Responsible Screening and Decision-making
As Private Equity investment advisors, we apply a long-term perspective when evaluating potential investment opportunities. Our goal is to identify companies that we believe are best positioned to capitalize on emerging trends at sector level, and to avoid stranded assets. We will prioritize investment opportunities that have tailwinds from major macro trends. When looking for new companies to invest in, ESG matters are always considered.
ESG is an integrated part of the investment analysis and decision-making process
- Our Responsible Investment Policy defines our formal exclusion criteria.
- We conduct a climate change due diligence in every transaction.
- We conduct an ESG due diligence in every transaction.
- A summary of the key risks and opportunities identified in the climate and ESG due diligence is always included in the investment decision material.
- We always consider the likely impact of key ESG and sustainability risks on return by having ESG risks integrated into our Risk Framework.
FSN Capital Exclusion Criteria
Our Responsible Investment Policy defines our formal exclusion criteria, stating we shall not invest in companies that:
- Have contributed to systematic denial of human rights
- Demonstrate a pattern of non-compliance with environmental regulations
- Show a pattern of engaging in child labor or forced labor
- Have an unacceptable high greenhouse gas footprint and have failed to take reasonable steps to reduce these emissions
- Produce weapons that through their normal use may violate fundamental humanitarian principles (e.g. anti-personnel land mines, production of cluster munitions, production of nuclear arms)
- Are directly related to adult entertainment, tobacco, gambling or alcohol
Climate change due diligence
FSN Capital’s climate change due diligence approach (developed in 2020) assesses transition risk and opportunities as well as physical climate risk and opportunities of an investment opportunity. It is a standard requirement in all our transactions.
Transition risk and opportunities are assessed based on sector-specific properties, while physical risk and opportunities are assessed based on the geographical reach of the company’s value chain.
Deal teams complete the four-step climate change due diligence and include their conclusions in the Investment Proposal. Depending on findings, their recommendation may be that external experts should be engaged to conduct a detailed climate change due diligence.
ESG due diligence
An ESG due diligence conducted by external experts is a standard requirement for all new potential investments. The due diligence scope depends on the risk profile of the specific investment opportunity, but will always include anti-corruption, sanctions, and background checks.
The objective of the ESG due diligence is threefold: (i) seek to identify potential “show-stoppers”; (ii) seek to ensure that ESG risks and opportunities are included in the pricing considerations, transaction structure, and transaction documentation; and (iii) identify the status quo and use this as a baseline in planning the onboarding and continuous improvement during the ownership phase.
To ensure we understand the underlying risk drivers we always ask the external ESG experts to comment on specific risks related to jurisdictions in the potential investment’s value chain and any industry-specific ESG risks.
FSN Capital Risk Framework
The FSN Capital Risk Framework is used for detailed analysis of alpha and beta risks in a due diligence process. Alpha risks can be managed actively by our guidance, while beta risks are beyond our control.
We always consider the likely impact of key ESG and sustainability risks on return by having ESG risks integrated in our Risk Framework.
* Beta risk