Foresight Enterprise VCT | ESG

Sustainability lies at the heart of Foresight’s business, Group-wide. Foresight believes that acting conscientiously as a corporate entity and investing responsibly by seeking to achieve positive environmental and social outcomes are critical to the long-term success of both Foresight and the funds it manages.

The Sustainability Committee was established by Foresight Group’s Executive Committee and has the responsibility for shaping and steering the Group’s approach to sustainability. An important part of the Committee’s remit is to develop and review the Group’s sustainability vision and strategy, as well as ensuring that the sustainability considerations and frameworks that are incorporated into Foresight’s investment processes and asset management activities are appropriate and market leading. Meeting once a quarter or more frequently on an ad-hoc basis as required, the Sustainability Committee includes senior leadership from the key teams at Foresight to ensure its influence and views reach across the whole business. The Committee is required to report regularly to the Executive Committee on such matters. Foresight Group’s Sustainability Policy and Approach can be viewed here on our website Sustainability Policy 2023 (foresight.group)

Across Foresight, we align ourselves with a number of external sustainability and ESG focused organisations, all of which guide our approach, and some hold us to account by way of annual submissions and reports. We have been a signatory of the Principles for Responsible Investment (“PRI”) since 2013 and a member of the UN Global Compact since 2019.  As part of our commitment to the transition towards net zero, Foresight has signed the statement in support of the Taskforce for Climate Related Financial Disclosures and has recently joined the initiative Climate International (“iCI”), recognising that systemic issues such as climate change require a collaborative approach.

Foresight is also a member of several other important initiatives including the UK Sustainable Investment and Finance Association (“UKSIF”) and Pensions for Purpose, a collaborative initiative between fund managers, pension funds and social enterprises to promote understanding of impact investing. Foresight is an accredited Living Wage Employer and encourages its portfolio companies to pursue these objectives. Foresight is also a signatory of the HM Treasury’s Women in Finance Charter, committing the Group to implement recommendations to improve gender diversity in financial services, and the Investing in Women Code, a commitment by financial services firms to improving female entrepreneurs’ access to tools, resources and finance.

Key to the Private Equity Team’s approach to ESG are five ESG principles, which we have identified as the main areas where it is possible to evaluate, monitor and encourage portfolio companies to develop their ESG standards. The ESG progress made by a particular company is regularly monitored and a five-principle analysis of each portfolio company, supported by quantitative and qualitative data, is undertaken prior to investment and annually throughout the life of the investment. This evaluation involves the company’s track record, current position, potential (the opportunities available), as well as the risks. The investment’s absolute ESG impact is considered alongside the potential for the company to improve its ESG record and the progress it makes with targeted improvements.

All investments made after May 2018 by Foresight 4 VCT Plc are within the scope of the ESG framework.

Over recent years, we have increasingly aligned our investment screening approach with the UN Sustainable Development Goals (“SDGs”), recognising that small businesses play a crucial role in delivering the targets set under these goals. Most recently, we have evolved our investment strategy to an outcome orientated approach that identifies and measures the contribution our companies make to four societal challenges, or Impact Themes, based on the SDGs.

Five Principles Approach

Awareness

• Does the business demonstrate a good awareness of corporate social responsibility?
• Is this reflected in its processes and management structure?

Environmental Factors

• Does the company follow good practice for limiting or mitigating its environmental impact, in the context of its industry?
• How does it encourage the responsible use of the world’s resources?

Social Factors

• What impact does the company have on its employees, customers and society as a whole?
• Is it taking steps to improve the lives of others, either directly, such as through job creation, or indirectly?

Governance Factors

• Does the company and its leadership team demonstrate integrity?
• Are the correct policies and structures in place to ensure it meets its legislative and regulatory requirements?

Third Party Interactions

• Is the principle of corporate responsibility evidenced in the company’s supply chain and customers?
• How does it promote ESG values and share best practice?

In tandem with our Five Principles approach, we recognise that our companies make a positive contribution towards systemic change. By applying an outcome focused approach, we can understand, measure and track the positive impacts that our companies have on society and the environment.

To do this, we have identified four Impact Themes that are aligned with the Sustainable Development Goals. These themes help us assess any opportunities in the business model and, by mapping our existing investments to them, we can identify the value both for the companies and for society.

1. Quality Employment at Scale (aligned to SDG 8: Decent work and economic growth)

Foresight invests in small, growing businesses that are vital to a healthy economy. SMEs are also a huge provider of employment, accounting for 61% of all jobs in the UK’s private sector. By helping small business owners with their growth ambitions, to date Foresight has supported the creation of c.1,000 jobs. We recognise that every employee at our portfolio companies is a strategic asset and we work with our management teams to foster inclusive and engaged workplaces.

2. Health (aligned to SDG 3: Good health and wellbeing)     

In addition to supporting companies that supply the pharmaceutical industry and help maintain NHS equipment, we have invested in companies that promote mental health and other wellbeing initiatives. During the COVID-19 pandemic, the health and safety of all employees has been paramount, and we have worked with our management teams to provide COVID secure workplaces and support the wellbeing of staff. We also encourage all of our portfolio companies to provide workplace benefits covering a range of areas including medical cover and cycle to work schemes.

3. Research and Innovation (aligned to SDG 9: Industry, innovation and infrastructure)

Research and development play a crucial role in the innovation process. They can lead to improvements to existing processes and increase efficiency as well as the creation of new products and services. By investing in innovative SMEs, we are supporting companies that stand ahead of their competitors, creating new jobs and driving change.

4. Sustainable, inclusive, local infrastructure and the environment (aligned to SDGs 15: Life on land, 9: Industry, innovation and infrastructure and 11: Sustainable cities and communities)

We believe that to deliver sustainable and inclusive growth, we must support quality, reliable and resilient companies. We have invested in a broad range of companies including those that are improving the safety of housing facilities in disadvantaged areas and those that are introducing new products and services to the market. Our portfolio companies are encouraged to engage with their employees and local communities and understand the effects they have on the environment.