Kings Arms Yard VCT | ESG

The Company is a Venture Capital Trust, and therefore the day-to-day operations are delegated to the Company’s Manager, Albion Capital Group LLP (“Albion Capital”). Albion Capital takes the concept of sustainable and responsible investment very seriously for existing investments made and in reviewing new investment opportunities. In turn, the Board is kept appraised of ESG issues in connection with both the portfolio and in how Company affairs are conducted more generally as a regular part of Board oversight. Albion Capital’s commitment to ESG is on its website at www.albion.capital/sustainability-and-esg.

The Board and Manager have exercised conscious principles in making responsible investments throughout the life of the Company, not least in providing finance for promising companies in a variety of important sectors such as technology, healthcare and renewable energy. In making the investments, the Manager is directly involved in the oversight and governance of these investments, including ensuring standards of reporting and visibility on business practices, all of which are reported to the Board of the Company. By its nature, not least in making qualifying investments which fulfil the criteria set by HMRC, the Company has focused on sustainable and longer-term investment propositions some of which will grow and serve important societal demands. One of the most important drivers of performance is the quality of the investment portfolio, which goes beyond the individual valuations and examines the prospects of each of the portfolio companies, as well as the sectors in which they operate – all requiring a longer-term view.

In the nature of venture capital investment, Albion Capital is more intimately involved in the affairs of portfolio companies than might be the case for funds invested in listed securities. As such, Albion Capital is in a position to influence good governance and behaviour in the portfolio companies, many of which are relatively small companies without the support of a larger company’s administration and advisory infrastructure. 

Albion Capital incorporates ESG considerations into its investment decisions. These form part of its process to create value for investors and develop sustainable long-term strategies for portfolio companies. Albion Capital reports ESG criteria to UN PRI (annually) and to the Board quarterly.

ESG principles are integrated at the pre-investment, investment and exit stages. This is reflected in transparency of reporting, governance principles adopted by the Company and the portfolio companies, and increasingly in the positive environmental or socially impactful nature of investments made. Albion Capital, where relevant, considers climate-specific issues in its investment policies and activities. However, as the majority of the Company’s portfolio consists of small (2-250 Full Time Employees), private, typically software companies with limited environmental impact, climate change is not considered to be a significant risk, and actions are proportionate to that risk.

• Pre-investment stage

An exclusion list is used to rule out investments in unsustainable areas, or in areas which might be perceived as socially detrimental. ESG due diligence is performed on each potential portfolio company to identify any sustainability risks associated with the investment. Identified sustainability risks are ranked from low to high and are reported to the relevant investment committee. The investment committee considers each potential investment. If sustainability risks are identified, mitigations are assessed and, if necessary, mitigation plans are put in place. If this is not deemed sufficient, the committee would consider the appropriate level and structure of funding to balance the associated risks. If this is not possible, investment committee approval will not approve the investment.

• Investment stage

All new and existing portfolio companies are asked to report against an ESG Balanced Score Card annually. The ESG Balanced Score Card contains a number of sustainability factors against which a portfolio company will be assessed in order to determine the potential sustainability risks and opportunities arising from the investment. The score cards form part of the Manager’s internal review meetings alongside discussions around other risk factors, and any outstanding issues are addressed in collaboration with the portfolio companies’ senior management.

• Exit stage

Albion Capital aims to ensure that good ESG practices remain in place following exit. For example, by ensuring that the company creates a self-sustaining ESG management system during our period of ownership, wherever feasible.

Albion Capital is a signatory of the UN PRI. The UN PRI is the world’s leading proponent of responsible investment, working to understand the investment implications of ESG factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions.

Additionally, Albion Capital, in making its commitment to responsible investment and sustainability, has aligned itself with the UN Sustainable Development Goals (“SDGs”). By focusing on a few specific goals - G13 Climate Action, G10 Reduced Inequalities, G16 Peace, Justice and Strong institutions - and actively monitoring them, Albion Capital creates tangible positive action towards meeting of the global challenge by 2030. Many investments within our portfolio also have good alignment with delivering a number of other SDGs, including G3 Good Health and Wellbeing, G5 Gender Equality, G8 Decent Work and Economic Growth, G11 Sustainable Consumption and Production), which Albion Capital continues to identify, optimise and evaluate.

As noted above, at Albion Capital an exclusion list is used at the pre investment stage to rule out investments in unsustainable areas, or in areas which might be perceived as socially detrimental.

Albion Capital does not invest in the following businesses or activities:

• production of or trade in any product or activity deemed illegal under applicable local or national laws or regulations, or banned by global conventions and agreements, such as certain:

• hazardous chemicals, pesticides and wastes
• ozone depleting substances
• endangered or protected wildlife or wildlife products

• production of or trade in arms, i.e. weapons, munitions, or nuclear products, primarily designed or designated for military purposes
• production of fossil fuels
• tobacco
• gambling
• pornography
• fur

The Company's portfolio is currently invested in healthcare, renewable energy, education, software and other technology (which includes cyber security and data protection), and business services, with the most significant percentage of the Company’s portfolio invested in sectors and companies which would be seen by many measures to be both sustainable and socially aware based on the services they render. 

As a Venture Capital Trust, the Company has delegated all day-to-day operations to its Manager, and as such has nothing to measure in respect of its operations. However, the Board does keep informed of the ESG performance of the portfolio and of Albion Capital. Albion Capital has aligned itself with the SDGs (G13 Climate Action, G10 Reduced Inequalities, G16 Peace, Justice and Strong institutions) and actively monitors its performance under each.

G13 Climate Change: Albion Capital is committed to ensuring that the environmental impacts of its business operations are positive and as far as possible, any negative impact is mitigated. Some of its recent initiatives:

• Since January 2021 Albion Capital  has been monitoring its carbon footprint using PlanA software
• Net Zero carbon emissions strategy is currently being designed

G10 Reduced Inequalities: Albion Capital aims to conduct its business in a socially responsible manner, to contribute to the communities in which it operates and to respect the needs of its employees and all of its stakeholders. Some of its recent initiatives:

• Unconscious Bias training for leadership team
• Mental Health First Aid training and mental health support network established at Albion Capital
• Future VC, a paid internship offered to groups that have historically been underrepresented in the industry
• FairHQ, working with expert consultancy to establish diversity and inclusion strategy for Albion Capital as fund manager
• Women in Leadership Series, video interview with women founders and CEOs in portfolio 

G16 Peace, Justice and Strong Institutions: Albion Capital seeks to conduct all of its business activities in an honest, ethical and socially responsible manner and these values underpin its business model and strategy. Some of its recent initiatives:

• Updated ESG for investment process including introduction of ESG Balance Score Cards reporting for portfolio companies
• Regular ESG updates for VCT boards
• Albion Capital is actively involved in promotion of ESG within venture capital industry,  working closely with BVCA and others to support adoption of ESG framework.

Additionally, to support local biodiversity Albion Capital is planning a tree planting field trip for October 2021.

The Company’s Annual Report and Financial Statements contain disclosures on ESG within its Section 172 disclosure and within the strategic report, this can be found on the Company’s webpage on the Manager’s website under “Financial Reports and Circulars”.

The Company adheres to the principles of the AIC Code of Corporate Governance and is also aware of other governance and corporate conduct guidance which it meets as far as practical, including in the constitution of a diversified and independent board capable of providing constructive challenge but also, through its experience of the Company, continuity over the longer-term investments the Company makes. 

Albion Capital supports two UK based charities: Whizz Kidz and Generating Genius. In Spring 2021 it hosted the Albion Spring Challenge which encouraged Albion employees to take up physical activity and fundraise for charities at the same time.  

This statement outlines the approach of the Company and Albion Capital to ESG matters as at May 2021. ESG matters are subject to increasing regulation and the policies of the Company and Albion Capital may be subject to change.