Capital Dynamics Provides Innovative Loan Structure with ESG Margin Adjustment
As an early adopter of ESG principles in the private markets, Capital Dynamics recognizes the important role that alternative asset managers like us can play in leading the transition to a Net Zero economy. In leading this transition, it is our belief that we can both benefit a broader set of constituents which will be impacted by environmental change and generate enhanced long-term investment returns for our clients. As climate change accelerates, setting a clear focus on greenhouse gas reduction targets in line with the 1.5°C objective will play a critical role in minimizing environmental-related financial risk to our portfolio companies. Companies which take these issues seriously are also likely to represent attractive investment targets for financial and strategic buyers in the future as the world collectively accelerates towards net zero goals over the next two to three decades. It is for these reasons that we are committed to taking immediate action in the advancement of Net Zero ambitions at the fund, asset, and operational levels of Capital Dynamics. Many, if not most, of our clients share these same concerns and goals. This is why we offer our clients a myriad of bespoke and customizable investment solutions to capitalize on the emerging frontier of Net Zero investment solutions and help us all drive towards an equitable lower carbon world.
We believe responsible investment leads to enhanced long-term financial returns and a closer alignment of objectives among investors, stakeholders, and society at large.
We believe the benefits of responsible investment include:
- Risk Reduction
- Cost Reduction
- Positive impact on operating performance
We integrate responsible investment practices across our organization. In addition to being an early signatory of the Principles for Responsible Investment (‘PRI’) in 2008, our company is actively engaged in initiatives to improve responsible investment industry standards.
In 2020, Capital Dynamics was awarded the highest rating (A+) from the UN PRI for (i) Strategy & Corporate Governance, (ii) private equity strategy, and (iii) clean energy strategy.
Our proprietary investment rating system: R-EYE™
Based on the 17 Sustainable Development Goals (“SDGs”) identified by the UN, we created the R-Eye™ rating system in 2018, and deployed it across our business lines the following year. The proprietary rating system makes use of ten to twelve criteria, depending on the investment strategy, which are included in a scorecard and the responsible investment evaluation process. By scoring a potential investment against these criteria, we can make an informed decision whether to proceed with the due diligence or refer it to our Responsible Investment Committee for further review prior to the final investment decision. After an investment is made, this R-Eye™ rating is actively monitored and updated during the holding period of an investment. Any change in the rating is reported to our investors and protocols are in place to respond quickly and thoughtfully where any material ESG issues are identified.
Capital Dynamics – in-house illustration. The R-Eye™ scorecard for each strategy will vary. Only investments beginning in 2019 are evaluated based on the R-Eye™ framework. Specific investment processes may vary depending on investment vehicle and asset class
Responsible Investment Committee
Our RI Committee includes representation from each investment strategy, investment risk functions, and senior client and business professionals.
The Committee works closely with each investment team as well as the organization as a whole to make sure our RI philosophy runs through our entire business.
- Votes on items such as RI policy and UN PRI submissions
- Advises Investment Committees on RI best practice
- Evaluates potential RI alerts within our investment portfolios
- Sets the agenda for RI training, community involvement and the advancement of RI thought leadership
Five RI Committees focusing on key topics
In 2019, the firm formed five Sub-Committees to focus on key areas of Responsible Investment ("RI") within the business.
EU Sustainable Finance Disclosure Regulation
The Sustainable Finance Disclosure Regulation (“SFDR”) applied from 10 March 2021. The SFDR requires financial market participants such as Capital Dynamics to provide information to investors with regards to the integration of sustainability risks, the consideration of adverse sustainability impacts, the promotion of environmental or social characteristics, and sustainable investment.
Our policies required by the SFDR can be found at the following links:
ENVIRONMENTAL BENEFITS GENERATED BY OUR CLEAN ENERGY ASSETS*
CO2 emissions equivalent to:
- 1,512,396 homes' electricity use for one year
- 1,841,332 passenger vehicles driven for one year
- 20,079,074 barrels of oil otherwise consumed
“Incorporating ESG best practices into our firm’s investment process is a top priority. This is no longer considered a ‘nice to have’ but something our clients expect from us.”
Head of Product Development & Strategy, Chair of Responsible Investment Committee
RESPONSIBLE INVESTMENT COMMITTEE SENIOR LEADERSHIP
latest News, Research & Events
Capital Dynamics Closes Mid-Market Direct V Fund above Target at $578 million
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