Terms & Conditions

Sun Capital’s Approach for Implementing ESG Factors into its Investment Program

American Investment Council’s guidelines & United Nations-backed Principles for Responsible Investment

At present, Sun Capital Advisors, L.P. and its wholly owned subsidiary, Sun Capital Advisors AIFM-VIII, LLC (the “AIFM” and together with Sun Capital Advisors, L.P., the “Firm”) generally follows American Investment Council’s (“AIC”) guidelines as a framework for implementing Environmental, Social and Governance (“ESG”) factors into its investment program, subject in all events to the Firm’s fiduciary duty to its investors. In addition, the Firm is a signatory to the United Nations-backed Principles for Responsible Investment (“PRI”), furthering its commitment to responsible investment, which requires incorporation of ESG issues into investment analysis and decision-making processes.

AIC has adopted a set of comprehensive responsible investment guidelines to apply prior to investing in companies and during their period of ownership. The guidelines cover environmental, health, safety, labor, governance and social issues.

The guidelines grew out of a dialogue between AIC members and a group of the world’s major institutional investors, which took place under the umbrella of the PRI. 

In general, the guidelines call for AIC member firms to:

  1. Consider environmental, public health, safety and social issues associated with target companies when evaluating whether to invest in a particular company or entity, as well as during the period of ownership. 
  2. Seek to be accessible to, and engage with, relevant stakeholders either directly or through representatives of portfolio companies, as appropriate. 
  3. Seek to grow and improve the companies in which they invest for long-term sustainability and to benefit multiple stakeholders, including on environmental, social and governance issues. To that end, AIC members will work through appropriate governance structures (e.g., board of directors) with portfolio companies with respect to environmental, public health, safety and social issues, with the goal of improving performance and minimizing adverse impacts in these areas. 
  4. Seek to use governance structures that provide appropriate levels of oversight in the areas of audit, risk management and potential conflicts of interest and to implement compensation and other policies that align the interests of owners and management.
  5. Remain committed to compliance with applicable national, state and local labor laws in the countries in which they invest; support the payment of competitive wages and benefits to employees; provide a safe and healthy workplace in conformance with national and local law; and, consistent with applicable law, respect the rights of employees to decide whether or not to join a union and engage in collective bargaining. 
  6. Maintain strict policies that prohibit bribery and other improper payments to public officials consistent with the U.S. Foreign Corrupt Practices Act, similar laws in other countries, and the OECD Anti-Bribery Convention.  
  7. Respect the human rights of those affected by their investment activities and seek to confirm that their investments do not flow to companies that utilize child or forced labor or maintain discriminatory policies. 
  8. Provide timely information to their limited partners on the matters addressed herein, and work to foster transparency about their activities. 
  9. Encourage their portfolio companies to advance these same principles in a way that is consistent with their fiduciary duties. 

Information on policies on the integration of sustainability risks in the Firm’s investment decision making process (Article 3(1), SFDR)

The Firm considers ESG factors, as deemed appropriate for each particular investment, as part of its investment due diligence process and portfolio monitoring.  A key driver behind this is to identify, assess and manage ESG-related risks, including “sustainability risks” within the meaning of the EU Sustainable Finance Disclosure Regulation (Regulation (EU) 2019/2088) (the “SFDR”), associated with investments which, if occurring, could cause an actual or potential material negative impact on the value of portfolio companies and hence the funds the Firm manages. 

Within the Firm, the responsibility of incorporating ESG risks into the investment due diligence process sits with the relevant investment team, subject to oversight and guidance provided by the ESG Committee (which is responsible for the Firm’s overall ESG program) and the Investment Committee (which is responsible for the decision to invest in any investment opportunity). Where appropriate, the Investment Committee considers material ESG risks as part of this decision making process, subject in all events to the Firm’s fiduciary duty to its investors.

ESG has been part of the Firm’s diligence process for many years (e.g., review of environmental practices; compliance with applicable laws; anti-corruption, international trade and privacy compliance programs; etc.). Sun Capital’s Transaction and Operations teams (together, in some cases, with third party advisors) review many ESG factors including ESG-related risks during pre-acquisition due diligence and throughout the period of an investment. In addition, the Firm and its third party advisors may assess other ESG items on a case-by-case basis depending on the context of the potential transaction and/or the company’s particular situation. 

In particular, as part of the pre-investment diligence, the Firm may employ available ESG tools including a questionnaire focused on the current ESG practices at a potential portfolio company; industry specific guides focused on a deeper evaluation of the ESG practices at the company or in its industry generally; and legal due diligence requests/questionnaires for the company, including in relation to its ESG practices.

As part of the Firm’s pre-acquisition diligence on a new potential investment, where appropriate, the Investment Committee is apprised of ESG risks considered by the applicable investment team to be material, and the Investment Committee evaluates such ESG risks in connection with its overall evaluation of the investment opportunity, subject in all events to the Firm’s fiduciary duty to its investors.

Typically, certain Firm personnel are on the boards of its funds’ U.S.-based portfolio companies and on the boards of certain holding companies of its non-U.S.-based portfolio companies. Accordingly, the Firm’s personnel often drive significant initiatives. For example, the Firm may use these board positions, on a case by case basis, to influence the management team regarding specific material ESG risks and opportunities. Moreover, throughout the ownership of portfolio companies by funds managed by the Firm, where appropriate, the Firm’s Operations and Transaction teams work with the management teams to evaluate certain of their ESG practices and, in some cases, encourage the portfolio company to improve their existing practices, standards, codes and programs. Further, the Firm may require certain portfolio companies to report to the Firm on their ESG practices and program on an annual basis.

The Firm recently engaged a third party advisor to assist the Firm in developing a multi-year ESG plan for the Firm and its portfolio companies and hired a dedicated ESG professional to enhance the Firm’s ESG program.

No Consideration of Sustainability Impacts

The Firm will consider ESG factors as part of its investment process when managing its funds, but, at this time, will not consider adverse impacts of investment decisions on “sustainability factors” as specifically set out in the SFDR. The Firm has chosen not to do so for the present time as it considers that its existing ESG policies and procedures are appropriate, proportional and tailored to the investment strategy of its funds. The Firm continues to monitor regulatory developments with respect to the SFDR and other applicable ESG-focused laws and regulations, including the implementation of related and secondary legislation and regulatory guidance, and will, where required or it deems otherwise appropriate, make changes to its existing policies and procedures.

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