ESG Board Paper – 18 February 2021
Mainspring Fund Services Limited (“Mainspring”) administers various private equity and venture capital funds. Mainspring Nominees Limited (“MNL”) is a wholly owned subsidiary of Mainspring and provides custodial and administration services, including its Investment Platform to EIS companies and other clients.
The Board of Mainspring believes that environmental, social and corporate governance (“ESG”) issues are now high on most stakeholder’s agendas and that poor ESG practices pose environmental, legal and reputational risks which can damage a company’s reputation. Mainspring believes that investors are becoming increasingly aware that companies with a strong ESG performance can create better long-term value. Millennials and iGens, the investors of the future, as well as potential staff within Mainspring’s business, are also pushing the ESG agenda and some of the world’s largest asset managers such as Blackrock, Vanguard and State Street are focusing on ESG factors. Consequently expectations have changed and Mainspring needs to reflect its commitment to ESG issues as well as creating a service for its fund manager clients, which will assist them with performing and reporting on their ESG responsibilities.
The Board has resolved, in order to better align Mainspring’s business with some of the broader objectives of society, to operate in accordance with recognised principles of governance and specifically to:
1) incorporate ESG issues into its day to day operations, including encouraging all Mainspring staff to have an awareness of ESG principles and to integrate these principles in their approach to Mainspring’s business;
2) consider creating a service for its fund manager clients to assist them in identifying and reporting on their ESG responsibilities;
3) arrange regular reports on Mainspring’s activities and progress relating to ESG issues;
4) review regularly Mainspring’s ESG policies and its services to clients, in order to evaluate their effectiveness and improve Mainspring’s ability to align better its activities with the broader interests of society.
In order to implement this approach the Board has resolved to adopt a five step framework as follows:
1) Level setting: Mainspring will agree on a definition of ESG which is appropriate for Mainspring and its business activities and provides a high level of corporate governance.
2) Assessment: The Board will determine the principal ESG risks and opportunities which are of strategic significance to Mainspring’s business model.
3) Integration: The Board will encourage integration of strategically significant issues into Mainspring’s business strategy and incentive programmes, focusing on employee selection and behaviour, as well as organisational processes and routines.
4) Stakeholder communication: Mainspring will shape ESG messages to its stakeholders in the context of Mainspring’s strategy and long-term value creation.
5) Board oversight: The Board will regularly oversee ESG policies and their effective implementation.
Mainspring’s Definition of ESG
There are many different areas which fall to be looked at when considering ESG issues. However, in view of its current business model, Mainspring has decided to focus its efforts on:
1) Environmental issues, Carbon neutral
Sustainable policies including issues relating to climate change.
A. Carbon – As a first step Mainspring will focus on understanding its carbon footprint and becoming a carbon neutral service provider.
B. Reduce, reuse, recycle – Mainspring had implemented a company recycling programme in its London office of both of waste and sharing fruit leftovers with the local community. On a return to office after the CoronaVirus pandemic these will be restarted in both offices where possible.
2) Social issues
Workplace diversity and inclusion, including talent management. This will focus on ensuring that the firm’s culture ensures that all directors, employees, consultants, service providers and contractors are treated with fairness and respect for their personal dignity and physical and mental wellbeing.
Mainspring will also consider policies to promote the wellbeing of all members of its staff, in each of its offices.
3) Governance issues
Board independence including composition and renewal. There will be a focus on ensuring the highest level of corporate governance.
Notwithstanding these three focus areas the Board wishes to encourage everyone associated with Mainspring to think, within the context of ESG issues, as to how they can impact Mainspring’s business and improve its performance. In addition, the Board is committed to creating a service which will assist Mainspring’s clients to identify and report on ESG issues to their own stakeholders.
What steps need to be taken by Mainspring? What can it do differently to ensure that the identified ESG issues become part of Mainspring’s core activity?
There are various pillars of Mainspring’s business. These will be looked at individually and a person nominated to be responsible for monitoring ESG policies in that particular area.
i. Administration – office related initiatives including:
• Routine usage of paper, and other recycling, bins.
• Print reduction programmes.
• Reducing plastic water bottles in each office by having a centralised water cooler so that staff bring their own re-useable bottles.
• Carbon footprint: considering whether each journey is essential and, if not, arranging video meetings.
• Green procurement policies for supply chains.
Neil Clark responsible for reporting on progress to the Board
ii. Business Development:
• Carbon footprint: deciding whether each journey is essential and, if not, arranging video meetings.
• Adapting website to highlight Mainspring’s approach to ESG both within Mainspring itself (for example to include a “We Care” section with details of individual or group charitable works).
Stephen Geddes responsible for reporting to the Board.
• Cost analysis of implementing an ESG policy.
• Creation of an ESG service to assist clients in dealing with their own ESG reporting obligations.
• Appropriate employment rights in employment/service contracts and due observation of applicable employment laws.
Neil Clark responsible for reporting to the Board.
• Gender diversity: commitment to achieve a balanced gender diversity within the firm.
• Ethnic diversity: making a commitment to have, as far as possible, a diverse panel of recruits when hiring.
• Reinforcement of a culture where individuals provide support and encouragement for other individuals’ commitments to not-for-profit or charitable activities in the community.
Responsibility: Stephen Geddes
Persons with responsibility for ESG in each area should report to the Board, in writing, on a quarterly basis.
Adopted by the Board on 11 March 2021