Responsibility

Embedding ESG into the investment cycle

Triton’s ESG programme is based on our responsible investment policy and applies to all investment strategies.

In Private Equity, which accounts for around 90% of Triton’s funds under management, ESG risks and opportunities are identified and managed throughout the investment cycle – from initial research to our final exit from the company (as shown below),

ESG Governance Structure

Our ESG governance structure enables Triton’s PCs to mitigate risks and realise ESG opportunities aligned to their business activities, helping them create and protect value under our ownership and for the future.

Within Triton, overall responsibility for the ESG programme, along with all investment decisions, sits with the Fund Manager Board. The Board is advised by the Investment Advisory Committee (“IAC”) and receives regular reports from the ESG team.

Triton’s dedicated ESG team of five full-time professionals works closely with the deal teams and PC board representatives. It also provides ongoing support and expertise to ESG representatives within PCs.

In all cases, the PC board has ultimate responsibility for the ESG agenda. In practice, PC CEOs designate responsibility for delivery of the ESG plan to their management team.

Depending on the company, this might be the CFO, in-house counsel, HR, Communications Director, Quality Health Safety Environment Director, or a dedicated Sustainability role. These individuals are supported by the ESG team every step of the way.

PRINCIPAL ADVERSE SUSTAINABILITY IMPACTS STATEMENT

Sustainability Related Disclosure

Triton Investment Management Limited (“TIML”) does consider the principal adverse impacts of its investment decisions on sustainability factors.

The Triton RI Policy and Responsibilities

Triton has a responsible investment policy (“RI Policy”) setting out its approach to identifying and managing ESG factors in both investment and portfolio management processes. The RI Policy was first developed in 2012. It was most recently revised and approved by the Board of Directors of TIML on 9 March 2021.

The ESG Team is responsible for the implementation of the RI Policy and the Head of ESG has the overall responsibility for the ESG programme. 

Triton expects each portfolio company’s board to take full responsibility for implementing the ESG Programme in their business. In practice, portfolio company CEOs and boards designate responsibility for ESG agenda delivery to members of their management team, who are supported by the ESG Team in implementing the Programme.

Methodologies to assess the principal adverse impact

As part of the investment decision-making process, all potential portfolio companies are reviewed for ESG risks and opportunities. The ESG Team applies their professional judgment to identify the principal adverse impact of every potential investment. This is supplemented by online screening to identify any adverse impacts and negative media coverage. In addition, for Triton Mid-Market (“TMM”) and Triton Smaller Mid-Cap (“TSM”) funds, standalone ESG due diligence is conducted by third-party experts.

Triton rolled out formal KPI reporting to track how its activities impact the environment and the people and communities in which Triton’s portfolio companies operate. The indicators selected were those that were considered relevant for all portfolio companies. In 2020, these indicators were reviewed to align with Triton’s external and internal materiality assessment.

This systematic annual reporting allows us to track improvements during Triton’s ownership and identify and prioritise the management of material ESG risks and opportunities.

The ESG Team assists portfolio companies in carrying out an appropriate materiality assessment to determine the probability of occurrence and severity of each adverse impact. This process is supported by a third-party tool that analyses relevant information available from public sources. The material topics identified help portfolio companies to recognize ESG issues, risks and opportunities in their ESG action plan. Materiality assessments are currently being rolled out to portfolio companies and Triton sector teams.

Data sources and margin of error

Triton manages funds that invest in private equity majority control opportunities or minority debt positions. For our private equity funds across the TMM and TSM strategies, we collect the relevant information directly from our portfolio companies. This is reported through our online KPI reporting platform on an annual basis.

For Triton’s debt funds, we base our analysis on material adverse impacts in accordance with the sector of the companies we invest in and complement this with company-specific information.

Engagement policies

Triton believes that better businesses will play a crucial role in a sustainable world, and ESG is a critical element of Triton’s toolkit for building them.

Our engagement with portfolio companies begins with a comprehensive onboarding process. In the first year of ownership, Triton works with all portfolio companies to assign responsibilities for ESG management and develop an ESG action plan.  We also introduce mandatory improvements to the ESG control environment, including the requirement to implement a minimum set of group-wide ESG-related policies.

Key stewardship objectives

Triton’s onboarding process for a portfolio company is followed by a detailed Programme. In consultation with portfolio companies, Triton sets annual portfolio-wide ESG focus areas to drive improvement across the portfolio based on current relevant topics. For example, in 2021, these focus areas centred around energy consumption, carbon emissions, circular economy, health and wellbeing, safety, supply chain management, loss prevention, data protection and cybersecurity. In addition, we encourage portfolio companies in identifying relevant Sustainable Development Goals (“SDGs”) and setting associated targets.

Progress against each portfolio company’s ESG Action Plan and its ESG programme generally is closely tracked and appropriate adjustments are made when required.  For example, several understandable adjustments were made in 2020 because of the COVID-19 pandemic.

In 2019, Triton piloted an exercise to estimate the financial value created and protected through improvements in energy efficiency and reductions in accidents and absenteeism. In 2020, we extended this initiative to several other portfolio companies to increase the scope of the assessment.

The specific approach to climate-related risks and opportunities

In 2019, Triton developed a portfolio energy transition strategy which, encourages portfolio companies to improve their energy and resource efficiency by implementing measures such as switching to renewable energy sources.  In order to compensate for portfolio company 2019 Scope 1 and 2 emissions and the Scope 2 and 3 emissions of Triton’s own footprint, Triton also partnered with ClimateCare to offset over 300,000 tonnes of CO2e and intends to do the same for our 2020 emissions.

An important recent commitment is Triton’s active membership of Initiative Climat International (“iCI”), a collective commitment to understand and reduce carbon emissions of private equity-backed companies and secure sustainable investment performance. 

Triton supported its portfolio companies to assess relevant climate-related risks and opportunities in line with guidance from the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (“TCFD”). Portfolio companies are now expected to implement management actions arising from their reviews of climate-related risks and opportunities.

Since 2020, portfolio companies have also been expected to develop a programme to manage their material environmental impacts – this includes identifying and realising opportunities from circular economy initiatives.

Most of our portfolio companies have now put in place an environmental programme. Climate change remains a key focus area for portfolio companies in 2021. We are now focused on ensuring that our businesses identify opportunities to align with the EU Taxonomy for climate change mitigation and adaptation, whilst ensuring no harm is done to the other environmental objectives.

Escalation

Triton has a structured, active ownership process, which aligns the expertise of the Chair, the CEO, the investment captain and other senior Executives to collectively shape portfolio companies’ strategy, corporate governance and capital structure and support them in managing their social and environmental impact. We are encouraging portfolio company boards to establish quantified targets for material ESG issues.

International standards

Triton’s RI Policy was developed in alignment with the UN Global Compact’s Ten Principles, the Universal Declaration of Human Rights and the OECD Guidelines for Multinational Enterprises.

Triton became a signatory of the UN PRI in May 2012 and is fully compliant with the PRI reporting requirements. Triton reports to the PRI on an annual basis. The Transparency Report is available on the firm’s website. Triton was awarded an “A+ rating” for Strategy and Governance and Private Equity in 2020 and also voluntarily published its PRI Climate Transparency Report.

In terms of other reporting frameworks, Triton has conducted a gap analysis of its internal processes against the TCFD recommendations which have indicated some improvements when considering climate-related issues in the investment processes.

In 2019, Triton also conducted an initial mapping of relevant material SDGs to each of its portfolio companies.  Several Triton portfolio companies have used SDGs to support their public sustainability reporting. In 2021, the ESG Team intends to build on this initial mapping to assist our portfolio companies in identifying and assessing future material ESG opportunities.

Triton encourages its portfolio companies to consider which ESG-related standards, guidelines, reporting frameworks and initiatives are most relevant to them, taking account of national regulations and competitor benchmarks. Examples include the Global Reporting Initiative (“GRI”) for public ESG reporting, ISO 50001 for energy management, and the UN Principles for Business and Human Rights for managing labour standards in direct operations and supply chains. 

The United Nations’ (UN) Sustainable Development Goals (SDGs) set out a blueprint for a prosperous and sustainable world.

Triton believes that businesses have an important role to play in delivering positive social and environmental change. The SDGs help us to identify and prioritise our ESG activities and demonstrate measurable impact against our goals.

We have aligned our material ESG topics with the SDGs to which Triton and its portfolio companies can make the biggest contribution. These, including relevant SDG targets, are set out below.