ESG REPORT. > Annual Review of HarbourVest s Environmental, Social, and Governance Activities

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1 ESG REPORT > Annual Review of HarbourVest s Environmental, Social, and Governance Activities 2017

2 page 1 / HARBOURVEST 2017 ESG REPORT We re driven by the belief that strong financial returns and positive social change can be accomplished in tandem.

3 > Contents Message from the Executive Management Committee...4 Integrated Commitment to ESG...5 Responsible Investing...7 HarbourVest Horizon: Accessing Private Equity s Emerging Talent and Underserved Opportunities...15 Corporate Citizenship...21 Outreach and Events...29 HARBOURVEST 2017 ESG REPORT / page 2

4 2017 Enhanced ESG scorecard tool Provided additional training to global investment teams Deepened philanthropic activities page 3 / HARBOURVEST 2017 ESG REPORT

5 MESSAGE FROM THE EXECUTIVE MANAGEMENT COMMITTEE We are pleased to present HarbourVest Partners 2017 ESG Report, our annual review of the activities we pursue to facilitate conscientious deployment of client capital as well as a workplace that promotes a collaborative firm culture and employee well-being. Through this report, we are expressing our core values and illustrating accomplishments that represent how we seek to be defined as a firm. Our drive to be a responsible investment firm is embedded in our culture and has remained a driving focus since our founding in Among our many accomplishments over the last 35 years, we have pushed for increased general partner diversity; sourced, mentored, and invested in impact-focused private equity funds; become an engaged signatory of the United Nations Principles for Responsible Investing; consistently upgraded our processes to identify the most promising investment prospects; initiated, significantly contributed to, and led philanthropic organizations; and cultivated an approach that favors team contributions over individual successes. Further, we believe that our team is comprised of individuals who embrace impact in their personal lives and imbue our firm and culture with that orientation of care and quality. teams to engage better with managers in a dialogue about responsible investing, and deepened our philanthropic activities that serve the communities in which we live and work. We have reaped significant benefits from our ESG program, and we are enthusiastic about what we can accomplish on this important front in 2018 and beyond. We hope you enjoy learning more about HarbourVest through this report. As we head into 2018, we remain committed to delivering compelling financial results, adhering to our ESG values, and being good stewards of the capital we have been entrusted to manage. This report outlines our firm s ambitious Environmental, Social, and Governance (ESG) program, an organizing guide that helps ensure we are delivering products and services to our clients that are consistent with the quality and sense of responsibility characterized by the core tenets of ESG. Led by Kathleen Bacon, Managing Director, and a senior committee representing key business areas of the firm, our ESG program has been embraced across the entire organization. JOHN TOOMEY PETER WILSON Executive Management Committee HarbourVest Partners This broad and deep commitment has been reflected in how we integrate ESG considerations across all of our internal and operational processes. In 2017 alone, we have enhanced the scorecard tool we utilize to assess different ESG factors in our investments, trained our global investment HARBOURVEST 2017 ESG REPORT / page 4

6 INTEGRATED COMMITMENT TO ESG For more than three decades, we have sought to align our interests with those of our investors, investment partners, and employees 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 our operations. We have adopted an ESG (Environmental, Social, and Governance) Policy to formalize our longstanding view of considering all stakeholders in our investment and management decisions. The core tenets of our policy are highlighted below. ALIGNED INTERESTS TRANSPARENCY PERFORMANCE MONITORING/REPORTING CORPORATE CULTURE INVESTMENT PRACTICE INTEGRATE ETHICS INTO INVESTMENT PROCESSES As a signatory to the Principles for Responsible Investment (PRI), HarbourVest is committed to incorporating high ethical business standards into all of our investment activities. FOSTER GP ADOPTION AND SUPPORT Encourage general partners (GPs) to increase their own commitment to responsible investing by incorporating ESG principles into their investment processes. REFLECT VALUES IN POLICIES AND PRODUCTS Where possible, ensure internal policies and investment products embody the spirit of the PRI and properly reflect our firm values. GOVERN EFFORTS THROUGH THE GLOBAL ESG COMMITTEE A group of senior executives from across the firm analyzes current progress on ESG initiatives and sets the strategic vision for future enhancements. PROVIDE TRANSPARENCY TO STAKEHOLDERS Align our interests with investors, investment partners, and employees by providing all stakeholders, including clients, with transparency into our decision-making. page 5 / HARBOURVEST 2017 ESG REPORT

7 KATHLEEN BACON Managing Director Investments MATT HOGANBRUEN Managing Director Investments JOHN TOOMEY Managing Director Investments JULIE EIERMANN Managing Director Operations JAMES KASE Managing Director Investor Relations LAURA THAXTER Principal Investor Relations GLOBAL ESG COMMITTEE MARK REALE Managing Director Corporate DIANA McEACHERN Office Manager Corporate HARBOURVEST 2017 ESG REPORT / page 6

8 RESPONSIBLE INVESTING OUR ESG INVESTMENT APPROACH Focusing on our core values drives us to ensure that our actions and investments are aligned with ESG standards, and that we consider all stakeholders who stand to be affected by our decisions. As a signatory to the Principles for Responsible Investment (PRI), we seek to adhere to a set of ethical principles throughout all stages of investment activity by embedding ESG considerations into our primary partnership, secondary, and direct co-investment due diligence processes. PRIMARY INVESTMENTS HarbourVest thoroughly evaluates its primary partnership managers on their attentiveness to ESG concerns. We also encourage our GPs to develop their own responsible investment practices. Manager scorecard: When conducting diligence on a new primary fund, our global teams utilize a proprietary manager scorecard to assess GPs on more than 20 factors across environmental, social, and governance categories, weighing efforts at both the portfolio and corporate level (see Chart 1). Results are compiled to determine an overall ESG rating, which we monitor and update on an ongoing basis. Our internally developed scorecard is based on industry best practices, and we treat it as a living tool continuously refining it to ensure that our factor assessments remain as current, objective, and quantitative as possible. Fostering GP support: As a PRI signatory, we strive to educate our GPs about the importance of integrating ESG principles into their investment processes. We encourage those without a formalized policy to consider developing and adopting one, and through educational conversations and our own due diligence efforts, we have successfully influenced many GPs to increase their commitment to responsible investing. We also leverage our memberships on advisory boards to drive deeper ESG awareness. CHART 1: MANAGER SCORECARD CONSIDERATIONS Policy Use of Expertise Culture Governance Due Diligence Ownership Exit Reporting 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. page 7 / HARBOURVEST 2017 ESG REPORT

9 SECONDARY INVESTMENTS Similarly with secondary investments, we conduct ongoing assessments on the underlying managers in each deal to gauge their overall ESG commitment. For traditional deals, whereby we purchase one or more limited partnership interests from a single seller, our global secondary team verifies whether the manager has an existing ESG policy. If not, we encourage them to institute a formal procedure and proactively share materials and information to assist them in that process. We also assess the existing portfolio of assets to identify any ESG concerns. For complex transactions, which generally require more resources and negotiation due to their non-traditional nature, we take a more active approach that emulates the manager evaluation process used by our primary partnership team. CO-INVESTMENTS Our co-investment 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 sponsor assessment: The lead sponsor in our co-investment deals is measured using our manager ESG scorecard, in collaboration with our primary team. The assessment provides a view into how the lead sponsor would approach advising the portfolio company on potential ESG risks, offering insight into governance between the lead sponsor and the company. As a proud signatory to the Principles for Responsible Investment, HarbourVest is committed to being a responsible investor, and we incorporate these principles into our investment process when evaluating private market opportunities regardless of strategy, sector, or location. Our framework and policies are reviewed annually, and our 2017 PRI report is available here: Company-specific assessment: Co-investment target companies are evaluated across various metrics, including business model, geographic location, and investment stage. Based on our assessment, the company is ranked on a traffic light scale. Any concerns uncovered during the process are included in further due diligence reports. Portfolio monitoring: After initial allocation, our team continues to monitor the ESG status of the companies in which we elect to directly co-invest. We also seek to regularly emphasize the importance of ESG policies to lead sponsors, encouraging adoption where possible. HARBOURVEST 2017 ESG REPORT / page 8

10 DILIGENCE IN ACTION: Assessing ESG Factors Across Our Global Platform As an asset manager devoted to the core principles of ESG, HarbourVest spends considerable time working to understand best-in-class methods for incorporating ESG considerations into our due diligence process. In the following Q&A, Global ESG Committee member and Managing Director Matt HoganBruen talks with Matt Cheng (Direct Co-Investments), Mac Grayson (Primary Investments), and Matt Souza (Secondary Investments) to learn how ESG informs our investment decisions, and to share valuable lessons learned. MATT HOGANBRUEN MATT CHENG MAC GRAYSON MH: Mac, you played a key role in creating our ESG scorecard (see p. 7). Can you walk us through the development process? MG: The first version of the scorecard, which we introduced in the spring of 2015, was designed to drive interaction with our general partners (GPs) and featured a qualitative scoring system. We focused specifically on the GP s ESG policy, as well as their engagement level across a number of ESG categories. Our deal teams completed the scorecards as part of the overall due diligence process, and the results were reviewed by two senior members of the ESG team. In the fall of 2016, we re-engineered the scorecard to be more quantitative in nature, which allows us to rank progress on nearly 20 different ESG-related topics. The new scorecard gives us the ability to benchmark GPs against their peers and to track trends across the portfolio. Over time, we hope to have enough data to determine if there is a correlation between the scores and the returns generated by those managers. MH: On the secondary side, Matt, how do we influence GPs to be more mindful of ESG concerns? MATT SOUZA MS: With traditional secondary transactions, we re purchasing LP interests that are generally five to seven years old on average. This leaves very little opportunity for us to engage with funds directly on ESG issues, and we have little control over assets already purchased or the criteria governing future investments. This is especially challenging on transactions involving large diversified portfolios, where the underlying company counts can exceed 100 or more. At the complex end of the market, specifically secondary direct transactions, ESG engagement is much more actionable. The nature of these transactions gives us more influence over limited partnership agreement negotiations and the development and implementation of a GP s ESG policy. MH: Matt, you were instrumental in establishing our ESG diligence process for co-investment opportunities. Can you discuss the steps we take to conduct these reviews? MC: At a high level, the deal team reviews the ESG aspects of a transaction to determine if there are any red flags that would preclude us from proceeding. Trouble signs could include participation in any illicit sectors or industries, weak governance controls, or a lack of alignment between major investors. page 9 / HARBOURVEST 2017 ESG REPORT

11 Second, if the initial screen does not surface any issues, the deal team then assesses the ESG profile of the lead GP, as it will play an outsized role in influencing the activities of the company post-investment. As a co-investor and minority shareholder, we will likely have less influence on the post-investment activities of the portfolio company and will rely on the lead GP for many aspects of the deal, including managing ESG. Key ESG factors we focus on for the GP profile include whether or not they have a formal policy, and whether the lead GP has dedicated ESG resources. For this analysis, we leverage the work that the primary and secondary teams do to assess the ESG characteristics of the GPs they meet with, which are often the lead GPs of the co-investments we evaluate. Our last step focuses on company-specific factors, and the metrics we consider tend to align with the specific profile of the company. For example, if we re evaluating an industrials deal, the deal team will likely focus on whether there are any environmental issues or liabilities. Conversely, in a software deal, environmental issues are likely to be less of a priority. In this final phase, the deal team frequently reviews and relies on many of the third-party diligence reports which the lead GP commissions to profile the ESG status of an investment. MH: Mac, any lessons learned from scoring primary fund managers? MG: One thing we ve discovered is that nearly all GPs have thought about ESG, even if they don t have a formal policy in place. Proper governance and operating in a responsible manner are manager traits that we fully support. We ve also learned that senior level buy-in is critical to incorporating ESG initiatives within an organization and even with this support, internal resources are needed to consistently integrate ESG and to track metrics for a GP s portfolio companies. Last, we generally see European GPs and control-oriented investors with the strongest processes in place, and accordingly, the highest scores within our ranking system. MH: Getting back to secondaries, Matt, what factors help you better understand the ESG elements of a given investment? MS: With traditional deals, challenges aside, we always ask whether the funds we are evaluating have ESG policies in place. We can screen investments against potential ESG risk industries (tobacco, alcohol, weapons, etc.) and identify issues in advance of performing further diligence. For secondary direct deals, we have to continually seek opportunities for deeper engagement on company due diligence and driving the adoption of ESG best practices in situations where we are a significant investor in a newly formed partnership, or spin-out general partner. This starts with the ESG scorecard, which we complete for all new funds and GPs. MH: How do we monitor the ESG profile of our co-investments after we invest? MC: Our efforts to monitor the ESG status of our co-investments are incorporated into our semiannual portfolio review. The semi-annual review is a formal internal presentation made by the coinvestment group to all HarbourVest employees in which we analyze and present the health and status of each existing co-investment. The ESG portion of our monitoring process is comprised of two primary components: an evaluation of the lead GP s ESG profile and an update on any company-specific ESG considerations. To the extent that there are any ESG issues with a portfolio company that surface post-investment, the deal teams work with the lead GPs to understand and address these issues in an expeditious manner. MH: The ultimate goal is to gain knowledge that can help us influence our GPs to either adopt or strengthen their ESG frameworks. Mac, how do we ultimately use the information we get from the scorecard to do that? MG: Being able to benchmark them against their peers is an important element in providing feedback to our GPs. We will be able to show where they are particularly strong or have specific deficiencies. We can also share best practices from across the portfolio. We have been encouraged by the number of GPs without existing policies that have requested our assistance to help them design an ESG policy or incorporate various ESG initiatives into their own processes. HARBOURVEST 2017 ESG REPORT / page 10

12 IMPACT INVESTING CASE STUDY: BAIN CAPITAL DOUBLE IMPACT FUND DOUBLING DOWN ON IMPACT INVESTING Impact investing has officially gone mainstream. The practice of investing to generate both a social/environmental benefit and a good financial return has quickly evolved from a niche strategy to a broadly accepted investment approach, and strong future demand bodes well for continued growth. Assets in impact-focused investment vehicles totaled $114 billion at the end of 2016, more than double where they stood in 2010, and activity and product development are on the rise. Investors are expected to direct more than $26 billion into more than 9,500 impact products in 2017, increases of 17% and 20%, respectively, from The field is growing in large part because evidence continues to mount that companies with socially-driven missions can execute on their mission and generate attractive returns for investors. In a recent survey, a large majority of impact investors reported that their investments have either Younger investors tend to be more philanthropically minded when deploying their investment capital. met or exceeded their expectations for both impact (98%) and financial performance (91%). 2 Another compelling growth driver is the massive generational wealth transfer currently underway, through which Millennials those born between the early 1980s and early 2000s stand to inherit trillions in assets from Baby Boomers over the next two decades. Many of these younger investors bring a philanthropic mindset to managing their capital, and have a strong desire to deploy capital in ways that can positively impact society as a whole. Impact investing has long held a place in the investment portfolios of foundations and family offices, many of whom report today that they are either already allocating capital to impact vehicles or have plans to do so. In recent years, other institutional investors including banks, sovereign wealth funds, pension funds, and insurance companies have shown increased interest, and are dipping their toes into the water at their own pace (see Chart 2 on page 14). 1,2 Global Impact Investing Network, 2017 Annual Impact Investor Survey page 11 / HARBOURVEST 2017 ESG REPORT

13 IMPACT INVESTING CASE STUDY: BAIN CAPITAL DOUBLE IMPACT FUND (CONT.) LARGER FIRMS TAPPING INTO PROMISE These positive trends have captured the attention of some of the best-known financial firms in the world. In just the last two years, BlackRock and Credit Suisse established new impact-focused divisions; Goldman Sachs acquired an impact investment firm; and both TPG and Bain Capital launched major impact funds that have exceeded fundraising expectations. TPG s Rise Fund has raised more than $2 billion in assets since its 2015 launch and counts U2 singer Bono as a board member. Bain Capital, meanwhile, launched its Double Impact Fund in the spring of 2016 and raised $390 million, well beyond its initial target size of $250 million. HARBOURVEST 2017 ESG REPORT / page 12

14 HARBOURVEST AN LP IN BAIN CAPITAL DOUBLE IMPACT FUND HarbourVest s Cleantech Fund Program, which was introduced in 2009, made a commitment to the Bain Capital Double Impact Fund in July 2017 out of Cleantech Fund II. The Cleantech Fund targets investment opportunities that are focused on sustainability and resource efficiency. We liked the Double Impact Fund for a number of reasons, said Mac Grayson, a principal on HarbourVest s primary team who was involved in the diligence process. Similar to Cleantech, it addresses issues around sustainability, so there was a thematic match. We also have a longstanding relationship with Bain Capital, and a healthy respect for their platform capabilities. The opportunity to invest in a smaller fund supported by the full weight of Bain Capital s global network was very appealing for us. ABOUT BAIN CAPITAL DOUBLE IMPACT Bain Capital Double Impact, which is managed by former Massachusetts Governor Deval Patrick, looks to invest in companies it believes are poised to deliver both financial and social impact. These may be companies providing products and services to customers who have been traditionally underserved, those developing new technologies that can save costs and maximize energy/water efficiency, or those in historically undervalued areas. Specifically, the fund s investment focus areas include: 1. Sustainability sustainable products and operations aimed at minimizing environmental impact and promoting ecologically beneficial water, energy, and agriculture practices through efficiency gains and sustainable alternatives 2. Health and Wellness improving health outcomes through food access and quality products and services promoting healthier lifestyles; access to healthcare; and better education, training, and human development 3. Community Building supporting great companies and expanding economic opportunity in distressed communities to create good jobs, promote ownership, and catalyze long-term growth The fund is aiming to close on 12 to 15 deals with commitment sizes ranging from $10 million to $40 million. Thus far, Patrick and his team have made early investments in a Midwest-based chain of fitness centers located in areas that rank low on key overall health metrics and in the largest recycler of green materials in the state of Texas. One of the most important elements of impact investing is quantifying the outcomes, and with numerous measurement standards in place it can be challenging for investors to get a true read on the efficacy of their investment. The Double Impact Fund measures impact in the pre-investment due diligence phase and in the post-investment engagement period, and employs rigorous screens on companies in its key focus areas. page 13 / HARBOURVEST 2017 ESG REPORT

15 We re pleased to have an investor of HarbourVest s experience and caliber in the Double Impact Fund. I know we share a mutual belief that impact investing, done effectively, can help solve for some of the biggest environmental and societal challenges we face today. Deval Patrick, Manager, Bain Capital Double Impact Fund CHART 2: INTEREST IN IMPACT INVESTMENTS (by Investment Type) Foundations Family Offices Banks Sovereign Wealth Funds Pension Funds Insurance Companies Already Allocating Capital Developing Strategy Starting to Consider Not Interested Source: Global Impact Investing Network, 2017 Annual Impact Investor Survey HARBOURVEST 2017 ESG REPORT / page 14

16 HARBOURVEST HORIZON: ACCESSING PRIVATE EQUITY S EMERGING TALENT AND UNDERSERVED OPPORTUNITIES We have been investing in private equity funds for more than 35 years, and along the way have HORIZON embraced the importance of supporting smaller funds, firms early in their life cycles, those led by diverse managers, and those focused on investing in underserved markets. Despite residing in private equity segments that have traditionally been overlooked by most investors, these types of managers nonetheless offer their limited partners (LPs) portfolio diversification, the potential for alpha, and exposure to undiscovered talent. Due to the unique attributes of the funds and firms in these segments, investors must possess a dedicated sourcing focus, particular analytical expertise, and a rigorous process in order to choose the managers that offer the best chances of success. HarbourVest s appreciation of the need for this specialized skill set is reinforced by its Horizon investment team, which has spent two decades focused on the funds and firms that populate the US lower middle market, which has historically lacked sufficient access to investor capital. Over the past five years, the HarbourVest Horizon team has sourced over 1,000 deals that conform to its investment focus. These prospects feature a diverse range of company stages, including all venture, growth equity, buyout, mezzanine, and special situations. As of July 31, 2017, HarbourVest Horizon had closed on approximately $1.2 billion in commitments to 62 private equity funds focused on the US lower middle market. This capital was leveraged considerably by these managers as these funds ultimately raised more than $19.6 billion in cumulative capital, capital that will be deployed to create jobs, manufacture great products, and push the US economy forward. Our appreciation for active governance is reflected in the fact that we hold advisory board seats on 93% of the funds in which we are invested. SMALL AND EMERGING MANAGERS HarbourVest Horizon s portfolio is comprised of funds that are small by private equity fund standards, but these often ignored firms are nonetheless vital to the US economy and to renewing the private equity talent pool. Of the funds in the portfolio, 89% have fund capitalizations of less than $750 million, and 82% are less than $500 million. The fund sizes in this portfolio range from $27 million to $1.1 billion with an average fund size of $316 million. In addition to being relatively small, most of these funds are led by managers who are early in their life cycles. Of these 62 funds, 27% are Fund I s and 63% are Fund I s or Fund II s. Fund I s, II s, or III s represent 84% of the portfolio. Many of HarbourVest Horizon s emerging managers have gone on to create lasting investment franchises that continue to generate outsized financial and societal returns. page 15 / HARBOURVEST 2017 ESG REPORT

17 DIVERSE MANAGERS Investing in private equity funds led by diverse individuals has long been an organizing priority of the HarbourVest Horizon team. During its history, the team has invested nearly $1.1 billion, or 88% of its dollars, into managers led by ethnic minority or female partners. During this period, 82% of its portfolio funds have at least one ethnic minority or female partner and 50% of its portfolio has more than one ethnic minority or female partner. According to a Knight Foundation study released in May 2017, only 2.1% of private equity firms are women-owned while only 3.8% are owned by ethnic minorities, underscoring the important role HarbourVest is playing in working to ensure that opportunities are being extended to talented individuals from all backgrounds. 3 Further, there is a diversity to the racial and gender heterogeneity in the HarbourVest Horizon portfolio. Nineteen percent of its funds have at least one partner who is Hispanic, 21% have at least one partner who is African-American, 44% of the funds have at least one partner who is Asian- American, and 34% of the funds have at least one partner who is female. Several of HarbourVest s clients incorporate diversity in particular funds led by female or ethnic minority partners as part of their investment approach to ESG. HarbourVest manages several vehicles focused on diverse managers. Clients choose HarbourVest both because of our long history of investing in diverse managers and also because of the rigor that we apply to our investment process and tracking our ESG outcomes. These separately managed accounts (SMAs) focused on diversity are often focused on smaller managers (i.e., those raising less than $750 million) or managers raising their first-, second- or third-time funds. In this role, we facilitate the flow of crucial capital to talented managers that may otherwise have been overlooked, as well as to the US small business economy. 82% of HarbourVest Horizon s portfolio funds have at least one ethnic minority or female partner and 50% of its portfolio has more than one ethnic minority or female partner. As much as HarbourVest is focused on this untapped opportunity, we are rigorous in our focus on returns for our clients. The firm compiles operating metrics for the companies that comprise the HarbourVest Horizon funds, gathering this data both to better understand these companies and also to track financial returns. This data is generally updated on a quarterly basis and includes information that is gathered when a company is first acquired as well as when it is exited. The following samples of data are primarily from certain SMAs that focused on diverse managers and small funds from 2004 to 2017, and do not include all funds in which HarbourVest has invested. 3 Financial Advisor, May 3, Women, Minorities Underrepresented As Asset Managers, Survey Finds HARBOURVEST 2017 ESG REPORT / page 16

18 Portfolio companies of diverse managers have exhibited compelling metrics: Median Annual Revenue at Entry $50.0M Median EBITDA at Entry $10.1M Median Enterprise Value at Entry $36.6M Median Leverage at Entry 3.7x Leverage Multiple Median EBITDA Margin at Entry 20% Median Net Debt at Entry $50.0M Median EV/EBITDA at Entry 6.9x Purchase Price Multiple page 17 / HARBOURVEST 2017 ESG REPORT

19 At the moment of initial investment (or entry as noted above), these companies are relatively high cash flowing companies, and are leveraged at reasonable multiples. At exit, these companies have the following characteristics: Median Annual Revenue at Exit $86.0M Median EBITDA at Exit $20.2M Median Enterprise Value at Exit $151.8M Median Leverage at Exit 1.9x Leverage Multiple Median EBITDA Margin at Exit 23% Median Net Debt at Exit $35.3M Median EV/EBITDA at Exit 9.1x Purchase Price Multiple These diverse managers are applying the techniques of private equity to achieve their results. They are growing revenue by 72% during their holding period, doubling EBITDA, doubling enterprise value, paying down debt, and selling their companies at a higher multiple at exit. These key metrics illustrate how diverse managers are providing value to our clients. HARBOURVEST 2017 ESG REPORT / page 18

20 By providing capital to fund managers that target companies that have historically been avoided by the capital markets, HarbourVest Horizon is endeavoring to have a profound effect on those who live and work in these previously untapped communities. page 19 / HARBOURVEST 2017 ESG REPORT

21 UNDERSERVED MARKETS Companies can also play a powerful role in the communities in which they are located. At their best, they spark innovation, sustain workforces, shape what products are utilized, create a platform for wealth creation for their owners, and act as sources of inspiration for the next generation of wouldbe entrepreneurs. Too often, economically marginalized communities are deprived of the capital needed to cultivate these vital economic engines. By providing capital to fund managers that target companies that have historically been avoided by the capital markets, HarbourVest Horizon is endeavoring to have a profound effect on those who live and work in these previously untapped communities. Since its founding, Horizon has operated numerous private equity vehicles focused on funds that invest in companies that are: > led by women or ethnic minorities > located in low to moderate income neighborhoods, the inner city or in rural areas; or > focused on delivering products or services to an ethnically diverse customer base The earliest of these underserved focused vehicles are now in their harvest stages, but when the number of companies in these impact-focused vehicles peaked in 2014, HarbourVest Horizon s entire fund portfolio boasted the following statistics: > 50% of the company-level investments within these funds provided capital to at least one of the above defined underserved markets > over 153,500 individuals were employed by these underlying companies > payroll for these companies totaled more than $5.6 billion 4 > nearly 25% of the companies were female or minority-owned 5 > the combined workforces of these companies were 35% ethnic/minority and 41% female > 23% of the companies were located in low to moderate income areas > 2.5% of the companies were categorized as rural according to the US Department of Agriculture > 13.5% of the companies were located in areas classified as inner city by The Initiative for a Competitive Inner City > companies with 100 employees or less provided health insurance to 73%, retirement benefits to 54%, and disability benefits to 64% of the overall workforce 6 These statistics show the profound impact our clients capital was achieving by merely targeting previously untapped segments of the financial ecosystem. EVOLUTION We are proud that during HarbourVest s long history, we have sought to be leaders in uncovering new investment opportunities through innovative products and approaches while also striving to meet our client s needs. This mission is evidenced by the impact we have had with new investment firms, diverse-led managers, and in underserved communities. We will always seek to deploy our clients capital in people and communities that have been overlooked by the capital markets as we seek strong financial returns. We will also work to ensure that all of our investment efforts are aligned with our ethos to be responsible investors while also influencing the rest of the global investment community to do the same. 4 Not all HarbourVest Horizon companies reported payroll data for A company is minority owned if ownership by minorities is greater than 50% in any given year of investment. 6 Data includes only active companies that reported employment data at 2014 year-end. Includes full-time employees. HARBOURVEST 2017 ESG REPORT / page 20

22 CORPORATE CITIZENSHIP Just as HarbourVest is committed to making an impact on our clients portfolios, we are equally committed to making a difference in society. For us, this means being a responsible corporate citizen in both our business operations and in the communities in which our more than 400 employees work and live. By consistently aligning our interests with those of our investors, investment partners, and employees, we have been able to build and foster a rigorous culture that revolves around strong ethical behavior, full transparency, and social responsibility. And these aren t just words on paper. We live these attributes every day by: Respecting the interests of our clients, employees, and key stakeholders KATHLEEN BACON London-based Managing Director, Investments Making responsible investment decisions Holding ourselves to the highest ethical standards Caring about our communities and the environment ADVOCATE FOR GENDER DIVERSITY Gender diversity is an area in which HarbourVest has a strong voice and passion, as well as a proud history. The firm s co-founders, Brooks Zug and Ed Kane, made it a priority from day one to consider women who were equally qualified to serve in senior roles. As a result, while females hold just over 12% of all senior private equity positions globally, 7 that figure is more than doubled at HarbourVest where 26% of our senior positions are held by women, and 27% of our managing directors are female. Across the private equity industry, however, there is much work that needs to be done to balance out gender representation, particularly at the highest levels of company management. One organization leading the charge today is Level 20, a European group of female private equity professionals dedicated to understanding the key challenges and putting solutions in place. London-based Managing Director Kathleen Bacon, a founding member of Level 20, explains the group s mission and the progress it s making in the accompanying interview. 7 Preqin, Women in Private Equity, March 2016 page 21 / HARBOURVEST 2017 ESG REPORT

23 GENDER DIVERSITY IN PRIVATE EQUITY: SEEKING A LEVEL (20) PLAYING FIELD Why is it so critical for the industry to become more gender diverse? Every business that wants to grow and succeed has to constantly evolve and make sure it consistently reflects the diverse world in which it operates. Speaking strictly for our industry, we are not aligned right now with the fact that more women today are controlling more of the world s wealth than ever before. They are leading businesses and making key financial and investment decisions that have broad ramifications. If our value-add is sourcing the very best investment opportunities and we don t have a thorough grasp on the needs and interests of our clients and investors we re already at a big disadvantage. Beyond demographics, there s also a very strong business case to be made for increased gender representation That s right. Numerous studies have been conducted that show that diversity among investment teams and senior decision-makers results in better, more well-informed decisions, and coincides with improved investment performance. 8 Success in private equity isn t just about mastering numbers and data it s also about reading people s emotions and motives, and understanding what makes them tick. Doing this well requires different perspectives. Increased diversity also gives firms access to a broader pool of talent, and can lead to a more respectful, productive working environment. Importantly, LPs agree that gender diversity brings benefits. Nearly 60% believe PE firms would benefit generally from having more diverse teams, and more than two-thirds believe team quality and dynamics would be improved as a result. 9 Tell us about your involvement with Level 20. What is the group aiming to achieve? Level 20 is a group of senior, female PE professionals who are passionate about leveraging our experiences and joining forces with other industry leaders to attract, nurture, and promote more women to private equity. We established the group in 2015, and today our members represent both LPs and GPs, and work for leading firms like Bain Capital, JPMorgan, and Pantheon. Since the gender diversity gap is particularly acute in Europe, we re focusing initially on working with European-based PE leaders to drive greater diversity. Our goal, and hence the name of the organization, is to have women account for 20% of all senior roles in the European PE industry by Can you provide a progress update? Since our inception in 2015, Level 20 has grown rapidly it now encompasses more than 1,000 members, has spread across the UK, Europe, and beyond, and has received financial backing from 40 GP sponsors. With these positive tailwinds, 2017 was an exciting and busy year for us. One of the bigger projects we initiated is a research study focused specifically on career paths in private equity. It has always been challenging to find good data on gender diversity, so we ve partnered with the Judge Business School at Cambridge University to help us understand and learn more. The findings from the study will be key in guiding our future work and allowing us to have some data to benchmark our own progress. Other projects underway include developing a toolkit to help GPs understand best practices in a range of areas, including recruitment, assessment, and career development, and an expansion of Level 20 globally, as we re launching our second chapter in Germany. 8 Credit Suisse, Women s Positive Impact on Corporate Performance, September World Economic Forum, Women in Private Equity: The Limited Partner Perspective, March 2016 HARBOURVEST 2017 ESG REPORT / page 22

24 MAKING AN IMPACT IN OUR COMMUNITIES HarbourVest has long understood that keeping employees engaged in fulfilling activities while also being good partners in the communities in which we work and live is essential in cultivating a meaningful work experience. It s one of the reasons why I really enjoy working here, said Katherine McCord, who heads up the firm s community relations efforts. Company leadership understands and embraces the importance of giving back, and encourages all of our employees to seek out ways to make a difference. HarbourVest and its more than 400 employees support a wide range of worthy causes and organizations throughout the year, including youth mentoring, children and adult special education, poverty and homelessness, various health causes, and the arts. In 2017, the firm and its employees donated a total of more than $50,000 during in-office > HarbourVest employees in Hong Kong spent a day at a special education school in Choi Hung. drives to support various causes, including pediatric cancer and Hurricane Harvey victims. The firm took its philanthropic endeavors to new heights in 2017, introducing a Boston Volunteer Week in June, and a Global Volunteer Week in October. In June, 175 employees donated their time and money to several Boston-area non-profits focused on the environment, children s issues, and homelessness. The Global Volunteer Week in the fall, coordinated by McCord and her team, involved employees in all nine of our global offices, including Beijing, Bogotá, Boston, Hong Kong, London, Seoul, Tel Aviv, Tokyo, and Toronto. It was such a win-win for everyone, said McCord. It feels great to help out worthy causes, and at the same time employees from across the firm are paired up together so there s a nice bonding dynamic that happens too. page 23 / HARBOURVEST 2017 ESG REPORT

25 > A quick regional round-up from our inaugural Global Volunteer Week Beijing: Our team in China spent time at the Qing Quan Foundation, which provides support and equal education opportunities to underprivileged students. The team offered guidance on rehearsing for job interviews, reviewing resumes, and engaged in one-on-one coaching sessions. Bogotá: Our Bogotá team spent a very rewarding day at SIU, a foundation that works with children from low-income families who have been diagnosed with cancer. Team members played games and entertained the kids while they waited for their daily appointments. They shared very hard and enlightening stories with us, said team member Beatriz Perez. We ended up being the recipients of a lot of love during a morning filled with glitter, colors, Halloween masks, and many, many hugs. Tel Aviv: Team members in Tel Aviv got their hands dirty for their volunteer day, picking beetroot from fields for an organization called Leket Israel, which preserves edible food that benefits more than 140,000 people each week. Tokyo: In Japan, our Tokyo team volunteered for the International Social Service Japan, a non-profit organization that helps individuals, children, and families confronted with complex social welfare issues due to migration and border restrictions. Employees participated in the group s charity movie festival and bazaar, and donated 100,000 yen to the organization. Toronto: Our Toronto team spent their volunteer time at Second Harvest, a group that rescues perishable food and distributes it daily to more than 230 agencies across the Greater Toronto area. The team also donated 1,000 nutritious meals to be served to underprivileged people in Toronto. Boston: More than 180 Boston employees gave their time to five different organizations, organizing books, toys, and clothing for children; serving hot meals to more than 225 women in need; and packing and storing more than 15,000 pounds of food. Hong Kong: In Hong Kong, our employees spent a day at a special education school in Choi Hung helping students with intellectual disabilities design and dye eco-friendly tote bags and other artwork. London: Our teammates in London put their overalls and boots on to help transform a neglected conservation area known as Ingestre Woods. Among other tasks, 41 HarbourVest employees helped clear pathways, build steps, plant bulbs, and clear waste. Seoul: Our team in Seoul spent valuable time with children from the Salvation Army Broadview Children s Home, where many of the younger children are orphans waiting for adoption. Employees played with the children in the playground and enjoyed lunch together in what was a rewarding experience for all. They shared very hard and enlightening stories with us, said Beatriz Perez. We ended up being the recipients of a lot of love during a morning filled with glitter, colors, Halloween masks, and many, many hugs. BEATRIZ PEREZ Bogotá Team HARBOURVEST 2017 ESG REPORT / page 24

26 page 25 / HARBOURVEST 2017 ESG REPORT Company leadership understands and embraces the importance of giving back, and encourages all of our employees to seek out ways to make a difference.

27 HarbourVest and its more than 400 employees globally support a wide range of worthy causes and organizations, including youth mentoring, children and adult special education, poverty and homelessness, various health causes, and the arts. HARBOURVEST 2017 ESG REPORT / page 26

28 GLOBAL COMMUNITY/CHARITY WORK IN 2017 Participating Employees 269 Total Hours Donated Number of Non-Profit Organizations Supported 25 Company/Employee Cash Donations to Multiple Causes $50,000+ 1,500 + CYBER-SECURITY FRONT AND CENTER Robust cyber-security measures are essential to successful global business operations, particularly within the financial services industry. With this in mind, HarbourVest in 2017 formed a new IT Risk and Information Security Committee, chaired by Chief Technology Officer Tricia Mackechnie. As part of our ongoing efforts to protect our clients and the company, the Committee will work together to ensure the confidentiality and security of our systems, digital assets, and related sensitive information. The group will also proactively guard against threats to our digital security. In carrying out its mission, the Committee will conduct global IT risk assessments as well as educate all company personnel on information security best practices on an annual basis. IT RISK AND INFORMATION SECURITY COMMITTEE TRICIA MACKECHNIE Chief Technology Officer (Chair) DANIELLE GREEN Chief Compliance Officer JULIE EIERMANN Chief Data Officer DAVID RULE Head of Infrastructure BRIAN KILLEEN Compliance Manager (Secretary) page 27 / HARBOURVEST 2017 ESG REPORT

29 OPERATIONAL DUE DILIGENCE Just as our global investment teams perform extensive diligence on market opportunities, our Operations team also conducts comprehensive analysis each year on our general partners operations, including Treasury, Compliance, Information Technology, and Accounting/Reporting. Through October 2017, our teams had evaluated 76 GPs, accounting for more than 70% of current NAV. The average overall score for our managers is 81%, up from 74% in CARING FOR THE ENVIRONMENT HarbourVest takes an active interest in environmental issues, from the types of companies in which we invest, to the products we offer, to how we conduct our business and operations. In 2017, the company completed the following ESG-related initiatives: > Introduced energy-efficient, centralized multi-function printing devices > Converted warrants distribution process to be completely electronic, saving an estimated 18,000 sheets of paper per year > Switched to US-made, 100% recyclable file archive storage boxes > Launched a new automated invoice payment system to significantly eliminate/reduce paper usage > Donated more than 180 pieces of furniture to local non-profits and schools > Worked with outside cleaning companies to ensure 100% use of eco-friendly products > Removed more than 40,000 K-cups from the waste stream in favor of 100% compostable coffee pods HARBOURVEST 2017 ESG REPORT / page 28

30 PEI Responsible Investment Forum March 7 New York, NY Mac Grayson, a Principal on our Global Primary team, participated on a panel entitled, Staying on Top of Your Portfolio: Monitoring and Reporting ESG. The discussion focused on the key information GPs should be seeking from their portfolio companies pre- and postinvestment, and how managers can efficiently report out results and progress. Investing in Women Event March 21 Montreal, Canada Senia Rapisarda, Managing Director in HarbourVest s Toronto office, took part in a panel at the Investing in Women in Technical, Entrepreneurship, Investor & Leadership Roles event. During the discussion and Q&A, Senia provided her thoughts on how companies can make their work environment more inclusive for women, and how greater diversity in the workforce leads to greater likelihood of success. London Business School Private Equity & Venture Capital Conference April 21 London, UK London-based Managing Director Kathleen Bacon served as a panelist for the session titled Diversity in the Spotlight, during which she shared her perspective on the importance of building and cultivating diverse investment and management teams OUTREACH AND EVENTS page 29 / HARBOURVEST 2017 ESG REPORT

31 Impact Capitalism Summit April 25 Chicago, IL HarbourVest Managing Director Craig Fowler participated on a panel titled Private Equity: Systemic Thinking for Private Capital Allocation. The panel explored some of the challenges and opportunities around impact investing in private equity. Europe PEI Responsible Investment Forum September 27 Berlin, Germany Managing Director Kathleen Bacon was a panelist for the breakout session, The Importance of Crisis Management and Response from an ESG Perspective. Using real case studies, Kathleen shared her insights on developing crisis management plans and managing potential reputational damage during challenging situations. AVCJ ESG Forum 2017 November 13 Hong Kong During a panel discussion entitled Formalising Your Commitment to Responsible Investment, Managing Director Kathleen Bacon joined leading GPs and LPs to discuss what constitutes responsible investment and how to convert a policy into reality. Members of our global team participate regularly in ESG-focused industry events around the world. Our engagement in these forums allows us to share our own insights as well as learn best practice methods and strategies from other firms and organizations. In 2017, HarbourVest professionals participated in these ESG events. HARBOURVEST 2017 ESG REPORT / page 30