Chequers endeavours to build sustainable businesses while lowering risks and generating strong returns for its investors. That is why we have been developing our ESG programme for over a decade. Our ESG journey is characterised by sustained efforts to make continuous improvements. We aim to drive positive change among our portfolio companies. At Chequers, ESG is integrated in our policies and processes. As a member of the UNPRI, we report on our responsible investment performance to our investors, and we are committed to support industry initiatives that promote ESG best practices.
Transparency and accountability remain central to Chequers. In addition to our annual reporting to the PRI, we share reporting with our investors on relevant information related to potential environmental, social as well as governance risks and on the performance of investment funds and portfolio companies.
Our strategy is to partner with companies that will meet the environmental and social challenges. Integrating ESG from the sourcing phase to exit is a key element that will lead companies to success.
Before investment, Chequers conducts an ESG screening and analysis of the targeted company to ensure compliance with our excluded sectors. In line with the materiality map developed by SASB, we undertake a specific ESG due diligence to highlight potential risks and areas of improvements. This ensures good risk management practices and contributes to create long-term value for our investors.
During the ownership phase, Chequers monitors ESG progress within its portfolio companies by engaging with them on concrete ESG-related targets. Our reporting reflects the ESG improvements of the company and is reviewed at board level on a yearly basis. As an active shareholder, Chequers supports its portfolio companies in developing their own ESG initiatives.
When preparing the exit of a portfolio company, we seek to showcase how during the ownership phase, Chequers has prepared the company to the environmental and social challenges. If required, the value creation captured on ESG can be analysed with the objective to be integrated in the offers made by the potential buyers.
The European Union (EU) Sustainable Finance Disclosure Regulation (Regulation (EU) 2019/2088) (“SFDR”) which came into force as of March 10, 2021, introduced new regulatory requirements in order to increase transparency on sustainability among financial market players and financial products. The information below regarding the policies of Chequers is provided in accordance with Articles 3(1), 4(1) and 5(1) of the EU SFDR.
A sustainability risk is defined as an environmental, social or governance event or condition that, if it occurs, would cause a negative material impact on the value of an investment. Should such event occur, the value of Chequers’ investment would be negatively impacted.
Prior to each investment decision, Chequers would have completed a mandatory process that identifies the material risks associated with the investment opportunity. As described in its responsible investment policy, Chequers integrates ESG risks assessment in the investment process. This starts with the exclusion policy which prevents Chequers from investing in sectors considered controversial and defeating the purpose of building sustainable businesses in an environmentally and socially manner. Activities linked to the tobacco, pornography, alcohol production and distribution, firearms and ammunition, coal and casinos sectors are excluded.
Chequers’ assessment of investment opportunities includes the identification of ESG-related risks and opportunities. The due diligence exercise highlights key ESG issues and encompasses climate, environmental, social, ethical, governance and external stakeholders’ considerations. Further, ESG consultant(s) can be instructed to perform an enhanced ESG due diligence on potential investments, where appropriate. The outcomes of the preliminary evaluation are presented to and discussed during the Investment Committee for proposed investment(s) and documented in the Investment Committee Memorandum. The Investment Committee will or will not recommend the investment by the Fund. Chequers will not pursue an investment opportunity if major ESG-risks cannot be mitigated by a comprehensive roadmap.
Sustainability risks are addressed in the following framework:
• As a stronger commitment, an ESG clause is included in the Shareholders’ Agreements. It provides a formal engagement to implement an ESG roadmap tailored for the investment and to share regular ESG communications.
• Sustainability risks are monitored throughout the post-investment phase. 35 ESG indicators are collected annually and enable Chequers to monitor progress over time.
ESG, sustainability and climate change are very important to Chequers Capital and are analysed accordingly in the investment processes. However Chequers does not currently intend to consider the prescribed adverse impacts of its investment decisions on sustainability factors within the meaning of Article 4 of the Disclosure Regulation.
The inclusion of sustainable factors in the decision-making process is integrated in Chequers’ ESG framework. As part of its investment process, the Firm will continue to use its existing ESG policies and procedures. The current position of Chequers was made on recognition of the fact that the regulatory technical standards supplementing SFDR, which will set out the content, methodology and information required in the principal adverse sustainability impact statement, remain in draft form and are still work in progress. Until final guidance is disclosed, Chequers will continue to monitor any regulatory developments with respect to the SFDR.
Chequers pays staff a combination of fixed remuneration (salary and benefits) and variable remuneration (including bonus). Chequers believes that each employee should receive a compensation taking into account their development and collective involvement in value creation. In this regard, ESG objectives including those relating to the exposure on sustainability risks on the investment decision making process are reflected on the calculation of the variable remuneration for relevant staff.