Environmental, Social & Governance Practices at Actis

Transcription

1 Environmental, Social & Governance Practices at Actis Actis is a signatory to the United Nations Principles for Responsible Investment ( UNPRI ) an investor initiative in partnership with UNEP FI and the UN Global Compact This report outlines Actis s approach to Environmental, Social and Governance ( ESG ) and provides the responses submitted to the UNPRI Annual Report in April 2011

2 Contents The UNPRI and ESG in practice at Actis UNPRI Report 2010: Actis responds Section 1: Organisational overview Section 2: Governance, policy and strategy Principle 1 Principle 2 Principle 3 Principle 4 Principle 5 & Principle 6 Appendix A: UNPRI Annual Reporting and Assessment Questions Actis s ESG team the positive power of capital For questions related to any aspect of the UNPRI reporting and assessment process, please contact the Actis ESG team 1 Mark Goldsmith mgoldsmith@act.is Director/Head, ESG Ritu Kumar rkumar@act.is Director/Senior Advisor, ESG

3 The UNPRI & ESG in practice at Actis Actis has US$4.6 billion funds under management and just over 100 investment professionals based in our offices in China, India, Brazil, South Africa, Nigeria, Singapore, Kenya, Egypt and the UK. This footprint can obscure the true impact of Actis s work in the emerging markets; as of December 2010, there were approximately 97,000 employees working in our portfolio companies, many of which are majority owned by Actis. We are very conscious of our obligations to this workforce and the communities where they live, as well as to our 100-plus institutional investors. These 97,000 employees work in a diverse range of industries including education, financial services, consumer goods and services, manufacturing, infrastructure and real estate. What unites every Actis investment is a common approach to environmental, social and governance ( ESG ) issues. Actis s largest exit in 2010 occurred in December when Reckitt Benckiser Group plc ( RB ) agreed to acquire Paras Pharmaceuticals Limited, a leading Indian FMCG personal care company, for INR 32.6 billion (approximately US$726m). There were many aspects of Actis s interaction with Paras which helped increase its value but we believe that we would not have been able to attract an international buyer like RB without having best in class ESG policies and practices in place. Our work at Actis is driven by the conviction that we bring more than capital to our investments; we bring benefits to our investee companies, investors and broader society; we call this ethos the positive power of capital. In September, the ESG team led a day long workshop on the positive power of capital ( PPC ), as part of a Leaders Quest week in Johannesburg. As a result of this, we have introduced an increased focus on value enhancement within Actis portfolio companies. A key PPC work stream in 2011 will be the measurement of non-financial and ESG factors and their impact on the portfolio company s market value. Sector based frameworks are currently being developed to assist individual portfolio companies to select and measure relevant metrics. During 2010, Actis Africa Real Estate Fund demonstrated an increased emphasis on the incorporation of green building measures, evidenced primarily by developments in Mauritius (IOREC), Ghana (One Airport Square) and Kenya (Nairobi Business Park). The ESG team worked closely with the real estate team to implement green building measures and benchmarking against internationally recognised rating schemes (e.g. LEED and Green Star). A notable feature of the programme has been to work with Actis s newly established development platform in West Africa to facilitate the customisation of green rating tools to local socio-economic and climatic conditions. This activity will become a major focus area for The Governance G in ESG saw a focus on improving the training provided to Actis investment managers who become non-executive directors on investee company boards. In January 2010, we started work with the Institute of Directors in the UK to develop a bespoke course for our investment managers. By the end of 2010, we had run the course in London and Singapore for more than twenty of our investment professionals and we will be delivering further courses in Actis is an active member of the UNPRI Steering Committee on Private Equity. As part of our commitment to the UNPRI we have continued in 2010 to contribute to a working group on exit strategy and to a general partner/portfolio company support group. We have also volunteered to lead a working group on the emerging markets. Environmental, Social & Governance Practices at Actis 2

4 Actis promotes the principles of responsible investment amongst investee companies in the financial services sector. For example, we have been encouraging two of our portfolio companies, the Infrastructure Development Finance Corporation (IDFC) in India, and Commercial International Bank (CIB) in Egypt, to sign up to the Equator Principles. IDFC is now also a signatory to the UNPRI. Actis has been active in a number of conferences and panel discussions during the last year, where we have advanced the implementation of the UNPRI. In November 2010, Actis sponsored the Triple Bottom Line Investing Conference Europe, moderated a session on ESG Integration into PE and spoke on a panel that discussed Investing in Green Real Estate: An Emerging Markets Perspective. Actis has also participated in the World Economic Forum s working group on Mainstreaming Sustainable Investments and has provided key inputs to the report Accelerating the Transition Towards Sustainable Investing, tabled at Davos in January In 2010 the Actis ESG team continued its strong support of Imperial College s MSc in Environmental Technology: Business and the Environment option through delivery of an annual lecture at the London-based campus in March, an intern placement over the Summer months, and support of the Sue Pritchard Award for the Best thesis related to the emerging markets. Through the annual internship process, research in the following areas has been supported: What Environmental, Social and Governance information should private equity investors in emerging markets be communicating to institutional investors for consideration in their investment decisions? (2006) Opportunities and strategies for an African sustainable timberland fund to attract investment (2007) A private equity perspective on climate change in developing country power generation (2008) An investment framework for the coal sector in the developing world, with a focus on private equity and carbon implications (2008) Measuring Actis s impacts: developing the approach for infrastructure and private equity (2010) In 2010, we noticed a number of other private equity organisations making the consideration of ESG issues more central to their investment decisions. We welcome this move and Actis will continue through our support of the UNPRI, and wider initiatives such as our work on green real estate and our participation in the World Economic Forum, to play our part in moving the private equity sector forward in this area. Is now the right time for a climate change fund in the emerging markets? (2004) Research and development of a management tool to estimate GHG emissions for private equity investors in emerging markets (2005) 3 Actis The Positive Power of Capital

5 introduction By being a signatory to the UNPRI, a company agrees to the adoption and implementation of six principles, these are listed below. This report contains the list of questions and corresponding answers Actis submitted to the UNPRI in April 2011 as part of its annual reporting and assessment process; it mirrors the structure of the online questionnaire. The questions as posed in the questionnaire are reported in Appendix A and are cross referenced in our answers which are detailed in the following order: Section 1 Organisational overview (Questions 1-10) Section 2 Governance, policy and strategy (Questions 11-18) Principle 1 We will incorporate ESG issues into investment analysis and decision-making processes (Questions 19-25) Principle 2 We will be active owners and incorporate ESG issues into our ownership policies and practices (Questions 26-51) Principle 3 We will seek appropriate disclosure on ESG issues by the entities in which we invest (Questions 52-57) Principle 4 We will promote acceptance and implementation of the Principles within the investment industry (Questions 58-64) Principle 5 We will work together to enhance our effectiveness in implementing the Principles (Questions 65-69) Principle 6 We will each report on our activities and progress towards implementing the Principles (Questions 70-77) Environmental, Social & Governance Practices at Actis 4

6 section 1 organisational overview 1.1 introduction 1.2 Actis is a leading investment manager 2 in emerging markets, investing extensively in Asia, Africa and Latin America. We are a pioneer in our field with a 60-year history of investing exclusively in emerging markets. We believe that by capturing and sharing knowledge across the firm and by building a diversified portfolio of investments, we are well positioned to achieve superior returns. We have US$4.7 billion 3 funds under management and have over 100 investment professionals 4 located across the emerging markets working together to deliver what we call the positive power of capital 5. investment focus and control of listed stocks As illustrated in Table 1, Actis s main area of investment is private equity, followed by infrastructure investments and listed equity in emerging markets (based on funds under management as of December 2010). All of our funds are actively managed internally 6. Asset class Listed Equity Emerging Markets Private Equity Non-listed real estate or property Infrastructure Other (Empowerment fund) TOTAL FUM values (US $ 000) , table 1: asset mix 4,632.3 % Actis has significant influence on management by way of board representation in over 75% of its listed equity investments by value (Table 2). As a result, we are able to engage with our investee companies executive management 7 at a strategic level on ESG issues table 2: listed equity investments Listed equity investment details 7 Days Ambow Banro Candax CIB Dalmia Bharat Sugar & Industries Ltd Diamond Bank Halonix IDFC Teranga Gold Corporation Mineral Deposits Poulina SML Isuzu Tanzania Tea Packers Value of Listed Equity Investments with board seat Actis fund AEM3, China 2 AEM3, China 2 Africa F2, CIFA Africa F2, CIFA AEM3 S ASIA2, India 2 Africa F2, CIFA S ASIA2, India 2 AEM3 Africa F2, CIFA Africa F2, CIFA Africa F2, CIFA S ASIA2, India 2 Africa Agribusiness US$454.7m Board seat YES YES NO YES YES YES* YES YES NO NO YES YES YES YES 5 Actis The Positive Power of Capital Value of Listed Equity Investments US$587.5m *Former Actis Partner

7 section 2 governance, policy and strategy 2.1 the Actis ESG approach There are five governing principles which underpin the practice of ESG at Actis. We aim to: 1. respect the dignity and well-being of all our people and those with whom the business brings us into contact 2. operate professionally in a performance-orientated culture and be committed to continuous improvement 3. be open and honest in all our dealings, while respecting commercial and personal confidentiality 4. be good corporate citizens, demonstrating integrity in each business and community in which we operate 5. be objective, consistent and fair with all our stakeholders 2.2 We are committed to sustainable value creation through ensuring that our principles and practices are shared by the entities in which we invest. To promote these common values we champion the most rigorous standards in health and safety, environmental and social issues in addition to transparency and best practice in corporate governance and accounting 8. For each investment that Actis makes, we aim to ensure that best practices are implemented in all aspects of the business including those relating to its interactions with society. ESG screening and appraisal are crucial elements of the investment selection and review process and we ensure that all of our investee companies adhere to our ESG code and work towards international best practice 9. policy and strategy Our ESG strategy is led by an experienced team of ESG experts who are able to engage directly with management at investee companies and to support investment managers in their interactions with investee companies. The key areas covered by the strategy include: policies on climate change, environment, health, safety, social and business integrity issues 10 sustainability guidelines and health and safety guidelines for real estate funds energy efficiency and reduction of greenhouse gas emissions in portfolio companies Environmental, Social & Governance Practices at Actis 6

8 section 2 governance, policy and strategy 2.3 responsibility All investment professionals and support staff that interact with our investee companies receive ESG training and there are a number of roles with specific ESG responsibilities: the Actis supervisory board and its sub-committees Senior Partner/ Chief Investment Officer/ Investment Committee members investment/ portfolio managers ESG specialists All staff receive an ESG induction when they join Actis and there are regular updates for investment managers. Accountability is enhanced by the inclusion of ESG criteria in the performance management process ESG implementation A range of Responsible Investment tools are applied to decision making in the pre-investment phase of the process: exclusion based on ethical criteria, which prohibit investment in a number of sectors including defence, gambling, tobacco, hard liquor and pornography screening as a way to identify key ESG issues and avoid adverse effects on people and the environment and the potential negative publicity surrounding the companies/sectors in question, as it may adversely reflect the Actis brand/license to operate pre-investment due diligence screening. These factors sometimes impact our valuation and investment performance models 12 As active managers of our investments we engage extensively with portfolio companies on ESG issues and the process for this is described in the next section of this report 13. ESG issues are also a factor in the exit process to ensure that we are consistent in our commitment to Responsible Investment over the whole life of the investment. 7 Actis The Positive Power of Capital

9 principle 1 we will incorporate ESG issues into investment analysis and decision-making processes P1.1 P1.2 P1.3 P1.4 introduction To achieve our aim of continuous improvement in ESG performance, Actis has implemented a Responsible Investment Management System ( RIMS ) across the business. The RIMS is comprised of Policies, Organisation, Planning and Implementation, Monitoring, Reviewing and Auditing 14. policies Actis has five ESG policies that cover the areas of Environment, Climate Change, Health and Safety, Business Integrity and Social Issues and include a commitment to international best practice. As indicated in section 2.4, we exclude a number of sectors from investment, including: defence, gambling, tobacco, hard liquor and pornography. organisation There are two experienced specialists within the Actis ESG team with expertise in all areas of the Actis five policies. The ESG team s main function is to provide support internally and to portfolio companies over the whole investment life-cycle. planning and implementation The investment appraisal process includes an evaluation of all new investments against each of the Actis five policies. A key input to this process is the risk rating that each new investment has in Environmental, Climate Change, Health and Safety, Business Integrity and Social Issues. This risk rating helps establish the degree of oversight and management assistance that will be needed if the investment is approved. Investee companies are also required to undertake to operate in accordance with Actis s policies and are supported in developing action plans to manage any areas of non-compliance. P1.5 P1.6 P1.7 P1.8 Investee company management is often assisted by the Actis in-house ESG team with the application of these policies especially where specific risks are identified in operations, and to strive for continuous improvement across these issues. monitoring Responsible Investment is an integral part of Actis s ongoing Investment Review process. reviewing Actis reports quarterly to its investors on employment numbers and taxes paid by investee companies and also annually on the implementation of its ESG procedures. auditing The processes used to drive continuous improvement in performance include ongoing auditing and monitoring of the implementation of the Actis five policies and related procedures by investee companies. ESG integration ESG issues are fully integrated into the investment appraisal and Investment Review processes, in parallel with conventional financial metrics. This is based on Actis s belief that these issues are central to long term investment performance. Data is gathered covering the full scope of ESG issues, with regular updates to ensure that changes in our portfolio have been taken into account. The majority of research is carried out in-house and where it is sourced externally, internal resource is devoted to understanding and applying the information. This methodology embeds ESG issues into the investment processes relating to all our asset classes 15. All staff undergo regular personal evaluations which can include a review of their ability to incorporate ESG factors and their research capacity on ESG issues 16. Environmental, Social & Governance Practices at Actis 8

10 principle 2 we will be active owners and incorporate ESG issues into our ownership policies and practices P2.1 introduction Actis s active ownership model seeks to add ESG value to investments and minimise risk factors through supporting management and implementing measures to control ESG issues and support investee company management in striving for continuous improvement in ESG performance. The main engagement mechanisms for achieving these aims are: structuring the investee company s board and board sub-committees in line with best practice in corporate governance monitoring of ESG issues via board presence, the Investment Review process and site visits by the ESG team and independent auditors the ESG undertakings and action plan to which the investee company commits 17 The ESG commitment requires every potential investee company to ensure that the business of the Company (and each member of the Group) will be carried out in a way that: encourages the efficient use of natural resources and promotes the protection of the environment ensures investee companies (in high carbon intensity sectors) determine their greenhouse gas footprint and make this data available on an annual basis to Actis provides safe and healthy working conditions for its employees and contractors treats all employees fairly in terms of recruitment, progression, remuneration and conditions of work, irrespective of gender, race, colour, language, disability, political opinion, age, religion, or national/social origin allows consultative workplace structures and associations which provide employees with an opportunity to present their views to management upholds high standards of business integrity and honesty, complies with local laws and international good practice and does not directly or indirectly offer, pay, solicit or accept bribes in any form takes account of the impact of its operations on the local community and seeks to ensure that potentially harmful occupational health and safety, environmental and social effects are properly assessed, addressed and monitored provides for the reporting as soon as practicably possible to Actis of any incident involving the Company (or any member of the Group) that results in any loss of life or any material effect on the environment; and ii) the reporting of the Company s (and each member of the Group s) compliance with the ESG Principles in an annual report by the Company to its board in a manner which allows a reader to make an informed assessment of the Company and, to the extent relevant, each member of the Group as against the requirements of the ESG Principles implements a social and environmental management system which enables effective identification, management and monitoring of any risks and provides a framework for action 9 Actis The Positive Power of Capital

11 principle 2 we will be active owners and incorporate ESG issues into our ownership policies and practices P2.2 voting related to listed equity investments Actis implements its active ownership strategy through board representation, rather than through (proxy) voting activity 18. We believe this is a more effective route for raising ESG issues, with the scope to directly influence management and to ensure that the Actis five policies impact portfolio companies activities in line with our commitment to Responsible Investment. Board representation is generally in the form of a senior investment manager with deep knowledge of the geographical area and sector in which the company operates. As a representative of Actis 19, they are accountable for taking decisions based on thorough research and analysis of the issues. Although the majority of research is carried out internally, external providers can also be utilised to ensure that there is full coverage of the issues in the decision making process 20. Where there is disagreement with management or other shareholders these will have been expressed in board discussions 21. P2.3 engagement listed equity and corporate fixed income issuers The Actis ESG guidebook sets out our engagement policy with all of our investee companies 22. This includes guidance to non-executive directors on discharging their responsibilities as members of investee company boards and on adding ESG value through risk management and identifying and acting on opportunities. In the last financial year, we engaged extensively with 11 of our listed equity portfolio companies 23. Governance was the predominant area for ESG engagement, followed by social and environmental issues 24. The most frequent channel for engagement was through board level discussions although engagement on specific matters was sometimes led by our in-house ESG team 25. Biannual reviews are performed of the investment management skills of our staff, including board representation, and may include a specific review of ESG engagement competencies 26. Environmental, Social & Governance Practices at Actis 10

12 principle 2 we will be active owners and incorporate ESG issues into our ownership policies and practices Working with our internal ESG team, investment managers are required to survey and assess the potential impacts of ESG issues, including a systematic review of the effects of ESG matters on the performance of current and potential investments, as part of the process to identify opportunities for engagement 27. The investment review process incorporates an assessment of engagement activities and setting objectives for future engagement 28. The outcomes and learning points from the engagement process are archived in a central knowledge management system and are available to all internal staff who have an input into investment decision making. This knowledge also incorporated in to the appraisal of all other investments 29. P2.4 active ownership non listed investments and listed equity with significant control Our ESG active ownership policies are fundamental to the Actis business model and apply across all asset classes. A structured system is in place to recognise and act on opportunities for active ownership and engagement with respect to ESG issues and ESG is a regular agenda item for the Supervisory Committee and our Executive Committee meetings. We also periodically assess the abilities of our internal people to add value through ESG management Actis The Positive Power of Capital

13 principle 2 we will be active owners and incorporate ESG issues into our ownership policies and practices P2.5 examples of the Actis engagement strategy A key success factor of the Actis portfolio management approach is active engagement with investee companies in driving forward improvements in ESG to meet international best practice and in environmental performance. Actis takes the following actions as part of its commitment to responsible investment: new investments are appraised against each of the Actis five ESG policies investee company management are required to commit to operating in accordance with the Actis ESG code new investments are assigned a risk rating against the Actis five policies to tailor the degree of monitoring and management oversight portfolio companies are supported in formulating action plans to manage areas of non-compliance with ESG best practice investee company management is supported in implementing policies and procedures to minimise ESG risks and promote continuous improvement in ESG performance Additional support across the investment cycle is given to investment managers by the internal ESG team. This covers pre-investment screening and due diligence on ESG issues through to dealing with portfolio management issues post-investment and can encompass site visits by ESG staff, document review and direct engagement with management. In 2010, the ESG team areas addressed the following areas in supporting investment managers and portfolio companies to add ESG value: Governance: In 2010, we focused on improving the training provided to Actis investment managers who become non executive directors on investee company boards. In January 2010, we started work with the Institute of Directors in the UK to develop a bespoke course for our investment managers. By the end of 2010, we had run the course three times for more than 20 of our investment professionals and we will be delivering further courses in The Positive Power of Capital: The ESG team led a day long workshop on the Positive Power of Capital ('PPC'), as part of a Leaders' Quest week in Johannesburg. As a result of this, we have introduced an increased focus on value enhancement within Actis portfolio companies. A key PPC work stream in 2011 will be the measurement of non financial and ESG factors and their impact on the portfolio company's market value. Sector based frameworks are currently being developed to assist individual portfolio companies to select and measure relevant metrics. Equator Principles: Actis promotes acceptance of the Equator Principles amongst investee companies in the financial services sector. For example, we have been encouraging two of our portfolio companies, the Infrastructure Development Finance Corporation (IDFC) in India, and Commercial International Bank (CIB) in Egypt, to sign up to the Principles. Real Estate: During 2010, Actis Africa Real Estate Fund demonstrated an increased emphasis on the incorporation of green building measures, evidenced primarily by developments in Mauritius (IOREC), Tanzania (Capital Properties) and Kenya (Nairobi Business Park). The ESG team worked closely with the real estate team to implement green building measures and benchmarking against internationally recognised rating schemes (LEED and Green Star). A notable feature of the programme has been to work with the newly established development platform in West Africa to facilitate the customisation of green rating tools to local socio economic and climatic conditions. This activity will become a major focus area for Infrastructure: The ESG team has worked closely with the Actis Infrastructure 2 fund in This has included supporting a research thesis (Imperial College MSc. Environmental Technology) on developing the approach for measuring the impacts of infrastructure investments. This work is continuing in collaboration with Forum for the Future. Environmental, Social & Governance Practices at Actis 12

14 principle 3 we will seek appropriate disclosure on ESG issues by the entities in which we invest P3.1 P3.2 introduction Our active ownership strategy means that we require comprehensive disclosure of ESG information to us by portfolio companies. The information is reviewed for each company as part of the investment review process on a monthly, quarterly or biannual basis. As well as disclosures for the investment review process, we also request that investee companies promptly disclose to us any incident leading to fatalities or material environmental impacts 31. reporting Actis requires the management of all potential investments to commit to operating their company such that it provides for the reporting as soon as practicably possible to Actis of any incident involving the Company (or any member of the Group) that results in any loss of life or any material effect on the environment. Each quarter, ESG information for each portfolio company is reported to investors as follows: ESG Management update ESG inherent risk ratings (Health and Safety, Environment, Climate Change, Social and Business Integrity) employee number (annual) taxes paid This information is compiled by the investment manager from information received from the investee companies 32. Portfolio companies are supported in systematically reporting ESG procedures and performance and are encouraged to integrate this into their normal financial disclosure 33. Portfolio companies receive ad-hoc feedback on their reporting and Actis requests further information or clarification from them as required. Additional information sought can include confirmation of the extent of involvement and compliance with international standards of ESG management such as ISO on environmental management and OHSAS on health and safety issues. The table below provides a summary of the fatal accidents that were reported to Actis by its investee companies in An investigation was carried out for each of these fatal accidents and recommendations tracked through the Actis investment review process. table 3: fatal accidents Portfolio Company Work Related Road Accident Member of the public Accidental Electrocution Security Related Umeme (Uganda) 1 7 KVTC (Tanzania) 1 Seven Energy (Nigeria) 1 TRIL (India) 1 Sinai Marble (Egypt) 1 Halonix (India) 1 Copperbelt (DRC) 2 13 Actis The Positive Power of Capital

15 principle 4 we will promote acceptance and implementation of the Principles within the investment industry P4.1 P4.2 introduction Actis continues to be an active member of the UNPRI Steering Committee on Private Equity and as part of our commitment to the UNPRI we have continued in 2010 to contribute to a working group on exit strategy and to a general partner/portfolio company support group. We are chairing a working group on the emerging markets. We are also working with our financial sector investee companies to adopt like minded Principles, such as the Equator Principles. promotion of the principles In addition to the WEF, we have been active in a number of conferences and panel discussions where we have advanced the implementation of the UNPRI. In November 2010, Actis sponsored the Triple Bottom Line Investing Conference Europe, moderated a session on "ESG integration into PE" and spoke on a panel that discussed "Investing in Green Real Estate: An Emerging Markets Perspective". When working with external providers, such as consultancies and research houses, we do not typically include ESG considerations when drafting contractual agreements 37. However, we have strongly encouraged peer organisations and institutional investors to consider ESG factors in their business processes 38. Actis also promotes acceptance of the Principles amongst its investee companies belonging to the financial services sector. For example, IDFC (the Infrastructure Development Finance Corporation) is also a signatory to the Principles 34. Actis is a core member of the World Economic Forum s (WEF) working group on Mainstreaming Sustainable Investment 35, and helped produce a white paper tabled at this year's WEF in Davos: Accelerating the Transition Towards Sustainable Investing. Actis will continue to remain involved in implementing the recommendations. Actis is also a member of the World Economic Forum s Investor Industry Group, a group of investors committed to the promotion of entrepreneurship in the global public interest, striving for world-class governance, economic progress, social development and environmental stewardship 36. Environmental, Social & Governance Practices at Actis 14

16 principle 5 we will work together to enhance our effectiveness in implementing the Principles P5.1 introduction P5.2 collaboration and networking Actis continues to be an active member to the UNPRI Steering Committee on Private Equity, a body dedicated to the promotion of Responsible Investment in this specific asset class 39. In 2010, we noticed a number of other private equity organisations making the consideration of ESG issues more central to their investment decisions. We welcome this move and will continue through our support of the UNPRI, and wider initiatives such as our work on green real estate and our participation in the World Economic Forum, to play our part in moving the whole private equity sector forward in this area. We have been particularly active with respect to Principle 4: promoting the acceptance and implementation of the principles in our sector 40. We aim to continually improve our understanding, application and advocacy of the Principles and make frequent use of the resources provided by the UNPRI to keep abreast of new developments 41. In addition to our work with the bodies such as the World Economic Forum, the Actis ESG team has continued its strong support of Imperial College s MSc in Environmental Technology in Business and the Environment option through delivery of an annual lecture at the London-based campus in March, an intern placement over the Summer months, and support of the Sue Pritchard Award for the Best thesis related to the emerging markets. We also interact with the following: Association for Sustainable and Responsible Investment in Asia principle 6 UK Sustainable Investment Forum Transparency International Equator Principles Secretariat we will each report on our activities and progress towards implementing the Principles P6.1 introduction We report to our investors on a quarterly basis and the information we provide includes a section dedicated to ESG data for each of our portfolio companies 42. Our disclosure to our Limited Partners also includes our activities and progress with respect to P6.2 Responsible Investment, including the implementation of the UNPRI 43. sharing of case studies Our Code of Conduct and Policy Commitments are publicly available through our website: In addition, a couple of case studies that demonstrate our ESG approach have been provided to the UNPRI which in turn makes them available to the wider public via their own website: 15 Actis The Positive Power of Capital

17 Environmental, Social & Governance Practices at Actis 16

18 Appendix A - UNPRI Annual Reporting and Assessment Questions Please note that, where relevant, the options provided in the questionnaire are reported immediately below the question in square brackets [ ]. Also, where it enhances clarity, the definitions used by the UNPRI are reported. 1 Q 1) Please provide the contact details for you primary and secondary PRI Reporting and Assessment contacts. 2 Q 2) What category best describes your organisation? [Asset Owner or Investment Manager] 3 Q 7) What were your organisation's total assets under management as of 31 December 2009, including the assets of all your consolidated subsidiaries? 4 Q 6) Please indicate the number of staff your organisation employs and provide details relative to the level of complexity of your organisation? [Complexity is defined by characteristics such as the number of investment strategies and mandates; the number of investment professionals and how they are organised within the firm] 5 Q 4) As an investment manager: Which category best describes the products and services your organisation provides? [Mainstream Investment Manager; Dedicated Socially Responsible Investment manager; Themed fund manager] 6 Q 8) Please provide an approximation of your average asset mix for 2009 or your most recent count. 7 Q 9) Please provide the following information based on your asset classes holdings: What percentage - if any - of your assets invested in publicly listed companies are invested in companies where your organisation or external investment managers have significant control (for example, have a board representative or other forms that would render other active ownership significantly more impactful than proxy voting and engagement alone)? 8 Q 11) Please provide a description of how your governance, policies and strategies address RI and ESG issues. 9 Q 13) For the following asset classes, to what extent has your policy or approach to responsible investment been incorporated in internal management processes (e.g. business planning, strategic planning, or similar)? [Asset classes are listed equity, fixed income, private equity, listed or unlisted real estate and property, hedge funds and infrastructure] A large extent of incorporation is defined as follows: the organisation has both long and short term RI objectives relating to various aspects of the RI programme across regions that are regularly updated or reviewed. Larger organisational objectives have been reduced to individual objectives for which staff members are held accountable on a regular basis. There are key performance indicators related to responsible investment, and resources have been allocated. The organisation has invested considerably in RI implementation and processes. This approach is applied to all new investments as well as legacy investments when possible. 10 Q 12) Do you have a policy or a set of policies that makes specific reference to responsible investment, and if so, do they cover environmental, social, and governance issues? 11 Q 14) Among the roles within your organisation, who has a clear responsibility related to responsible investment implementation and; are there incentives and training for individuals related to RI/ESG considerations and responsibilities? [Individuals are: board of trustees or board of directors and their committees; Chief Executive Officer of Chief Investment Officer or equivalent; Other Senior management; Portfolio Managers; Analysts; Researchers; RI or ESG specialists; Other] 12 Q 15) Select any of the following RI, ESG and/or SRI approaches that you or your external investment managers currently apply in the investment decision making process. [Approaches are: Exclusion based on ethical criteria; Screening as a way to avoid the potential negative publicity surrounding the companies/sectors in question as it may adversely reflect on you or your manager s brand/license to operate; Screening based on a belief that exclusion or inclusion of certain investments from your investment universe can have a material effect on portfolio performance; ESG analysis within individual investment decisions, possibly including these factors into valuation and investment performance models; Themed Investing; None of the above] 17 Actis The Positive Power of Capital

19 13 Q 17) Please select any of the following active ownership activities that you, your external service providers or your external investment managers currently undertake on behalf of your organisation? [Activities include: (Proxy) voting related to listed equity; File and/or co-file shareholder resolutions on listed companies; Engagement on ESG issues with listed equity or fixed income issuers; Ownership and engagement activities focused on ESG issues related to unlisted investments or listed equity which permit a significant control; None of the above] 14 Q 19) Please provide a short description of your organisation s approach to this Principle. For example, how do your organisation s investment analysis and decision-making processes incorporate ESG factors. 15 Q 20) What percentage, by asset class, of your organisation s assets under active management internally integrate the consideration of RI/ESG issues in investment decision making processes such as researching ESG information and/or constructing/managing portfolios and to what extent? A large extent of integration is defined as follows: You gather and analyse information across a comprehensive range of ESG issues and across a large proportion of the geographical coverage of your investment universe. Furthermore, the information is updated regularly. This research and analysis may be undertaken internally or may be purchased from an external party. In the latter case, internal resources are nevertheless applied to interpreting the information. 18 Q 27) Do you have a (proxy) voting policy and if so, does it address environmental, social and governance (ESG) issues? 19 Q 29) For listed equities, who makes voting decisions on behalf of your (or your client s) organisation? 20 Q 30) For those listed equity votes you cast: to what extent is information related to voting items gathered and analysed before voting decisions are made and; do you monitor that voting is done in accordance with your voting instructions? A large extent is defined as follows: Research to inform voting decisions is undertaken in-house. The company reviews each ballot item and undertakes any necessary research to make an informed judgement. Alternatively, the company may be buying external voting research and significantly supplementing it with in-house research and analysis. 21 Q 31) Do you inform your listed equity companies of your rationale when you abstain or vote against management recommendations? 22 Q 37) Do you have a written engagement policy or other documents that address direct engagement with listed equity and fixed income issuers; if so, do these policies address environmental, social and governance (ESG) issues? 23 Q 39) In total, how many listed equity and fixed income issuers did your organisation engage with or were engaged with on your organisation s behalf on ESG issues in 2009, by level of engagement? 16 Q 21) For the assets under active management internally that integrate the consideration of RI/ESG issues, to what extent do you have a process for monitoring the capability of investment analysts, portfolio managers and other relevant investment professionals on how they integrate the consideration of RI/ESG issues into investment analysis and decision-making processes? A large extent is defined as follows: All relevant staff members undergo a regular monitoring of their RI competency, including their ability to incorporate ESG factors and their research capacity on ESG issues. 17 Q 26 Please provide a short description of your organisation s approach to this Principle. For example, how is your organisation an active owner and how does it incorporate ESG issues in its ownership policies and practices. 24 Q 40) Approximately what proportion of the engagements with listed equity or fixed income issuers undertaken by your organisation or on your organisation s behalf addressed environmental, social or governance (ESG) issues? 25 Q 38) Who engages with listed equity or fixed income issuers on behalf of your (or your client s) organisation? [Please select among: internal staff; external engagement service provider(s); external investment manager(s); or other external entity] 26 Q 41) To what extent do you assess and monitor the ESG engagement competency and capabilities of the following groups? Environmental, Social & Governance Practices at Actis 18

20 Appendix A - cont. [e.g. internal staff; external engagement service provider(s); external investment manager(s); or other external entity] hedge funds infrastructure A medium extent is defined as follows: You take an active interest in the external investment managers engagement progress but do not have regular dialogue with them. You require and review ad hoc reporting on engagement progress performed on your behalf. You evaluate the managers engagement progress regularly (i.e. annually) but do not undertake additional analysis. 27 Q 42) Given your (or your client s) engagement policy and/or approach, to what extent do you have or do the third parties acting on your behalf have a process for identifying and prioritising ESG related engagement opportunities? [Groups are e.g. internal staff; external engagement service provider(s); external investment manager(s); or other external entity] A moderate extent is defined as follows: Relevant staff members are assessed on their competency in the area of active ownership and engagements but primarily on an ad hoc basis, not in a regular and systematic fashion. 31 Q 52) Please provide a description of your approach to this Principle. For example, how does your organisation seek appropriate disclosure on ESG issues by the entities in which it invests. A large extent is defined as follows: You or your third party agents gather and analyse information across a comprehensive range of ESG issues and across a large proportion of the markets in your investment universe. This research includes an analysis of the impacts of various issues on specific companies performance and prioritisation of engagement opportunities. 28 Q 43) To what extent do you or your third party engagement providers or investment managers set ESG engagement objectives and evaluate your engagement success? A moderate extent is defined as follows: You may have developed a process to measure the impact of your engagement efforts but may not always apply it. You might sometimes set engagement objectives before engaging with companies. 29 Q 44) To what extent do you or your external investment manager integrate the information and progress of the ESG engagements into the investment decisionmaking process? A large extent is defined as follows: Information related to your organisation s engagement activities is readily available to those making investment decisions, systematically analysed and incorporated into the assessment of all investments. 30 Q 49) To what extent do you assess and monitor ESG active ownership competency and capabilities undertaken by the groups listed below in the following asset classes: fixed income - sovereign and other non-corporate issuers private equity non-listed real estate/property 32 Q 53) Who asked your organisation s investee companies (or other investment entities) to provide information about their ESG policies, practices or performance in 2009? 33 Q 55) In which format or mechanism have you or your third parties agents requested reporting on ESG issue policies, practices or performance? [Options include: Integrated with regular financial reports, Standalone corporate (social) responsibility or sustainability reports; Global Reporting Initiative (GRI); Carbon Disclosure Project (CDP); Submission of a tailored survey or Other reporting framework by an industry or association] 34 Q 58) Please provide a description of your approach to this Principle. For example, how does your organisation promote the acceptance and implementation of the Principles within the investment industry? 35 Q 63) To what extent did you engage in dialogue, lobbying or initiatives pertaining to government policy and/or industry regulations related to RI/ESG issues in 2009? A large extent is defined as follows: You may have initiated dialogue on policy initiatives relating to RI/ESG issues. You may have commented on issues relevant to your domestic market as well as issues relevant to foreign markets. 36 Q 63) To what extent did you engage in dialogue, lobbying or initiatives pertaining to government policy and/or industry regulations related to RI/ESG issues in 2009? A large extent is defined as follows: You may have initiated dialogue on policy initiatives relating to RI/ESG issues. You may have commented on issues relevant to your domestic market as well as issues relevant to foreign markets. 19 Actis The Positive Power of Capital

21 37 Q 59) Did you include RI/ESG considerations when working with service providers and/or external investment managers in 2009 (where applicable)? Specifically when: searching for service providers or external managers; drafting contractual agreements; structuring incentive schemes. 38 Q 60) To what extent did you encourage peer organisations and/or your institutional clients to consider RI/ESG factors in 2009? 43 Q 76) Did you disclose (either to clients/beneficiaries or publicly) RI/ESG activities, results and progress related to Principle 3, Principle 4 or Principle 5 in 2009? 44 Q 70) Please provide a description of your approach to this Principle. For example, in what ways does your organisation report your implementation of the Principles? A large extent is defined as follows: Actis has consistently been an active advocate for responsible investment. We actively seek to promote RI in contracts with institutional investors, industry forums and media activity. 39 Q 65) Please provide a description of your approach to this Principle. For example, how does your organisation work with other parties to enhance its implementation of the Principles? 40 Q 66) To what extent did you collaborate with other investors in regard to the Principles, and what Principle did you collaborate most on? Large extent is defined as follows: You may have initiated one or more collaborative initiatives (formal or informal) with industry associations relevant to the Principles or adopted a leadership position within established initiatives or associations. You may also have worked actively with a number of other investors on specific issues of relevance to the Principles. We collaborated most on principle 4: promoting the acceptance and implementation of the Principles within the investment industry. 41 Q 67) Did you log in to the PRI Engagement Clearinghouse in 2009 and if so, how did you use it? (E.g. led an engagement; joined an engagement; or logged in). 42 Q 71) To what extent did you disclose, either to clients/beneficiaries or publicly, your policy and/or approach to incorporating ESG issues into investment analysis and decision-making processes in 2009? A moderate extent is defined as follows: You prepared a comprehensive and detailed review of your investment process highlighting how you integrate ESG factors, but it was not necessarily distributed publicly. Alternatively, your review may have contained gaps either in coverage or in detail. Environmental, Social & Governance Practices at Actis 20