A Futuregrowth ESG case study
IN A NUTSHELL
- ESG screening is a crucial aspect of the
- Sustainability is key to understanding risk.
- Engagement is a powerful aspect of gauging opportunity.
- We are able to influence our investment partners to
drive positive change.
An effective investment strategy is all encompassing and should not be based solely on the financial assessment of a transaction.
The inclusion of environmental, social and governance (ESG) screening is thus crucial in the assessment of any potential
investment and underpins a sustainable investment case.
Futuregrowth’s responsible investment strategy focuses on integrating ESG factors into the investment process. This includes investment screening, financial analysis and management engagement. We recognise that in the complex financial environment in which we operate, there is no one-size-fits-all solution to analysing companies for sustainability issues, and note that there will be variances in our approach.
In order to fully understand the risks associated with an investment
opportunity, we consider a range of investment criteria during the
due diligence process.
Our mandate is to be a long-term funding partner and, as such,
we view sustainability as key to understanding the risks associated
with a particular investment. For this reason, ESG integration –
although a critical measure of sustainability – should not be a
stand-alone process but should form part
of the larger analysis process.
ESG analysis involves performing detailed
due diligence on a company’s policies,
actions and processes. Management
engagement is one of the key ways we assess an investment and
determine whether the current controls in place support responsible
It is for this reason that we structure the majority of our unlisted
loans internally and thus have dedicated and experienced analysts
who take the time to fully understand a business, and are able to
successfully negotiate terms that are mutually beneficial to both
parties. In our experience, these types of investment opportunities
provide us with enhanced protection measures, as opposed to the
terms available to investors in the listed market.
Last year, we were considering an investment opportunity presented
by a South African pork producer. We had an opportunity to
engage with this privately owned company on their factory farming
practices and, in particular, on the topic of the humane treatment
Despite the financial standing of the company in question, our
point of departure for the industry (and this transaction) was our
support of the principles outlined in the World Organisation for
Animal Health and GLOBALG.A.P*.
These principles are founded on the ideals
of high standards of animal welfare and good
As part of our investment due diligence
process, we took time to understand the
company’s view, policy and practices around
supplier requirements, factory farming standards and slaughter
processes. These were then considered in relation to established
standards. In addition to this, we explored sustainable change and
alignment with industry best practice standards for farmed animals
for the company itself, and also along the supply chain.
We concluded our due diligence and credit approval process
towards the end of 2014, with the first draw under the facility
taking place in the first quarter of 2015. The following is a highlevel
summary of the issues considered:
Supporting high standards
It is our philosophy to invest in sustainable businesses on behalf of our clients. Furthermore, we believe that we should be a long-term partner, and as such we believe that given our role, we are able to influence our investment partners to consider all aspects of their business practices, particularly if some processes do not measure up to “best practice”. Futuregrowth is committed to managing its investments in a responsible and sustainable manner. In doing so, we believe that we are able to contribute positively to the long-term success of our business and deliver on our client promise to provide sustainable returns that contribute to pension funds’ long-term return objectives, risk tolerances and mandates.
*G.A.P: Good Agricultural Practice