Sustainability

ADMCEU and its Cibus Funds follow a robust environmental, social and governance (ESG) management process that helps to mitigate ESG risks and assists sustainable value creation throughout the investment process.

We want to build profitable companies that recognise and optimise their natural capital use, producing more & better food with fewer inputs.

Sustainable Investing in Food and Farming

ADMCEU and the Cibus Funds believe we can address the challenge of how to produce more food with fewer resources and at the same time, capitalise on the investment opportunities in agriculture’s changing landscape.

Population increases, urbanisation, disposable income growth and changing consumer preferences are driving a structural change in food demand. We believe that sustainability and commercial prosperity in the agriculture sector are inextricably linked.

At the same time, changes to our increasingly erratic and warming climate are being recorded at an increasing rate and biodiversity loss is impacting pollination, vital for approximately 70 of the top 100 food crops we eat today.

Quite simply, we believe sustainable farming and production practices and companies that run on sustainable lines will be more valuable. We believe that broadly, capital will be allocated to companies that find innovative ways to produce better food with fewer negative externalities and more efficient resource use. We want to be ahead of that curve. Please read our White Paper on what motivates us to get there, here.

Our Sustainability Process

Our sustainability process is documented in our Environmental and Social Management System (ESMS), each component is listed below. The ESMS outlines the assessment and regulation of sustainability factors and risks (environment, social and/or governance events or conditions that, if they occurred, could cause a material, negative financial impact) as part of our investment due diligence processes, ownership and exit.

We view ESG and sustainability integration as our strategy and fiduciary duty and have done for over 15 years, with the establishment of the ADM Capital Foundation, a philanthropic vehicle created to support critical research and impact-driven approaches to promoting environmental conservation. We also recognise the importance of our role in actively engaging and supporting our portfolio companies to improve their social and environmental outcomes.

Finally, our governing policies, including ‘Climate Change’, ‘Modern Slavery’, ‘ESG and Sustainability’, ‘Remuneration’ and ‘Stewardship and Engagement’, underpin our whole sustainability process. Links to these are listed at the bottom of the page.

The exclusion list, based on the International Finance Corporation (IFC) and the Guernsey Green Fund rules (see below), is the initial step of our ESG due diligence process. We do not consider production practices that are damaging to our environment and society. We positively select for organisations that act to avoid harm, benefit society, and/ or create solutions to some of our planet’s greatest challenges.  

IFC Standard Exclusions

  • Production or trade in any product or activity deemed illegal under host country laws or regulations or international conventions and agreements, or subject to international bans, such as pharmaceuticals, pesticides/herbicides, ozone depleting substances, PCBs, wildlife or products regulated under CITES and transboundary movements of waste prohibited under international law.
  • Production or trade in weapons and munitions. 
  • Production of or trade in tobacco. 
  • Gambling, casinos and equivalent enterprises. 
  • Production or trade in radioactive materials. This does not apply to the purchase of medical equipment, quality control (measurement) equipment and any equipment where IFC considers the radioactive source to be trivial and/or adequately shielded. 
  • Production or trade in unbonded asbestos fibres. This does not apply to purchase and use of bonded asbestos cement sheeting where the asbestos content is less than 20%. 
  • Drift net fishing in the marine environment using nets, or other practices damaging to the marine environment or local communities, as determined by the Cibus funds (See Animal Welfare Policy Criteria). 
  • Production or activities involving harmful or exploitative forms of forced labour/harmful child labour (see ADM Capital Europe LLP’s Modern Slavery policy). 
  • Commercial logging operations in primary tropical moist forest or agricultural activities that involve degradation of primary forest.
  • Production of or trade in wood or other forestry products other than from sustainably managed forests.
  • Activities prohibited by host country legislation or international conventions relating to the protection of biodiversity resources or cultural heritage. 
  • Animal factory production where animal welfare is not taken into consideration (see Animal Welfare Criteria). 
  • Trade in goods without required export or import licenses or other evidence of authorisation of transit from the relevant countries of export, import and, if applicable, transit.

Guernsey Green Fund Exclusions

  • Uranium mining for nuclear power.
  • Any fossil fuel-based power generation including gas, ‘clean’ coal and other coal.
  • Efficiency upgrades to greenhouse gas intensive power sources –e.g., clean coal technology. 
  • Energy savings in fossil fuel extraction activities –emission reduction requirements require a rapid phase-out of all fossil fuel usage. Anything that helps to extend the life of fossil fuel usage is exclude. 
  • Landfill without gas capture.
  • Waste incineration without energy capture.
  • Rail lines where fossil fuels [carried as cargo on the trains] account for more than 50% of freight.

Lisa Genasci designed the ADM Capital ESG Toolkit (Toolkit), which provides analysts with sector-specific knowledge of ESG risk and opportunity factors. The toolkit generates a simple rating system, providing appropriate due diligence questions to support the analyst in their initial assessments and due diligence. The toolkit is based on the Sustainability Accounting Standards Board’s (SASB) industry standards, in-house research and MSCI’s ESG ratings methodology.

ADM Capital’s ESG Toolkit is designed to support Investment Team due diligence by providing broad and sector specific guidance on ESG risks and opportunities
SectorsImpact TopicsIssuesSub-issues
Examples:
Agrifood Technology/ Services
Agriculture (Real Assets)
Aquaculture
Environment
Social Capital
Business Model & Innovation
Human Capital
Leadership & Governance
Water & Wastewater Management
GHG Emissions
Labour Practices
Animal Welfare
Ecological Impacts
Waste Management
Employee Health and Safety
Resource Efficiency
Land Management
Training
GHG Emissions of Operations
Ecosystem Services
Gender Equality
Wages
Child Labour
Food Waste Management
Climate Change Adaption
Regional Water Scarcity
Building Energy Efficiency
Organic Farming
Food Safety Auditing
Fertiliser Efficiency
Renewable Energy Sources

Note: ADM Capital continues to expand its coverage across sectors, having targeted those prevalent across the current investment pipeline.

By adopting industry leading standards from the SASB, MSCI, IFC and the ADMCF, it is a pragmatic tool which can be applied in the context of private equity.

ESG is integrated into the Cibus deal process from inception, with an initial understanding set out in the first IAC concept note.

Lisa Genasci and Justin Mundy support ADMCEU and Cibus Funds’ ESG integration in an advisory capacity.

For each investment, based on a minimum ownership and capital investment criteria, independent ESG consultants are engaged to review the environmental, social and governance elements of the operations of the company. Where the investment is smaller and the challenges believed to be less material after an initial assessment using the toolkit, we manage ESG due diligence in house and build our own ESAP with the company management. The results of which form the basis of the Environmental Social Action Plan (ESAP).

The ESAP for a transaction identifies any key ESG risk factors and guides sustainability risk mitigation or sustainable performance enhancement based on IFC Performance Standards and/or other relevant standards. The ESAP is broken down into identifiable and measurable actions that are agreed by the Cibus team, the operating partners, management and stakeholders of the company. We work proactively with portfolio company management to add environmental and social value and improve governance practices via their ESAP. Management is incentivised to comply or exceed the ESAP targets and questioned if fallen short.

KPIs are established and data is collected to monitor progress towards agreed ESG goals, as well as to capture the value of ESG risk mitigation and sustainable practice integration in investee companies. The Cibus funds align their KPIs to capture both negative and positive sustainability performance.

We have been working with the administrator to develop a framework to report on KPIs consistently across each portfolio company and at the fund-level for the Cibus Fund and all future Cibus funds. We gather a range of KPIs, that cover various items from waste, emissions, gender diversity, pay equality to fuel sources. The collection of this data will aid:

Consistency – Each company will have to report on the same macro ESG KPIs, applicable across all portfolio companies, reducing time spent reviewing and consolidating data previously reported across varying units and metrics.

Progress Tracking – Data will be stored in the same database. Therefore, performance and progression on ESG KPIs can easily be tracked and analysed. Improving our ability to address ESG risks and target challenges.

Fund-wide Reporting – We intend to utilise the KPIs gathered to produce fund-wide reporting, our first annual sustainability report and report to the UN PRI. The dashboard will also enable portfolio companies to produce internal and external ESG risk and sustainability reports.

We will be able to report to our Limited Partners with consistent, thorough reporting, encouraging and supporting our LPs to report on their own investment portfolios.

We track progress with regard to ESAP items and other ESG obligations. We ensure ESG representation, warranties and covenants are incorporated into transaction documents and evaluated for compliance.

We will produce an annual sustainability report, disclosing the performance and progress of our portfolio companies. ADMCEU and the Cibus Funds aims to incorporate and disclose via the recommendations developed by the Task Force for Climate-related Financial Disclosures. We are also a signatory of the UN Principles of Responsible Investment (‘UN PRI’) and will produce our first Transparency Report in 2022.

The firm’s approach to remuneration has always been designed to consider and integrate sustainability risks. Bonuses can be adjusted as appropriate to reflect behaviours and performance in relation to sustainability and ESG.

Engagement