HAO Capital believes ESG issues are integral to both our own operations and our portfolio companies' operations, and that they can have a significant impact on private equity investment. Environmentally sustainable, socially responsible and well governed companies will have a lower risk profiles built into their business models leading to better investment returns.

Purpose

HAO Capital will commit to integrate Environmental, Social and Governance (ESG) issues into its investment analysis and decision making processes. We will be guided and influenced by the UNPRI's "Six Principals"[1] and the United Nations Global Compact[2]. We believe that integrating ESG considerations into our investment strategy will help us to create value for portfolio companies, manage risk and address our LPs interests.

Scope

This policy will cover both HAO Capital's current portfolio of investments and any future investments and fund vehicles. HAO Capital typically takes minority interest positions in investee companies. However, we normally require board representation when making investments and would seek to utilise this platform to address ESG issues with our portfolio companies in line with the Six Principles.

Governance Structure

HAO Capital has appointed an ESG Officer to manage our approach to Responsible Investing. Our ESG Officer has ultimate ownership for integrating ESG consideration into our investment decisions. However, we take a whole company approach to implementation, with buy-in from our founding partners, investment professionals and administrative teams. In particular, investment professionals will seek to positively commit with investee companies across the investment lifecycle, with a particular focus at the board level where we believe we have the greatest ability to facilitate change.

We believe that our corporate governance model is fundamental to the value creation process in portfolio companies. It involves active ownership, small, empowered boards and efficient decision-making. Our commitment to responsible governance starts internally with clear, established distinctions between the investment manager and investment advisory functions. In addition, we work with our portfolio companies to implement a robust governance and management structure. We seek to establish a strong alignment of interest between the board, company management and all investors.

Implementation Approach

HAO Capital will integrate ESG considerations across the investment lifecycle, including both pre- and post-investment.

At the pre-investment stage:

- HAO Capital will not invest in any company active in the tobacco, alcohol, gambling, pornography, fur, firearms, weapons, fossil fuel or nuclear power sectors
- Investment professionals will conduct due diligence to assess the potential social & environmental return before committing to an investment
- Engage with external consultant(s) to perform ESG review and provide potential investee companies with an ESG questionnaire to identify potential and existing risks in the business
- Work with company management to actively manage any risks identified in the due diligence process

At the post-investment stage:

- HAO Capital will identify relevant metrics and data collection methods that we will use to monitor ESG risks for specific portfolio companies during the investment holding period
- Investment Professionals will engage with company management to support them in reporting the required ESG metrics
- We will actively manage any new risks that are identified during the investment holding period

Reporting

HAO Capital intends to include an ESG section in its annual report to Limited Partners for all new fund investments. For existing fund investments, we will encourage investee companies to provide information regarding ESG issues, but recognise, as a minority shareholder who has already invested capital, we may have less ability to change behaviour at the individual portfolio company level. Over time, we intend to report more publicly on ESG related matters as our policy and procedures mature. This additional disclosure may include our quarterly reports to Limited Partners and public disclosure via our website.

Regular Revisions of the Policy

HAO Capital will review the effectiveness of our Responsible Investment Policy on a regular basis, and report relevant findings, progress and recommendations to our fellow team members. We will endeavour to keep up to date with external best practices and relevant legislation, both in the countries we invest and on a global basis.

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Development of HAO Capital's Responsible Investment Policy started in 2018 and is continually updated (this version was finalised in March 2021).

Notes:

[1] The UNPRI's "Six Principles" can be found here
[2] The United Nations Global Compact can be found here