ADM Capital believes that the social and environmental aspects of business ultimately influence returns. As such, we fully expect that our investments, whilst producing superior returns, should be based on ecologically sound principles.
For over two decades, ADM Capital has witnessed Asia’s profound economic transformation and the progress out of poverty for many millions. The dramatic shift to production in Asia has strained our ecosystems, depleted our natural resources and pushed planetary boundaries beyond levels deemed safe.
Additionally, changes to our increasingly erratic and warming climate have been recorded and these are, in part, driven by human actions, according to the scientific community. This was most recently made abundantly clear in the 2021 Intergovernmental Panel on Climate Change (IPCC) AR6 report, which indicates that greenhouse gas (GHG) emissions are at historically high levels and if left unchecked, the impacts to our economy, environment and society will be significant, representing a global risk to markets and communities. The scientists’ message is that the next decade is decisive. We must all follow the science and embrace our responsibility to keep global warming to 12.5 degrees above pre-industrial levels.
Managing Environmental & Social Risk
At ADM Capital we view Environmental, Social and Governance (“ESG”) integration as part of our fiduciary duty and broader responsibility under our stewardship and Engagement policy. We believe that as a fund manager we have an important role to play in supporting our portfolio companies’ social and climate outcomes. Integration can mitigate potential environmental and social risks that would otherwise reduce an investee company’s financial viability and also help identify business opportunities.
Our ESG integration is embedded in our business and governance processes through the Environmental and Social Management System (“ESMS”), which is central to our overall risk management framework. The ESMS guides the investment decision-making approach from concept note through to exit and lays out the process by which we assess and control the risks associated with a financial transaction.
ADM Capital establishes new climate vertical with the Elkhorn Renewable Energy Fund and the Asia Climate-Smart Landscape Fund. ADMC develops DEI policy.
ADM Capital structures ESG-Linked Subscription Facility for two funds – G3 (USD30mn) and Limosa (USD60mn).
ADM develops Stewardship & Engagement Policy.
ADMC implements its proprietary ESG Metrics Tool to identify, quantify and score potential borrower ESG risk.
Establishes Climate and Modern Slavery policies, ESMS.
Lisa Genasci – CEO, ADM Capital Foundation, joins the Investment Advisory Committee as an observer and sustainability advisor.
IFC becomes the cornerstone investor in Asia Secured Lending Facility. ADM Capital begins outsourcing its technical ESG Due Diligence to third party providers including Pacific Risk Advisors.
ADM Capital becomes the first Asia ex-Japan fund manager PRI Signatory.
Funds develop Statement of Environmental, Social and Ethical Values.
ADM Capital Foundation is established to help stimulate research and action to address environmental and social challenges.
Each component of our ESMS is listed below.
The ESMS outlines the assessment and regulation of sustainability factors and risks as part of our investment due diligence processes, ownership and exit.
We view ESG and sustainability integration as key to our private credit strategy and part of our fiduciary duty.
This has been the case since the establishment in 2006 of the ADM Capital Foundation, a philanthropic vehicle created to support critical research and impact-driven approaches to environmental conservation.
We also recognise the importance of our role in actively engaging and supporting our portfolio companies to improve their social and environmental outcomes.
Our governing policies, including ‘Climate Change’, ‘Anti-Slavery and Human Trafficking, ‘ESG‘, ‘Stewardship and Engagement’ and “Diversity, Equity and Inclusion’, underpin our whole sustainability process.
ADM Capital’s exclusion list is the initial step in our E&S due diligence process and is based on IFC’s exclusion criteria as well as relevant criteria from other LPs.
For example, we will not invest in companies with significant involvement in producing, marketing or distributing tobacco, gambling, casinos and equivalent enterprises, nuclear power, pornography, firearms or military weapons. Our full exclusion list can be found here.
In-house ESG Toolkit
ADM Capital Foundation designed the ADM Capital ESG Toolkit (“Toolkit”), which provides analysts with sector-specific knowledge of ESG risk and opportunity factors. The toolkit generates a simple rating system, providing appropriate due diligence questions to support the analyst through KPI setting and ESAP development with companies. The toolkit is based on the Sustainability Accounting Standards Board’s (“SASB”) industry standards, in-house research and MSCI’s ESG ratings methodology.
Investment Advisory Committee
ADM Capital Foundation (ADMCF) has supported ADM Capital’s ESG integration with advisory and research over a number of years. The former CEO of ADMCF sits as a sustainability observer to ADM Capital’s Investment Advisory Committee (IAC).
ESG Due Diligence Process
Independent E&S consultants are engaged to conduct E&S due diligence based on IFC Performance Standards gap analysis ahead of any transaction. Our analysts work proactively with the consultants to understand any E&S risks and opportunities relative to the potential investment.
Environmental and Social Action Plans (ESAPs)
Following E&S due diligence, our third-party providers build an ESAP for each transaction that identifies key E&S risk factors and guides sustainability mitigation or enhancement based on IFC Performance Standards. The ESAP is broken down into identifiable and measurable timebound and budgeted actions that we require our borrowers to complete. These are included in our loan documents.
Key Performance Indicators
We believe data is integral to capturing our E&S impact on a company and allows us to identify means for a company to improve. We set KPIs to capture ADM Capital’s value add, both in a transaction and across our funds. We have used SASB Accounting Metrics as a guideline to be more industry specific in terms of impact and opportunities.
We are working to align our KPIs with the 2015 Sustainable Development Goals (‘SDGs’).
The collection of 17 interlinked goals are designed as a “blueprint to achieve a better and more sustainable future for all”
We monitor ESG performance through regular engagement with our companies, managing compliance with IFC Performance Standards through Environmental Social Action Plans (“ESAPs”) and by setting Environmental and Social Indicators for each transaction. We seek board director or board observer status whenever possible and this helps us work closely with borrowers. ESAP completion is verified by a third-party consultant annually and we ensure ESG representation, warranties and covenants are incorporated into transaction documents and evaluated for compliance.
Our companies report on environmental and social KPIs semi-annually and investors receive quarterly reports, which includes ESG data. We produce an annual sustainability report, disclosing the performance and progress of our portfolio companies. In 2022, we published our first climate report following the recommendations developed by the Task Force for Climate-related Financial Disclosures. We are also the first Asia ex-Japan signatory of the Principles of Responsible Investment in 2008 and provide an annual and disclosed report to PRI.
Our approach to remuneration integrates sustainability considerations. Bonuses can be adjusted as appropriate to reflect behaviour and performance in relation to sustainability and ESG compliance in transactions.
The information contained in this website is not intended and should not be used or construed as an offer to sell, or a solicitation of any offer to buy, securities of any fund or other investment product in any jurisdiction. No such offer or solicitation may be made prior to the delivery of definitive offering documentation. The information in this web site is not intended and should not be construed as investment, tax, legal, financial or other advice.
General Fund Risk Disclosure
The funds described in this website (each, a “fund”) are not subject to the same regulatory requirements as mutual funds, including mutual fund requirements to provide certain periodic and standardised pricing and valuation information to investors. There are substantial risks in investing in a fund. Persons interested in investing in a fund should carefully note the following:
A fund represents a speculative investment and involves a high degree of risk. An investor could lose all or a substantial portion of his/her investment. Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment in a fund.
An investment in a fund should be discretionary capital set aside strictly for speculative purposes.
An investment in a fund is not suitable or desirable for all investors. Only certain persons meeting certain additional eligibility criteria may invest in a fund.
A fund may employ leverage and other investment techniques, and such leverage and other investment techniques may result in increased volatility of the fund’s performance and increased risk of loss.
A fund may trade in commodities, futures and other derivatives, which may increase the risk of loss of the fund. Fund investments are illiquid and there are generally significant restrictions on transferring interests in a fund. There will likely be no secondary market for the interests of a fund.
A fund may have limited or no operating history.
The investment manager of a fund may have certain discretionary authority over the fund’s assets.
A fund may invest in a limited number of securities or instruments, which could result in a limited degree of diversification and higher risk.
A fund generally involves a complex tax structure, which should be reviewed carefully. A fund’s investment strategy may cause delays in important tax information being sent to investors.
The management fees of a fund’s investment manager may be substantial regardless of whether the fund has a positive return, and will offset the fund’s profits.
A fund is not required by regulators to provide periodic pricing or valuation information to investors.
There are likely to be a number of conflicts of interest or potential conflicts of interest in connection with an investment manager’s management of fund assets.
The above summary is not a complete list of the risks and other important disclosures involved in investing in funds. Before making any investment in a fund, investors are advised to thoroughly and carefully review offering documentation with their financial, legal and tax advisors to determine whether an investment is suitable.
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