Caledonia Investments | ESG

At Caledonia we are committed to building our business for the long term. To this end, we consider the sustainability of the investments we make and aim to operate our business in a sustainable manner.

At Caledonia we believe that responsible investment and business success go hand in hand. We are committed to building businesses for the long term and consider the ESG impact of the investments that we make.

Through proactive and constructive engagement with our portfolio, we are committed to fostering continuous improvement and driving positive change.

We expect to invest in businesses and funds which:

• grow, provide employment and generate economic benefit in an environmentally and socially responsible way, both during and after our ownership
• take a responsible approach towards the environment and society, based on good governance practices.

Chaired by our Chief Executive Officer, the Responsible Investment/Responsible Corporate Working Group (‘RI/RC Working Group’) advises and assists in the development and implementation of Caledonia's approach to sustainability matters, including climate-related issues. The group has met regularly throughout the year.

A review of our approach and progress across each investment pool, alongside our overall business operations for the year ended 31 March 2025 can be found on pages 47 to 55 of our annual report 2025: https://www.caledonia.com/shareholder-centre/results-reports/

We continue to recognise the importance of communicating ESG performance clearly to our stakeholders. We recognise a need to support the journey to net zero, with a commitment to supporting a sustainable future as we deliver investment performance for our shareholders over the long term. 

Our investments – Public Companies

We aim to invest in businesses which we believe are of high quality and have durable business models that enable long-term compounding.

Our extensive due-diligence process ensures that selection risk is managed by analysing numerous characteristics for each company and then, through ownership, our monitoring and engagement continues to ensure sustainability is embedded in our portfolio management process. 

Our approach means we do not typically invest in capital intensive businesses or companies directly involved in the extraction and production of coal, oil or natural gas.

In line with our selective, quality-driven investment approach:

• we exercise our voting rights judiciously, ensuring that we cast votes on all our holdings ahead of shareholder meetings
• while we generally vote in support of management’s recommendations, we will abstain or vote against proposals that we believe do not serve the best interests of our shareholders
• we will use influence through engagement and voting to encourage companies to proactively plan for and demonstrate the measures they have implemented to address climate risks and opportunities.

Our investments – Private Capital

We look to invest in established businesses with strong financial metrics operating in markets that present attractive opportunities for growth. Our long-term approach to working with our portfolio companies aligns with our responsible investment strategy throughout the investment cycle – from origination, ownership and exit. Working closely to support the management teams of portfolio companies, we look to:

• elevate corporate governance standards through the appointment of seasoned, non-executive chairs and by establishing audit and remuneration committees
• embed our team in non-executive roles, fostering close partnerships with management to drive performance whilst managing risk
• hold regular formal and informal meetings with management that encompass a wide range of topics, including ESG policies, and performance metrics that are reviewed annually
• actively assess and manage their social and environmental impacts, fostering responsible stewardship of their businesses
• encourage investment in technologies to improve energy efficiency and support a successful transition to a low-carbon future.

Our investments - Funds

We invest in funds operating in North America and Asia with a bias towards lower mid-market buyouts. The pool provides attractive diversification, investing in 80 funds managed by 45 managers with an underlying portfolio of over 600 companies, across a range of sectors.

We expect our fund managers to consider all factors including ESG considerations, when seeking to optimise returns while effectively managing risk.

We will encourage our fund managers to consider climate change factors in their selection criteria, both in terms of identifying potential risks and capitalising on emerging opportunities, and to explore initiatives that help reduce emissions within the underlying portfolio.

At Caledonia, we are committed to building a sustainable future that underpins robust, long term investment performance for our shareholders. We recognise that our principal environmental impact arises primarily from the companies and funds within our portfolio.

With this in mind, we have set an expectation for the businesses we invest in to target net zero emissions (Scope 1 and Scope 2, market-based) by 2050. We understand that the pace at which these targets are met will vary across our portfolio; as risks and opportunities arise from evolving regulatory frameworks, shifts in consumer preferences, or increasing pressure to curb carbon emissions and address wider environmental issues.

We actively engage with our underlying portfolio companies and fund managers to evaluate the robustness and transparency of their carbon emissions data. We continue to enhance our monitoring and reporting systems to enable us to track progress on this journey towards a low-carbon future and we anticipate that many will achieve this target more swiftly.

At Caledonia, we are committed to building a sustainable future that underpins robust, long term investment performance for our shareholders. We recognise that our principal environmental impact arises primarily from the companies and funds within our portfolio.

To reach this target, we are pursuing several initiatives, including:

• maintaining our commitment to sourcing all electricity from renewable suppliers
• enhancing energy efficiency across lighting, cooling systems and IT equipment
• gradually reducing, with the goal of ultimately eliminating the use of gas for heating.

In 2021, our switch to a renewable energy provider markedly reduced our market-based Scope 2 emissions. We continue to recycle nearly all waste and ensure that wastewater is safely returned to the sewer system.

The resulting emissions from water and waste processes are categorised under ‘other’ Scope 3 emissions and are considered immaterial.

It is worth noting that electricity consumption has risen since 2020, mainly due to the return of colleagues to the office after the Covid-19 pandemic and, more recently, our decision to operate 24-hour security for enhanced safety.

In 2023, we engaged an external provider to conduct an Energy Savings Opportunity Scheme audit of our office energy usage. This provided us with a number of recommendations which we have implemented.

Looking ahead, our transition strategy will be to explore the implementation of innovative, low-carbon alternatives to replace our traditional gas boiler heating system.

Further information on our climate change metrics can be found on pages 52 - 55 of our annual report 2025: https://www.caledonia.com/shareholder-centre/results-reports/

Our investments

We have set an expectation for the businesses we invest in to target net zero emissions (Scope 1 and Scope 2, market-based) by 2050. We understand that the pace at which these targets are met will vary across our portfolio; as risks and opportunities arise from evolving regulatory frameworks, shifts in consumer preferences, or increasing pressure to curb carbon emissions and address wider environmental issues. 

We actively engage with our underlying portfolio companies and fund managers to evaluate the robustness and transparency of their carbon emissions data. We continue to enhance our monitoring and reporting systems to enable us to track progress on this journey towards a low-carbon future and we anticipate that many will achieve this target more swiftly.

Most of our colleagues commute to our office via public transport. We actively encourage sustainable travel through our cycle-to-work programme, supported by secure bicycle storage along with changing and shower facilities. Our meeting rooms are equipped with modern audiovisual and teleconferencing facilities, reducing the need for travel where appropriate.

Our Scope 3 emissions primarily relate to international business travel. Since 2020, the net asset value of our portfolio has increased by 64% and the proportion of our overseas investments has almost doubled. Our Public Companies and Funds investment teams continue to deepen their due-diligence, monitoring, governance and stewardship activities against a background of continuing macroeconomic and geopolitical uncertainty.

We remain committed to managing our business travel in an informed and responsible manner and will continue to explore ways in which we can reduce these emissions over the medium term.

At Caledonia we are committed to building our business for the long term. We seek to create a thriving workplace culture – built on shared, consistent values and purpose that helps us to attract, retain and develop exceptional people. This year we completed our second employee engagement survey to help us understand how we can continue to improve our working environment.

We were delighted to receive a 92% response rate to the anonymised survey and that 96% of those who responded recommended Caledonia as a “great place to work”. We benchmark our analysis against businesses within the UK’s financial services sector and were pleased that Caledonia is once again in the top quartile for both participation and engagement.

Feedback from colleagues helps us to shape the future direction of our business. Since our inaugural engagement survey in 2023 we have been working on a number of initiatives to help ensure that Caledonia remains a great place to work in the years ahead.

We are committed to creating an inclusive environment where our employees can develop and contribute fully, underpinned by good remuneration packages, favourable leave policies and health and wellbeing support, alongside training and development to support progression. 

At Caledonia we are committed to investing time to plan for success in the future, to sow the seeds that will flourish for generations to come.

Every June and July we welcome a cohort of successful applicants who we believe will benefit the most from the intern programme.

Led by an independent facilitator but with involvement from across Caledonia, the interns experience insight into the investment management industry, benefitting from a detailed programme. This includes building softer skills in a workplace environment, as well as learning from our investment teams on how and why we construct our long-term investment approach. The programme culminates in the group working in small teams to present their ‘Dragons Den’ style investment recommendations.

Ahead of the programme, each intern is assigned a mentor from the Caledonia team. The role of the mentor plays a key part in helping the intern through the programme.

As interns embark on their chosen careers, they can continue to maintain a lasting relationship with Caledonia, creating an important network of talent for the future.

Established in 2020, The Caledonia Investments Charitable Foundation is proud to support causes which link closely to Caledonia’s history, values, culture and team. The company made a grant of £300,000 to the Foundation. The Foundation provides support to a number of charities each year and seeks to create an enduring legacy by supporting the development of a small number of these through a multi-year donation programme. Material donations alongside smaller grants benefited other charities connected with Caledonia and its employees. We also provide colleagues with up to two additional days of leave each year to encourage them to volunteer their time to support the Foundation’s activities, together with other charities and good causes.

Please visit our Sustainability section of the annual report for further information.