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Cabot Square Alternatives Plc

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Our ESG Goals

For Cabot Square Alternatives Plc (“ALTS”), investing responsibly is essential for us to maintain a sustainable investment model over the long term.

ALTS’s Investment Manager and Investment Adviser have developed and integrated environmental, social and governance (“ESG”) analysis, both negative and positive screening, into their investment process to ensure that related risk factors and opportunities are considered.

Together with our Investment Manager and Investment Adviser we believe investing for positive impact will help to promote long-term financial returns for ALTS.

Environmental, social and governance policy statement

ALTS recognises that ESG issues can have a significant impact on equity investment in terms of raising funds, making investments, managing investments and creating value in its portfolio of infrastructure and property investments. For this reason, we have adopted this ESG policy.

In developing our ESG policy, we have given consideration to a range of codes and standards, including the United Nations supported Principles for Responsible Investment (“UNPRI”) and the United Nations Global Compact.

The Board of ALTS intends to adopt best practice in governance by both adopting the AIC Code and also by seeking, where possible and practical, to follow best practice as it develops. We will ensure that this approach to governance is cascading down into the Alternative Asset Managers in whom we invest.

In terms of measuring positive ESG impacts we will specifically report on environmental, social and wellbeing, local economic impact as well as on governance.

The Investment Manager and Investment Adviser teams will use all reasonable endeavours to:

  • Comply with all relevant regulations governing the protection of human rights, occupational health and safety, the environment, and the labour and business practices of the jurisdictions in which we conduct business;
  • Adhere to the highest standards of conduct intended to avoid even the appearance of negligent, unfair or corrupt business practices;
  • Regard implementation of our ESG engagement activities as an integral part of “how we do business”;
  • Appoint a Head of Sustainability and provide for the assignment of and accountability for ESG responsibilities to senior managers at companies we own a significant stake in – in this regard, we have appointed James Keigher as our Head of Sustainability;
  • Instruct investment professionals in the identification and management of ESG risks and opportunities, and provide them with appropriate support and assistance;
  • Identify ESG risks and opportunities prior to the acquisition of companies entrusted to our care and control, and manage ESG risks and opportunities following acquisition;
  • Establish appropriate ESG policies and practices for companies we own a significant stake in and comparable to standards adopted by ALTS;
  • Recognise that our ESG activities are of an ongoing nature and to encourage continual improvement in ESG performance at the companies we own;
  • Distribute this policy and related ESG information to all ALTS’ Alternative Asset Managers and require that Alternative Asset Managers adopt their own ESG policies, processes and reporting, that meets or exceeds ALTS’s standards; and
  • Encourage dialogue on how we can accommodate ESG issues in a way that is consistent with our investors’ and other stakeholders’ initiatives in these areas.
  • Our Head of Sustainability will review the policy’s effectiveness and implementation on a regular basis and will report relevant findings, progress and recommendations to the Board of Directors.

Definitions

Our definition of responsible investment is the integration of environmental, social and corporate governance considerations into investment management processes and ownership practices in the belief that these factors can have an impact on financial performance.

ALTS’ acknowledges that ESG issues can affect the performance of investment portfolios. Investing practices which incorporate ESG issues can be both financially profitable and profitable for society as a whole. ALTS’ incorporates ESG policies in the investment process. This includes discussions with the Investment Manager and Investment Adviser as well as their discussions with Alternative Asset Managers that ALTS invests in, about how they deploy ESG practices and policies, and understanding the ESG impacts of our entire portfolio.

The UNPRI was launched in 2006 and has become the standard for global best practice in responsible investing. The aim of UNPRI aim is to ensure that ESG issues are considered during the investment process and subsequent management of investments. The framework is voluntary for incorporating ESG issues into mainstream investment practices and followed the United Nations adoption of 17 Sustainable Development Goals (“SDG”) and 169 individual targets to guide the global community’s sustainable development priorities intended to stimulate action in areas of critical importance for humanity and the planet.

In accordance with the UNPRI, ALTS is committed to the following six principles:

  • Principle 1: Incorporating ESG issues into investment analysis and decision making processes
  • Principle 2: Being active owners and incorporating ESG issues into ownership policies and practices
  • Principle 3: Seeking appropriate disclosure on ESG issues by the entities in which investments are completed
  • Principle 4: Promoting acceptance and implementation of the principles within the investment industry
  • Principle 5: Working together to enhance effectiveness in implementing the principles
  • Principle 6: Reporting on our activities and progress towards implementing the principles.

For more information on UNPRI and SDG please visit www.unpri.org

Investment opportunity

The Company seeks to provide a new model for investors to access returns from the alternatives sector to generate an attractive level of sustainable dividend income alongside capital appreciation over the long term.

The Company has identified the opportunity to invest directly in a portfolio of infrastructure and property alternative assets (together “Alternative Assets”) and in asset managers managing such Alternative Assets (“Alternative Asset Managers”) (each, an “Investment”).

Alternative Assets typically have a low correlation to, and reduced volatility compared with, traditional assets such as equities and bonds, whilst also providing portfolio diversification benefits.

The Company’s investments in Alternative Assets are expected to comprise direct interests in infrastructure (including renewable energy) and property alternative assets, or specialist debt secured against infrastructure and property alternative assets. Alternative Assets in which the Company makes investments are expected to be physical in nature and include freehold and leasehold land, buildings, plant, machinery, equipment, inventory, fixtures and fittings, but may also include other assets with contractual cash flows (potentially including government subsidies).

It is expected that, over time, the Company’s portfolio will comprise investments in a number of Alternative Assets, together with investments in a smaller number (being four to six) of specialist Alternative Asset Managers managing these Alternative Assets. In addition, the Company may invest directly in Alternative Assets without taking a stake in the corresponding Alternative Asset Manager.

Investments in Alternative Assets and Alternative Asset Managers will be held through separate Special Purpose Entities (“SPEs”). For ease of reference, each combination of an Alternative Asset Manager and the Alternative Assets it manages is referred to by the Company as an “Alternative Asset Platform”.

Over time, the Company’s investments into Alternative Assets may also take the form of co-investments alongside other funds established or managed by Alternative Asset Managers (“Third Party Funds”), although the Company will not invest itself in such Third Party Funds.

Track record

The Investment Manager has an extensive and successful track record of investing in alternative assets and alternative asset managers and building alternative asset platforms that reach substantial scale and believes it can build new alternative asset platforms suited to being held in an evergreen premium-listed UK investment fund that will be an attractive investment for institutional and retail investors.

Market opportunity

The Investment Manager and the Investment Adviser believe there is a shortage of capital and a lack of expertise in the market of investing in infrastructure and property investments with a value between £1 million and £25 million, which can result in attractive risk adjusted returns for those willing and able to invest in this range.

The Investment Manager and the Investment Adviser will target investment opportunities that are expected to generate an attractive risk adjusted return and that can also make a positive environmental, social and governance (“ESG”) impact by focusing on some of the biggest challenges facing societies and economies. Including opportunities in relation to renewable energy and sustainable infrastructure as well as social infrastructure opportunities in shared ownership and affordable housing, healthcare and education. The Company will report on ESG as well as financial results, and believes that investing for a positive ESG impact will also help promote positive long term financial returns for the Company.

Pipeline

The Investment Manager and the Investment Adviser have agreed heads of terms, including exclusivity beyond Initial Admission, to invest in two Alternative Asset Managers. Based on discussions between the Investment Adviser and the Alternative Asset Managers, these Alternative Asset Managers also have their own pipelines of Alternative Assets in which the Company can invest. The Investment Manager and the Investment Adviser have also identified additional Alternative Asset types in which the Company may invest. These investment opportunities in the two Alternative Asset Managers, their pipelines of Alternative Assets and the additional Alternative Asset types are collectively referred to as the “Current Pipeline”. In the opinion of the Investment Manager and the Investment Adviser the Current Pipeline represents potential investment opportunities for the Company of £500 million. The Investment Manager and the Investment Adviser have offered the Company a first right of refusal, during the period from Initial Admission to the date falling eighteen months following Initial Admission (the “Initial Investment Period”), over those investments in the Current Pipeline which are under exclusivity.

It is expected that the Company’s investment in the Current Pipeline will enable the Company to meet its intention to have substantially invested or committed the Net Initial Proceeds during the Initial Investment Period. If the net proceeds of the Initial Issue and the Subsequent Placings, in aggregate, total at least £196 million, the Company expects to invest in a portfolio comprising approximately 20 Alternative Assets and a minimum of 3 Alternative Asset Managers by the end of the Initial Investment Period.

The Investment Policy is intentionally broad in terms of the types of Alternative Assets the Investment Manager will consider for investment, and allows the Company flexibility to allocate investment towards the most attractive investment opportunities available at any particular time, whilst also enabling the Company to source and invest in Alternative Assets before the weight of institutional capital directed into such investments increases prices and reduces returns. The Investment Manager and the Investment Adviser intend to target Alternative Assets between the immature and established stage, therefore seeking an attractive return with an acceptable level of risk.

Building Alternative Asset Platforms

In addition to investing in Alternative Assets, the Company is also expected, over time, to acquire significant stakes in a smaller number (being four to six) of specialist Alternative Asset Managers. The Investment Policy permits the Company to invest, in aggregate, no more than 20 per cent. of the Gross Asset Value in Alternative Asset Managers (calculated by aggregating the amounts invested in each such Alternative Asset Manager, whether in the form of debt or equity, and based on the latest available reported valuations at the time of making any such investment). The Investment Manager (acting on the advice of the Investment Adviser) expects, in practice, that the actual amounts invested in Alternative Asset Managers, in aggregate, will be significantly lower than 20 per cent. of Gross Asset Value. The Investment Manager and the Investment Adviser expect the value of the Alternative Asset Managers to increase as the respective Alternative Asset Platforms scale up. Therefore, over time, the Alternative Asset Managers may, on a fair value basis, constitute a larger proportion of the Gross Asset Value.

In order to spread investment risk to offer investors exposure to a diverse investment portfolio, the Investment Policy permits the Company to invest, in aggregate, no more than 25 per cent. of the Gross Asset Value in an Alternative Asset Manager and the Alternative Assets managed by such Alternative Asset Manager (calculated by aggregating the amounts invested in each such Alternative Asset Manager and Alternative Asset, whether in the form of debt or equity, and based on the latest available reported valuations at the time of making any such investment).

Scale benefits

By investing in Alternative Asset Managers, the Company increases the number of asset managers originating and analysing opportunities for investment by the Company, thereby accelerating the Company’s potential to achieve scale benefits. The Investment Manager and the Investment Adviser believe that, subject to further fund raising by the Company, there is sufficient potential within the Current Pipeline and the Further Investment Opportunities to enable the Company to be scaled up to approximately £1 billion within five years and further thereafter. This, in turn, has the potential benefit in the future of reducing the Company’s ongoing charges ratio by 25 to 50 basis points per annum.

Diversification benefits

The Investment Manager’s and the Investment Adviser’s ability to tailor Investments and flex the Company’s capital allocation over time is expected to increase the Company’s ability to meet its Target Dividend and Target NAV Total Return and to build a portfolio likely to provide diversification benefits.

The content of this website has been approved (where relevant) for purposes of Section 21 of the Financial Services and Markets Act 2000, by Cabot Square Capital LLP, which is authorised by the Financial Conduct Authority

London, UK.

Charles (Charlie) Ricketts
Independent Non-executive Chair of the Board, chair of the Management Engagement and Nomination Committees

With over 30 years’ experience in the investment trust sector, Charlie brings a wealth of experience to the Board. He was head of investment funds at Cenkos Securities for 8 years and prior to that was a managing director and head of investment companies at UBS Investment Bank. Since stepping down from Cenkos in 2014 he has pursued a number of business and charitable interests. Charlie is a non-executive director of Templeton Emerging Markets Investment Trust plc and Asia Dragon Trust plc.


Annette Barbara (Barbara) Powley
Independent Non-executive Director and chair of the Audit Committee

Barbara is a chartered accountant with over 30 years’ experience in the investment trust industry. Prior to March 2018 she was a director in BlackRock’s closed-end funds team from 2005 with responsibility for the oversight and administration of BlackRock’s stable of investment trusts. From 1996 to 2005 she had a similar role at Fidelity. She brings to the Board her extensive knowledge of the investment trust sector and its regulatory requirements. Barbara is a non-executive director of M&G Credit Income Investment Trust plc.


Anthony (Tony) Roper
Senior Independent Non-executive Director and chair of the Risk and Remuneration Committees

Tony started his career as a structural engineer with Ove Arup and Partners in 1983. In 1994 he joined John Laing plc to review and make equity investments in infrastructure projects both in the UK and abroad and then in 2006 he joined HSBC Specialist Investments to be the fund manager for HICL Infrastructure Company Limited. In 2011, Tony was part of the senior management team that bought HSBC Specialist Investments from HSBC, renaming it InfraRed Capital Partners. Tony was a managing partner and a senior member of the infrastructure management team at InfraRed Capital Partners until June 2018 during which time he oversaw the successful launch of The Renewables Infrastructure Group on the London Stock Exchange. Tony is a non-executive director of Affinity Water Limited and is the chairman of Aberdeen Standard European Logistics Income plc and SDCL Energy Efficiency Income Trust plc.

Cabot Square Alternatives Plc
1 Connaught Place London W2 2ET