Responsible Investment
1. Purpose
The purpose of this Policy is to set out the firm’s approach to the identification and management of environmental, social and governance (ESG) related risks and opportunities throughout our investment activities. It also covers the approach to ESG within our own operations. We apply the UN Principles of Responsible Investing and are keen to promote these principles to our portfolio companies, investors and wider stakeholders.
Atlantic Bridge believes that responsible investing and sustainability are critical to the future of the planet, the state of society and ultimately, to the success of the firm. Through our position in the technology investment sector, we are keenly focused and aware of market trends, including sustainability trends, and incorporate these as part of our overall investment strategy. As an investor in leading technology entrepreneurs, we know that deep technology innovations led by them, have the potential to help solve many of our pressing global sustainability challenges, across changing demographics, climate change and resource scarcity etc.
We are aware that climate change is an increasingly material financial risk for investors. Portfolio companies across all sectors of the economy may face financial implications from the physical effects of climate change and from the regulatory and other changes that will occur as we transition to a low-carbon economy. This disruption will also afford climate-related opportunities that portfolio companies may build on.
Atlantic Bridge also believes that a structured approach to identifying and managing material ESG issues across the portfolio can affect, and can significantly enhance, the performance of the investment portfolio and is in the best interests of its investors. We incorporate ESG factors not only into decisions about what to invest in, but also into the stewardship role that we play for companies during the investment holding period.
Underlying our investment philosophy is our strong conviction that good awareness of and management of ESG issues is a source of value creation and will lead to the maximisation of returns for our investors.
2. Scope
This Policy applies to the Firm’s investment process across all assets, where appropriate, following the date hereof and will be administered in accordance with local laws, regulations, and the Firm’s fiduciary duties. The Firm may update this Policy in the future, as appropriate.
Atlantic Bridge Funds are often non-control investors in Portfolio Companies and may have a limited ability to diligence, influence, and control the integration of ESG considerations in an investment. Reasonable efforts will be made to encourage these Portfolio Companies to consider relevant ESG-related principles and to support their implementation where possible.
ESG practices are evolving rapidly, and Atlantic Bridge’s adoption and adherence to various industry principles, frameworks, methodologies, and tools are expected to vary over time. Atlantic Bridge considers its focus on ESG as a tool to both help identify investment opportunities and avoid material risks and share best practices.
3. Roles and Responsibility
The Atlantic Bridge ESG Committee, led by its Chair Paul Murray, Partner, has overall responsibility for the firm’s ESG strategy and this Responsible Investment Policy. It also has formal oversight over and accountability for ESG integration into investment decisions, performance management, active ownership and stewardship policies and guidelines for exclusions.
The Atlantic Bridge Finance team, led by Financial Controller Des Shiels, has the formal oversight and accountability for the implementation of this policy, ESG data collection, compliance, reporting and disclosure.
The Atlantic Bridge Investment Committees have the formal oversight over and accountability for guidelines on ESG factors as well as guidelines on sustainability outcomes. We ensure that our investment committees have the necessary ESG competencies and skills in order to take informed decisions and drive recommendations.
The Atlantic Bridge investment team, under the guidance of the ESG Committee and Investment Committees, will seek to ensure that ESG issues are considered in the investment process, as appropriate and as laid out in this policy. Where additional ESG expertise or capacity is needed, the relevant teams may call on external resources as appropriate on behalf of the Fund(s).
4. Areas of ESG Focus
The organization acknowledges the expanding scope of ESG matters, necessitating a comprehensive assessment of historical, present, and potential future challenges in operational, regulatory, and reputational domains. We aim to utilize ESG due diligence references, such as the IFRS’s SASB Standards, to enrich our comprehension of ESG-related risks and opportunities pertinent to each respective industry. Our objective is to integrate ESG factors, including those listed below, into our investment scrutiny, ownership, and monitoring protocols, wherever deemed relevant:
Environment
- Climate action and resilience
- Nature and environmental stewardship
- Circularity
Social
- Diversity, inclusion and equality
- Health, safety and wellbeing
- Human rights
- Community engagement
Governance
- Business conduct
- Cybersecurity
- Data privacy safeguards
Addressing Climate Change: Mitigation, Resilience, and Adaptation
We acknowledge the pervasive impact of climate change, which transcends industries and geographical boundaries. Our objective is to collaborate with Portfolio Companies to support them in setting and achieving net zero strategies. We will also seek to build investment opportunities into technologies targeting energy efficiencies or other climate relevant actions.
In the long term, we plan to evaluate the potential climate-related hazards, both physical and transitional, that may affect Portfolio Companies. As an integral part of our investment procedure, we aim to formulate resilience strategies, wherever relevant, to counteract these risks.
Addressing Biodiversity Decline
We acknowledge the accelerating crises of nature decline linked to pollution, destruction and climate change. We are keen to promote environmental stewardship, the protection of nature and the promotion of nature positive strategies where appropriate. While our portfolio currently includes only a limited number of companies operating in at-risk sectors, we understand that advocating for this approach and emphasizing the inherent value of nature holds equal relevance for the entire value chains of all our investments.
5. ESG During the Investment Cycle
5.1 Pre-investment At the pre-investment stage we analyze high level material ESG risks and opportunities specific to the sector and growth stage of the company. This may include the engagement of specialist external consultants as appropriate. At this stage we send detailed ESG questionnaires to target companies.
All material ESG risks and opportunities identified are included in the initial discussion documents prepared for the Investment Committee (IC).
The investment team incorporates the relevant ESG areas into the Investment Memorandum (IM), which is presented to the IC. The IC meets on a weekly basis to consider potential investment opportunities. After consideration of the IM and discussion of the proposal, including any material ESG issues raised, the IC may ask the investment team to go back to the company and re-negotiate certain terms. The IM will be adjusted in line with any changes to the agreed terms. A final IM will be presented to the IC when the investment decision is being made.
The analysis of material ESG risks and opportunities are included in the IM when seeking approval for a proposed transaction. These risks may necessitate the inclusion of additional clauses in the transaction legal documentation.
Even if no risks are identified, this outcome is included in the IM to ensure that it is clear that ESG factors were considered during due diligence. The IM serves as a reference point on which to base future ESG reporting on the company in question.
Specific Sustainability Outcomes are formulated where appropriate and minimum safeguards as well as specific ESG targets are set.
5.2 Management and Stewardship During its ownership Atlantic Bridge will seek to set ESG KPI’s as well as safeguard thresholds to ensure the avoidance of negative impact according to best practice and regulation. Furthermore, specific sustainability outcomes will be set for portfolio companies according to the overarching fund strategies. All of the above will be applied within the principles of what is reasonable and appropriate for the specific investment. The performance against these KPIs and targets will be closely monitored by our internal investment team and other external resources.
Sustainability Outcomes
We aim to align our funds to specific UN Sustainable Development Goals 2030 (SDGs) and when appropriate a portfolio company will determine how it contributes to these high-level SDGs by defining specific positive sustainability outcomes, using supporting frameworks such as the IRIS System by the Global Impact Investing Network.
100 Day Action Plans and performance monitoring
Based on the initial material ESG risk and opportunity assessment, relevant portfolio companies are asked to develop a 100-day plan to take action in an appropriate manner. This plan comprises the commitment to related actions to minimum safeguard levels along their value chain based on our ESG themes described in section 10. Specific actions for designated ESG KPIs are set such as climate action, DEI (diversity, equality, inclusion), policy development or the change of government structures. Depending on the fund theme, sector specific sustainability outcomes are refined and full engagement towards these is assured. As part of the 100-day plan clear executive leadership responsibility for ESG matters is also assigned. If appropriate an external consultant is proposed to assist portfolio companies in the development and implementation of these action plans.
Ongoing monitoring and stewardship
The designated Atlantic Bridge investment lead closely monitors the achievement and long-term success of the plan, assessing whether relevant ESG objectives are being met and linking this with overall performance management of the portfolio company.
Regular monitoring of its portfolio will also help to identify ESG Value creation opportunities within its companies. Any identified ESG weaknesses in portfolio companies can be addressed and the necessary support can be given to assist.
The Firm normally requires as a condition of investment that it may appoint a member of the Board and/or an Observer to the Board. The Firm’s close partnership with management and the Board has earned Atlantic Bridge a reputation within the investment community as a leader that effectively balances the priorities of investors and management. As part of their Board representation, the appointed Director can have deeper conversations with company management about which ESG issues should be prioritised and can set clear expectations around improving performance on those issues. Within this process we also assign clear board responsibility for ESG matters and ensure that material ESG matters are discussed by the board at least yearly.
5.3 At Exit
Atlantic Bridge’s ESG approach during the holding period is based on the premise that actively managing ESG (Environmental, Social, and Governance) issues throughout the investment cycle can both mitigate risk and boost the overall value of the company. To achieve this, Atlantic Bridge integrates ESG considerations into the exit preparation process. The goal is to maximize the positive impact of strong ESG performance on investment returns and equip the company with the tools to address inquiries from potential investors, thereby minimizing post-exit ESG-related risks.
We believe that the strong focus on ESG, which we request our portfolio companies to work in partnership with us on, will prove advantageous during any M&A (Mergers and Acquisitions) stage. It’s reasonable to assume that prospective buyers will conduct thorough ESG assessments before acquisition, making our proactive approach essential.
In our exit planning strategy, we collaborate closely with the portfolio company to assess any significant ESG issues that may arise. This proactive approach ensures there is time to address and rectify potential problems, ultimately safeguarding the investment and enhancing its attractiveness to potential acquirers.
6. Exclusions
Atlantic Bridge funds shall not invest in a “fossil fuel undertaking” as defined in the Fossil Fuel Divestment Act 2018. This includes oil, gas and coal.
As technology and healthcare investors we are naturally committed to not investing in other high emitting sectors such as the production of cement, steel, aluminum, chemicals aviation, shipping, road transport, agriculture, forestry, fishery and construction. We will consider investments into technologies supporting these industries to decarbonise and be less harmful to the environment.
We only invest in companies which are aligned with minimum standards of business practice aligned with international norms such as the OECD Guidelines for Multinational Enterprises, the International Bill of Human Rights, UN Security Council sanctions or the UN Global Compact.
Furthermore, our funds shall not invest in companies or other entities who are engaged in, or directly or indirectly control other entities whose business activity is any one of the following:
(a) an illegal economic activity (i.e., any production, trade or other activity, which is illegal under the laws or regulations applicable to the Partnership or the relevant Portfolio Company or entity, including without limitation, human cloning for reproduction purposes); (b) the production of and trade in tobacco; (c) the production or financing of the production or trade in weapons and ammunition or the funding of the same or any activity of primarily military relevance; (d) the manufacture of “prohibited munitions” (including “cluster munitions, explosive bomblets” and “anti-personnel mines” as each such term is defined in the Cluster Munitions and Anti-Personnel Mines Act 2008) or components to be used therein; (e) pornography or the pornographic adult entertainment industry; (f) casinos and equivalent enterprises or the gambling industry generally; (g) the research, development or technical applications relating to electronic data programs or solutions, which (i) aim specifically at: o supporting any activity referred to under items (a) to (d) above; o internet gambling and online casinos; or o pornography, or (ii) are intended to enable to illegally: o enter into electronic data networks; or o download electronic data.
In addition, when providing support to the financing of the research, development or technical applications relating to (i) human cloning for research or therapeutic purposes or (ii) genetically modified organisms (GMOs), the Partnership shall ensure the appropriate control of legal, regulatory and ethical issues linked to such human cloning for research or therapeutic purposes and/or GMOs.
7. Transparency and Reporting
Atlantic Bridge provides updates on the implementation of this Policy and on material ESG activities of its portfolio companies in annual reports to investors, with the content of the updates developed in line with PRI guidance. The firm also provides ESG updates to its investors on a quarterly basis through its investor reports. All reporting will be aligned according to the EU’s Sustainable Financial Disclosure Regulation (“SFDR”) and other local applicable laws when relevant.
8. Remediation and exit policy As responsible investors we are committed to upholding ESG standards across our investment portfolio. We expect all portfolio companies and stakeholders to fully comply with these ESG principles. In the event of non-compliance with our ESG policy, we have established a Remediation and Exit Policy tailored to our investment context.
Remediation Measures: Educational Support: If a breach of our ESG policy occurs due to lack of awareness or understanding within a portfolio company, we will provide educational resources and training to enhance their ESG knowledge and practices. Corrective Action Plan: In cases where non-compliance is attributed to procedural or operational shortcomings, we will work collaboratively with the portfolio company to develop a corrective action plan. This plan will outline specific steps to rectify the situation, including adjustments in processes and practices. Ongoing Monitoring: Following any breach, we will intensify our monitoring efforts to ensure that the corrective measures are being effectively implemented, and that the non-compliance issue is successfully resolved.
Consequences of Persistent Non-Compliance: Formal Warnings and Escalation: If non-compliance persists despite remediation efforts, we will issue a formal warning to the portfolio company.
Raising as a Board Agenda Item: The investment usually covers a list of prohibited transactions by management that require Board approval which must include Atlantic Bridges vote. If the matter is not resolved by consensus, the Governance controls can be used to implement board resolutions to change behaviors and resolve compliance if an ESG breach has occurred. Divestment: In the very rare situation where neither formal warnings or board voting on an agenda item of ESG breach fail to resolve the breach and where we have assessed that substantial non-compliance threatens our ESG commitments and poses significant financial, reputational, or operational risks to both the company and the investment, only then can Atlantic Bridge consider remedial actions which may involve revisiting the terms of our investment and or ultimately divesting from the portfolio company.
Legal Action: If non-compliance results in legal violations, breaches of regulatory requirements, or severe reputational damage to the Fund, Atlantic Bridge will take legal action in accordance with applicable laws and regulations.
We believe that adhering to our ESG policy is a crucial element of our long-term investment strategy. Compliance with these ESG principles is essential for enhancing the long-term sustainability and success of our portfolio companies. We encourage all portfolio companies and stakeholders to recognize their shared responsibility in upholding these principles and contributing to positive societal and environmental impacts.
9. Our own responsible operations
Atlantic Bridge strives to be a responsible business and employer through: • Encouraging the efficient use of natural resources and protection of the environment • Providing safe and healthy working conditions for its employees and contractors, • Offering a salary and benefits package to all employees that is in excess of what would be comparable elsewhere, including health cover, income protection insurance and a staff pension scheme with an employer contribution, • Offering a training budget for all staff to commit to continuous professional development, • Treating all employees fairly in terms of recruitment, progression, remuneration and conditions of work, irrespective of gender, race, language, disability, political opinion, age, religion, marital status, family status or national/social origin, • Upholding high standards of business integrity and honesty, complying with local laws and international good practice and not, directly or indirectly, offering, paying, soliciting or accepting bribes in any form, and • Contributing to collaborative initiatives and organisations that are in line with our values.
The Atlantic Bridge Company Handbook, Health and Safety Policy and Code of Conduct [WIP] includes written policies covering areas including: • Environmental • Labour and Working Conditions • Health and Safety • Diversity and Inclusion • Code of Ethics • Corporate Governance • Data protection