2016 ANNUAL TPG GES REPORT

Transcription

1 2016 ANNUAL TPG GES REPORT

2 TABLE OF CONTENTS FOREWORD FROM TPG LEADERSHIP 3 RESPONSIBLE INVESTORS 4 GLOBAL ENVIRONMENT: GLOBAL BUSINESS 6 SOLUTIONS CAPITAL 7 ASSESSMENT AND IMPACT 8 POWER OF THE NETWORK 10 GOVERNANCE 11 ENVIRONMENTAL 12 SOCIAL 15 EXIT CASE STUDY 17 COMMUNITY 19 FORESIGHT 20 TABLE OF CONTENTS 2

3 FOREWORD FROM TPG LEADERSHIP The Dynamic Nature of Sustainability and ESG Sustainability and ESG is a dynamic element of TPG s investment business. Our investment focus spans the globe, and we work on almost every continent and in every economic sector. Our world and the environments, the social contexts, the legal and governance systems within which we and our investors operate, change constantly and change rapidly. Governance is a priority for TPG and, in fact, we believe GES instead of ESG is a more appropriate acronym, thus the title of our report. Sustainability and ESG is an important aspect of our business, and our strong core principles and practices enable us to address these issues in an integrated way across the Firm. Such decisions are incorporated into our investment decisions through rigorous due diligence, governance, management and operation of our portfolio companies. We strive to be systematic to measure our results and to be transparent. We engage in active discussions with our investors and limited partners to align with their interests in, and perspectives on, Sustainability and ESG. We have a dedicated team of professionals who have the responsibility to advance these principles and practices within the firm and our portfolio companies. We recognize the value of the embedded wisdom and experience on Sustainability and ESG and we share that knowledge and best practices with all our portfolio companies, with whom we are partners on this initiative. This 2016 TPG GES Report highlights the outcome of our activities over the past year. We continue to make substantial progress in learning how ESG due diligence in the investment process can not only mitigate risk but also how it can identify opportunities to create value. We are also working both deeper and more broadly across our portfolio companies to create greater impact and value, not only by reducing costs and improving resource efficiencies, but also by increasing our focus on supply chain issues, tapping employee interest and engagement, and responding to increasing customer preferences. Case studies are also included to show how some of the leadership of our portfolio companies, have helped to address important environmental or social issues, and contribute to constructive solutions. Looking ahead, we remain focused on our responsibility to earn a great return for our investors as well as aligning with our investors expressed interests and desire to address important issues. We believe that our Sustainability and ESG Program plays an essential role in fulfilling that mission. We are deeply committed to the view that investment capital and our ability to deploy it has a critical role to play in addressing challenges, needs and human aspirations in vital areas such as education, healthcare, access to capital and economic opportunities, transportation and communications, energy, adequate and clean water, clean air, and waste disposal. We see a positive opportunity for TPG and our focus on Sustainability and ESG to have an impact on these issues, and, as we address these dynamic challenges, we will continue to dedicate and leverage our global expertise and network. David Bonderman Chairman and Founding Partner Jim Coulter Co-Chief Executive Officer and Founding Partner Jon Winkelried Co-Chief Executive Officer and Partner Jonathan Coslet Chief Investment Officer and Partner Jack Weingart Managing Partner, TPG Funding Jerome Vascellaro Chief Operating Officer and Partner FOREWORD 3

4 RESPONSIBLE INVESTORS Since its founding, TPG has focused on responsible investing through the life cycle of our private equity investments. TPG has dedicated full-time resources to support its long-standing commitment to the Sustainability and ESG Program. The Firm s Global Sustainability and ESG Policy (as described below) does not take a one-size-fits all approach. We seek to be opportunistic where ESG initiatives can assist in creating enterprise value. TPG s Global Sustainability and ESG Policy Sustainability and ESG Highlights TPG s Sustainability and Environmental, Social, and Governance ( ESG ) Program supports the Firm s longstanding consideration of environmental, health and safety practices in due diligence, investment decisions, and operations. The broad set of Sustainability issues (including social and governance issues) have material influence on TPG Capital s assessments of risk, valuation, profitability, and opportunity, across the portfolio. 70 TPG colleagues that sit on non-profit boards 8 Sustainability Leadership Council summits held Our focus on Sustainability and ESG issues enables: Better investment decisions Enhanced results for investors, portfolio companies, stakeholders and TPG TPG companies to be better global citizens 48 Sustainability and ESG Performance Self-Assessment 3.0 Participants 90 Portfolio companies engaged on Sustainability and ESG initiatives TPG s commitment is to: Incorporate Sustainability and ESG considerations into our investment diligence and decisions Ensure that Sustainability and ESG practices are implemented and that measurable results are achieved in our companies and our operations Strive for greater transparency from our companies 30% Increase in Annual Self-Assessment participants versus Members on TPG Sustainability Leadership Counsel portfolio company Yammer web portal PRE-INVESTMENT OWNERSHIP EXIT RESPONSIBLE INVESTORS 4

5 RESPONSIBLE INVESTORS To further our commitment to responsible investment and support the need for greater transparency within the industry, TPG became a signatory to the United Nations-backed Principles for Responsible Investment (PRI) in How TPG Aligns with the 6 PRI Principles 1 4 We will incorporate ESG issues into investment analysis and decision-making processes TPG Global Sustainability and ESG Policy ESG due diligence and Investment Review Committee Tools, guidelines and training 2 5 We will be active owners and incorporate ESG issues into our ownership policies and practices Dedicated Sustainability and ESG team Portfolio Company engagement and monitoring Annual Sustainability and ESG Performance Self-Assessment 3 6 We will seek appropriate disclosure on ESG issues by the entities in which we invest Establish, measure and report on progress of ESG policies Report through a TPG portfolio company work plan and framework We will promote acceptance and implementation of the Principles within the investment industry Regular dialogue with limited partners Working with industry bodies Public speaking engagements We will work together to enhance our effectiveness in implementing the Principles Share best practices TPG-led annual conferences PRI Advisory Committee We will each report on our activities and progress towards implementing the Principles PRI framework TPG website: external and internal Annual GES report Public disclosure of information RESPONSIBLE INVESTORS 5

6 GLOBAL ENVIRONMENT: GLOBAL BUSINESS A Truly Global Organization Our extensive network is comprised of well-established teams and long-term, local relationships around the world. We recognize that the changes in the global environment affect our global business. As we grow and become more diverse, we will continue to ensure that Sustainability and ESG are integrated into all aspects of our Firm s business and global matters of interest, as highlighted below, are addressed and widely understood. MONTREAL: CARBON PLEDGE UK: ESOS, CRC, MODERN SLAVERY ACT ASIA: RESPONSIBLE SUPPLY CHAIN USA: THE CLEAN POWER PLAN PARIS: COP21 AGREEMENT CARBON PLEDGE TPG AT WORLD ECONOMIC FORUM IN DAVOS AUSTRALIA: RENEWABLES Shaded areas represent countries in which we have invested 17 offices worldwide in 11 countries Over 475 professionals Over 30 nationalities represented GLOBAL ENVIRONMENT 6

7 SOLUTIONS CAPITAL At TPG, we are investors who provide the capital, expertise, and support our partners need to reach their full potential and create greater possibilities. We believe great investments and great returns come from building true partnerships with the leaders, innovators, and companies in which we invest. Integrated into our overall strategy, is our approach to Sustainability and ESG. TPG s Sustainability and ESG Key Themes and Strategies Environmental, Social and Governance Due Diligence Sustainability and ESG Portfolio Company Program Network and Community Building Key External Stakeholder Relationships and Reporting TPG s Alternative & Renewable Technologies (ART) growth-equity platform, is dedicated to partnering with companies that deploy novel business models and technologies to reduce environmental impact and promote resource efficiency. With approximately $250 million in assets under management as of March 31, 2016, TPG ART looks to help develop companies in multiple sectors, including but not limited to renewable power generation, energy efficiency, environmental services, waste management, agriculture, and industrial technologies. FEATURED STORY Anuvia TPG Growth Founded in 2007 to specialize in growth equity and middle-market buyout opportunities. As of March 31, 2016, TPG Growth manages more than $7 billion in assets across a variety of sectors including media, technology, and industrials. FEATURED STORY Fortune highlights Bono and TPG s Satya SOLUTIONS CAPITAL 7

8 ASSESSMENT AND IMPACT The 5 D S of TPG Diligence DESCRIPTION DATA DISCUSSION DEBATE DECISION What kind of deal is this? What kind of company is this? Thoughtful Balanced What data do we need? Relevant Concise Full Transparency Have we aired all important points? Even-handed Balanced Provocative Who believes what? Pressured discourse with respect Experiential wisdom What is the best answer for the firm? All voices heard Be prepared for all outcomes Live with it Dynamic Elements of our ESG Program While our Sustainability and ESG Program has been in place for many years, our approach and tools remain flexible and dynamic given our firm s growth and changing market conditions. The Investment Review Committee (IRC) an inclusive body where all persons involved in the investment process are invited to participate. ESG factors are incorporated into the TPG due diligence process which is embedded in the Investment Review Committee. An Annual Sustainability and ESG Performance Self-Assessment consisting of 40 questions, sent to all portfolio companies in the Sustainability Leadership Council SLC An ESG Framework highlighting leading practices and opportunities for value creation An ESG Program Summary that aggregates our Sustainability and ESG work together during our ownership period An ESG Workplan consisting of 3-4 actionable opportunities to be implemented in collaboration during TPG s ownership period The Sustainability Leadership Council made up of representatives of portfolio companies engaged in sustainability practices: the function of the council is to enable leaders to share best practices, drive results, reduce costs, and identify cross-portfolio opportunities CEO and Portfolio Company Sustainability Awards ASSESSMENT AND IMPACT 8

9 ASSESSMENT AND IMPACT TPG s Sustainability and ESG Performance Self-Assessment and Framework Analysis A systematic process: as a part of TPG s Sustainability and ESG Program, portfolio companies are asked to: Establish ESG policies Participate in the TPG Sustainability and ESG Leadership Council Complete an Annual Sustainability and ESG Performance Self-Assessment, Framework Analysis and Workplan Measure and report on the progress of their goals and action plans Through the Sustainability and ESG Performance Self- Assessment and Framework Analysis process, we are able to determine the current state of the program and where we can focus initiatives to drive progress and value. OBJECTIVES ANNUAL SELF-ASSESSMENT ESG FRAMEWORK ESG WORK PLAN COMMUNICATION INSIGHTS / EXAMPLES 1 Measure Performance and Identify Portfolio Trends Third annual assessment 40 questions in assessment 30% increase in respondents since 2014 Present Leading Practices and Opportunities Collaborate on 3-4 Actionable Initiatives Track and Share ESG Performance and Lessons Learned GES Report Annual conference PC Webinars 1. The logos displayed are a few examples of the TPG portfolio companies participating in the Assessment and Framework process. Portfolio companies were selected for non-performance based reasons Sustainability Assessment Dashboard The TPG Sustainability Assessment Dashboard integrates portfolio company ESG data populated from the annual selfassessment, alongside financial data and general company statistics. ASSESSMENT AND IMPACT 9

10 POWER OF THE NETWORK Sponsors for Educational Opportunity TPG LEVERAGE PROCUREMENT TPG FEATURED HIGHLIGHT Veterans Initiative Summit TPG served as co-host with The Blackstone Group, The Carlyle Group and KKR at a summit in October 2015 to share best practices of veteran hiring programs including those of the following TPG portfolio companies: Taylor Morrison, Uber, Enlivant, Ride, Jonah Energy LLC, and Caesars Entertainment. The Summit convened representatives from the White House, U.S. Military, the U.S. Departments of Labor and Veterans Affairs, private equity portfolio companies, and the U.S. First Lady Michelle Obama, to advocate and advance veteran hiring, retention, and career development. POWER OF THE NETWORK 10

11 GOVERNANCE Governance is a priority for TPG and, in fact, we believe GES instead of ESG is a more appropriate acronym, as stated by Jim Coulter in his 2014 keynote at the Private Equity International Responsible Investment Forum. Governance is critical during our due diligence phase of investment, to the structure of our investments and in the ongoing management of our portfolio companies. As part of our annual portfolio company Sustainability and ESG Self-Assessment, we also dedicate a section to Governance. This allows us to understand our portfolio companies most important governance issues, determine their levels of transparency and stakeholder engagement, and helps us actively manage risk and opportunity. There are two reasons for companies to operate sustainability. One is economical because it can help you reduce costs the other is business ethics because you want to do business in a positive way. Charles Bouaziz Ontex CEO, 2015 If you don t get the governance right, then you don t even get to really talk about the environmental and social. Beth Lowery TPG Capital s ESG Head, 2016 The way private equity works, with the governance structure, we can push things down into our supply chains so not just our investments but the entire ecosystem within which we operate. If we do so, the noise we re making today, which is beginning to permeate the industry, will transform into truly deep impact for years to come and differentiate the industry as one that cares. Jim Coulter: think GES, not ESG TPG Co-CEO and Founding Partner, 2014 GOVERNANCE 11

12 ENVIRONMENTAL COLLABORATIVE, GREEN SPACE DESIGN Helping Cushman & Wakefield clients integrate sustainability and creativity into corporate spaces to maximize collaboration and wellness Energy Foundation Frog Design Recology Results: Supporting a cohesive corporate sustainability strategy Creative material reusage Potential impact on strong client relationships Health and wellness in the workspace FEATURED HIGHLIGHT Ride s Ann Fandozzi on Carpooling Bloomberg Transforming employee commuting to a sustainable green solution Reduced CO2, less waste, lower pollution Long term vision to change the face of commuting in America aiming to take 1 million cars off the road Note: case study examples are TPG portfolio companies. Portfolio companies were selected for non-performance based reasons ENVIRONMENT 12

13 ENVIRONMENTAL PROACTIVELY ENGAGING WITH STAKEHOLDERS Collaborating with governmental officials and NGOs to protect wildlife and reduce emissions while driving business value Results: Reduction of fugitive methane emissions from operations Wildlife protection and collaboration with the U.S. Department of the Interior, Wyoming, and NGOs approval of new development plan while protecting sage grouse Investing in local communities and creating resource solutions Jonah s Paul Ulrich with U.S. Secretary of the Interior Sally Jewell HEALTHY PEOPLE, HEALTHY COMMUNITIES, HEALTHY PLANET Using innovation to reduce the corporate footprint, while building and maintaining smart facilities Results: Water: 20% reduction beyond code for clubs Energy efficiency: 20% improvement on a per club basis versus 2010 baseline 56% reduction in lighting W/sq ft; $2.75M annual savings Renewables: solar system installation offsetting 20% electricity load Note: case study examples are TPG portfolio companies. Portfolio companies were selected for non-performance based reasons ENVIRONMENT 13

14 ENVIRONMENTAL SOLAR STANDARD Integrating solar panels as part of a standard build package for new homes in select California communities Results: Created solar energy relationships with leading solar providers Offsetting each new home s energy usage with renewables, and enabling thousands of dollars of cost savings for each new home buyer Potential brand differentiation MAKING RENEWABLE ENERGY MORE AFFORDABLE Securing Large-scale Generation Certificates (LGCs), under Australia s Renewable Energy Target Results: Solar This Summer Program gives residential customers the option to buy or lease a solar system (between 1kW and 5kW) at attractive discounts Transitioning company towards a lower carbon economy through development of additional retail solar products Growing business through creating and capturing growth opportunities in the Western Australian market Development of public sustainability reporting One of our Environment and Community Policy commitments is the systematic identification investigation, evaluation and reporting of natural resource reduction and energy efficiency improvement opportunities. Alinta Sustainability Report Note: case study examples are TPG portfolio companies. Portfolio companies were selected for non-performance based reasons ENVIRONMENT 14

15 SOCIAL SHOP, REUSE, REIMAGINE Improving lives through the power of reuse 2015 Results: Diverted more than 650 million lbs of reusable goods from entering the waste stream Paid 120 non-profit partners (e.g. Epilepsy Foundation, Big Brothers Big Sisters) more than $140M Sold quality goods at affordable prices: nearly 96% of retail items sold at Savers stores are under $10 Published a Community Impact Report Uber raised over half a million dollars for No Kid Hungry through the app, donated over $200,000 to the American Red Cross to aid disaster relief efforts, and ran hundreds of campaigns in cities across the world including collecting gently-used clothing for Goodwill, delivering free flu shots with trusted medical partners, and donating time and funds to local charity organizations. FEATURED HIGHLIGHT Initiative: Social / Philanthropy FIGHTING HUMAN TRAFFICKING Example: Sabre signature corporate responsibility Sabre s program Passport implemented, to Freedom Passport Program to Freedom unites the initiative travel to and tourism end human industry trafficking. against human trafficking and slavery Results: Survivor Scholarships program implemented (new application process re-opened January 2016) Increase awareness and education through online training course Advocate for legislation change, and provides opportunities for leaders to collaborate Collaborating with leading organizations (e.g. Marriott, UNESCO) to educate travelers on human trafficking through Be a Responsible Traveler. Note: case study examples are TPG portfolio companies. Portfolio companies were selected for non-performance based reasons SOCIAL 15

16 SOCIAL DONATION PARTNERSHIP WITH SAVERS Providing LifeStorage customers the opportunity to donate storage items to Savers nonprofit partners Results: Turning costs at LifeStorage into revenue stream at Savers LifeStorage customers are given coupons to Savers and donation slips Benefits: cost savings; client donation and business differentiator FOUNDATION AND INGREDIENT TRANSPARENCY 10% Non-GMO ingredients; committed to transparency and supports GMO labeling effort Works with farmers who share its values and sense of community; local sourcing from nearly 900 local farmers from Chenango County, New York, to Twin Falls, Idaho 10% of profits are donated to the Chobani Foundation; focused on democratizing food and empowering local communities of total Chobani profits are donated to charities through the Chobani Foundation Note: case study examples are TPG portfolio companies. Portfolio companies were selected for non-performance based reasons SOCIAL 16

17 EXIT CASE STUDY TPG and Ontex management worked together on identifying efficiency opportunities and Ontex identified and shared best practices with TPG s Sustainability Leadership Council TPG invests in Ontex and underwrote meaningful ops improvement case Ontex adopts first sustainability charter, first occupational health and safety policy and introduces PEFC 1 ecolabel Ontex presents at 2012 TPG Sustainability Leadership Council Summit, sharing best practices and goals Ontex receives Green Brand Award - Moltex (diapers) & Environmental Product Development certificate for product life cycle transparency - Serenity product ESG Summary¹: More than 90% off fluff pulp eco-labelled 53% manufacturing plants PEFC or 27% FSC chain-ofcustody certificates Lean and Green award for commitment to reduce CO2 emissions of logistical activities by 20% in Europe from MARCH 2014 JULY 2010 Multi-site certification to ISO in place Environmental policy in place Introduction of FSC ecolabel in place First plant certified to ISO Environmental Department renamed Sustainability Department with broader focus Roll out of ISO certified energy management system ISO certification Istanbul and Ortona plants First Report under Global Reporting Initiative guidelines Ontex task force ranks most material sustainability issues TPG exits the Ontex investment at an approximate 50% increase in EBITDA multiple and approximately 25% higher earnings 1. PEFC Sustainable Forest Management Certified 2. ISO Environmental & Energy Management systems 3. ISO Environmental & Energy Management systems Note: Case study facts publicly available through Ontex Sustainability report Product innovation, certification, recycling and reduction in energy costs were significant in unlocking value and contributing positively to value creation EXIT CASE STUDY 17

18 EXIT CASE STUDY TPG and Petco management worked together to establish Petco sustainability initiatives and identify leadership opportunities. TPG invests in Petco and identifies opportunities for efficiency and industry leadership in sustainable partnerships VP Sustainability and Energy manager hired Operational improvements: recycling, logistics, paper and packaging reduction EPA ENERGY STAR leader; first LEED 1 store Expanded water, waste, energy, recycle programs Founding member Pet Industry Sustainability Coalition Leading role in Retail Sustainability Initiative of RILA 2 ESG Summary Solar System at Petco San Diego HQ Decrease of energy use of 10.2% as a % of sales since % waste diversion rate in stores 100% of coral and live rock and 33% of marine species sold in Petco stores are aqua-cultured Named to World s Most Ethical Companies list MARCH 2016 DECEMBER 2009 Planet PETCO launched to offer natural products for the LOHAS 3 eco-conscious customer 1% for the Planet donating 1% of gross sales from Planet Petco products to environmental causes Growth of natural, organic product line integrate consumers ESG requirements 2011 hosted TPG s Fourth Annual Sustainability Leadership Council in San Diego HQ Supply chain accountability audits initiated Collaboration with WWF 4 bringing together manufacturers, retailers, NGO s and other stakeholders to address pet food sustainability TPG exits the Petco investment at an approximate 19% increase in EBITDA multiple 1. LEED Leadership in Energy and environmental Design I 2. RILA Retail Industry Leaders Association 3. LOHAS Lifestyle of Health and Sustainability I 4. WWF World Wildlife Fund Sustainable products, energy efficiency and supply chain focused on natural resource conservation contributed to value creation EXIT CASE STUDY 18

19 COMMUNITY TPG Culture At TPG, our Founders have created a culture of making the right choices, throughout TPG s investment cycle and by actively engaging with our portfolio companies. We make it about personal choices, rather than corporate responsibility, encouraging everyone to become personally involved. Social Impact is a TPG global initiative focused on enabling TPG employees to make a tangible difference in their local communities while creating growth and leadership opportunities. At TPG we invest in building long-term value that benefits all stakeholders. Included in our values is a sense of shared responsibilities and commitment to the environment. As individuals, TPG employees serve on several governing and advisory boards of local, national and international non-profit organizations dedicated to environmental effort. TPG also provides grant funding to local and national nonprofits supporting our employees active engagement Impacts Leadership and Engagement Grants Random Acts of Kindness 23 grants in support of 70 boards memberships across the firm, including organizations focused on: 11 Acts nominated by 15 people including: Education Health Social services Environmental issues Public policy International aid Diplomacy Myanmar flood disaster Nepal earthquake Remembrances of friends and family of the firm TPG-in-Action Events 220 participants in volunteer events, examples include: East Harlem Tutorial Program in New York Care Packages for Troops Swords for Plowshares Care Package Backpacks for Veterans COMMUNITY 19

20 FORESIGHT Following TPG s 2015 GES report, we wanted this year to provide further information regarding our Sustainability and ESG program, as well as highlighting some of the more innovative aspects of our strategy. We hope that this report provides you with meaningful insight. In 2016, the Sustainability and ESG team continues to work with our Firm s Leadership to broaden and deepen the integration of the Sustainability and ESG program across TPG Global, as part of the overall Firm strategy and long standing commitment to responsible investing. As the firm continues to grow, we also continue to harness strong internal awareness through ESG training, document templates, Firm updates, a new sustainability dashboard and regular dialogue. Looking forward, we will continue to create ESG value for our investors, through both the Firm s and our portfolio companies global ecosystems. We will continue to proactively work with deal teams on ESG due diligence and with our operating professionals and leverage procurement team on portfolio company sustainability performance and initiatives, through our systematic assessment and framework process. We will strive for greater transparency though reporting and disclosure, including submitting TPG s annual PRI framework report, along with our own GES report. And we will continue to work across the TPG s platforms and geographies. TPG is committed to our work within the private equity industry, driving responsible investment to create measurable business value. We understand the importance of Sustainability and ESG for the Firm, for our portfolio companies, and for our limited partners. As the industry collaborates on global issues such as climate change, we will also continue to collaborate, leveraging our knowledge, skill set and global network to encourage long-term ESG integration. As we firmly believe that the richness of the work we do is often best shared through dialogue, the team welcomes the opportunity to further discuss any of the topics covered in this report. Private equity is nothing but investing with a really interesting toolkit ESG has a special place in the toolkit and has to be absolutely core to what we do. ¹ 1. Jim Coulter, TPG Founding Partner, June 19, 2014, PEI Conference, London William Reilly Elizabeth Lowery Edward Norton Emily Croft-Baker Kirk Hourdajian FORESIGHT 20