With the technological and methodological support of SIRSA / Reporting 21 Press release 26 July 2018 For the fifth consecutive year, private equity firms and their portfolio companies have mobilised to affirm their commitment to sustainable development France Invest, the French private equity and venture capital association, along with Deloitte and SIRSA, published its fifth ESG Annual Report 2017, which describes, quantifies and qualifies the French private equity industry s commitment to Environmental, Social and Governance (ESG) issues at investment firms and their portfolio companies. For the fifth edition of its ESG Annual Report, France Invest is pleased with the record-breaking number of contributors, which gives substantial breadth and depth to this unique document in the private equity industry. Some 40% of the private equity firms members of France Invest responded to our survey on the Reporting 21 platform. This participation rate, double that of the previous edition, attests to the increased efforts by French private equity firms to incorporate extra-financial aspects in the unlisted company segment. Aware of its central role, France Invest formalised the ESG commitments of its asset management company members in its membership Charter back in 2014. Candice Brenet, Chair of the France Invest s ESG Committee, noted: For the past 10 years, the French private equity industry has actively and increasingly promoted sustainable development issues alongside companies. This shared awareness as regards the importance of ESG factors is expressed in a multitude of ways in the practices of the asset management companies and their portfolio companies, depending on their specificities. This broad range of approaches ensures that extra-financial considerations are effectively taken into account on behalf of private equity firms and our ecosystem. For that reason, we chose to present the results of our survey by asset class. One can thereby see how the priorities and implementation of the objectives are inextricably linked to the characteristics of France Invest s various business activities and company cultures. Nicolas de Jenlis, Head of Deloitte Sustainable Development, added: French private equity is marking a major milestone as it finds its own sustainable development model. In order to bring about a full-fledged transformation of the business models, a full partnership approach will be needed instead of mere cooperation between the companies and providers of capital. For private equity firms, that means being both demanding and able to keep pace with the companies sustainable development goals. France Invest members are pursuing this trajectory in an international environment marked by unprecedented efforts surrounding sustainable finance. Yannick Grandjean, CEO and founder of SIRSA, the CSR consulting firm that developed the Reporting 21 platform, stated: We are thrilled to participate in the outlining and development of extra-financial data collection for ESG in the French private equity industry, as well as to contribute to monitoring the progress of all the market players over the years.
Enhanced transparency on behalf of extra-financial aspects In 2017, 122 of the 308 private equity firms members of France Invest 1 participated in the ESG survey on the Reporting 21 platform. They employ more than 3,250 people, manage 218 billion in assets and fund nearly 5,800 companies. In 2017, they carried out a total of 1,500 investment transactions. Moreover, 1,450 of the portfolio companies employing 845,000 people also responded to the questionnaire. The main lessons by market segment One fourth of the private equity firms specialising in small cap actors implemented ESG reporting with their portfolio companies. This figure is impressive given the small size of these private equity firms, which have more limited human and financial resources. Private equity firms operating in the mid cap segment and funding French SMEs already well established in their sector performed 338 acquisition-related ESG due diligence assignments in 2017. ESG due diligence, which is increasingly used by mid-cap companies, favours the formalisation of an action plan and involvement of managers on ESG issues when new investments are made. In the French large cap segment, which involves fund-raising in France and abroad and high minimum initial investments, all private equity firms responding to the survey publicly formalised their ESG commitments. A total of 88% of these companies are involved in financial marketplace committees and working groups looking to help advance the integration of ESG issues into industry practices. The commitment to ESG issues by market participants providing debt financing, mainly for buyout transactions, has risen steadily, as evidenced by the 64 ESG questionnaires sent out during the year by investors to these management companies (3.37 per company on average). And this trend has occurred despite the fact that the position of private debt providers is unique within the governance of the portfolio companies. In the infrastructure segment, where investments are characterised by the duration of the holding period (approximately 10-15 years), 74% of the private equity firms track the annual workplace accident frequency and severity rates. In this sector, which employs a large number of workers, accident rates are a major challenge that need to be watched closely. Private equity firms specialising in impact investing, characterised by investments designed to make a positive environmental or social impact (poverty, disability, access to education, etc.) while generating a financial return, have 40% female employment. This female employee ratio, among the highest for the investment teams, shows that impact investing firms are generally striving to create teams whose profiles and career diversity match their investment strategy. The France Invest ESG Annual Report 2017 is available at www.franceinvest.eu and www.deloitte.fr Appendix Charter of Commitments by investors in growth ESG at France Invest Private equity firm members of France Invest are committed to facilitating the long-term transformation of the unlisted companies they fund. Professional shareholders in unlisted companies act as initiators to promote and structure the approaches of portfolio companies seeking to improve the impact of their activities as regards the environment and their stakeholders (employees, partners, subcontractors and customers). These initiatives are supported and nourished by investors, who increasingly look at how management companies take ESG issues into account in their investment decisions and support for companies. Four France Invest clubs and committees enable members to discuss and cooperate on ESG issues: The ESG Committee promotes the integration of extra-financial issues in the practices of management companies and their portfolio companies. The Impact Committee comprises members who fund projects aimed at achieving both a financial return and social objective. Invest avec Elles club promotes the place and role of women in private equity. Climate Committee includes members actively participating in clean technologies and those that would like to promote eco-industries in France and abroad. 1 Number of active members at 31/12/2017 2
*** Press contacts France Invest - Antoinette Darpy - +33 (0)6 72 95 07 92 - a.darpy@franceinvest.eu Deloitte - Nadia Dussol - +33 (0)1 55 61 54 34 - kdussol@deloitte.fr / Marie Goislard - +33 (0)1 55 74 52 33 marie@rumeurpublique.fr SIRSA / Reporting 21 - Yannick Grandjean - +33 (0)6 50 60 42 29 - yannick.grandjean@reporting21.com About France Invest France Invest comprises almost all the private equity teams operating in France. It has over 300 active members and almost 200 associate members. Through its compliance, control and best practices development mission, it is one of only two associations recognised by the French financial markets authority (AMF), and membership in the association by asset management companies is one of the conditions for authorisation. It is the only industry association specialising in private equity. France Invest's priorities include promoting the position and role of private equity, actively participating in its development by serving as a hub for the entire industry and establishing best practices, methods and tools for professional and responsible shareholder conduct. For more information: www.franceinvest.eu About Deloitte Deloitte refers to one or more firms belonging to Deloitte Touche Tohmatsu Limited (DTTL), a UK-registered company ( private company limited by guarantee ), and its network of member firms established as independent and legally distinct entities. DTTL (or Deloitte Global ) does not provide services on behalf of clients. For more information on our global network of member firms: www.deloitte.com/about. In France, Deloitte SAS is the member firm of Deloitte Touche Tohmatsu Limited, and the professional services are performed by its subsidiaries and affiliates. 2018 Deloitte SAS, Member of Deloitte Touche Tohmatsu Limited About SIRSA/Reporting 21 The information and data published in this report have been collected through Reporting 21, the extra-financial reporting platform developed by SIRSA. SIRSA is a CSR consulting firm that assists both corporate and financial organisations in quantified CSR strategies. Its missions range from ESG risk analysis to the design of extra-financial reporting frameworks and processes, as well as collecting and analysing the data and delivering data outputs. 3
APPENDIX CHARTER OF COMMITMENTS FOR INVESTORS IN GROWTH CHARTER OF COMMITMENTS FOR INVESTORS IN GROWTH The members of France Invest, i.e. professionals who provide equity financing for company creation, development and buyout transactions and who recognise the economic, social and environmental impact of their activities, adopted a Private Equity Charter back in 2008. This prior experience combined with growing societal expectations have prompted them to transform the initial Charter into its current version as the Charter of Commitments. In addition to the rules already set forth in the industry code of ethics and the regulatory framework defined by the French Financial Markets Authority, and given the limits of their effective power as shareholders as well as their fiduciary responsibilities toward equity investors, the Charter s signatories agree to uphold the following objectives: A. Economic issues France Invest signatory members recognise that their investment choices and the performance of their duties as shareholders have an impact on the French economic fabric and its development. They also agree to: 1. invest the savings entrusted to them for the purpose of actively financing, in accordance with their respective areas of specialisation, the creation, growth and long-term development of companies, and more specifically of unlisted SMEs; 2. act as an attentive and active partner, either as a minority or majority investor, for entrepreneurs or teams who are fully responsible for the management of their companies; 3. support ambitious development projects through the launch of new activities, R&D and innovation, industrial and commercial investment, international development and acquisitions; 4. support the implementation by companies of their respective sectors best professional practices with respect to the management and control of their development; 5. promote a financing structure (debt/equity) in the case of leveraged majority investments and with the consent of the entrepreneurs that takes into account reasonable economic contingencies so as not to jeopardise the company s operations or deprive it of the means to invest in its own development. B. Social and human issues Convinced that a company s overall performance depends on careful management of human capital, the signatories agree to: 6. promote constructive labour relations within the companies that are respectful of the rights of all, both managers and employee representatives; 7. support the development of profitable activities that enable job creation or preservation; 8. support training initiatives undertaken by the companies; 9. promote shared value creation by allowing company employees to participate in the success of a company through profit-sharing and incentive-based mechanisms or through widespread employee access to company share ownership or any capital gains. C. Environmental issues While promoting the competitiveness of the companies in which they invest, France Invest members seek to encourage these portfolio companies to be exemplary in recognising environmental issues. Recognising that all economic activity has an impact on the natural world, the signatories agree to: 10. request an audit whenever an environmental risk is identified and encourage the company to prevent any negative environmental impacts identified as a result; 11. promote the establishment of best practices in the areas of ecosystem protection and biodiversity; 12. orient the companies development strategies toward the long term so that they take into account the challenges of natural resources dependency, energy consumption and waste generation. D. Governance issues Investing primarily alongside entrepreneurs in unlisted companies, France Invest members have for years established modern governance systems that contribute to the success and sustainability of the companies in which they invest. The signatories also agree to: 4
13. ensure compliance with laws, bargaining agreements and the articles of association of companies in which they invest; 14. act to prevent corruption and money-laundering within their sphere of control; 15. act on behalf of the smooth operation of various company governance bodies, in which each managers, independent directors and shareholders exercise in full their roles and responsibilities; 16. promote the transparency of their activity as investor, notably by measuring and disclosing the economic and social impact of their investments. The signatories, recognising the fact that their commitment to the principles contained in this Charter, may only be expressed in their capacity as shareholders and, where applicable, members of the administrative bodies of the companies in which they invest, will strive to work together with managers, co-shareholders, employee representatives and employees of these companies and to promote awareness of this Charter by all of them. Company signatory: Name of signatory: Title of signatory: Date: Signature: 5