Responsible investing through ESG
At Wren House, we believe that a key element of ensuring sustainability is through a thoughtful approach to historical and emerging environmental, social and governance (ESG) challenges. In our portfolio companies, we see the impact of rapid changes in the expectations and demands on them as a result of changing environmental forces, declining resources, constantly evolving social pressures and increasingly active regulators and governments.
Wren House is committed to responsible investing. We do this by integrating ESG assessments into our investment process to identify issues early. We also seek investment partners who share our values and investment approach, and work alongside our portfolio companies to put in place leading practices in response to risks that are identified during regular reviews of ESG as part of our Asset Management process.
As a firm, we also believe that we should behave as we expect our portfolio companies to. We apply the same ESG principles to our own business and have a strong culture of responsibility and integrity in our interaction with our investors, colleagues and portfolio companies.
Creating long-term sustainable value in companies through responsible behaviour in relation to environmental practices, the treatment of employees, customers and suppliers, and leading transparency and governance practices makes good business sense. We also believe that this will drive superior results.
We use our ESG framework at all stages in the transaction lifecycle to identify risks and opportunities.
As part of our diligence process, we will work with our advisors to identify key ESG risks. If the risks are too high, we will not pursue the opportunity. If we believe that we can mitigate the risks, we will determine the actions available and consider any impact on the long term value of the business.
As part of the post deal activity, we will work closely with the management teams of our portfolio companies to put in place measures to mitigate the ESG risks identified, such as new policies, improved working practices, enhanced capability and stronger governance processes.
We monitor the implementation and adherence to these actions through our Asset Management process. At Wren House we believe in active Asset Management regardless of the size of our investment. Each year we develop an Asset Management strategy ahead of the asset budget review process to ensure that we are clearly focused on areas that will drive the most value for our portfolio companies. The actions associated with this strategy are reviewed on a fortnightly basis in order to retain focus on the key value creation and protection initiatives. The ESG framework sits alongside our Asset Management framework and is implemented through initiatives executed by the management teams of our portfolio companies. Wren House is an active portfolio manager; ensuring that best practice governance is employed at its portfolio companies, playing an active role in Boards and Committees and regularly reviewing Board and Management effectiveness to ensure that the required high standards are being met.
Working with our portfolio companies
We are committed to partnering with our portfolio companies to bring our investment strength, operational capabilities and long-term ownership model to bear to support innovative answers to ESG challenges. As a number of the challenges our portfolio companies face are similar, we seek opportunities to share best practice across our portfolio companies in order to enhance their ability to respond to ESG issues and improve overall performance and sustainability.
Using our ESG framework, we will work with our portfolio companies to identify ESG risks within their companies and associated supply chains, and put in place relevant mitigating actions. Given the rapidly changing environment, we expect our portfolio companies to continuously improve their approach through a programme of audit and review, and encourage them to achieve relevant associated certificates and awards to demonstrate their credentials. We also seek to align incentive structures with demonstrated good practice against ESG principles.
Network of external advisors
We work closely with our advisors at all stages of a transaction to identify and mitigate risks associated with ESG. Our portfolio companies are also directly engaged with the organisations that set the standards, including, for example, GRESB and ISO.
ESG in Action
Thames Water was ranked top of the water resources category, and 4th of all Infrastructure Assets (out of 160) in the annual GRESB survey that looks at how ESG activity is incorporated into all aspects of the business activity. An example of a focus on the environment includes the recent development of the Walthamstow Wetlands Centre, Europe’s largest urban wetlands centre built around 10 reservoirs, that was ranked one of the world’s 9 best wetlands for watching wildlife by the Lonely Planet beside the Pantanal in Brazil and the Everglades.
Associated British Ports
Readiness for GDPR has had Board level focus in order to ensure that the systems in Associated British Ports adhere to the new regulations aimed at data protection and privacy for all individuals within the EU.
London City Airport
As a public asset in private ownership, and being located in the central London borough of Newham close to its neighbours, London City Airport has for many years been committed to working closely with its local community and monitoring and mitigating its environmental impacts, particularly aircraft noise. As one of the largest employment sites in East London, the airport has had a programme for many years to support local residents into work at the airport, and now 65% of staff working at the airport live within 5 miles. Furthermore, in order to share the benefits of growth, the airport actively works with local suppliers, and last year alone spent £35 million on businesses in East London. The airport also has a very comprehensive scheme in place to monitor and control aircraft noise, with a complete night curfew in place and a generous noise insulation scheme available to local residents near the airport.