Responsible Investment Policy

This document sets out Circularity Capital’s approach to its focus on investing in the circular economy and the management of environmental, social and governance (ESG) factors. All Circularity Capital staff are required to adhere to this policy.

Circularity Capital’s guiding principles

The circular economy provid­­es a framework for decoupling business growth from resource constraints, enhancing resource productivity and driving competitive advantage. The circular economy also provides an alternative to today’s primarily linear ‘take-make-dispose’ model of production and consumption and can drive positive environmental and societal impact.

Circularity Capital recognises that its activities as a specialist private equity investor in this field can have a significant impact on society and the environment. Circularity Capital believes that ESG factors are integral to the investment and portfolio management processes and has formalised its approach to managing these factors within this policy.

At the heart of Circularity Capital’s approach to ESG is its specialist mandate to only invest in businesses which have a measurable positive environmental impact and contribute positively to society – and in doing so to ensure best in class governance, transparency and diversity.

Circularity Capital is a signatory to the Principles for Responsible Investment (PRI) and is committed to implementing the PRI’s six Principles within our investment management activities:

  • We will incorporate ESG issues into investment analysis and decision-making processes.

  • We will be active owners and incorporate ESG issues into our ownership policies and practices.

  • We will seek appropriate disclosure on ESG issues by the entities in which we invest.­­

  • We will promote acceptance and implementation of the Principles within the investment industry.

  • We will work together to enhance our effectiveness in implementing the Principles.

  • We will each report on our activities and progress towards.

What ESG means in practice to our team and investment activities

Investment assessment, analysis and decision-making processes:

  • We implement a positive screening process to identify businesses which have a positive impact in accelerating the circular economy (in addition to avoiding PRI excluded sectors).

  • As part of this process we consider a spectrum of broader ESG factors using a scorecard assessment approach.

  • We use social and environmental impact metrics to monitor and assess the ongoing circular economy impact of each investee business in which we invest.

  • We work with an external advisor to support this assessment.

  • We agree appropriate legal drafting with management to integrate these ESG factors.

  • All the team are required to engage with ESG modules within our broader continual professional development program.

Post-investment through to investment liquidity:

  • Actions relating to ESG improvements identified during assessment/diligence are included in our post-investment 100-day plan process which is actioned by the investment team.

  • Regular interaction including attendance at investee company board meetings provides an opportunity for us to further support management teams achieve their circular economy and broader ESG strategies.

  • An annual review using our ESG score card system allows for us to monitor progress.

  • We place a major emphasis on transparency with our LPs – this includes providing annual reporting on the ESG performance of individual investee business and at a fund level.

  • We also make our ESG Policy available to investors and respond to ad hoc requests for ESG Information.

  • We make relevant ESG information, gathered through the due diligence and investment hold periods, available to potential buyers at the exit stage.

Disclosure:

  • We publicly report our ESG practices in the annual Responsible Investment Transparency Report produced for the PRI.

The Governance of this policy:

The management board of Circularity Capital LLP reviews and, where necessary, updates the ESG Policy annually to reflect on-going efforts to improve its ESG approach, as well as emerging requirements from stakeholders and evolving good practices. Circularity Capital LLP actively communicates its ESG Policy to its investment teams and will use the ESG Policy as a basis to engage internal and external stakeholders on ESG management, as appropriate.