RM1.1: ESG Due Diligence for New Acquisitions

(6.6 points)

Intent

The intent of this indicator is to assess whether the entity has a process to address ESG risks and, indentification of opportunities in its pre-investment process. The integration of ESG policies may assist in reducing risk and identifying opportunities for improved ESG performance.

Requirements

Select Yes or No: If selecting Yes, select applicable sub-options.

Does the entity have a process to formally address ESG risks and/or opportunities in its pre-investment processes?

• Yes
  • Select elements of the pre-investment process (multiple answers possible)
    • ESG risks and opportunities are identified (relating to the material issues) are identified
    • ESG risks are analysed
    • ESG risks are evaluated and treated
    • ESG risks and opportunities are considered and can impact the investment decision

(Provide applicable evidence in file upload or URL):

• No
  • Provide additional context for the answer provided (not validated, for reporting purposes only)

    ________________________

Prefill: This indicator is similar to the one included in the 2019 Assessment and some sections have been prefilled from the 2019 Assessment. Review the response and/or evidence carefully.

Changes 2020: The checkbox ‘material ESG issues are identified’ has been removed due to overlap with the second option.

Validation

Evidence: Document upload or hyperlink is required. The evidence should sufficiently support all of the items selected for this question. If a hyperlink is provided, ensure that it is not outdated and the relevant page can be accessed within two steps.

Evidence should clearly demonstrate the selected elements of the risk assessment process. The risk assessment criteria for each selected element are explained further below:

1. ESG risks and opportunities are identified: The entity should have a process for identifying i). Potentially material ESG risks and ii). ESG-related opportunities. This may determine the scope (purpose, process, depth) of an entity’s due-diligence process.
2. ESG risks and opportunities are analysed: The entity should have a process to assess and rate the ESG risks and/or opportunities. For example, a risk register, internal ESG scorecard or matrix rating the materiality of each risk.
3. ESG risks and opportunities are evaluated and treated: The entity should have a process to mitigate the risks based on the outcomes of the analysis.
4. ESG risks and opportunities are considered and can impact the investment decision: The entity should have a process to report, review and document such ESG risks and/or opportunities for decision makers. This may include:
• Impact on Investment Committee’s decision
• Deal structure
• Pricing negotiations
• Post-investment action plan

The entity may redact any portion of evidence not necessary to illustrate the overall answer or selected sub- option(s).

Good practice example: Please refer to pages from 6 to 8 at this link.

Document upload: Participants may upload several documents. When providing a document upload, it is mandatory to indicate where relevant information can be found within the document.

Scoring

This indicator is scored as a Two Section Indicator (i.e. Section 1: 'Elements' response and, Section 2: 'Evidence' response).

Section 1: Fractional points are awarded (equally) to each selected element of the pre-investment process and are then aggregated to calculate the total score for the section. The checkboxes are equally scored.

Section 2: ‘Evidence’ is mandatory for this indicator. Therefore, no points will be awarded unless the hyperlink and/or the uploaded document is considered valid, based on the evidence criteria stated above. The evidence is validated which determines a multiplier, according to the table below:

Evidence: The evidence is manually validated and assigned a multiplier, according to the table below. The evidence must support the validation requirements. If any requirements are not met, the evidence may be partially accepted or not accepted depending on the level of alignment with the requirements.

Validation status	Score
Accepted	2/2
Partially accepted	1/2
Not accepted/not provided	0

Terminology

Material: An issue is material if it may reasonably be considered important for reflecting an entity's relevant environmental, social or governance impacts; or substantively influencing the assessments and decisions of stakeholders.

ESG Risk: Environmental, social, governance risks (i.e regulatory, license to operate) stemming from the business or operational activities of an entity.

References

UNPRI Limited Partners’ Responsible Investment Due Diligence Questionnaire, 2015

PRI Reporting Framework 2018, Direct Infrastructure Supplement, INF 05, INF 07

(Partially aligned with)

UNPRI, PRI Reporting Framework - Main definitions, 2018

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