Causeway Capital Partners I, LP (“CCPI”)

SFDR Statement (Article 8 Disclosure)

Summary

Causeway Capital is a value-add private equity investment manager. It launched its first fund (CCPI) in 2016, targeting investments in small to medium sized private companies with the potential to deliver strong risk adjusted financial returns and make a broader economic impact through the support and creation of sustainable employment and increased international trade.

The Sustainable Finance Disclosure Regulation (“SFDR” or the “Regulation”) applied from 10 March 2021. Causeway Capital fully endorses the SFDR’s objective of reducing so-called ‘greenwashing’ through regulating the information provided by financial market participants to investors.

CCPI is an Article 8 fund as set out in the SFDR. This means that the fund promotes, amongst others, environmental or social characteristics, and that the companies in which investments are made follow good corporate governance practices.

Environmental and social characteristics of CCPI

CCPI promotes the following environmental or social characteristics:

  • CCPI applies an ESG framework that supports investments in improving their ESG performance; and

  • CCPI aims to exclude investments that conflict with its exclusion policy – which excludes industries/activities based on negative environmental or social characteristics in accordance with Causeway Capital’s Responsible Investment (ESG) Policy,

(the “Environmental or Social Characteristics” and each an “Environmental or Social Characteristic”).

Information related to CCPI and its portfolio company ESG scorecard (showing performance of each portfolio company with respect to certain ESG metrics) is included in quarterly investor reports.

Investment Objectives

CCPI’s investment objectives do not specifically include sustainable investment, a requirement for Article 9 products.

Investment strategy

CCPI’s strategy is to invest in a diverse range of privately held, small to medium sized companies in ROI and the UK with strong growth potential. CCPI is invested into 7 portfolio companies through a range of transaction structures and Causeway Capital has strategic influence at each company through its contractual control protections and board representation.

Causeway Capital prioritises potential investee companies with strong environmental or social characteristics in line with our Responsible Investment (ESG) Policy on our website. The key themes of this policy are, to the best of our ability, to:

  • Comply with all relevant regulations and best practice, at the manager level and at our portfolio companies, in the countries in which we operate

  • Manage and minimise our own direct ESG impacts at a manager level

  • Integrate ESG considerations into all stages of the deal cycle – in relation to pre-investment diligence and portfolio management (including 100-day plans), and also at exit, recognising the long-term value added by ESG initiatives

  • Encourage portfolio companies to consider and address all ESG issues relevant to their business, with the aim of delivering continuous improvement

  • Track and report progress of ESG initiatives at portfolio companies. We include an ESG section and scorecard in our quarterly and annual reporting to LPs

  • Commit not to invest in companies whose primary business activities involve: arms / ammunition, gambling, pornography, tobacco, or other vices. We will not invest in companies that fail to meet minimum international human and labour rights standards

Proportion of investments

Causeway Capital’s Responsible Investment (ESG) Policy ensures that all (100%) individual investments promote the funds environment and social characteristics.

In addition, Causeway Capital has analysed the investments made by CCPI since its inception and confirms that 100% of these investments were sustainable investments as defined in article 2(17) SFDR. Note that it is not a formal requirement under CCPI’s fund objectives to make sustainable investments.

Monitoring of environmental or social characteristics

After an investment has been made, the Investment Team continues to monitor its progress on key ESG metrics using Causeway Capital’s ESG scorecard. Summary reporting data is included in quarterly and annual investor meetings. In addition, third party specialist consultants may be used if deemed necessary.

Methodologies

Causeway Capital’s portfolio company ESG scorecard comprises a number of common and specific metrics to each portfolio company that combine to provide an overall view of ESG performance and progression. The scorecard methodology is reviewed at least annually to incorporate industry standard developments.

Data sources and processing

The Investment Team will utilise portfolio company management information in order to curate its ESG scorecard. At certain times, The Investment Team will work with third party external consultants (eg. In pre-Investment due diligence or mid-Investment status reports), where the third party external consultants provide an independent view on the relevant ESG data and information.

Limitations to methodologies and data

The Investment Team is primarily reliant on the relevant portfolio company in gathering this data. As mentioned above, the Investment Team will work with third party external consultants at certain points which provides some independent third-party verification of the data we are dealing with.

Due diligence

The Investment Team will look to integrate ESG considerations into all stages of the deal cycle – in relation to pre-investment diligence and portfolio management (including 100-day plans), and also at exit, recognising the long-term value added by ESG initiatives. When screening new opportunities, the Investment Team will assess ESG considerations and should an opportunity move to diligence and ultimately investment, additional due diligence is undertaken where necessary / risk is identified.

Engagement policies

ESG is a standing board agenda item at all our portfolio companies where Causeway Capital engages through our board representative. Where investee companies establish ESG board sub-committees, Causeway Capital will join as a full member.

Information on any designated reference benchmarks used

Not applicable at present. Causeway Capital intends to incorporate external benchmarks into its processes in due course in line with the industry in general.

Integration of sustainability risks

CCPI’s policy on the integration of sustainability risks in its investment decision making process is set out within the Responsible Investment (ESG) Policy.

Adverse Sustainability Impacts Statement

Due diligence policies with respect to the principal adverse impacts of investment decisions

CCPI conducts ESG due diligence for each potential investment. Within the ESG due diligence, CCPI focusses on assessing whether there are any red flags (e.g. unmanageable ESG risks) that should prevent CCPI from proceeding with the potential transaction. In conducting its due diligence, CCPI pays particular attention to potential adverse impacts on sustainability factors arising from the company’s operations.

Policies on the identification and prioritisation of principal adverse sustainability impacts and indicators

During the screening and due diligence phases of each proposed investment, the consideration of sustainability impacts forms an integral part of the investment decision making process and will be continuously evaluated throughout on an on-going basis in order to understand whether an investment contemplated by CCPI will proceed further in the on-going due diligence and ultimately to the CCPI Investment Committee review.

Principal adverse sustainability impacts

The principal adverse sustainability impacts of CCPI’s investment decisions will typically vary depending on the sector and industry of the target company. However, CCPI will typically consider the following factors in its investment process: greenhouse gas emissions, share of non-renewable energy consumption and production, exposure to companies active in the fossil fuel sector and board gender diversity.

Information on how remuneration policies are consistent with the integration of sustainability risks

Causeway Capital pays staff a combination of fixed remuneration (salary and benefits) and variable remuneration. Qualitative non-financial performance metrics form a significant part of the assessment process. These metrics may include, for example, an employee’s failure to adhere to effective risk-management, to comply with applicable regulatory rules, unethical behaviour etc. Consideration of these factors (including where relevant an individual’s contribution to ESG-related efforts) may form part of the employee’s performance assessment process. In addition, a proportion of the variable remuneration for employees may be deferred. This allows ex-post performance adjustments to be applied to deferred remuneration where risks, including sustainability risks, materialise in the future.