ESG Policy

At Pearl Diver Capital, we are dedicated to operating as a responsible and sustainable company. We understand the importance of considering the environmental, social, and governance impacts of our business activities. Our ESG policy reflects our commitment to long-term value creation while contributing positively to society and the planet.

Environmental Responsibility

Climate Change: We recognise the need to address climate change and commit to reducing our carbon footprint. We strive to minimize our greenhouse gas emissions, increase energy efficiency, and transition to renewable energy sources whenever feasible.

Resource Conservation: We are committed to conserving natural resources and minimizing waste. We promote recycling, responsible consumption, and sustainable sourcing practices throughout our operations.

Social Responsibility

Health and Safety: We prioritise the health and safety of our employees, contractors, and stakeholders. We maintain safe working conditions, provide necessary training, and ensure compliance with applicable health and safety regulations.

Diversity and Inclusion: We value diversity and inclusion as fundamental principles of our business. We foster an inclusive work environment that respects and appreciates individual differences, promotes equal opportunities, and prohibits discrimination of any kind.

Governance and Ethics

Ethical Conduct: We uphold the highest standards of ethical conduct in all aspects of our business. We adhere to applicable laws and regulations, promote integrity, and encourage transparency in our operations and relationships with stakeholders.

Stakeholder Engagement: We actively engage with our stakeholders, including employees, customers, suppliers, and investors, to understand their perspectives, address concerns, and integrate their feedback into our decision-making processes.

Our Approach

Pearl Diver agrees to actively consider the "Ten Principles” (detailed below) of corporate governance published by the United Nations Global Compact, to the extent practicable, in managing the Company and its investments in Portfolio CLO Vehicles.

Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and

Principle 2: make sure that they are not complicit in human rights abuses.

Labour

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

Principle 4: the elimination of all forms of forced and compulsory labour;

Principle 5: the effective abolition of child labour; and

Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment

Principle 7: Businesses should support a precautionary approach to environmental challenges;

Principle 8: undertake initiatives to promote greater environmental responsibility; and

Principle 9: encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

In April 2020, Pearl Diver Capital became a signatory to the UN-supported Principles for Responsible Investment (PRI). The PRI is a global, collaborative network of investors established in 2006 in recognition of the increasing relevance of ESG issues within the investment process. The Principles set forth by the PRI are a set of best practices for incorporating ESG issues into investment decision-making where consistent with fiduciary responsibilities. As a signatory, Pearl Diver Capital commits to the following:

1.    We will incorporate ESG issues into investment analysis and decision-making processes.

2.    We will be active owners and incorporate ESG issues into our ownership practices.

3.    We will seek appropriate disclosure on ESG issues by the entities in which we invest.

4.    We will promote acceptance and implementation of the Principles within the investment industry.

5.    We will work together to enhance our effectiveness in implementing the Principles.

6.    We will each report on our activities and progress towards implementing the Principles.

ESG in our Investment Process

Pearl Diver funds invest in corporate loan securitisation Notes (“CLOs”) where underlying loan portfolios are managed by established loan asset managers (“CLO Managers”). During the Investment process, the Investment team considers whether the CLO Manager has an ESG policy in place and assess the industries the corporate loan issuers are operating in.

See Flowchart below for ESG in our investment process:

 Annually, Pearl Diver sends a bespoke ESG questionnaire to all CLO Managers in Pearl Diver’s universe. Key questions that we are trying to ascertain from the CLO mangers include but isn’t limited to:

  • Do they have an ESG policy and are they a signatory to any ESG initiatives.

  • How do they integrate ESG into their investment process.

  • Any ESG restrictions in their investments in underlying companies.

Pearl Diver then uses a third-party provider which is able to score the underlying companies within a CLO with its own rating on E, S and G. This data feeds into our investment analysis and is presented at Investment committee providing an ESG score to the potential CLO investment.

As part of ongoing monitoring, the credit team at Pearl Diver also regularly discuss ESG items with CLO managers in their regular update calls.

Farm Animal Welfare

The company further acknowledges that farm animal welfare is an important issue for companies involved in the food and agricultural industries, including those in retail, food processing, food service and hospitality sectors. Recently, pressure from governments and consumers has forced companies to re-evaluate their policies regarding food quality and sourcing. We as investors seek assurances that the Portfolio CLO Vehicles in which we invest have considered the risks and opportunities with respect to farm animal welfare, to the extent practicable.

ESG Committee

Pearl Diver Capital has an ESG committee who meet on a quarterly basis. The members of this committee include:

  • Kerrill Gaffney, Partner and Head of ESG

  • Kelvin Ho, Partner and COO

  • Michael Brown, Partner

  • Kwan Yi Kwong, Compliance Manager

The ESG committee has representatives from all departments at the company which allows a diverse view from individuals with different responsibilities. The committee primarily discusses and reviews the ESG policy and practices at the company and also in respect of the funds the company advises. Topics for discussion would include, ESG data and investment coverage, CLO manager’s ESG policies, ESG reporting and presentations, board and firm diversity, and internal ESG improvements amongst other topics.

Monitoring and Reporting

 We regularly monitor and assess our ESG performance, set targets for improvement, and report transparently on our progress. We believe in the importance of accountability and strive for continuous improvement in our ESG practices. This is reported to our Investors and Advisory board on an annual basis.

 

Nothing in either of the above paragraphs shall oblige Pearl Diver to act, or refrain from acting, in any manner that the company believes, in its sole discretion, is (i) inconsistent with its powers or duties under the Fund’s Partnership Agreement or the ability of the Partnership to maximize its returns from any investment; or (ii) otherwise not in the best interest of the General Partner, the Partnership and/or any Portfolio CLO Vehicle.  It is acknowledged that the General Partner does not have any control or influence over the investment decisions made by Portfolio CLO Vehicles on an ongoing basis.