We consider ESG at three levels: the Board, HarbourVest and investee companies. We are dedicated to promoting the highest standards which we believe foster higher-quality investments and improved returns.
Focus on ESG
The prioritisation of ESG considerations and ethical business standards within HVPE’s portfolio is supported by the Investment Manager’s robust ESG due diligence and monitoring procedures which it applies across each of its investment strategies. The Investment Manager relies on two primary tools, its proprietary ESG Scorecard that it uses to evaluate GPs on their ESG processes and capabilities, and RepRisk®, an external database that supports both ESG analysis in due diligence and incident-monitoring of ESG and business conduct risks within the portfolio. HarbourVest seeks to use its influence to improve ESG standards in the HVPE portfolio through actively engaging with its GPs through the ESG Scorecard assessment and feedback process and through the sharing of best practice.
HarbourVest’s ESG policy and latest digital ESG report for 2020 can be found on the HarbourVest website. Some highlights over the year include:
- In 2020, HarbourVest added new indicators to its proprietary ESG Manager Scorecard to help better understand how GPs are managing, prioritising and disclosing on ESG risks and value creation opportunities.
- HarbourVest was also proud to receive an A+ in governance in its UN Principles for Responsible Investment (“PRI”) rankings, and equally proud to be recognised by the British Private Equity & Venture Capital Association (“BVCA”) with its 2020 Excellence in ESG Award in the LP category.
- HarbourVest updated its ESG Policy in early 2021 to reflect evolving ESG practices, and the firm’s deep commitment to responsible investing. The new Policy includes more detailed information on its ESG integration processes and reflects HarbourVest’s strategic commitments to climate change and diversity and inclusion.
Climate Change Strategy
- In last year’s ESG Report, HarbourVest announced plans to develop its climate strategy around the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations. This year, HarbourVest is pleased to share in its ESG report its first progress update around the TCFD’s four pillars: governance, strategy, risk management, and metrics and targets.
- In addition to being a TCFD Supporter, HarbourVest also became a member of the Initiative Climate International (“iCI”) in 2020. The iCI is a practitioner-led initiative to develop tools and materials that aid private equity action on climate change.
- In 2020, for the first time, HarbourVest committed to measuring and offsetting its carbon footprint, and is now, a certified CarbonNeutral® company in accordance with CarbonNeutral Protocol, the leading framework for carbon neutrality.
Diversity and Inclusion
- Internally, HarbourVest’s Diversity & Inclusion Council accomplished much in 2020, taking on issues that were of most importance to the firm. By instituting key policies and delivering education, the Council helped the firm focus on creating more of a shared understanding, appreciation, and commitment to diversity and inclusion.
- On the talent and hiring front, HarbourVest developed plans to launch its first-ever internship programme in conjunction with Sponsors for Educational Opportunity, which works to close the career opportunity gap in underserved communities. It also joined the #10000BlackInterns initiative in the UK.
Engaged Corporate Citizen
- HarbourVest’s Global Volunteering Group helped identify and work with organisations that needed urgent help, focusing in particular on COVID-19 driven food insecurity and poverty. Employees donated generous amounts of both time and money – $2.4 million – to support these causes.
Approach to ESG
The Board recognises the critical importance of ESG considerations to many investors. It acknowledges that ESG issues can present both opportunities and threats to long-term investment performance and is committed to responsible and sustainable investing. The Board also believes that HVPE will benefit from the continued evolution of HarbourVest’s ESG practices and standards.
The Board is aware that as an investment company, its approach to ESG matters is materially informed by the strategy of the Investment Manager and accordingly the Board is committed to ensuring that it has appointed an Investment Manager that applies the highest standards of ESG practice and has the skill and vision to respond to ongoing developments. It is confident that in HarbourVest it has such an Investment Manager.
The Board is reliant on the Investment Manager’s screening processes, controls and priorities to address ESG matters within the investment portfolio in both the selection and oversight of investments. The Board believes that engagement with management of investee companies and funds is an effective way of driving meaningful change and takes considerable comfort from the extent of the Investment Manager’s activity in this area.
The Board receives regular updates from the Investment Manager on the development and implementation of its ESG policies and processes and the Board will continue to monitor those closely. These updates include information on the levels of engagement with investee companies and ESG issues in respect of their monitoring and selection of holdings in the Company’s portfolio. This provides a valuable opportunity for the Board to confirm and challenge the Investment Manager to demonstrate that it is continuing to apply the highest standards of ESG practice across its investments and operations. The Board recognises that the Investment Manager has been a signatory to the UN Principles for Responsible Investment (”PRI”) since 2013, that it is committed to considering the potential impact that its investment and operational decisions could have, and that it encourages the GPs with which it invests to adopt the PRI. With regard to environmental and climate disclosures, the Investment Manager has started to report annually on its progress through its ESG report in line with the Recommendations of the TCFD. The Board has noted that the Investment Manager is a CarbonNeutral® company in accordance with The CarbonNeutral Protocol, a leading framework for carbon neutrality. The Investment Manager’s offsetting programme delivers finance to emission reduction projects, supporting the transition to a low carbon economy. Finally, the Board also reviews the Investment Manager’s approach to promoting diversity, social responsibility, and projects to combat social exclusion and enhance opportunities.
The Board is committed to incorporating ESG oversight across the Company’s outsourced providers and within its own operations. Ms Espinal is the HVPE Director responsible for ESG matters. She helps to promote closer monitoring and further development in this area for the Company.
The Company’s oversight of outsourced providers has been expanded to include questions and confirmations in respect of their ESG policies as part of its annual review of providers.
As an investment company with no direct employees, the core of the Company’s ESG initiatives is derived from its oversight of its service providers, most importantly the Investment Manager. However, the Board also considers the application of ESG standards to its own activities as an Investment Company, including the following:
- Carbon Footprint: The Board has initiated a project to calculate its own carbon footprint with a view to achieving Carbon Neutral status, and will provide an update to shareholders in due course.
- Relations with Stakeholders: The Board will extend its interaction with its shareholders and other stakeholders to include a consideration of ESG matters. The Board has noted the governance and environmental benefits of broader shareholder participation facilitated by virtual shareholder events and will explore continuing to offer remote access where possible.
- Diversity and Inclusion: The Board’s approach to diversity and inclusion is set out on page 51 and is reflected in the activities of the Nomination Committee. 43% of the Directors who are being proposed for re-election at the AGM are female, a figure well above the level recommended in the Hampton-Alexander Review. While it does not have a diversity target in mind, given the range of factors that this term necessarily covers, the Board will consider actively prioritising diversity in its next recruitment process.
- Position on Modern Slavery: The Board recognises the importance of the issues which the UK Modern Slavery Act 2015 is designed to address. It will expand its oversight of outsourced providers, including the Investment Manager, to include questions relating to their policies to combat Modern Slavery.