Environmental, Social and Governance (“ESG”)

Approach to Responsible Investing

Palamon believes that robust and fully implemented Environmental, Social and Governance (“ESG”) policies and practices enhance the reputation of the Firm and its portfolio companies, help build sustainable brands, attract, motivate and retain staff, improve operational efficiency, strengthen competitive positions, improve risk management and access to capital and thus increase profits and make portfolio companies more attractive exit opportunities.

Palamon recognises that its activities can be a force for positive change and that the impact of each investment reaches beyond balance sheet calculations. The Firm’s recognises that integrating an awareness of ESG factors and investing responsibly is entirely consistent with its ambition to generate returns for its investors.

ESG therefore forms a key part of both the investment decision-making and portfolio management processes, and is a key theme running through the Firm’s activities.

An established commitment to ESG

Palamon aims to invest in and support companies that create both enduring value and repeatable returns. By investing responsibly, the Firm is able to reduce the financial and reputational risks associated with private market investing and drive additional value for all stakeholders.

Palamon has integrated ESG considerations into its investment and management processes and always seeks to deploy best practice ESG to develop its own business and to drive value in the businesses in which it invests. This behavior referred to as Palamon’s Responsible Investment Principle.

Palamon regards Environmental Policies as being those designed to

  • Create systems which effectively assess, reduce and mitigate any adverse impacts on the physical environment in which a

    portfolio company operates and enhancing any positive impact

  • Ensure compliance with applicable laws and the promotion of international best practice standards

    Palamon regards Social Policies as being those designed to achieve the following key objectives

  • The obligation on business in which Palamon invests to treat all their employees and contractors fairly and with respect and to safeguard the health and safety of all those employees and other affected by the businesses in which Palamon invests

  • The recognition and as appropriate promotion of the social impact of the businesses in which Palamon’s capital is invested

  • Compliance with application laws and the promotion of international best practice standards – see Appendix I Palamon regards Governance Policies as being those designed to achieve the following key objectives

  • Upholding and promoting high standards of business integrity including resisting bribery, the prohibition of the making of payments for improper purposes and the giving and receipt of gifts of substance where there is a risk that their receipt or giving will create an expectation or obligation

  • Promotion of transparency and accountability

  • Clear definition of responsibilities, procedures and controls with appropriate checks and balance

  • Design of effective systems of internal controls and risk management

  • Compliance with applicable laws and the promotion of international best practice standards

Implementing ESG across the lifecycle of an investment

As a control investor, Palamon requires that portfolio companies follow the Responsible Investment Principle and associated Practical Procedures or to adopt policies and procedures consistent with them.

Palamon takes the following practical steps over the life of its investments

  • Assessing RI Risk and existing ESG credentials before each investment

  • Forming Action Plans to manage and improve RI issues

  • Collecting and monitor relevant KPIs and insightful RI Data

  • Active ownership of portfolio companies to drive up standards including a requirement to adopt key governance policies and practices

  • Reinforcement of ESG objectives through their inclusion in the Investment Agreement

  • Training – to ensure that Palamon’s staff have the skills and understanding to assess responsible investment issues and respond to them intelligently

  • Reporting – obtaining, analysing and providing useful information to our investors and other stakeholders

Internal responsibility – in order to monitor the implementation of its ESG programme, Palamon has appointed Antony Barker, Managing Director of Investor Relations, as the senior team member with responsibility for monitoring ESG matters.

The Firm’s proprietary “Environmental, Social and Governance assessment’ form is used by its investment team to identify existing or emerging areas of concern in its prospective investee companies. This practice helps to ensure that the ESG merits and risks of an investment are understood, as well as allowing Palamon to benchmark companies in its investment pipeline.

Communicating ESG concerns to Investors

Palamon believes that it is important to be open with investors and that such an approach creates trust. Palamon will ensure that material ESG events are promptly brought to the attention of a Fund’s Investors. The Firm will also communicate progress made within its portfolio and significant ESG-related milestones as they are attained.

Palamon will seek to communicate matters of ESG, as appropriate, through its:

• Quarterly reports
• Advisory Committee meetings
• Annual Investor Meeting

UNPRI and Walker Guidelines

Palamon is a signatory to the United Nations Principles of Responsible Investing and supports and endorses the recommendations of the Walker Guidelines on greater disclosure and transparency in private equity.

Membership of the British Private Equity Venture Capital Association (BVCA)

Palamon is a member of the BVCA, an industry body and public policy advocate for the private equity and venture capital industry in the UK.