MESSAGE FROM OUR
EXECUTIVE MANAGEMENT COMMITTEE
Viewed from an ESG lens, the remarkable confluence of events we witnessed across 2020 underscored just how dynamic and interconnected this important three-letter ecosystem truly is, and why it matters in investing.
Entering the year, most of us were focused on the ‘E’ amidst global climate protests and the tragic wildfires in Australia and California. Many firms, including HarbourVest, made good progress on their climate objectives despite having to soon pivot to another crisis: an unprecedented pandemic that caused a global economic shutdown.
The ‘S’ part of ESG can be challenging to articulate to investors – but 2020 brought to the fore the many inequities that weave through society today, affecting income, race relations, employee well-being, and diversity and inclusion. In the midst of COVID-19, with businesses across the globe forced to shift priorities and modify their daily operations on the fly, we reached out to 31 of our GPs to get insights into how they and their portfolio companies were addressing the social impacts of the pandemic.
For our firm, having in prior years put resources into responsible planning and flexible working, we reaped the benefits and were able to seamlessly transition our 700+ global team into working from home. Our past investments in technology and cybersecurity allowed us to maintain business-as-usual operations, and to have full confidence that our data and systems would be adequately protected. Most importantly, we were able to keep employees in our 10 global offices safe and healthy.
In our view, the ‘G’ – good governance and oversight – is a baseline investment consideration. We have a fiduciary duty to our investors to always act in their best interests, and there is nothing more important to us than the integrity and excellence of the partners with whom we work. In 2020, we added new indicators to our proprietary ESG Manager Scorecard to help us better understand how our GPs are managing, prioritizing and disclosing on ESG risks and value creation opportunities. We were also proud to receive an A+ in governance in our PRI Rankings, and equally proud to be recognized by the BVCA with its 2020 Excellence in ESG Award in the LP category.
Climate Change Strategy In last year’s ESG Report, we announced our plans to develop our climate strategy around the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). This year, we are pleased to share our first progress report with you around the TCFD’s four pillars: governance, strategy, risk management, and metrics and targets. More broadly, we are lending our voice and support to the industry discussion on climate change and are as committed as ever to working with our industry partners to use our expertise to help develop solutions and strategies. In addition to being a TCFD Supporter, we also became a member of the Initiative Climat International in 2020, and our Head of ESG and ESG Council Chair both serve on its steering committee.
Focused on Stewardship The concept of stewardship is a rising theme for us. We have long been committed to partnering with our fellow GPs and LPs to drive change across the industry and share best practices on ESG. More recently we have been focused on meeting the increased demand for investment solutions that can meet both the sustainability and risk-return objectives of our clients. Our solution, the HarbourVest Stewardship Initiative, leverages our direct co-investment and/or real assets deal flow to create custom, scalable portfolios of impact-oriented investments.
Investing in Diversity HarbourVest has long supported diverse-led managers, who continue to receive a disproportionately low share of investors’ capital allocations each year. In 2016, we took our commitment to a new level with the addition of an outside investment team with more than 20 years of experience investing in these hard-to-navigate markets. Two of those team members, Sanjiv Shah and Craig Fowler, along with primary team member Amanda Outerbridge, provided some good insights in this interview on why we invest in diversity, and how LPs can play a role in helping advance diversity and inclusion across our industry.
Externally, we were inspired by the efforts some of our GPs are taking to tackle these big issues, and wanted to share case studies on two managers who are making diversity and inclusion a central business focus, and two others who are addressing systemic biases in their own innovative ways.
Prioritizing Diversity and Inclusion HarbourVest has long prized diversity of thought as one of our core tenets and we are proud to have this reflected in our senior leadership. At the same time, we recognize that we haven’t been as focused or intentional in our approach to diversity and inclusion as we need to be - and are dedicated to finding ways to continuously improve in this area as we grow and serve our clients’ evolving needs.
The callous disregard for George Floyd’s life, and for so many others, sent our firm on a journey of reflection, education, and action. We tried to make sense of these events by having candid, sometimes uncomfortable, conversations with our team, and we emerged from these discussions with a renewed commitment to ensuring that we do all we can to foster a culture and community where people of all genders, ethnicities, and sexual orientations can bring their whole selves to work. This is the only way to ensure that we tap into and maximize their diverse talents to drive better results for our investors.
Internally, our Diversity & Inclusion Council accomplished much in 2020, taking on issues we felt were of most importance to our firm. On the talent and hiring front, we developed plans to launch our first-ever internship program in conjunction with Sponsors for Educational Opportunity (SEO), which works to close the career opportunity gap in underserved communities, and we joined the #10000BlackInterns initiative in the UK. We have embedded diverse hiring into the performance objectives of firm leaders, who will be evaluated on their talent acquisition efforts and outcomes. For internal programs, the Council took the lead in delivering Conscious Inclusion training to all staff globally and developed and rolled out a new respectful workplace policy that codifies the behaviors and policies we expect all employees to comply with.
Reflecting our resolve to work within our industry, HarbourVest also became a founding signatory to ILPA’s Diversity in Action Initiative in 2020, as well as a signatory to the NAIC’s Diverse Alternative Investment Industry Statement, which commits us to help create permanent pathways for more Black and Latinx investors to gain access to institutional capital.
Engaged Corporate Citizen As we set high expectations for our managers on ESG and climate change, it’s important to us that we “walk the talk” ourselves and take responsibility for our own emissions as a firm. In 2020, for the first time, we committed to measuring and offsetting our carbon footprint, and we are incredibly proud that HarbourVest is now a certified CarbonNeutral® company in accordance with The CarbonNeutral Protocol, the leading framework for carbon neutrality.
No summary of our year would be complete without a salute to our global team, whose generosity and desire to help were on full display across 2020. Our Global Volunteering Group helped us identify and work with the organizations in our regions that needed urgent help, focusing in particular on COVID-driven food insecurity and poverty. Our global team, as usual, donated generous amounts of both time and money to support these causes, including our Managing Directors, who personally funded HarbourVest’s first-ever corporate donation of more than $2 million to organizations focused on these issues.
Our Opportunity The history books will look back on 2020, rightly so, as a dark time. However, it also showed us what we can accomplish when we pull together and focus. As we look back and then ahead, two words that come to mind are grateful and committed. We are grateful for our own ecosystem – our global community of people and partnerships that forms such a strong foundation of trust and reliability when times get tough. We leaned on you and you leaned on us, and we are all better for it. And we are committed to engaging on the bigger issues and doing our part to effect real change. That is our opportunity, and our team is up to the challenge.
We hope you enjoy reading about our ESG activities and initiatives and look forward to keeping you updated. As always, thank you for your support and partnership.
Managing Directors John Toomey and Peter Wilson
Managing Directors John Toomey (left) and Peter Wilson
"We are grateful for our global community of people and partnerships that forms such a strong foundation of trust and reliability...and we are committed to engaging on the bigger issues and doing our part to effect real change."