For Hg, responsible investing means growing sustainable businesses which are great employers and good corporate citizens, whilst also generating superior risk adjusted returns for the millions of pensioners and savers who are invested with our clients. Our time and money support the sustainable growth of knowledge businesses enabling them to change how their customers work and provide quality employment opportunities for thousands of people worldwide.
Our approach to Responsible Investing
We want the businesses we invest in to be genuinely focussed on doing well for all stakeholders including employees, customers, suppliers, shareholders and the wider society. We firmly believe that responsible business practices help generate superior long-term performance. As such, our RI approach supports the backbone of our investment philosophy – to invest in growth companies and sectors, rather than turnaround or distressed investing.
This is not just a screening process. As part of our RI approach, we take an active interest in how our companies manage environmental, social, and governance (‘ESG’) issues. We encourage, support and stretch the companies we partner with to strive for best practice responsible business standards.
Hg has been a signatory of the UN Principles for Responsible Investment (‘UNPRI’) since 2012 and since then we have continued to increase our ambitions and ESG commitments.
How we integrate Responsible Investing into our investment process
ESG is embedded into the entire deal process, from screening to exit. When considering potential new investments, we screen them against our exclusion list, which outlines the sectors, businesses and activities in which we will not invest (see our Responsible Investment policy for the full list).
During due diligence, we assess companies for compliance with relevant laws in relation to environmental, social, governance, health and safety, bribery and corruption issues.
- A ESG red flag report identifies high level concerns arising from our diligence results.
We also consider the inherent ESG risk of the company and carry out an associated ESG review detailing risks and opportunities in relation to our Responsible Business framework.
- We take an active approach to managing ESG during our ownership. This starts with an ESG onboarding and maturity assessment within the first months of acquisition to prioritise ESG topics and agree an action plan.
- As part of our on-going engagement on ESG, we conduct a maturity assessment of our businesses to identify areas for improvement where Hg can support the companies to realise their ambitions within and beyond our Responsible Business framework. The assessments are updated at least annually.
- We send out regular ESG-related communications and have an online Responsible Business community. ESG-related face-to-face events also enable portfolio companies to share best practice, network and get support.
- Upon realisation, we aim to articulate the increased value from improved ESG performance with case studies and performance metrics. These are made available during vendor DD.
Being a responsible investor is good for the businesses we partner with and is also the right thing to do. We look for companies that not only deliver long-term growth for shareholders, but are also great employers and care about the impact they have on society. Responsible investing is about ensuring businesses optimise the resources they have, whilst also making sure they operate under the right governance model. At Hg, we believe strongly that ESG related measures help to make a business best-in-class.
Hg Partner & Chair of the Hg Realisation Committee
Responsibility across our businesses
Our responsible business framework
Our approach to responsible investment is outlined in our Responsible Business framework which is tailored specifically for tech and tech enabled service companies.
The framework highlights key ESG areas for our businesses, along with support provided by Hg. It covers the most material ESG topics for the sectors we invest in and is based on extensive benchmarking of best practices and industry standards, as well as interviews with Hg employees and feedback from our clients. The framework is reviewed annually, to adapt to regulatory changes, emerging ESG issues and to meet the expectations of our clients.
All our portfolio companies are assessed against the framework, which is focused on three areas; Essentials, Employees and Society:
There are certain minimum ESG requirements that Hg expects from all our businesses. These include:
- Governance and Business Integrity, such as code of conduct, appropriate controls, board composition and health & safety and grievance procedures.
- Risk and Compliance, including compliance with laws and regulations, active risk management, as well as standards and policies to combat bribery, corruption, money laundering and other malpractice.
- Data and Cybersecurity, which includes Hg’s minimum standards for cybersecurity along with appropriate information protection practices and GDPR compliance.
One of the most important assets of our businesses are the employees. A diverse workplace with engaged and motivated employees is vital for growth and business success. We look at employees from four aspects:
- Diversity of talent and equal opportunities irrespective of ethnicity, gender, disability and background.
- Engagement and motivation by promoting transparent communications, health and wellbeing, learning opportunities, recognition and good leadership.
- Grow businesses and talent, including organic job growth, healthy staff turnover, talent management and succession planning.
- Purpose and culture, including a value driving vision, mission, norms and behaviours.
We want all our businesses to strive for positive external impact by acting transparently and contributing to society through their business practice, charitable and community support and supplier and customer relations. Our businesses contribute to society in a number of ways:
- Community engagement including the management of community stakeholders, as well as apprenticeships, charitable giving and volunteering.
- Environmental impact, such as energy use, waste management, data centres, company fleet and climate change risks.
- Positive relationships with key external stakeholders including customers and suppliers.
- Transparency of company commitments and progress, including external reporting and sustainability communications.
"We’ve found it very unique and reassuring that Hg values non-financial metrics and ESG performance so highly, while genuinely caring about the employees across the portfolio. Hg’s Responsible Business assessment helped us review measurements towards how we do business and the impact we have on our employees and society. It proved to be a valuable exercise in understanding how we perform against the rest of the industry and Hg’s portfolio, while also enabling us to reflect on what we do well and what we could do differently. Hg is truly a responsible investor and Sovos is happy to have their backing and support as we continue our mission to Solve Tax for Good."
Chief Talent Officer, SOVOS
Responsibility at Hg
Hg’s Own Operations
Our Responsible Business framework applies just as much to Hg as it does for our businesses. We strive to be a responsible investor, business and employer in a number of ways:
- We uphold the highest standards of business conduct. All employees are required to abide by Hg’s Guidelines for Business Conduct and Ethics, as well as our Anti-Corruption Policy.
- We are committed to be a world class employer, by creating a diverse and inclusive workplace where everyone is welcomed, motivated and stretched. We strive to develop a diverse pool of high calibre employees and staff and are dedicated to talent management and development to give everyone at Hg the opportunity to perform to the best of their ability.
- We strive to have a positive impact on society by building positive external relationships, act with transparency, minimise our environmental impact and give back to communities. Each year we contribute to our employees’ charities of choice, in 2018 we donated over £1 million to charitable causes.
"ESG is an integral part of both Hg’s onboarding and management process. New businesses to the portfolio are assessed against our ESG standards, before receiving ongoing support throughout our partnership. This process helps to pinpoint opportunities and areas for improvement and puts ESG topics on the agenda of our boards. Improvements range from putting certain policies in place, to helping the companies develop employee engagement surveys. We also encourage crossportfolio collaboration via Hg forums and our online platform, Hive. Sharing best practice is a core method for advancing performance across the Hg portfolio."
Hg Partner and Head of Operations Innovation