GP Selection

Our ESG due diligence considers the breadth and depth of a GP’s ESG integration practices into their investment process.

A comprehensive analysis of the following ESG factors culminate in an ESG risk profile of the relevant GP and/ or PE fund which is presented as part of the investment memo for the Investment Committee’s approval.

ESG Policy and Practices

An ESG policy has become a baseline expectation from GPs. Some indicators of quality that we look for in the GP’s policy and practices include:

• Responsible investment values expressed through prohibited industries

• Board and C-suite level oversight for sustainability matters and a robust accountability structure for management and escalation of ESG risks

• Alignment with global standards such as Principles of Responsible Investment and integration of ISSB Standards

• Rigor of pre- and post-investment ESG risk management

• Extent of engagement with portfolio companies on ESG risks and value creation

Resources and Capability Building

Dedicated sustainability resources and a regular training program supports strong awareness and proper management of ESG issues. We note that some GPs have built external support networks of subject matter expertise to supplement and strengthen their responsible investment practice

Industry Engagement

We view a GP’s active participation in collective engagement platforms positively. It reflects a commitment to investing responsibly, rallies the industry around meaningful initiatives and promotes a sharing of best practices.

Environmental and Climate Action

We evaluate a GP’s commitment to and progress on environmental action. With increasing attention on climate risk, we consider how GPs identify and assess material climate change risks and respond with mitigation measures.  Forward-looking GPs have asked their portfolio companies to start measuring their greenhouse gas (“GHG”) emissions and identify opportunities for strategic positioning. Best practices involve developing action plans to take advantage of lower cost renewable energy, capitalising on incentives offered by policy stimulus, and decarbonising the supply chain with relevant procurement policies and engagement with strategic suppliers.

Reporting and Transparency

We place a value on transparent reporting – GPs who proactively engage with investors on ESG incidents, track and make available sustainability performance indicators and who disclose their progress and outcomes of stewardship measures.

Good governance fosters trust, transparency and integrity in organisational practices

Azalea’s operational due diligence process complements our financial and ESG due diligence by examining the strength of the GP’s controls over important areas such as legal and regulatory compliance, data security, cybersecurity and financial management. It seeks to ensure that we select and invest with quality GPs that have good principles of governance in place and align with our standards of accountability towards investors.