At Wafra, it is our mission to provide long-term investment solutions that can span not just years, but generations. Embedding material environmental, social and governance (ESG) considerations in our investment process can help us to holistically manage financial risk and identify opportunities to create additional value for our clients. Wafra takes a hands-on approach to ESG and views investments as partnerships in which we aim to educate, engage and empower our portfolio companies to adopt best-in-class ESG practices and build long-term sustainable businesses.
Wafra acquires ownership stakes in both established and next-generation alternatives managers around the world to partner with innovative, best-in-class investment teams to create shared value. We conduct detailed diligence on governance factors to ensure that incentives are aligned and to prevent exposure to any potential reputational risk. We will engage with managers and support them in implementing value creation projects.
In 2018, Wafra helped launch Capital Constellation (“Constellation”), an innovative joint venture investment platform that makes growth investments in promising investor entrepreneurs to help build sustainable asset management businesses that can help shape the future of private capital markets. Constellation’s unique structure allows Wafra to help drive the adoption of strong, long-term stewardship practices, not only among a new generation of private equity managers, but also across their underlying portfolio companies.
Real Assets and Real Estate
As a property owner and operator, Wafra’s real estate and real asset investment teams recognize the importance of including ESG factors throughout the investment lifecycle.
During the underwriting process, we conduct diligence on physical, environmental, social and governance factors to identify meaningful risks. Diligence will involve completing certain third-party reports, including a Phase I environmental report, property condition report and third-party appraisal prepared by a nationally recognized appraiser.
Operational efficiency is a priority and Wafra routinely looks to take advantage of opportunities to promote energy, water and waste efficiency. In addition, the portfolio may include some LEED-certified buildings and encourages sustainability standards.
The team also consults hired property management firms to handle day-to day operations in order to ensure compliance with local ordinances, including any localized environmental or sustainability initiatives. The team continually solicits feedback and holds quarterly meetings with property managers to better understand issues tenants may be facing from a variety of perspectives, including ESG factors.
Private Equity and Venture Capital
Both private equity and responsible investing are designed to develop sustainable businesses that will be successful over a long-term investment horizon, relying on a collaborative, stewardship-based approach. We seek to leverage this natural alignment by integrating ESG considerations through three key channels:
We may restrict investments in companies that are misaligned with sustainability principles or other values-based preferences as desired by our clients.
We assess sector-specific ESG risks and existing mitigation strategies. Wafra may engage with company management on material risks, develop corrective action plans and monitor progress.
We partner with portfolio companies to provide guidance and help drive the implementation of best-in-class ESG practices and value creation projects.
Liquid Markets – Equity and Credit Strategies
We integrate company- and sector-specific ESG considerations into our fundamental analysis to identify issues that may not yet be fully priced into markets. ESG criteria may be incorporated in three ways:
We use expert third-party ESG ratings and research alongside our own diligence to deepen our analysis of material ESG issues.
We may restrict investments in companies that are misaligned with sustainability standards or other values-based preferences as desired by our clients.
Wafra has the fiduciary responsibility to vote proxies in a way that maximizes shareholder value and reviews expert third-party recommendations for ESG-related proposals.
Wafra is actively involved in the ESG community and participates in a number of different advisory groups and industry events. Relevant research publications include:
- Technical Guide for Limited Partners: Responsible Investment in Private Equity
- Introducing Confidence-Building Measures to PRI Signatories (2018)
- SASB Case Study: Private Equity (upcoming)
Wafra became a signatory to the United Nations Principles of Responsible Investing (“PRI”) in 2016 and, as such, is committed to integrating ESG issues into its investment analysis and decision-making processes.
Wafra recognizes the responsibility we hold towards our investors to make suitable investment decisions while prudently managing risk. The firm complies with the UK Modern Slavery Act of 2015, a policy designed to ensure that certain businesses and their supply chains are free from modern slavery and human trafficking.