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Kester Capital III LP
The contents of this document are intended to satisfy the requirements of Article 10 of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector, as it may be amended from time to time, and any laws, rules or regulations promulgated thereunder ("SFDR"). The information in this document is not for distribution to and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States of America to or for the benefit of US Persons. US Person includes, but is not limited to, a person (including a partnership, corporation, limited liability company or similar entity) that is a citizen or a resident of the United States or is organised or incorporated under the laws of the United States.
Kester Capital LLP ("Kester Capital") is a non-EU AIFM. As such, Kester Capital will be required to ensure compliance with SFDR, including the financial product related provisions, in the event that it enters the market of a given Member State by means of a National Private Placement Regime. In any event, Kester Capital has chosen to voluntarily align with SFDR because sustainability considerations are strongly embedded in the firm’s strategy, culture and values at all levels.
A) Summary
Kester Capital recognises the importance of managing environmental, social and governance ("ESG") matters in the businesses in which we invest, and we are committed to integrating responsible investment principles into the way we do business, while seeking to create the best possible returns on our investments. As part of our ESG Investment Policy, we have adopted an ESG framework based on environmental, social and governance themes to create a continuity of focus across our ESG integration process. As part of our ESG framework, each prospective investment made by Kester Capital III LP (the "Fund") will be assessed against eight environmental, social and governance themes. Within these broad themes, Kester Capital is equipped to focus down on the individual ESG matters that may be material to any one business. We use this framework to structure our pre-deal processes, stewardship performance analysis and reporting within our portfolio.
B) No sustainable investment objective
This financial product promotes environmental or social characteristics, but does not have as its objective sustainable investment.
C) Environmental or social characteristics of the financial product
As part of Kester Capital's ESG framework, each prospective investment made by the Fund will be assessed against the following eight environmental, social and governance themes:
· Social Themes: Employment & Staff Care, Supply Chain Sustainability, Marketplace Responsibility and Community Care & Engagement
· Environment Themes: Carbon, Emissions, Pollution & Waste and Natural Resources and Raw Materials
· Governance Themes: Governance and Ethics, Risk Management and Compliance
We use this framework to structure our pre-deal processes, stewardship performance analysis and reporting within our portfolios.
D) Investment strategy
The Fund will invest, directly and indirectly, in a portfolio of private equity investments (principally in equity and equity-related securities) in businesses headquartered in, or where a major part of their activities or operations is in, or a major part of their revenue is derived from, Western Europe, and with the principal objective of providing investors with returns by means of long-term capital appreciation. Kester Capital has adopted the following guiding principles, which apply across all of its funds under management:
· To proactively take steps to understand the potential impacts and implications of our investments and other business undertakings, including environment, social, governance and commercial matters.
· To seek to minimise negative impacts and maximise positive impacts through our investment and stewardship activities, by the use of good practice and engagement with our portfolio businesses.
· To be proactive and consistent in managing full compliance in our own undertakings and in relation to the companies in our stewardship, and to go beyond compliance where this will help us to fulfil our responsible investment commitment more effectively.
Kester Capital considers good governance to be a key factor in ensuring the success of its investee companies. In order to enable the Fund to be an active owner of its companies and to successfully implement Kester Capital's Value Creation Toolkit, Kester Capital will generally seek board seats for the portfolio companies in which it invests. Where Kester Capital does not have a board seat, it will seek strong minority protections which afford Kester Capital a good degree of influence regarding the governance of its investee companies. Prior to making an investment, Kester Capital will conduct due diligence in accordance with its ESG Investment Policy to assess the existing governance practices of its prospective portfolio companies, including with respect to board structure, composition and protocols, board skills and engagement (including background checks on the CEO, CFO and Chairman and a review of the organisational structure), effective leadership and policy, employee relations, remuneration of staff, tax compliance, risk management & compliance and data protection and anti-cybercrime measures.
Once an investment is made, Kester Capital actively supports its investee companies to further improve the governance of their business. ESG is a standing agenda item on monthly portfolio board meetings which Kester attend.
E) Proportion of investments
This financial product promotes environmental or social characteristics, but does not anticipate making any sustainable investments.
F) Monitoring of environmental or social characteristics
The ESG Investment Policy covers all Kester private equity funds, all investment activities across the deal cycle, and Kester Capital's own operations. All Kester Capital staff are required to adhere to the ESG Investment Policy. As part of the ESG Investment Policy, Kester Capital will conduct identification, management and monitoring of ESG risks and opportunities within our portfolio at appropriate points in the investment cycle, using our adopted ESG framework and expert tools and training to guide and support us.[1]
G) Methodologies
For each of our eight ESG themes, our ESG due diligence tool contains several questions that the deal team must answer as part of the due diligence process. Responses to each question are based on qualitative performance and materiality scores that, taken together, automatically calculate a risk assessment. The consolidated risk assessment results for each ESG theme are summarised in graphical / tabular format, and any “high risk” or “very high risk” results are flagged with commentary on how Kester Capital plans to address the risk(s) post-investment. This ESG summary, as well as details of the individual questions and responses, is then included in an Investment Committee paper for review and sign-off before completion of each new investment.
H) Data sources and processing
Kester sources ESG information and data as part of its due diligence process on new investment opportunities. This information is reviewed by the deal team and, where applicable, third-party advisers with appropriate efforts made to ensure reliability and accuracy. Where necessary, certain data are estimated, or approximate values used.
I) Limitations to methodologies and data
Kester is reliant on the target companies for the provision of ESG data and information. This information is cross-checked and verified to the extent possible but there is an inherent level of self-reporting to this process.
J) Due diligence
Kester Capital has developed a comprehensive ESG due diligence tool which forms a key part of the investment decision making process and an early stage ESG red flag checklist. Where deemed necessary by the Deal team, Kester instructs external experts to perform ESG due diligence on target companies focusing on material risks and opportunities. If Kester concludes that the ESG risks of a target company are too great and cannot be appropriately mitigated, no investment is made.
K) Engagement policies
Kester uses our governance role to engage with our portfolio companies to promote and support ESG management in order to protect and create value and to be responsible in business.
L) Designated Reference Benchmark
The fund has not defined a benchmark with regards of attaining the sustainability characteristics.
