REPORT ANNUAL REVIEW OF HARBOURVEST S ENVIRONMENTAL, SOCIAL, AND GOVERNANCE ACTIVITIES

Transcription

1 ESG REPORT 2018 ANNUAL REVIEW OF HARBOURVEST S ENVIRONMENTAL, SOCIAL, AND GOVERNANCE ACTIVITIES

2 CONTENTS 3 MESSAGE FROM THE EXECUTIVE MANAGEMENT COMMITTEE 4 APPROACH AND GOVERNANCE PROGRAM OVERVIEW, GLOBAL ESG COMMITTEE 6 COMMITTED TO RESPONSIBLE INVESTING ESG INVESTMENT PROCESS, PRI ASSESSMENT, GP ESG RANKINGS 14 SUPPORTING EMERGING AND DIVERSE-LED MANAGERS IMPACT INVESTING, FEMALE-LED VC FUNDS 20 CORPORATE RESPONSIBILITY DIVERSITY, COMMUNITY, TALENT DEVELOPMENT, OPERATIONAL HIGHLIGHTS 24 OUTREACH AND EVENTS We re driven by the belief that strong financial returns and positive social change can be accomplished in tandem. HARBOURVEST 2018 ESG REPORT / 1

3 MESSAGE FROM THE EXECUTIVE MANAGEMENT COMMITTEE We are pleased to present HARBOURVEST PARTNERS 2018 ESG REPORT, our annual review of the initiatives and activities we undertook in 2018 to support our longstanding commitment to being conscientious investors and engaged corporate citizens. As a leading private markets manager and investor, as well as a proud signatory to the Principles for Responsible Investment ( PRI ), we have a dual responsibility to continuously strengthen our own ESG capabilities, and to look for ways to drive increased awareness and adoption across our industry. In 2018, these efforts included providing deeper ESG training to more of our global staff and strengthening our post-investment monitoring protocols. In terms of influencing awareness and adoption, we used our proprietary manager scorecard to rank the ESG programs of 178 general partners, and plan to share these results with them in 2019 so they can see how they perform relative to their peers (see p. 12). Through this benchmarking we hope to drive further improvements in ESG policies and practices among our top-performing managers. We also continued to be a leading global voice in the ongoing conversation around diversity and inclusion in our industry. Diverse and inclusive teams, as numerous studies have shown, make faster decisions and deliver better overall outcomes for their clients. Diversity is especially important in private equity, where it serves as a major catalyst for innovation the main engine of value creation. We have been building and cultivating diverse teams at HarbourVest for more than three decades, and as a result have above-average diversity statistics relative to many of our peers (see p. 21). In 2019, we will deepen our commitment by establishing an internal Diversity & Inclusion Council. Perhaps our most gratifying highlight came in the form of an external validation of the progress we have made. Our ESG efforts are assessed independently each year by the PRI, and our most recent results across three core categories Strategy and Governance (A+), Indirect Investments (A+), and Direct Investments (A) were our best ever and placed us in the top quartile of private equity managers (see p. 7). None of these achievements would be possible without our incredibly dedicated people. We may be biased, but our team cares a great deal about giving back. To further support their generosity, we introduced a matching gift program in 2018, and held two Global Volunteer Weeks where staff based in our nine global offices performed community service activities during business hours (see p. 24). These community-focused activities also serve to reinforce the team-building culture that is pervasive across the firm. We hope you enjoy reading the report and learning more about ESG at HarbourVest. While these three important letters mean different things to different investors, most agree on this: ESG factors are becoming more prominent in the investment decision-making process and will only grow in importance in the years ahead. Through it all, we will remain steadfastly committed to delivering strong financial results, adhering to our ESG values, and being responsible stewards of the capital you have entrusted us to manage. Peter Wilson and John Toomey ESG factors are becoming more prominent in the investment decision-making process and will only grow in importance in the years ahead. PETER WILSON (left) AND JOHN TOOMEY EXECUTIVE MANAGEMENT COMMITTEE HARBOURVEST PARTNERS 2 / HARBOURVEST 2018 ESG REPORT HARBOURVEST 2018 ESG REPORT / 3

4 APPROACH AND GOVERNANCE INTEGRATED ESG PROGRAM GLOBAL ESG COMMITTEE HARBOURVEST S ESG COMMITTEE is responsible for overseeing the firm s ESG Policy, recommending modifications, and ensuring overall implementation across the organization. INTEGRATE ETHICS INTO INVESTMENT PROCESSES HarbourVest is committed to incorporating ethical business standards into all of its investment-focused activities. FOSTER GP ADOPTION AND SUPPORT We encourage general partners (GPs) to increase their own commitment to responsible investing by incorporating ESG principles into their investment processes. For more than 35 years, HarbourVest has sought to align its interests with those of our investors, investment partners, and staff around the world. Doing so on a consistent basis has allowed us to proudly build and maintain a culture of ethical behavior, transparency, and social responsibility in both our investments and operations. ALIGNED INTERESTS TRANSPARENCY PERFORMANCE REFLECT ESG VALUES IN POLICIES AND PRODUCTS Where possible, we strive to ensure that our internal policies and investment products embody the spirit of the PRI and properly reflect our core values. GOVERN FIRM-WIDE EFFORTS THROUGH ESG COMMITTEE A group of senior executives from across the firm assesses current progress on ESG-focused initiatives and sets the strategic vision for future projects and enhancements. PROVIDE TRANSPARENCY TO STAKEHOLDERS We align our interests with those of our investors, investment partners, and employees by providing all stakeholders, including clients, with transparency into our decision-making. For additional information regarding ESG at HarbourVest, please visit our dedicated web page at For specific requests or questions, please send an to clientservice@harbourvest.com and we would be happy to assist you. KATHLEEN BACON Managing Director, Investments; ESG Committee Chairperson; Member, Global Investment Committee As the Chair of the Committee, Kathleen focuses on setting ESG strategy firm-wide and ensuring implementation. JULIE EIERMANN Managing Director, Chief Data Officer Julie and her team work to provide the tools and data necessary to help our investment teams incorporate ESG considerations into their diligence and investment processes. JAMES KASE Managing Director, Global Head of Investor Relations Jamie solicits and delivers key market feedback from clients on ESG initiatives and deliverables to ensure that the Firm s activities are aligned with prevailing ESG concerns and considerations. DIANA McEACHERN Office Manager, Operations Diana and her team focus on ESG best practices and driving related efficiency improvements across HarbourVest s global operations footprint. MARK REALE Managing Director, Global Head of Human Resources Mark oversees corporate and employee engagement in the areas of resource conservation, corporate giving, community engagement, and diversity and inclusion. He is also responsible for our talent management efforts globally. LAURA THAXTER Principal, Global Head of Client Service Laura works with our investment and investor relations teams to ensure that ESG initiatives and key updates are communicated in a timely fashion to prospects and clients. JOHN TOOMEY Managing Director, Investments; Member, Executive Management Committee ( EMC ) and Global Investment Committee As a member of the EMC, John provides senior-level executive support to the Committee and holds it accountable to firm-wide goals and objectives. CHRISTOPHER WALKER Principal, Primary Investments As the lead investment representative on the Committee, Christopher focuses on coordinating ESG-focused activities and initiatives across HarbourVest s global primary, secondary, and direct co-investment teams. 4 / HARBOURVEST 2018 ESG REPORT HARBOURVEST 2018 ESG REPORT / 5

5 COMMITTED TO RESPONSIBLE INVESTING Every primary fund, secondary transaction, and direct co-investment opportunity we consider undergoes a thorough review of potential ESG risks and benefits before being approved. These opportunities go through the filter of our ESG manager scorecard, which allows us to assess GPs overall compliance and gives us a framework for providing objective, actionable feedback on areas where they can strengthen and improve. Our investment professionals also hold seats on numerous fund advisory boards, and we utilize these forums to further engage GPs and LPs in dialogue around ESG issues. PRIMARY FUNDS In the process of conducting diligence on new primary funds, our investment teams utilize our proprietary manager scorecard to assess GPs on more than 20 factors across the environmental, social, and governance spectrums, weighing efforts at both the portfolio and corporate level. SECONDARY TRANSACTIONS Similarly with secondary investments, our teams conduct ongoing assessments on the underlying managers in each deal to gauge their overall ESG commitment. The type of diligence we perform depends on whether the opportunity is a traditional deal involving a purchase of one or more limited partnership interests from a single seller or a complex transaction, which MANAGER ESG SCORECARD Policy Use of Expertise Culture Governance Due Diligence Ownership Exit Reporting 6 / HARBOURVEST 2018 ESG REPORT MANAGEMENT How the GP ensures its ability to identify and manage ESG risks and opportunities. INVESTMENT PROCESS How ESG issues are managed throughout the investment lifecycle. REPORTING How the GP measures, manages, and reports ESG performance. often requires more resources and negotiation. For traditional opportunities, we verify whether the manager has an existing ESG policy and if they do not, encourage them to consider doing so. Our teams also examine the existing portfolio of assets to identify any ESG concerns. For complex deals, we take a more proactive approach that closely tracks the manager evaluation process utilized by our Primary team. DIRECT CO-INVESTMENTS Our Direct team actively monitors ESG risks at the company level, focusing on the investment opportunity itself, and at the GP level, where we analyze the lead sponsor. Lead sponsors are measured using our ESG scorecard, which gives us a view into how the lead sponsor might approach advising a portfolio company about a potentially significant ESG issue. Target companies are evaluated and ranked across various metrics, including business model, geographic location, and investment stage. Any concerns discovered during this process are flagged for further evaluation. REAL ASSETS Responsible investing is essential to the process of developing successful real assets-focused businesses and creating value for our clients. Our Real Assets team is acutely aware of the impact investments in areas such as infrastructure and power, energy, and natural resources can have on the environment, and actively considers ESG issues as part of its underwriting process and ongoing asset management. INFRASTRUCTURE & POWER > Significant investor in clean and efficient energy sources (renewable energy, natural gas) > Focus on operating excellence to maximize energy yield ENERGY Invest in best-in-class energy managers focused on: > Water consumption reduction > New, more efficient technology to boost production yields > Safety-focused cultures 2018 ASSESSMENT BEST-EVER SCORES PLACE FIRM IN TOP QUARTILE FOR INDUSTRY As a signatory to the PRI, our ESG progress is measured annually through an independent assessment. In 2018, we re proud to report that we received our highest grades ever across the core ESG areas of Strategy & Governance, Indirect Investments, and Direct Investments, placing us in the top quartile of private equity managers. Our Strategy & Governance grade improved in part from having clearly assigned roles and responsibilities among ESG Committee members, as well as our ongoing investment in personnel development and training. In the Indirect category, which includes primary fund investments and secondary transactions, the firm s monitoring capabilities and high advisory board participation rates contributed to our strong results. On the Direct side, our integrated approach to responsible investing particularly how we factor ESG considerations into our due diligence process helped drive our grade from a B in 2017 to an A this year. We received our highest grades ever across the core ESG areas of Strategy & Governance, Indirect Investments, and Direct Investments. ESG CATEGORY HARBOURVEST 2017 SCORE HARBOURVEST 2018 SCORE INDUSTRY 2018 MEDIAN Strategy and Governance A A+ A Indirect Investments B A+ C Direct Investments B A B To view the public version of HarbourVest s 2018 PRI Assessment Report, please click here. To access the firm s 2018 Private Transparency Report, please log on to HarbourVest s secure Investor Log-in website at investor.harbourvest.com using your address and password. Once logged in, go to the News and Update tab and select Market Updates. HARBOURVEST 2018 ESG REPORT / 7

6 COMPANY: Greenlight Planet LOCATIONS: Mumbai, Nairobi, Chicago LEAD GP: Apis Partners Greenlight Planet is dedicated to delivering safe, affordable solar energy products to more than 2 billion underserved people around the world. The company distributes its popular Sun King solar-powered lights and phone chargers in more than 60 countries, with a significant focus on Africa and South Asia. Greenlight Planet s award-winning products have been recognized by the Economist magazine and the World Bank for excellence in sustainable energy. To see us go from bootstrapping our growth to being supported by private capital has been transformative for our business and the people we serve around the world. This influx of capital has us thinking beyond solar energy, as we believe we can make an impact in areas such as water treatment and communication services and connectivity. RHADIKA THAKKAR DIRECTOR OF CORPORATE AFFAIRS 1.3B PEOPLE WITH NO OR LIMITED ACCESS TO ELECTRICITY 30M USERS IN AFRICA AND SOUTH ASIA 60+ COUNTRIES WITH OVER 27M DAILY USERS Greenlight Planet data IMPACT INVESTMENT CASE STUDY 8 / HARBOURVEST 2018 ESG REPORT HARBOURVEST 2018 ESG REPORT / 9

7 COMPANY: Intelex HEADQUARTERS: Toronto LEAD GP: JMI Equity Intelex is a global leader in the Environmental, Health and Safety, and Quality (EHSQ) software market, delivering a comprehensive and integrated solution to help companies across different industries ensure compliance, reduce risk, and improve performance. Intelex s integrated EHSQ SaaS Platform enables customers to improve their environmental impact, reduce safety incidents, and ensure the quality of their products by providing a management and measurement framework that engages their global workforce to continually improve social responsibility. We re proud to partner with HarbourVest and JMI, both of which have strong enterprise software portfolios. The capital support we ve received is helping us accelerate and expand our mission of building a safer, cleaner world. We re adding staff, developing new products, and opening new offices in key markets to better serve our clients across all industries. MARK JAINE FOUNDER AND CEO 100,000 LIVES SAVED IN LAST 5 YEARS 24% REDUCTION IN CARBON EMISSIONS EQUIVALENT OF REMOVING 5 MILLION CARS FROM THE ROAD $3.8B HEALTH AND SAFETY-RELATED COSTS AVOIDED Intelex data IMPACT INVESTMENT CASE STUDY 10 / HARBOURVEST 2018 ESG REPORT HARBOURVEST 2018 ESG REPORT / 11

8 INTERVIEW WITH CHRISTOPHER WALKER PROACTIVE PUSH: MOVING THE ESG METER WITH OUR GPs CHRISTOPHER WALKER HARBOURVEST STRIVES TO EDUCATE ITS GPs ON THE IMPORTANCE OF INTEGRATING ESG PRINCIPLES INTO THEIR INVESTMENT PROCESSES AND HAS HAD SUCCESS INFLUENCING MANY TO DO SO. WE TOOK OUR EFFORTS TO A NEW LEVEL IN 2018 AS OUR INVESTMENT TEAM USED OUR MANAGER SCORECARD TO RANK THE ESG PROGRAMS OF 178 GPs, UNCOVERING SOME INTERESTING RESULTS IN THE PROCESS. IN THE FOLLOWING INTERVIEW, CHRISTOPHER WALKER, A PRINCIPAL ON OUR PRIMARY TEAM AND A MEMBER OF OUR GLOBAL ESG COMMITTEE, SHARES SOME OF THE THEMES AND FINDINGS FROM THIS ANALYSIS, AND EXPLAINS HOW WE PLAN TO USE THE DATA TO CONTINUE TO DRIVE INCREASED ESG AWARENESS AND ADOPTION WITH OUR PARTNERS. Our effort to influence and work with GPs to improve their ESG programs has two key components. Can you explain each? The first phase involved analyzing all of the GPs to whom HarbourVest committed capital in 2017 and 2018, and using our scorecard to assign each a score from zero to 4. We completed this work in 2018, and now have a rich database of information to share with our GPs as an impetus for change. For Phase II, which is underway and will extend through 2019, we plan to provide each manager with a comprehensive blind ranking showing where their ESG program stands relative to its peers. We believe this visual representation will be highly effective and gives us an unbiased way to inform our underperforming GPs so they can take action. We also plan to send ESG plan templates to those managers considering adoption, and will encourage them to share their views and future plans with their broader LP bases. What are some of the top-line findings or themes that emerged from the rankings? Not surprisingly, the adoption of ESG policies and programs is far from uniform around the world. European managers, particularly those focused on buyouts, have the best adoption rates as ESG issues continue to be more front of mind for European GPs and LPs than their US or Asian counterparts. Conversely, North American-based venture funds generated some of the lowest rankings in our research. We re aiming to work with and hopefully help drive improvement with those managers that generated below-average scores. It s worth noting that while many of the managers we met with didn t have formal plans or dedicated ESG personnel, the majority were interested in learning more and potentially adopting a policy. This is where we come in and can add demonstrable value. For Phase II, which is underway and will extend through 2019, we plan to provide each manager with a comprehensive blind ranking showing where their ESG program stands relative to its peers. Why do US venture funds lag in terms of establishing ESG programs? By their nature, venture funds tend to have much smaller operations than larger buyout funds, and may not have an immediate need based on the early development stage of their underlying companies, many of which aren t involved in ESG-sensitive industries. Additionally, the cost of hiring dedicated ESG staff or other resources can be prohibitive. Another factor is that venture funds are generally minority investors, so buying a firm for control is not typically a central part of their business model. This weakens the argument for creating a more formal ESG policy. Did any other findings stand out? Our scorecard measures GPs on three broad categories: management, investment process, and reporting. Given the nature of the asset class and HarbourVest s focus on managers that have repeatable, proven processes in place, management and governance scores were quite high across both venture and buyout managers. The overall scores for the reporting category were lower, which could stem in part from the fact that ESG issues have not always been as prevalent as they are today. Many GPs have historically considered ESG reporting issues to be part of the general turnaround process and haven t always isolated these issues in their reporting to LPs as a separate line item. We are committed to sharing some of the leading behaviors from our scorecard analysis with those managers that have the most room for improvement. Can you provide more detail on how you plan to share the rankings with your GPs? What are your expectations? When we show GPs their relative ranking, they will quickly see the areas where they trail and can immediately compare themselves to their peers in the same geographic region, thus allowing for clear and relevant comparisons. Given the competitive nature of GPs within the industry, and the fact that ESG is becoming a core topic in due diligence, we hope this sparks a desire on their part to improve. As an LP that is well educated and trained on ESG matters, we feel we can add value to this improvement process. 12 / HARBOURVEST 2018 ESG REPORT HARBOURVEST 2018 ESG REPORT / 13

9 SUPPORTING EMERGING AND DIVERSE-LED FUNDS We source more than 150 opportunities each year focused on emerging and diverse-led funds. 1 HarbourVest has long understood the importance of supporting smaller funds, particularly those that are early in their life cycles or led by diverse managers. While the funds and firms in these market segments can offer compelling potential returns, their distinct attributes require investors to have a dedicated sourcing focus, specialized analytical skills, and a proven manager selection process. In all, we have closed on approximately $1.5 billion in commitments to 69 private equity funds focused on the US lower middle market. 2 This capital will ultimately be deployed to create jobs, manufacture great products, and push the US economy forward. Reflecting our appreciation for active governance, we hold advisory board seats on 89% of the funds in which we are invested. SMALL AND EMERGING FUNDS Of the small and emerging funds in our portfolio, 90% have fund capitalizations of $750 million or less, and 77% are $500 million or less. The fund sizes in this portfolio range from $27 million to over $4 billion, with an average fund size of $404 million. Most of these funds are led by managers who are early in their life cycles as 28% are Fund I s and 62% are Fund I s or II s. First-, second-, and third-time funds represent 81% of the portfolio. 2 Purchase Price Multiple DIVERSE MANAGERS We are also committed to investing in funds led by diverse individuals as our teams have invested more than $1 billion into funds managed by female or ethnic minority partners. Within our emerging and diverse portfolio, 80% of the funds have at least one female or ethnic minority partner, and 46% have more than one female or ethnic minority partner. The need to support these underserved groups remains as strong as ever. 2 In the US, female-led funds received just $2 billion in venture capital support in 2017, a paltry 2% of the $85 billion total that was invested. 3 This stands in stark contrast with the fact that women are controlling more wealth than ever before: By 2020 it s estimated that women will oversee more than $72 trillion in assets, close to one-third of total global wealth. 3 1 HarbourVest data as of November 30, Includes all partnership investments with a focus on US-based funds generally targeting less than $750 million that pursue venture, growth, buyouts, recapitalizations, turnarounds, special situations, and other private markets transactions since January 1, Includes performance generated by the HarbourVest Horizon team at a prior firm. Three of the four senior decisionmakers from the prior firm now make up the HarbourVest Horizon team. 2 Portfolio data cited encompasses all separately managed account programs on the HarbourVest Horizon platform from January 1, 2002, through November 30, PitchBook, January 2018 SUPPORTING DIVERSE-LED FUNDS NOTHING VENTURED, NOTHING GAINED FUND: Forerunner Ventures Fund IV FUND SIZE: $360 million FOCUS: Commerce NOTABLE INVESTMENTS: Jet; Dollar Shave Club; Glossier; Away To be a good investor, you have to think differently from others. At Forerunner, our staff today is 70% women and 30% minorities because we know that these different perspectives bring important benefits. For younger women who want to get into venture capital, find a role model. Being able to observe and learn from example every day, and to envision yourself confidently in those mentor s shoes someday, is incredibly empowering. KIRSTEN GREEN FOUNDER HarbourVest made commitments to two female-led venture capital funds in 2018: Forerunner Ventures Fund IV, which invests in entrepreneurs who are transforming the traditional rules of commerce, and Westlake Village BioPartners, which focuses on high-quality, early-stage life sciences companies. The well-known managers of each fund offer some thoughts below for women who may be contemplating a career in venture capital. FUND: Westlake Village BioPartners FUND SIZE: $320 million FOCUS: Life Sciences NOTABLE INVESTMENTS: Flexus Biosciences; TrueNorth Life Sciences; Epizyme Achieving balanced opportunity in our industry is going to require tenacity and teamwork and those values have to start at the top. We can t hope to build strong, stable companies and products if workforces don t represent society as a whole. We need to inspire more young women to pursue careers in engineering, business, and the sciences and we need to take proactive measures to support them as they advance up the management ranks. DR. BETH SEIDENBERG FOUNDER 14 / HARBOURVEST 2018 ESG REPORT HARBOURVEST 2018 ESG REPORT / 15

10 PRODUCED 14M GALLONS OF POTABLE WATER FOR OIL DRILLING CAMP WORKERS RECYCLED 14M GALLONS OF DOMESTIC WASTEWATER REDUCED 700,000 MILES OF TRUCK TRAFFIC COMPANY: WaterFleet HEADQUARTERS: San Antonio, Texas LEAD GP: EagleTree Capital When one of our longstanding clients wanted an investment solution focused on diversity and ESG, we partnered with EagleTree Capital, which counts Texas-based WaterFleet among its most successful portfolio companies. WaterFleet s mobile water solutions significantly improve workforce living conditions, provide long-term cost savings, and help safeguard the environment. Its ability to provide on-site potable water production and wastewater management has significant applications for a variety of industries, including oil field, construction, and emergency management. Texas summers are incredibly humid and getting clean water to our oil fields has always been costly and time-consuming. WaterFleet s capabilities have been transformational they ve helped us improve overall safety and living conditions for our teams, and their water purification process is a game changer for us. SENIOR DRILLING SUPERINTENDENT PARSLEY ENERGY, MIDLAND, TEXAS 30 SYSTEMS CURRENTLY IN OPERATION ACROSS STATE OF TEXAS 50 SYSTEMS PROJECTED BY END OF 2018 WaterFleet data IMPACT INVESTMENT CASE STUDY 16 / HARBOURVEST 2018 ESG REPORT HARBOURVEST 2018 ESG REPORT / 17

11 COMPANY: ProgenyHealth HEADQUARTERS: Plymouth Meeting, Pennsylvania LEAD GP: Sunstone Partners ProgenyHealth is the market leader in evidence-based care management solutions for premature and medically complex newborns. The company s team of neonatologists, pediatricians, and NICU nurses provide continuity of care in collaboration with providers from hospital to home and throughout the first year of life. ProgenyHealth s broad network ensures that it is measurably improving health outcomes for the smallest, most vulnerable members of society. Sage is focused on the continual development of the most advanced alternative resource solutions in an effort to reduce its carbon footprint from energy and water reduction projects to waste recycling. IMPACT INVESTMENT CASE STUDY 1,300 HOSPITALS IN 50 STATES 6,000 PROVIDERS IN THE US ProgenyHealth data COMPANY: Sage Automotive Interiors HEADQUARTERS: Greenville, South Carolina LEAD GP: Clearlake Capital Sage Automotive Interiors, a portfolio company of Clearlake Capital, is one of the world s leading providers of automotive interior materials to automotive Original Equipment Manufacturers (OEM). The company s longstanding commitment to sustainability has resulted in renewable designs and ecologically-friendly business practices. 85% WASTE RECYCLED IMPACT INVESTMENT CASE STUDY 18 / HARBOURVEST 2018 ESG REPORT Sage Automotive Interiors data HARBOURVEST 2018 ESG REPORT / 19

12 Diverse, inclusive teams make faster decisions and deliver better overall outcomes for our clients. CORPORATE RESPONSIBILITY Our vision is to be the responsible partner of choice for our employees, clients, and other key stakeholders. To us, this means being engaged, conscientious corporate citizens in the markets and communities where we operate. It also means ensuring that we are providing our employees with the resources and support they need to be successful both professionally and individually. Our focus revolves around four guiding principles: > Respecting the interests of our clients, staff, and key stakeholders > Making responsible investment decisions > Holding the organization to the highest ethical standards > Caring about our communities and environment DIVERSITY AND INCLUSION: OUR COMMITMENT AND WHY IT MATTERS Since our founding in 1982, we have consistently focused on building and cultivating teams that reflect the business opportunities and clients we engage with around the globe. We provide a broad range of career opportunities and empower our diverse workforce by including them in all aspects of our decision-making process. We lead by example and advocate for increased diversity and inclusion across our industry. Why this level of commitment? We know from past experiences that diverse, inclusive teams make faster decisions and deliver better overall outcomes for our clients. In fact, numerous studies have shown that diversity is a major catalyst for innovation, one of the primary drivers of value creation in private equity. Companies that report above-average diversity on their senior leadership teams generate nearly twice as much innovation-based revenue as those firms with below-average diversity at the management level. 4 COMPANIES WITH BELOW-AVERAGE DIVERSITY 26% AVERAGE INNOVATION REVENUE 4 COMPANIES WITH ABOVE-AVERAGE DIVERSITY 45% Due to our longstanding focus on building diverse teams, HarbourVest is proud to have above-average diversity and inclusion statistics relative to our peers. Women at HarbourVest today hold 26% of all senior-level positions, more than double the industry average of 12%, and nearly one-third (28%) of our managing directors are women. Collectively across the firm, 47% of our staff is female. 5 4 The Boston Consulting Group, How Diverse Leadership Teams Boost Innovation, HarbourVest data, as of September 30, Not including Boston. HARBOURVEST PROFILE GENDER DIVERSITY > GLOBAL STAFF 47% 53% AVERAGE INNOVATION REVENUE 4 > MANAGING DIRECTORS > SENIOR LEADERSHIP (PRINCIPALS, SVPs, VPs) ETHNIC DIVERSITY > 74% OF OUR WORKFORCE IS WHITE, AND 26% ARE ETHNIC MINORITIES Ethnic minority representation across HarbourVest globally includes: Managing Directors (17%) Principals, SVPs, VPs (21%) Office Heads (50%) 6 28% 26% WHITE ASIAN HISPANIC BLACK OTHER 72% 74% 20 / HARBOURVEST 2018 ESG REPORT HARBOURVEST 2018 ESG REPORT / 21

13 LEADERS IN DIVERSITY ADVOCACY & RECOGNITION Several senior HarbourVest leaders serve on the boards of leading diversity and inclusion organizations. Senior Advisor GEORGE ANSON was named Chair of London-based non-profit organization Level 20 in November Level 20 advocates for more women to serve in senior private equity leadership roles. The group is active in both the UK and across Europe. LPs need to push the agenda by asking firms during due diligence and advisory board meetings what they re doing to increase diversity in their investment teams CAMBRIDGE JUDGE BUSINESS SCHOOL AND LEVEL 20 7 OPERATIONAL IMPROVEMENTS In addition to being responsible investors, we also strive to be conscientious, engaged corporate citizens. With nine offices situated in key markets around the world, we understand that our operational ESG footprint matters, and we make efforts every year to become more ecologically friendly across various parts of our business. SOME HIGHLIGHTS FROM 2018 The firm saved nearly 80 trees through paper recycling efforts during office moves During the moves, we donated all serviceable furniture to a local nonprofit that redistributes used and surplus building materials, making it possible for low- and moderate-income homeowners to repair and care for their homes Managing Director SANJIV SHAH is Co-Chair of the Board of Directors for the Association of Asian-American Investment Managers, which works to promote the advancement of Asian Americans and Pacific Islanders in investment management. He also serves on AAAIM s executive committee. SALLY SHAN, a Managing Director based in our Beijing office, founded shero Fellowship in 2014, an organization that seeks to cultivate a spirit of leadership and entrepreneurship among China s young female future leaders. For her efforts, the Aspen Institute described her as a trailblazer whose business acumen is changing the norms of traditionally majority-male venture firms in China. > Toronto-based Managing Director Senia Rapisarda (second from left) accepts the Diversity Leader of the Year Award from McRock Capital, which recognizes those firms that have demonstrated a consistent pattern of breaking barriers to promote workplace diversity and inclusion initiatives. Installed high-efficiency LED lighting throughout our Boston office 76,000 CUPS & BOTTLES REMOVED FROM ANNUAL WASTE STREAM In 2018, we permanently removed all plastic cups and seltzer bottles in our Boston office and gave each team member an ecologicallyfriendly tumbler. TALENT DEVELOPMENT At HarbourVest, we believe strongly that our people are our greatest asset and that their success is contingent upon having candid and continuous communication around how they are performing. Our Performance and Development Process ( PDP ) is essentially a partnership between employees and their managers. PDP focuses on achieving great results by ensuring that every employee has the information, resources, and support they need to succeed and reach their full potential. > Employees and managers draft yearly goals aligned to enterprise priorities > Transparency and communication around performance shared through quarterly feedback sessions > Year-end performance conversations include employee self-assessment and manager assessment 7 Women in Private Equity, British Private Equity & Venture Capital Association and Level 20, May / HARBOURVEST 2018 ESG REPORT HARBOURVEST 2018 ESG REPORT / 23

14 COMMUNITY ENGAGEMENT HarbourVest and its global staff take active roles in supporting many worthy causes and organizations in their communities. Some common causes include youth mentoring, child and adult special education, gender diversity, poverty and homelessness, women s leadership, the arts, and various health causes. This commitment to doing good by others flows through the organization, from the top levels of management through all levels of the firm. NEW MATCHING GIFT PROGRAM To further support our team s generosity and commitment to giving back, we introduced our first corporate matching gift program in 2018 through Benevity, a multi-function giving platform. Through the program, the firm will match charitable donations up to $1,000 per employee for each calendar year. GLOBAL VOLUNTEER WEEKS We held our firm-wide Global Volunteer Weeks in June and October, during which time staff in our nine global offices worked together during business hours to support a wide range of local causes. In 2018, our teams donated more than 1,700 hours to 23 different organizations. 24 / H A R B O U R V E S T E S G R E P O R T 2018 VOLUNTEER WEEKS ORGANIZATIONS SUPPORTED BEIJING HONG KONG Qing Quan Foundation (Mentoring) Food Angel (Hunger) St. Mary s Home for the Aged (Adult Welfare) BOGOTÁ Banco de Alimentos Bogotá (Hunger, Immigration) The Promoción Humana Foundation (Cultural) BOSTON Community Music Center of Boston (Arts) Community Servings (Terminally/Chronically Ill) Massachusetts Society for the Prevention of Cruelty to Children (Child Welfare) Room to Grow (Child Welfare) Rosie s Place (Women s Homelessness) St. Francis House (Homelessness) The Franklin Park Zoo (Animal Welfare) The Food Project (Hunger) The Rose Kennedy Greenway (Environmental) WayPoint Adventure (Adult Education) LONDON Moo Canoes (Environmental) Volume 48 (Corporate Responsibility) SEOUL Bangbae Senior Welfare Service Center (Adult Welfare) Bukhan Mountain National Park (Environmental) TEL AVIV Leket (Food Salvage) TOKYO International Social Services Japan (Child Welfare) This commitment to doing good by others flows through the organization, from the top levels of management through all levels of the firm. TORONTO Daily Bread Food Bank (Hunger) WoodGreen (Social Service) H A R B O U R V E S T E S G R E P O R T / 25

15 2018 VOLUNTEER WEEKS 23 ORGANIZATIONS SUPPORTED 2018 VOLUNTEER WEEKS 1,723 TOTAL HOURS >33K(USD) FINANCIAL CONTRIBUTIONS 26 / HARBOURVEST 2018 ESG REPORT HARBOURVEST 2018 ESG REPORT / 27

16 2018 OUTREACH AND EVENTS HarbourVest staff members regularly participate in ESG-focused industry events around the world. Our engagement in these forums allows us to share our own insights and learn leading behaviors and strategies from other industry practitioners. We took part in the following events, among others, in 2018 where our team members discussed issues such as investing; post-investment reporting and monitoring; the benefits of having diverse and inclusive teams; impact investing; and how firms can convert ESG policy into real action. LATAM LP CONFERENCE MARCH 7 / BOGOTÁ, COLOMBIA Managing Director Kathleen Bacon was a keynote speaker at this annual conference sponsored by the Latin American Private Equity and Venture Capital Association (LAVCA). Kathleen s presentation focused on the importance of having a sustainable ESG framework in place, and how more investors globally are making ESG considerations a higher priority in their decision-making process. Bacon s remarks made an impression on one attendee, who Kathleen Bacon: ESG cannot be an afterthought it has to be embedded in the firm. #PRI principles > HarbourVest Managing Director Kathleen Bacon shares her thoughts on ESG at the second annual Latin American LP Conference in Bogotá, Colombia. ASSOCIATION OF ASIAN-AMERICAN INVESTMENT MANAGERS REGIONAL & ANNUAL CONFERENCES APRIL 9 / BOSTON SEPTEMBER 19 / LOS ANGELES Managing Director Sanjiv Shah moderated panels at these events focused primarily on investment management opportunities with minority and femaleowned enterprises. IMPACT CAPITAL MANAGERS SPRING CONFERENCE MAY 30 / CHICAGO Sanjiv Shah participated on a panel that shared best practices and strategies around impact investing, including the need to balance expectations for financial returns versus creating impact. RESPONSIBLE INVESTMENT FORUM EUROPE JUNE 12 / LONDON Managing Director Kathleen Bacon delivered a presentation at this event titled Providing Hard Evidence of the Financial Value of ESG, during which she shared best-in-class ESG management strategies, spoke about breaking the link between risk and return, and explained how HarbourVest works with its portfolio companies to emphasize the importance of ESG CHINA FUND OF FUNDS CONFERENCE SEPTEMBER 21 / BEIJING Beijing-based Principal Shumin Gong participated on a panel with five other female fund-of-funds leaders from across Asia Pacific. The group took the opportunity to discuss investment management techniques, advice they could give to young women considering a career in the private markets, and how to promote more women in senior leadership positions globally. KAYO WOMEN S PRIVATE MARKETS SUMMIT OCTOBER 3 / CHICAGO Amanda Outerbridge, a Managing Director on our Boston-based primary investment team, participated on a panel at this event with other female investment leaders where the topics ranged from manager selection to asset allocation to sub-sectors to keep an eye on in WOMEN IN PRIVATE EQUITY FORUM NOVEMBER 28 / LONDON Managing Director Valérie Handal and Vice President Abigail Rayner each participated in PEI s Women in Private Equity Forum in London. The event, co-hosted with the Women in Infrastructure Forum, brings together more than 300 investment professionals to discuss the latest issues affecting the industry and strategies for increasing diversity within the asset class. > Principal Shumin Gong (far left), participates on a panel with other Asian female fund leaders at the 2018 China Fund of Funds Conference in Beijing. 28 / HARBOURVEST 2018 ESG REPORT HARBOURVEST 2018 ESG REPORT / 29

17 HarbourVest is an independent, global private markets investment specialist with more than 30 years of experience and more than $60 billion in assets under management. The Firm s powerful global platform offers clients investment opportunities through primary funds, secondary transactions, and direct co-investments in commingled funds or separately managed accounts. HarbourVest has more than 400 employees, including more than 100 investment professionals across Asia, Europe, and the Americas. This global team has committed more than $34 billion to primary funds, completed over $18 billion in secondary purchases, and invested $9 billion directly in operating companies. Partnering with HarbourVest, clients have access to customized solutions, longstanding relationships, actionable insights, and proven results. Beijing Bogotá Boston Hong Kong London Seoul Tel Aviv Tokyo Toronto This material does not constitute an offer or solicitation for any fund sponsored by HarbourVest Partners, LLC ( HarbourVest ) or its affiliates, or any investment services provided by HarbourVest. No sale will be made in any jurisdiction in which the offer, solicitation, or sale is not authorized or to any person to whom it is unlawful to make the offer, solicitation or sale. This document includes information obtained from published and non-published sources that HarbourVest believes to be reliable. Such information has not been independently verified by HarbourVest. Unless otherwise specified, all information is current at the time of issue. Any opinions expressed are those of HarbourVest and not a statement of fact. The opinions expressed do not constitute investment advice and are subject to change. Past performance is not a guarantee of future success and there can be no assurance that investors in funds will achieve the returns discussed herein. Investments in private funds, involve significant risks, including loss of the entire investment. Before deciding to invest in a fund, prospective investors should pay particular attention to the risk factors contained in the fund documents. Investors should have the financial ability and willingness to accept the risk characteristics of an investment in a fund. Certain information contained herein constitutes forward-looking statements, which can be identified by the use of terms such as may, will, should, expect, anticipate, project, estimate, intend, continue, or believe (or the negatives thereof) or other variations thereof. Due to various risks and uncertainties, including those discussed above, actual events or results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. As a result, investors should not rely on such forward-looking statements in making an investment decision. For additional legal and regulatory information please refer to important legal disclosures.