Focusing on where we have the biggest impact
A materiality assessment is the process through which firms identify the ESG topics that matter the most to their business and to its stakeholders. In 2021, Hg undertook its first formal materiality assessment, taking into account the importance of environmental, social and governance topics to internal and external stakeholders.
Our materiality assessment is founded on an extensive review to identify the key ESG issues to Hg and the companies in which we invest. Hg’s ESG team engaged with our stakeholders including investors in our funds, portfolio companies and employees through interviews, survey and document reviews. To integrate topics from an external perspective, we used an AI-based external scanning tool called Signal, allowing us to have a sense of how important the topics are in the media and news outlets.
For the review of regulatory requirements and standards, our desk-based review was complemented by engagement with our legal advisors and participation in various ESG and private equity forums (e.g. SASB, ICi, ESG Data Convergence Project, etc.).
This process has helped Hg prioritise ESG objectives for our FY23 strategy, considering what matters most to us and our stakeholders. Going forward, we will review our materiality matrix regularly to ensure that we continue to incorporate external trends and issues importance to our stakeholders.
The stakeholder groups we engaged with as part of the assessment:
Key ESG topics
We identified five ESG topics that emerged as having the highest importance to Hg and its stakeholders:
Key ESG themes
Key aspects in tech
Importance to Hg
Climate change is one of the biggest challenges we face globally. Environmental risks continue to dominate the World Economic Forum’s Global Risks Report 2022 – for both the short and long term. The WEF defines ‘climate action failure’, ‘extreme weather’ and ‘biodiversity loss’ as the top three risks, making climate change a key issue and at the front of most investors’ minds.
- Data centre energy consumption
- Carbon footprints
- Climate change related risks
- Regulatory compliance
Hg takes our role in climate action very seriously. We believe that by better understanding and managing the emerging risks and opportunities that arise from climate change we can enhance our investment decisions. We aim to be a leader within the PE industry in the fight against climate change by aligning our own operations and our portfolio towards achieving Paris-aligned carbon reduction targets.
Diversity and Inclusion
Diversity can include but is not limited to age, gender, background, sexual orientation and ethnicity. The private equity and technology sectors have historically fallen short on diversity, which is why we have focused on executing our DEI strategy at firm level and across our portfolio companies.
- Recruiting the next generation of talent from a diverse candidate pool
- Greater representation for ethnic minorities
- Greater diversity at Board level
Building and maintaining a diverse and inclusive workforce where everyone feels valued is what we strive to do. At Hg, we aim to drive change as part of recruitment, development and retention and building an inclusive culture.
Cybersecurity continues to be one of the top 10 risks as defined by the WEF. It is vital for all companies in general and software companies in particular to manage and mitigate the risks associated with cyber threats and hackers.
- Risk related to cyber attacks
- Protecting sensitive company, employee and customer data
A cyber-attack can be detrimental for a business, its employees, its customers and reputation. We want our businesses to be as secure as possible and be prepared for the challenges and responsibilities that come with being a big tech player.
Competition law exists to promote healthy, fair and open competition between businesses, which in turn will create the foundation for a healthy economy, more innovation, affordable goods and job opportunities. Competition law sets out a detailed framework for both fair and ethical business conduct as well as M&A activities.
- High M&A activity
- Complexity and rapidly evolving competitive landscape in tech
As Hg’s portfolio companies are active globally our activities can be subject to competition and antitrust legislation at a national and regional level. We are invested in businesses that we believe can have a positive impact on competition and challenge current conditions for the better. We take a pro-active approach in managing competition and antitrust compliance across our portfolio and ensuring competitive, ethical and fair market practices at all times. This covers both the day-to-day business conduct of our growing portfolio as well as M&A activities.
Governance refers to the set of rules, controls, policies, and resolutions put in place to dictate corporate behaviour. It includes risk management processes, compliance with laws, codes of conduct and regulations and tax compliance.
- Policies and procedures
- Upholding ethical business conduct
- Board accountability and practices
It is of significant importance to Hg that we comply with relevant laws and regulation and that we have robust policies and risk management processes in place. We aim to be an example of good practice and identify areas of improvement across portfolio companies too.