Headway Capital Partners LLP is an independent London based investment firm providing a full range of capital and liquidity solutions to private equity managers and general partners (“GPs”) through its advised funds (together, “Headway”). Headway invests in private equity co-investments and secondary transactions, with a focus on independent sponsor, secondary direct and GP-led transactions involving small to mid-cap buyout and growth assets in Europe and North America.
Headway believes that sustainable investment and the appropriate consideration of Environmental, Social and Governance (“ESG”) factors are in the long-term best interest of all its stakeholders. Headway therefore recognizes and supports the growing importance of ESG in alternative investments.
The analysis of ESG factors is integrated into every stage of Headway’s investment process. In line with our investment strategy, Headway’s approach includes the consideration of ESG factors concerning both the companies and the general partners in which and with whom we invest.
Headway is a signatory to the UN-supported Principles for Responsible Investment (PRI), and as such, commits to the following Principles:
- Incorporate ESG issues into investment analysis and decision-making processes;
- Be active owners and incorporate ESG issues into ownership policies and practices;
- Seek appropriate disclosure on ESG issues by the entities into which investments are made;
- Promote acceptance and implementation of the Principles within the investment industry;
- Work together to enhance effectiveness in implementing the Principles; and
- Report on activities and progress towards implementing the Principles.
Headway believes the implementation of these Principles will result in better outcomes for its investors and closer alignment between their investment objectives and those of society more broadly.
Purpose and Scope of Policy
This policy summarises our commitment and approach to integrating ESG factors into our investment analysis and decision-making processes and asset management practices. This policy is approved by the Management Board and Investment Committee of Headway Capital Partners LLP, applies to all future investments (from the date of the policy), and will be updated periodically as we continue to progress in our ESG journey. All Headway employees are required to declare that they have read and understood this policy and agree to its implementation in their everyday work.
Given its focus on co-investments and manager-centric secondaries, Headway operates in a complex investment environment, and our ESG approach is dynamic and fit for our investment strategy. Headway’s approach is aimed at identifying and evaluating key ESG aspects of an investment from origination through to exit. Additionally, we advocate the GPs with whom we invest to incorporate ESG into their investment management practices, to recognize their ability to impact ESG within their portfolio companies, and to work towards implementing, measuring, and reporting on sustainability practices within these companies.
- identify key material ESG risks and opportunities as part of the due diligence, investment decision and ownership phases of its investment process;
- map material ESG issues to the United Nations Sustainable Development Goals (“SDG”), and to consider SDG alignment in its investment decisions; and
- encourage GPs to implement ESG best practices and support the building of long-term sustainable businesses in an environmentally and socially responsible manner.
Headway seeks to ensure that material ESG risks and opportunities are considered as part of our evaluation of any prospective investment.
Each prospective investment is first reviewed against a set of excluded activities: controversial weapons (cluster munitions, anti-personnel mines, chemical weapons), tobacco products, small arms, and thermal coal. If a majority of revenue is derived from these activities, the investment opportunity is automatically rejected.
During Headway’s initial due diligence, early red flags relating to ESG are identified for each prospective investment, and a prospective investment’s potential alignment with Sustainable Development Goals is also highlighted.
Headway’s investment due diligence process then includes assessment of the ESG risks and opportunities unique to each prospective investment, prioritization is based on sector specific risks as identified by SASB (Sustainability Accounting Standards Board) materiality map. Headway gathers relevant information through posing questions to GPs and/or senior management of the target companies.
Headway’s Investment Committee considers findings from ESG related due-diligence in deciding whether to proceed with an investment, as well as in its determination of what post-acquisition processes and practices should be implemented in order to improve and properly manage ESG-related risks. Each Investment Committee paper includes a specific section on ESG which summarises the outcomes of the ESG due diligence undertaken and highlights any material areas requiring improvement.
During its investment ownership, Headway seeks to ensure that ESG issues are regularly assessed through ongoing monitoring of ESG related information. Headway engages regularly with its GPs in an effort to support them constructively on the effective management of ESG issues. In addition, and to the extent available, relevant information is gathered from underlying investments.
Transparency and Reporting
Headway recognizes the benefits of transparency and is committed to continuously improving our ESG related disclosures and communication to clients and other key stakeholders. Presently, our ESG Policy is available to the public on our website, and our ESG Framework is available to our investors. We will seek opportunities to incorporate this information transparently, reliably and regularly into our normal internal and external communications and seek feedback and dialogue from our stakeholders.
Information relating to the EU Sustainable Finance Disclosure Regulation (the “SFDR”)
Integration of sustainability risks
Headway’s policy on the integration of sustainability risks in its investment decision making process is outlined above.
No consideration of sustainability adverse impacts
Investment firms are required to publish information on whether they consider the “adverse impacts of investment decisions on sustainability factors” (the “Principal Adverse Impacts”) under the SFDR. Funds advised by Headway which are in the scope of SFDR do not currently consider the Principal Adverse Impacts of investment decisions on sustainability factors in connection with all their products and services, as defined under and in accordance with the SFDR and are not required to do so. However, ESG has been integrated into Headway’s investment process in reflection of our belief that doing so enables us to better manage investment risks. As an indirect investor in private equity through secondary transactions and co-investments, there are limitations inherent to our investment strategy; our focus is on engaging with our portfolio GPs regarding ESG, rather than directly at the asset level. Headway is not currently in a position to obtain and/or measure all the data which SFDR would require us to report, or to do so systematically, consistently and at a reasonable cost. This is in part because underlying investments are not widely required to, and may not currently, report by reference to the same data.