Responsible Investment and our ESG principles
Do no harm: HPE Growth will not invest in technology sectors that relate to weaponry, pornography, gambling, or industries that harm human rights, labour rights, the environment and anti-corruption or any other sector under embargo. HPE Growth is increasingly reluctant to invest in technologies or companies with a significant carbon (CO2) footprint. We furthermore endeavour to reduce the use of (high carbon) energy and the production of waste within our own operations and promote initiatives to become carbon neutral ourselves.
Implement and adhere to good governance: Beyond the governance in place at HPE Growth, the firm and its professionals ensure that each of HPE Growth’s portfolio companies as of the time of investment have a structured and professional board in place, along with sound employee relations, remuneration of staff and full tax compliance. We make specific portfolio measurements in board structure, lawsuits, fraud, audits, and whistle blowing schemes.
Promote diversity: We actively monitor and encourage gender diversity within our portfolio companies and within our own team. Supporting the management teams of our portfolio companies in accelerating growth depends almost entirely on the performance of its people. This translates also to our own organisation. We therefore aim to empower our employees to reach their full potential by providing a lively and exciting workspace. We consider a workspace with diversity in gender, age, culture, age groups and nationalities to be a great contributing factor. HPE Growth actively seeks to build such teams meeting these criteria.
Ensure appropriate data protection for all stakeholders: HPE Growth requires its portfolio companies to follow all new GDPR regulations. Furthermore, in highly regulated sectors such as FinTech and Digital Health, data protection is a key strategic priority for the management as well as the board. Detailed measurements which are conducted include assessing the number of incidents, lawsuits, fraud and audits, alongside active whistle blowing schemes.
HPE Growth is a highly experienced investment firm focused on growth capital investments in high-growth digital technology companies across Europe with a focus on Northern-Western Europe. Within the scope of our investment strategy, we aim to act responsibly and hold our portfolio companies responsible with acts which are in line with the most accepted national and international ESG standards.
HPE Growth sees impact within two levels: (1) within HPE’s own operations and (2) through our portfolio companies. According to our own internal principles, responsible investments within our portfolio need to follow HPE Growth’s ESG principles of:
ESG Themes within our Investments
Our business sees the UN’s Sustainable Development Goals as key indicators to understanding societal impact. Through continuous assessment of our industry drivers, HPE Growth further aims to create a measurable impact on the UN SDGs. The following SDGs are our key focus, and we evaluate the impact on these for any investment:
Gender Equality (SDG 5)
Decent Work and Economic Growth (SDG 8)
Industry Innovation and Infrastructure (SDG 9)
Peace, Justice and Strong Institutions (SDG 16)
Specific SDGs may also be applicable to our portfolio companies. For example, Good Health and Wellbeing (SDG 3) is important for our Digital Health investments.
HPE Growth further believes that diversity and inclusion will lead to stronger teams and that diverse points of view lead to better decision making, hence better results, thus it must be embedded into company culture. This is based on the fundamental belief that the appropriate representation of women, nationalities and minorities will lead to better work environments and better business decisions. A key moment to influence or adjust a misbalance in diversity is recruitment. HPE Growth screens any potential investment against ESG factors in our industry analysis and further monitors and evaluates ESG issues of its portfolio companies by means of a semi-annual questionnaire. During our bi-annual ESG review, we ensure the measurement of SDG-related performance via KPI measurement, as well as reporting on three factors of importance related to diversity: (i) Gender ratio across the company, (ii) Gender ratio across top management, (iii) Gender ratio of the supervisory board.
Collaborative Initiatives & Industry Leadership
This policy is in line with local and international standards and initiatives that HPE Growth endorses, examples include the United Nations Principles for Responsible Investment (“UN PRI.”) Since 2009, HPE Growth has been a signatory to the UN PRI which provides investment professionals, fulfilling their fiduciary duty, a framework of key ESG considerations when evaluating issues that can impact the investment performance. Adherence to these principles should not only lead to better long-term financial returns for our investors but also to a closer alignment between the objectives of institutional investors and society at large.
In this context, HPE Growth is a UN PRI signatory, requiring commitment to the following principles:
Incorporate ESG issues into our investment analysis and decision-making processes.
Be active owners and incorporate ESG issues into our ownership policies and practices.
Seek appropriate disclosure on ESG issues by our portfolio companies.
Promote acceptance and implementation of the principles within the investment industry.
Work together to enhance our effectiveness in implementing the principles.
Report on our activities and progress towards implementing the principles.
HPE Growth has committed itself to numerous organisations to ensure internal frameworks and ESG considerations remain up to date and can stand up to market scrutiny. Our business is a part of the ILPA Data Convergence Project, sharing information on key ESG KPIs across private equity organisations globally. Separately, we have also been an active participant in Invest Europe and NVP since 2010, furthering our mission to continuously challenge and improve our views.
Guiding principles for Investment & Exclusions
Responsible investing has been incorporated into HPE Growth’s fund documentation, whereby portfolio companies are prohibited from engaging, directly, or indirectly, in:
The manufacture, marketing, and distribution of weapons, artillery, and/or ammunition
The manufacture, marketing, and distribution of tobacco, distilled alcoholic beverages, pornography, and related products
The research and development of technical applications related to electronic data programs or solutions which allow illegal downloading of electronic data
The creation and promotion of gambling such as in casinos, online gaming, or equivalent enterprises
The development of technology for the purposes of human cloning
The exploration, extraction, and production of coal or crude oil
The operation and marketing of predatory lending firms
Further, we shall not invest in any company which conducts business with a person, entity, or country that is a target of relevant trade sanctions, violates fundamental human rights, or takes part in any illegal activities under local or international law.
ESG Integration Across the Investment Process
Further, we shall not invest in any company which conducts business with a person, entity, or country that is a target of relevant trade sanctions, violates fundamental human rights, or takes part in any illegal activities under local or international law.
Deal Sourcing / Screening Phase
HPE Growth follows a strict and well-defined internal process for making investment decisions. Opportunities originated through the Firm’s proprietary and non-proprietary channels typically undergo a rigorous selection process, incorporating three separate filtering stages within the deal progress funnel. HPE uses selected ESG KPI’s in its sourcing and investing processes and uses them in its investment decision making process. For each potential investment target HPE is analysing, the investment team considers ESG risk factors.
HPE Growth screens deals against ESG factors in our industry analysis. This could prompt further investigation during the due diligence phase or lead to abandoning the investment entirely. Since HPE Growth invests in innovative digital technology growth firms in Northern Europe, ESG risks, such as those in human rights and carbon footprint, are likely to be minimal. We continue to utilise positive selection criteria to select investments which are top ESG performers, with a special focus on those which promote diversity and data protection. We further aim to improve on these factors throughout the investment period, thus do consider companies with a strong capacity for ESG improvement.
Due Diligence
HPE Growth has incorporated ESG aspects into the investment analysis and decision-making process. The investment team, as part of HPE Growth’s business, performs due diligence on each potential investment opportunity against our ESG principles to understand how they are being managed. As part of this process, we use an internally developed proprietary ESG due diligence questionnaire. We clarify the expectations of how ESG issues should be managed when finalizing the investment agreement with each potential portfolio company. The results of such processes are formally captured and discussed in an Investment Memorandum and HPE Growth’s Investment Committee.
The due diligence is used not only at the start of new investments but also as a monitoring and evaluation tool throughout the investment life. HPE conducts a human resources due diligence in most of its investment processes. During such due diligence, the culture of the organization and its approach to diversity is reviewed, along with a joint strategy to overcome shortcomings.
Responsible investing has been incorporated into our fund documentation, whereby portfolio companies are prohibited from engaging, directly or indirectly, in fields that would harm for example, human rights, labour rights, the environment and anti-corruption.
Portfolio Monitoring & Engagement
HPE Growth is an active and engaged investor in all its portfolio companies and considers this a key element in creating value for our investors. We therefore monitor the portfolio companies to make sure that ESG issues are being managed properly. HPE Growth has board (observer) positions at all its portfolio companies and actively participates in all communications with the portfolio companies. This includes discussions of ESG topics in cases where we believe that such matters will become a risk for the long-term value of the firm or where we consider the ESG matters to be important to enhance the value of the portfolio company.
Engagement is a key part of the creation of positive change for all portfolio companies and in each step of the investment process, ESG risks and opportunities are considered. HPE growth encourages the understanding, adoption, and disclosure of ESG matters among all its portfolio companies. From initial interaction when sourcing potential investments, though to management of the portfolio. HPE Growth has implemented both ESG and SDG impact evaluation into its investment and monitoring processes. The Firm evaluates portfolio companies on a range of ESG topics bi-annually based its proprietary ESG questionnaire. HPE reports on ESG and SDG performances to its stakeholders, including SDG goals, if appropriate, to be included in 100-day plans once an investment is made.
Exit Approach
Throughout its portfolio company engagement, HPE publishes biannual questionnaires on ESG SDG’s and discusses the outcome with its portfolio companies. Through HPE’s board representation, ESG matters of compliance and diversity are brought to the table with the aim to have portfolio company buy in to comply with our ESG SDG goals. Following the investment horizon, we discuss the success of improvement plans and priorities, along with suggestions on how to continue to improve.
Governance (Roles & Responsibilities)
HPE Growth has an experienced, multidisciplinary team of professionals, bringing over 150 years of investing experience to the Fund. The team is comprised of 18 investment, capital formation and operations professionals whose combined expertise positions the Firm as one of the best technology growth equity investors in Europe. HPE Growth has a strong leadership of four Partners. These executives have over more than 70 years of combined, complementary experience in technology growth capital, private equity, investment banking, entrepreneurship, and operations. The Partners have worked together since 2015 and have strong networks both in the deep local technology markets in Europe as well as in the US technology market, including Silicon Valley.
The Firm’s organisational setup is framed along the following three key pillars:
Investment Team: a clear and efficient governance structure comprising multiple committees which drive investment, general management, and portfolio company decisions.
Capital Formation Team: responsible for portfolio control, fundraising, investor relations functions and ESG & SFDR.
Operations and Risk Management Team: a well-defined and tailored core infrastructure, incorporating legal, compliance, risk, financial, HR, IT and Facilities.
HPE Growth has created a special position, Head of ESG, within the Capital Formation Team to oversee ESG governance. The Head of ESG reports to HPE Growth’s partners directly on all ESG related matters and works closely with the investment and operations teams to ensure ESG issues are fully embedded within the organisation. The Head of ESG has the following responsibilities among others:
Implementing and adhering to the Responsible Investment Policy.
Continuously improving HPE Growth’s efforts on ESG matters and disclosures.
Raising awareness and providing training sessions to HPE Growth’s employees.
Monitoring and evaluating all portfolio companies on ESG issues by, for example, tracking key performance indicators (“KPIs”).
Reporting to investors, by among others the annual Impact Report, which serves to report on the ESG KPI’s and on the impact on the SDGs), and website publications.
Reporting on the responsible investment approach to the UN PRI.
Collaborating, engaging and supporting best practices on responsible investment within the industry
HPE Growth has built a compensation program that is designed to ensure no improper treatment of investors or other risk-taking behaviour will occur and to remunerate and support staff fairly, appropriately, and objectively. HPE pays part of its staff a combination of fixed remuneration (salary and benefits) and variable remuneration (including bonus). Variable remuneration for relevant staff considers compliance with all policies and procedures, including those relating to the impact of sustainability risks on the investment decision making process.
Corporate Sustainability
HPE’s governance is transparent, straightforward, and robust. We have simple onshore Fund structures, and our investors have a seat at the table in our Investment Advisory Committees Diversity is one of the key priorities for HPE’s team We have a long way to go in terms of female management/ Partner representation, however, we strive to maintain an inclusive culture throughout our team. Our goal is to have more than 25% female representation in our team by the end of 2022 and strive to continue past this goal.
As a company we strive to be as sustainable as possible We rent an energy efficient building and commute by train or bike We only travel by plane for our international destinations when needed and are using online meetings whenever possible. Employees of HPE Growth should not drive lease cars and HPE Growth does not provide company cars to its employees, but instead they are encouraged to travel by low carbon or public transit. HPE Growth has rented a modern office space in a building with central climate control and automated low energy lighting. We have further abandoned and replaced soft-drink cans and one-way PET bottles by a system of re-usable water-bottles. We are committed to embody the same principles and standards which we hold for our portfolio companies.
Policy Oversight & Review
To achieve success in the consideration of ESG issues, HPE Growth follows a process of continuous improvement method. This Responsible Investment Policy is reviewed at least annually and, when necessary, updated to keep pace with the emerging requirements that HPE Growth and portfolio companies are governed under and the good practices from the industry.
We consider it important to equip our organization with the knowledge of responsible investing. Organizational learning, knowledge gathering and sharing around ESG related topics within HPE Growth, and our portfolio companies are key aspects to achieve this. HPE Growth actively communicates the Responsible Investment Policy to internal and external stakeholders.
