Case study: private debt ESG questionnaire

Case study by LGT European Capital

LGT European Capital sets out its ESG scoring framework in an aggregated scorecard for portfolio companies. Thus far, the response rate to LGT’s questionnaire has been 90%, showing the leverage that lenders have to demand ESG data from borrowers.

	Items	Score	Commentary
General	Existence of an ESG policy	43%	43% of the companies have an ESG policy. Two companies stated they are currently developing one.
	Tracking of ESG initiatives	37%	37% of the companies track their ESG initiatives with specific KPIs, sometimes featured in a dedicated annual report.
	Absence of litigation (in environmental, social and ethical affairs)	90%	Three companies dealt with ESG-related litigation in 2017 (one environmental, one product recall, one HR-related).
Environment	Existence of an environmental policy	57%	57% of the companies have an environmental policy, the primary focus of which is waste management.
	Estimation of CO2 footprint	23%	23% of the companies have assessed their carbon footprint at least once.
	Water or energy consumption	53%	53% of the companies track their consumption of water and energy (primarily electricity and fuel).
	Waste volumes, cost, and % recycled	37%	37% of the companies track their waste volumes. 27% of the companies monitor waste recycling.
Social	Job creation	90%	Net 2017 job creation throughout portfolio was 499, with 90% of companies having increased their headcount.
	Diversity – female headcount	34%	34% of the portfolio’s headcount are female.
	Availability of training opportunities	90%	90% of the companies provide training opportunities to a significant portion of their employees.
	Company-wide profit sharing	50%	50% of the companies grant extra bonuses to their employees depending on financial performance.
Governance	Independent member(s) at Board	43%	43% of the companies have boards comprising at least one independent member.
	Board meetings per year	6	Board meetings are scheduled six times per year on average.
	Existence of a corporate code of ethics	53%	53% of the companies have a corporate code of ethics.
	Existence of other specific committees	47%	47% of the companies use specific committees (management, audit, remuneration, etc.) to assist the board.

The companies that answer our questions are pleased to do so and ask us to give feedback to improve their way of addressing [ESG matters].

LaBanque Postale Asset Management