Our Sustainability Approach & Related Disclosures

Investing in Sustainable Growth

Long before ESG became part of the private equity landscape, we recognised that corporate social responsibility enabled companies to improve their growth prospects and better manage risk, reduce resource consumption and improve operational efficiency. It’s common sense. We created Argos Wityu with ESG as a source of innovation and new opportunities.

"At Argos Wityu, we want to support sustainable growth and value creation by going beyond a purely financial approach."

Gilles Mougenot

Managing Partner

Our companies’ ESG initiatives

To be sustainable, a company’s growth must be based on a responsible management system that considers environmental, social and governance (ESG) factors. Operating at the European level, Argos Wityu encourages and supports all the companies in its portfolio on these issues.

Coralie CORNET

ESG TEAM MEMBER AT ARGOS WITYU

2021 Key figures

JOBS CREATED

9.3% CAGR to a total of 8,675 FTE

TRAINING  INTENSITY

€481 per employee per year

ENVIRONMENT 

95% of Argos Wityu’s portfolio companies are engaged in environmental initiatives

19 (100%)

Number of portfolio companies with an ESG action plan ​

 

INTRODUCTION

The Argos Wityu portfolio companies place great importance on the environmental footprint of their operations and employees. In 2020, the companies we support deepened their environmental management and they fully intend to do the same in 2021.We are aware that due to the industrial nature of the operations of some of our companies, the relevance of implementing environmental management is even more important.

Currently, 4 companies (out of 18, up from 2 last year) are actively monitoring their carbon footprint, and a further 4 have set targets to do so in 2021. 9 companies have formally declared their environmental approach, and 12 companies (up from 10 last year) are constantly looking for initiatives to reduce their energy consumption.

MATERIALS AND WAST

Of all environmental initiatives, waste management monitoring is the most heavily managed. 89% (up from 82% in 2019) of companies have a waste management policy in place and are committed to continuously assessing the environmental impact of their activities. Companies we support have launched reforestation programmes to offset production impacts (e.g. Lineas and Juratoys) and have carried out remediation of historic sites.

Some of our companies have also introduced repair rather than replacement policies to extend the life of products. In addition, other companies have placed greater emphasis on the ingredients used in their products, looking for more environmentally friendly and healthier ingredients.

 

TRANSPORT

Our companies are particularly well placed to reduce CO2 emissions by stimulating transport initiatives. Policies currently in place include carpooling and carsharing and the introduction of electric vehicles into the fleet.

Our companies intend to expand their transport initiatives through work-at-home policies, the introduction of plug-in hybrid cars into the fleet, the phasing out of diesel vehicles and the stimulation of public transport.



INTRODUCTION

Portfolio companies play a key role in promoting sustainable development by creating jobs and ensuring decent working conditions that promote equal opportunities. As a growth-oriented private equity fund, Argos Wityu supports its portfolio companies in their job creation efforts.

The Covid-19 crisis had a small negative impact on our employee base which, due to the business mix, remained limited. The portfolio companies most exposed to the crisis are the logistics company Lineas and the food company Compagnie des Desserts. While these companies lost a limited number of employees, Cohedron, Olinn, Zodiac Milpro and Fabbri all experienced growth in headcount.

 

Argos Wityu’s ESG Initiatives

CARBON FOOTPRINT INITIATIVE.

Since 2020, each Argos Wityu office has initiated a plan to calculate its carbon footprint, with the support of the GoodPlanet Foundation, a non-governmental organisation supporting ecology and sustainable development.
Argos Wityu intends to offset its carbon footprint by financing projects initiated by the GoodPlanet Foundation. This foundation supports solidarity projects that are recognised for the work they do in raising awareness and fighting climate change and biodiversity loss. The projects include access to energy, waste recovery, sustainable agriculture, forestry, bioclimatic schools and biodiversity conservation.

CONTRIBUTING TO A GREENER SOCIETY

The consolidated 2020 carbon footprint of all Argos Wityu offices decreased by 39% compared to 2019 (to 396 tonnes) – mainly due to reduced air travel. Argos Wityu contributed €8,700 to Natuurpunt, which will use these funds to create 4,350m² of new forests in the Brussels area. In addition, each office has committed to “Friday initiatives”, in which the team donates time to a worthy cause of their choice.

In March 2022, Argos Wityu took action in favour of Ukraine. Argos Wityu team members have collectively joined forces to donate to Doctors Without Borders. More than €52,500 has been collected internally. This amount was matched by Argos Wityu, bringing the total amount of the donation to over €105,000.

In March 2020, Argos Wityu helped Policlinico di Milano during the coronavirus emergency. Collectively, our Italian team, together with the company, donated €25,000 to Policlinico di Milano. These funds were used to procure high-performance mechanical gas ventilators for new intensive care areas created for the epidemic.

UNPRI AND iCi MEMBER

Argos Wityu is proud to have joined UNPRI in 2021. While we have always been committed to applying leading ESG principles in our practices, by joining UNPRI, Argos Wityu has committed to making ESG a part of its core mission.

By joining UNPRI, Argos Wityu is committed to applying the group’s guidelines throughout the investment, portfolio management and divestment processes as well as in te management of its own company.

As an ICI signatory, Argos Wityu is committed to reducing the greenhouse gas emissions of the companies it supports and to ensuring sustainable performance. The ICI forms a unique sharing platform that brings together and mobilises all private equity players wishing to make a concrete contribution to the fight against climate change.

PERIMETER, OBJECTIVES AND DEFINITION

This document covers all the entities of Argos Wityu in Europe and aims at presenting the reasons why Argos Wityu does not consider principal adverse impacts of investment decisions on sustainability factors. Adverse impacts refer to the negative consequences of investments on ESG factors.


HOW WE MONITOR ADVERSE IMPACTS


At Argos Wityu, we firmly believe that corporate social responsibility enables a company to improve its outlook for growth and manage risks more effectively. Such an approach makes it possible to reduce resource consumption and to improve operational efficiency, working conditions and employee relationships. It’s a source of innovation and new opportunities.

On a daily basis, principal adverse impacts are closely monitored by Argos Wityu throughout the investment process, from the due diligence phase to exit. Moreover, Argos Wityu asks its target investments to provide a certain amount of adverse impacts indicators on a quarterly basis:

• Environmental: carbon footprint, environmental approach, initiatives taken to decrease
energy consumption, waste management, etc
• Social: inclusion of women in the company and at the Executive Committee, etc
• Governance: presence of a code of conduct, existence of an anti-corruption policy, depth of the compliance function, etc

Finally, Argos Wityu engages with each target investment on an action plan to improve on material ESG aspects. In doing so, Argos wishes to positively improve the impact of its investments on ESG factors.


WORKING HAND IN HAND WITH TARGET INVESTMENTS TO PROVIDE YOU WITH
THE PRINCIPAL ADVERSE IMPACTS STATEMENT

At Argos Wityu, ESG issues have always been an integral part of our business model for many years. In this context, we have already voluntarily implemented ESG declarations to investors since 2013.

Due to the recent introduction of regulatory requirements on this subject, we are currently adapting our ESG reporting in order to comply with the new indicators set out in the Disclosure Regulation (Regulation EU 2019/2088) that will come into force from 2022 (reference period in 2022 and first statement on 30/06/23 at the latest).
We are making great progress thanks to the active engagement of our companies in transforming themselves to constantly improve their ESG Key Performance Indicators.

For these reasons, and in line with the dispositions of the Disclosure Regulation, we have chosen not to report publicly for now on the principal adverse impacts of our investment decisions on sustainability factors. Our investors will however continue to receive on a quarterly basis their ESG reporting as well as any tailored reporting already provided on these matters. As requested by the Disclosure Regulation, we will provide the full set of KPIs asked by this Regulation on 30/06/2023 at the latest.

THIS POLICY AIMS AT ENSURING THE ALIGNMENT BETWEEN THE BEHAVIOUR OF ITS EMPLOYEES AND
THE LONG-TERM OBJECTIVES OF ARGOS WITYU.

Argos Wityu applies a remuneration policy that is consistent with effective risk management and does not encourage excessive risk-taking, may they result from financial or sustainability risks. This policy aims at ensuring the alignment between the behavior of its employees and the long-term objectives of Argos Wityu. It also wishes to dissuade any risk-taking that is deemed excessive or unacceptable by the company.

The content of Argos Wityu’s remuneration policy is in line with the requirements of the AIFM Directive (Directive EU 2011/61/UE) as well as article 5 of the Disclosure Regulation (Regulation EU 2019/2088) on the transparency of remuneration policies regarding the integration of sustainability risks.

Given the size of the Company’s workforce and for the sake of simplification, Argos has decided to extend the principles of this remuneration policy to all employees of the Alternative Investment Fund Manager (AIFM).

Our remuneration policy takes all risks into account, may they be financial or sustainability risks, and aims at ensuring consistency between employee behavior and the long-term objectives of the company. The implementation of this remuneration policy takes into account the size and internal organization of the AIFM, as well as the nature, diversity and complexity of its activity.

For its beneficiaries, the provision of carried interest allows them to invest in the long run alongside their investors, ensures an optimal alignment of interests between investors, employees, their partners and society and promotes a sound and effective risk management system.

The compliance officer integrates the issue of remuneration into the potential risks of conflicts of interest. This procedure is put in place to minimize the risks in this area. A control of its application is integrated into the compliance officer’s internal control program.

PERIMETER AND OBJECTIVES

This document covers all the entities of Argos Wityu in Europe and aims at presenting how its policies integrate sustainability risks in its investment decision-making and investment advice processes.

DEFINITION AND IMPORTANCE OF INTEGRATING SUSTAINABILITY RISKS

A sustainability risk means an environmental, social or governance event or condition that, if it occurs, could cause a negative material impact on the value of the investment.

At Argos Wityu, we firmly believe that corporate social responsibility enables a company to improve its outlook for growth and manage risks more effectively. Such an approach makes it possible to reduce resource consumption and to improve operational efficiency, working conditions and employee relationships. It’s a source of innovation and new opportunities.

Our ESG methodology and the integration of these risks into our investment strategy thus allows us to achieve the following objectives, as stated in our Responsible Investment Code:

  • Comply with all applicable laws;
  • Endeavour to reduce adverse impacts and enhance positive effects of the business on the environment, employees and all stakeholders;
  • Remain pragmatic and use ESG as drivers for value creation;
  • Commit to continuous improvements with respect to environment, social matters and governance
  • Work over time to apply relevant international best practice standards, with appropriate targets and timetables for achieving them; and
  • Communicate with our partners on their socially responsible initiatives and performance.

 

INTEGRATION OF SUSTAINABILITY ISSUES AND ENGAGEMENT WITH TARGET INVESTMENTS

Argos Wityu is committed to integrating ESG throughout its investment decision-making process, while adapting its approach to each investment to ensure an appropriate and effective strategy. With the support of the ESG team, the investment team is responsible for the implementation of this policy during the different phases of the investment process.

Pre-acquisition: assessment of ESG risks and opportunities

During the pre-acquisition phase, Argos Wityu analyses both financial and ESG drivers through the following steps:

  1. All investments must comply with Argos Wityu’s ESG standards. These include the respect of an exclusion list and of Argos Wityu’s Responsible Investment Code.
  2. An ESG due diligence questionnaire is then conducted by Argos Wityu’s investment teams. This questionnaire enables Argos Wityu’s teams to identify the main ESG-related growth drivers and risks. The questionnaire is based on the documents available, the results of our due diligence measures as well as discussions with target investments’ management. A short synopsis of the main risks and opportunities identified is then included in the notes for the Investment Committee.

Once a target investment is deemed appropriate by the Investment Committee, measures are taken to ensure a thorough ESG knowledge of the target investment and work on an ESG action plan:

  1. Before the closing, an external ESG review is carried out by external advisors in order to better measure identified areas of ESG risks and opportunities uncovered during the internal ESG due diligence phase. The focus of this review is threefold:
    • Identify a small number (typically 1-3) of ESG drivers that could create value or avoid risks of value destruction (reduction in energy consumption, reduction of employee turnover, reputational issues, etc)
    • Put in place an Action Plan to leverage those drivers over a multi-annual period (use of technology using less energy, long term bonuses, etc)
    • Identify ESG Key Performance Indicators to follow this Action Plan (energy consumption in watts per day, employee turnover rate)
  2. Argos Wityu ensures that ESG commitments with target investments are formalized in writing through the following elements:
    • The inclusion of relevant ESG representations and warranties in the Sales and Purchase Agreements (SPAs) signed with target investments
    • The insertion of the following elements in the Shareholders’ Agreement concerning target investments:
      • the recognition of the ESG Principles, stating that value-creation can be obtained from non-financial aspects
      • the need for target investments to comply with Argos Wityu’s Responsible Investment Code
      • the necessity of sending a quarterly reporting to Argos Wityu on ESG aspects (Human Resources and ESG KPIs, advancement of the action plan, etc).

Argos Wityu is committed to integrating ESG throughout its investment decision-making process, while adapting its approach to each investment to ensure an appropriate and effective strategy. With the support of the ESG team, the investment team is responsible for the implementation of this policy during the different phases of the investment process.

 

Investment period: engagement, monitoring and support

Following the acquisition, one key ESG action is chosen based on materiality, in accordance with the management of the target investment. The goal is to monitor and support the target company in order to bring the necessary changes to attain a more sustainable future.

During the holding period, each target investment must send a quarterly reporting to Argos Wityu on the following matters:

  • Reporting on quantitative Human Resources KPIs common to all portfolio companies. These include aspects like headcount, turnover, training intensity, injuries and absenteeism
  • Reporting on ESG KPIs that embody the following elements:
    • Environmental: carbon footprint, environmental approach, initiatives taken to decrease energy consumption, waste management, etc
    • Social: inclusion of women in the company and at the Executive Committee, etc
    • Governance: presence of a code of conduct, existence of an anti-corruption policy, depth of the compliance function, etc
  • Reporting on progress on the firm’s ESG Action plan

Upon reception of the reporting, Argos Wityu’s investment teams ensure that an ongoing engagement with the target investment’s firms is made by:

  • Ensuring that HR and ESG KPIs action plan are properly monitored and recorded
  • Challenging management progress on HR KPIs and ESG KPIs
  • Questioning whether new actions / KPIs should be added

Finally, the key ESG action specific to each target investment is to be discussed at the target company’s board level at least once per year.

 

Exit: capturing the potential ESG value-added

ESG Due Diligences at Exit are only put in place in the following cases:

  • When the topic is of specific interest given the industry (for example when the company is in a sector known for its pollution risks such as extractive or metal transformation industry, or other social risks such as labour in the apparel industry) and/or given the company’s positioning in the value chain, or
  • When the illustration of how ESG action created value or limited risks on value creation is reasonably material

In this case, an ESG Vendor Due Diligence is carried out by an external advisor. The goal is to:

  • Describe the company’s behavior in ESG area
  • Identify how implementation of the ESG Action Plan created value
  • Use HR and ESG KPIs collected in quarterly reporting during the investment period
  • Demonstrate that the ESG Action Plan did have an impact on the evolution of KPIs (reduction of waste, energy consumption, employee turnover, …)

 

Focus on climate change and biodiversity risks (French Energy & Climate Law)

Argos Wityu takes into account the impact of its investments on climate change and biodiversity in its ESG investment-decision process, in particular through:

  • The monitoring of the environmental indicators of targets analysed
  • The implementation of an engagement policy with target investments in order to improve their impact


INTEGRATION OF SUSTAINABILITY RISKS THROUGHOUT ARGOS WITYU’S ORGANISATION

Focus on the ESG Team

At Argos Wityu we believe that ESG must be taken into account and therefore we have a dedicated ESG team that communicates on these matters and answers to the top management. They mainly work on:

  • Collecting ESG KPIs for our portfolio of companies with the help of the investment teams
  • Maintaining a portfolio-wide view of HR and ESG KPIs
  • Exchanging best practices and examples of actions

Our ESG team also raises awareness and trains our staff on ESG with regular ESG coffees and annual trainings on ESG topics.


The dissemination of ESG practices throughout the organisation

Sustainability risks are considered in a cross-divisional approach by all Argos Wityu’s teams:

  • Integration of sustainability risks in research work and exchanges with target investments
  • Involvement of asset managers in the effective integration of ESG principles and the understanding of their impact on target investments
  • Quarterly ESG reporting put in place towards Argos Wityu’s investors

Our Risk, Compliance and Internal Control teams are dedicated to ensuring that ESG criteria are duly taken into account during the due diligence phase and monitored throughout our relationship with the companies in portfolio. They work closely with our ESG dedicated team and our investment team aiming at improving our ESG standards.

 

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