Respnsible Investment plicy The fllwing is a summary f the full 3i Respnsible Investment plicy. References thrughut this Plicy t the Prtal are t 3i s glbal internal web-based knwledge system which is accessible by all 3i staff. ------------------------------------------------------------------------------------------------------------------------------- 3i will use its influence as an investr t prmte a cmmitment in ur prtfli cmpanies t: Cmply, as a minimum, with applicable lcal and internatinal laws and regulatins (Applicable Laws) and, where apprpriate, relevant internatinal standards 1 (Internatinal Standards) where these are mre stringent than Applicable Laws. Mitigate any adverse envirnmental and scial impacts and enhance psitive effects n the envirnment, wrkers and relevant stakehlders. Uphld high standards f business integrity and strng crprate gvernance. Scpe This Plicy applies, subject t certain exceptins 2, t all new investment pprtunities cnsidered by 3i s business lines (and the funds which they manage r advise) acrss all sectrs and gegraphies frm Nvember 2011 (the date n which this Plicy became effective). 1 The Internatinal Standards include the relevant IFC Perfrmance Standards and assciated Guidelines and the Internatinal Labur Organisatin (ILO) Fundamental Cnventins. The IFC is the private sectr arm f the Wrld Bank and its Perfrmance Standards are intended t prvide a reference fr businesses in emerging markets fr envirnmental and scial standards. The IFC s Envirnmental, Health and Safety (EHS) Guidelines are technical reference dcuments with general and industry-specific examples f gd industry practice. The mst basic labur rights have been cdified by the ILO in the 1998 Declaratin n Fundamental Principles and Rights at Wrk which identified 8 cnventins fundamental t the rights f peple at wrk, irrespective f the level f develpment f a cuntry. 2 This Plicy des nt apply t investments made (i) by funds raised, r substantially raised, by fund management platfrms prir t their acquisitin by 3i r (ii) by funds raised, r substantially raised, prir t Nvember 2011 when this Plicy became effective. Fllwing the sale f 3i s Debt Management business line t Investcrp in March 2017, 3i cntinues t hld a number f investment interests in debt funds which are nw managed n a fully discretinary basis by Investcrp Credit Management. New investments made by thse debt funds fllwing the sale will nt, therefre, be subject t this Plicy. Certain areas f the Plicy (e.g. the minimum crprate gvernance standards) d nt apply t PPP / prject investments by the Infrastructure business as they are either nt relevant r inapprpriate t thse investments. 1
3i s respnsible investment apprach 3i will: Prvide sufficient infrmatin, instructin, training and resurces t its staff t ensure that they can effectively manage envirnmental, scial and gvernance ( ESG ) matters within their investment activities. Mnitr and audit the implementatin f this plicy n an nging basis. Reprt prgress n the implementatin f this plicy annually t relevant 3i stakehlders. 3i will implement this plicy in its new investment activities by: Screening new investment pprtunities against its Exclusin and Referral lists. At an apprpriate stage in the investment prcess, carrying ut a high level assessment f new investment prpsals t identify ptential material ESG risks and pprtunities. Where ptential material ESG risks are identified, evaluating management s cmmitment, capacity and track recrd in addressing ESG issues and whether specialist due diligence is required. Where ur due diligence identifies actual material ESG risks, 3i will require the ptential prtfli cmpany t cmmit t implementing apprpriate measures t mitigate thse risks. Such measures may include meeting relevant Internatinal Standards (ver a reasnable time frame) where these are mre stringent than Applicable Laws. 3i will supprt the ptential prtfli cmpany t d s by develping actin plans with apprpriate targets, timetables and resurces. 3i will implement this plicy in its prtfli management and advisry activities by: Mnitring and recrding the prtfli cmpany s perfrmance against agreed actin plans, targets and timetables as part f 3i s prtfli review prcess and by encuraging and supprting the prtfli cmpany t adapt t new ESG requirements and develpments in its particular business sectr. Mnitring and recrding serius incidents invlving prtfli cmpanies which result in lss f life, serius injury, material effect n the envirnment r material breach f law and by prmting crrective actins. Cnsidering, at the time f exit, apprpriate disclsure f material ESG matters, impacts and steps taken t manage them. Exclusin and Referral lists Bth the Exclusin and Referral lists apply t new investments as well as acquisitins made by prtfli cmpanies which require 3i s cnsent and/r funding. These lists are nt exhaustive; judgement must be applied fr activities nt n the list but which carry similar risks. 2
Exclusin List 3i will nt invest in cmpanies engaged in any f the fllwing businesses: 1. The prductin, marketing r use f, r trade in, prducts r activities deemed illegal under Applicable Laws, r banned thrugh glbal cnventins and agreements, including: Slavery, human trafficking, frced labur, cmpulsry labur r harmful child labur; Certain hazardus chemicals, pesticides and wastes; Ozne depleting substances; and Endangered r prtected wildlife r wildlife prducts. 2. Where the business: is, r any f its direct r indirect wners r cntrllers are, n a sanctins list f the UK, EU, UN, US r any ther relevant bdy r jurisdictin; supplies r purchases prducts, gds r services t r frm persns in cuntries r regins where such supply r purchase is prhibited r restricted by sanctins; r is lcated, r has any peratins, in a cuntry subject t cmprehensive / cuntry-wide sanctins 3. 3. The prductin, marketing r use f, r trade in, weapns f mass destructin r inhuman weapns r technlgies which are subject t existing internatinal prhibitins 4. 4. The trade in human bdy parts r rgans. 5. Animal testing fr csmetics. 6. The prductin, marketing r use f, r trade in, unbnded asbests fibres. 7. Where mre than 10% f their current r planned revenues are derived frm: The wnership, peratin, marketing r management f gambling facilities and/r the develpment r prcessing f gambling prducts which are unregulated and/r which, in the pinin f the Chief Executive r General Cunsel, are r might be explitative f vulnerable grups in sciety; The prductin, distributin, marketing r trade in tbacc r tbacc prducts; The prductin, distributin, hsting r marketing f material r activities relating t prngraphy; r The prductin, marketing r use f, r trade in, weapns (and assciated critical cmpnents), dedicated weapn platfrms, munitins, military and paramilitary services 5. 3 This is intended t exclude businesses which have a physical presence in the relevant cuntry such as a lcal ffice (e.g. a branch r subsidiary) r factry etc. Where the business des nt have a physical presence in the relevant cuntry but deals with agents, distributrs, custmers r suppliers etc. wh are lcated in the relevant cuntry, yu shuld refer t paragraph 7 f the Referral List. 4 This includes nuclear, chemical, bilgical and radilgical weapns, landmines, cluster bmbs, materials such as depleted uranium and dedicated delivery systems fr such weapns. 5 This exclusin des nt apply t systems r services generally regarded as primarily defensive r nn-ffensive such as avinics, radar, snar, instrumentatin, fixed r mbile cmmunicatins equipment, prtective service clthing and equipment, fire cntrl systems, transprt cmpnents, mining rdnance, supprt services and technical training. 3
Referral list 3i may invest in businesses which are engaged in the fllwing activities the investment pprtunity must first be discussed with the General Cunsel and apprved by the Chief Executive befre substantial due diligence is initiated and the Chief Executive will decide, fllwing cnsultatin with the General Cunsel, whether the pprtunity shuld be prgressed: 1. Cnducts business activities invlving the use f cntrversial technlgies including (but nt limited t): Stem cell research; Genetic mdificatin; Recruitment fr human testing; r Animal testing fr fd prducts, medical research and ther cntrversial testing r prductin prcesses. 2. Generates nuclear pwer r prduces, handles r reprcesses nuclear fuels. 3. Operates in specific lcatins where its activities carry high risk f material harm t peple r the envirnment, such as: Envirnmentally prtected areas; Sites f scientific interest; Habitats f rare r endangered species; Fisheries f ecnmic imprtance; Land ccupied by indigenus peple r vulnerable grups; Primary r ld grwth frests f eclgical significance; r Culturally r archaelgically significant areas. 4. Where mre than 10% f their current r planned revenues are derived frm the supply f prducts r services t cmpanies whse principal business is excluded under the Exclusin List. 5. Owns, perates, markets r manages gambling facilities and/r develps gambling prducts which are regulated and which, in the pinin f the Chief Executive r General Cunsel, have nt been determined as explitative r ptentially explitative f vulnerable grups in sciety. 6. Operates in the sub-prime lending sectr. 7. Has key suppliers 6 which are engaged in any f the activities included in the Exclusin list r has any cmmercial cunterparties 7 wh are cvered by the sanctins referred t in paragraph 2 f the Exclusin List. 6 A key supplier is ne which accunts fr 10% r mre f the business s ttal supplies 7 Such as custmers, suppliers, agents, distributrs, intrducers, bankers r jint venture partners 4
Minimum ESG standards We seek t invest in businesses which are cmmitted t: A cautius and respnsible apprach t envirnmental management f their business peratins (and thse f their supply chain) by making efficient use f natural resurces and mitigating envirnmental risks and damage. Respecting the human rights f their wrkers and f the peple wrking in their supply chain. Maintaining safe and healthy wrking cnditins fr their emplyees and cntractrs and fr the peple wrking in their supply chain. Treating their emplyees fairly. Uphlding the right t freedm f assciatin and cllective bargaining. Treating their custmers fairly and respecting the health, safety and wellbeing f thse affected by their business activities. Uphlding high standards f business integrity, aviding crruptin in all its frms and cmplying with applicable sanctins and anti-bribery, anti-fraud, anti-tax evasin and antimney laundering laws and regulatins. Implementing a strng crprate gvernance and risk management culture and t cmplying in frm and substance with established best practice in crprate gvernance which is apprpriate t the relative size and cmplexity f the relevant business and the markets in which it perates. We d nt expect that all f ur prtfli cmpanies will necessarily meet all f the minimum standards immediately fllwing 3i s investment. Hwever, we d expect the executive management team t be fully cmmitted t meeting the minimum standards within a reasnable timeframe and 3i will supprt them t d s. Envirnment, labur, health & safety, extrtin, bribery and financial crime As a minimum, each ptential new prtfli cmpany must cmply with all Applicable Laws relating t the envirnment, labur and health & safety matters, sanctins and the preventin f extrtin, bribery and financial crime (including tax evasin). 8 Where 3i s initial high level assessment identifies ne r mre ptential risks, 3i s pre-investment due diligence will typically include a mre fcused investigatin int relevant areas, such as: Severe degradatin f water, sil r air quality. Prductin f substantial slid waste. Emissin f significant quantities f greenhuse gases. 8 fr nn-uk cmpanies this may include cmplying with the UK Bribery Act 2010 if they carry n a part f their business in the UK 5
Lss f bidiversity r habitat. Significant labur issues (fr example, health & safety issues, pr wrking cnditins, wages belw industry / natinal legal minima, discriminatin r absence f a freedm f assciatin and cllective bargaining). Invluntary resettlement. Impact n cultural r archaelgical heritage r indigenus peples. Nn-lcal labur r ther issues where the negative scial impact culd be significant. Bribery and crruptin. If ur pre-investment due diligence identifies ne f the abve as an actual r ptentially material risk, management must: demnstrate t us that they have the cmmitment, capacity and track recrd t effectively manage thse risks and a willingness t make imprvements and reach standards acceptable t 3i in this area ver time; and cmmit t implementing apprpriate measures t mitigate thse risks, which may include cmmitting t apply the relevant Internatinal Standards ver a reasnable time frame where these are mre stringent than Applicable Laws. With particular regard t bribery, even where 3i s pre-investment due diligence assesses the cmpany as lw risk, we expect management t carry ut an assessment f the business s expsure t bribery within an agreed time frame fllwing 3i s investment and t cmmit in advance t implement any imprvements which may be identified. Crprate gvernance All ptential prtfli cmpanies must have in place r, as a term f 3i s investment, agree t implement: Bard cmpsitin and meetings An apprpriate balance between executive and nn-executive directrs with a chairman wh is independent frm the executive management 9. Bard meetings t be held regularly with an agreed agenda and papers circulated sufficiently in advance. An annual prgramme f bard agenda tpics t be agreed in advance with 3i, including an annual review f material ESG issues facing the business. Management infrmatin A cmprehensive bard pack, cvering areas and KPIs agreed with 3i, t be circulated prmptly within a time perid agreed with 3i. 9 It is acknwledged that, in relatin t certain particular investments r certain particular types f investments, an independent chairman may nt always be apprpriate r achievable 3i will assess the suitability and relevance f this minimum standard n a case-by-case exceptins basis and cnsider alternative prtectins as apprpriate. 6
A rbust budget and bjective-setting prcess, with clear accuntability fr key deliverables, t be cmpleted within a time perid agreed with 3i and which is tracked and mnitred by the bard during the year. Systems and cntrls Rbust systems which prduce reliable data withut manual interventin and effective systems f internal cntrl and risk management which are fit fr purpse in the cntext f the current and planned size and cmplexity f the business. Peridic independent reviews f the cmpany s internal cntrls and risk management systems. A grup-wide business resilience strategy including detailed plans fr business cntinuity, cyber resilience and disaster recvery which are regularly tested. Auditrs An internatinally knwn and respected firm f auditrs wh are independent f the bard and sharehlders. Audit & Risk Cmmittees The bard will take specific respnsibility fr financial reprting and internal cntrls as well as fr mnitring and reviewing the perfrmance f the external auditrs. This respnsibility will be discharged either thrugh the full bard (e.g. a supervisry bard) r thrugh a distinct audit & risk cmmittee (r separate audit and risk cmmittees) which include(s) a 3i bard member and is chaired by an independent nn-executive directr specifically chsen fr this rle r by the 3i bard member. The full bard r the audit & risk cmmittee(s) shuld als explicitly cnsider current and emerging risks facing the business and assess the business s resilience t such risks. Remuneratin Cmmittee The bard will take specific respnsibility fr setting and reviewing executive management s remuneratin, which respnsibility will be discharged either thrugh the full bard (e.g. a supervisry bard) r a separate remuneratin cmmittee which includes a 3i bard member. Whistle-blwing A clear whistle-blwing plicy with rbust external r internal reprting arrangements. Last updated: June 2017 7