via email, but this year they were invited to respond directly on the platform. This has been a significant transition for Argentum and the managers, but the response rate remains very high, in line with previous years.
This year's ESG survey builds on the questions from the previous year. Our focus has been to gather information on the development of the managers' ESG guidelines, information on climate risk and opportunities, data security, and measures taken to prevent corruption. We have also chosen to repeat the questions on how the funds are preparing for the EU taxonomy for sustainable activities, SFDR, and how they relate to the UN Sustainable Development Goals.
The annual survey evolves in line with current regulations and trends. In 2022, we added questions regarding net-zero strategy and science-based climate targets, as well as questions about biodiversity and ecosystems. In 2023, we added questions about the value chain to gain insight into whether this is something the managers of the funds focus on in their portfolio.
As a member of the ESG Data Convergence Initiative, Argentum has also issued the data template for the project to managers, asking them to report on KPIs linked to emissions, renewable energy consumption, diversity of board members, injuries, new employees and employee engagement.
Questions in this year’s ESG survey
Below you can find the questions we asked the managers in this year’s ESG survey of the portfolio:
- Policies and guidelines
- Please state whether you changed ESG policies/guidelines in 2023 and whether you plan to make changes in the future. Please comment.
- Please state if there have been any breaches on ESG policies/guidelines in the reporting year. We kindly ask you to inform us of any breaches as soon as possible.
- During the due diligence processes/ pre-investment phase
- Please state whether there have been any recent developments regarding the evaluation of ESG factors in the due diligence process.
- Were any specific ESG issues discovered in DD processes during the reporting year?
- Key topics - Climate risk and opportunities
- Please comment on how portfolio companies are exposed to physical climate risks and the opportunities to reduce such risks.
- Have you identified any climate-related risks or opportunities that could significantly impact the return of your fund or individual portfolio companies?
- Have you developed a net zero strategy and defined science-based targets for the portfolio companies, or do you have concrete plans for doing this in the future? Please comment.
- Have you identified risks related to biodiversity and ecosystem services in the portfolio companies?
- EU regulatory changes
- Which measures have been taken to prepare for the EU taxonomy for sustainable activities and the upcoming CSRD regulation?
- Do you plan for current or future funds to comply with articles 8 and/or 9 of the Sustainable Finance Disclosure Regulation (SFDR)?
- What guidelines/practices are used to ensure that the most significant negative consequences (so-called 'principal adverse impacts' or PAI) that investments have on sustainability factors are assessed and taken into account?
- Do you plan for current or future funds to comply with articles 8 and/or 9 of the Sustainable Finance Disclosure Regulation (SFDR)?
- UN Sustainable Development Goals
- Do you integrate the UN Sustainable Development Goals (SDGs) in your ESG work?
- Which of the SDGs are most relevant to your ESG activities? Please specify your relevant SDGs.
- Data security
- To what extent have specific measures been taken to ensure adequate data security in the portfolio companies?
- Anti-corruption
- Do any of your portfolio companies have operations in areas where corruption is typically widespread?
- Which company(-ies), and what anti-corruption measures have been taken?
- How are these measures being monitored?
- Reporting on ESG factors
- Please comment on the development of the reporting from your portfolio companies on ESG-related issues, especially regarding ESG-related key performance indicators?
- Do you plan to make future changes to your ESG reporting to your LPs in the future?
- Value creation related to ESG
- To what extent do you see that ESG efforts have had a positive financial impact on any of your portfolio companies?
- Please highlight any other positive externalities related to ESG focus in the portfolio companies on the community and other stakeholders.
- Value chain
- How does the company proactively monitor and manage ESG-related risks across its entire value chain, and what mechanisms are in place to ensure accountability and transparency in addressing potential ethical, social, and environmental issues throughout the various stages of production, distribution, and consumption?
- How does the company monitor and address ESG risks in its value chain, specifically in terms of governance practices?