Responsible Investing

Effective risk management is fundamental to private credit. Our investment teams conduct rigorous due diligence, seeking to avoid businesses with governance shortcomings and concerns. At the same time, we assess how prospective mid-market borrowers are positioned to navigate sustainability risks and opportunities, which can range from supply chain risks to environmental policy tailwinds that support growth of a company’s products and services.

Post-investment, Pemberton’s teams maintain ongoing engagement with borrowers to proactively identify and manage any potential deterioration in the risk-return profile, including governance and sustainability concerns. We monitor the management and disclosure of sustainability matters through our annual Borrower Questionnaire. While an important instrument in our asset class to incentivise progress on sustainability performance through the loan lifecycle is a ‘margin ratchet’, which reduces the loan interest margin if the borrower delivers against predefined, material sustainability targets.

Pemberton’s Responsible Investing Policy and governance review are embedded in risk management for our private credit strategies. For example, substantially all* potential investments across our platform must undergo a ‘red flag’ controversy screen using a third-party specialist provider. Where sustainability and governance concerns are identified for a prospective borrower, requiring deeper guidance and decision-making, the relevant investment team can escalate the opportunity to the Responsible Investing Advisory Council to consider on a case-by-case basis.

*where there is coverage by the third-party controversy database

We strive to undertake stewardship responsibilities to the extent possible for an investor in our asset class, with a materiality-based approach to engagement efforts to protect and enhance value. As the sole or lead lender in direct lending, Pemberton has a degree of influence to encourage portfolio companies in strengthening their risk mitigation and preparedness for sustainability disclosure and climate regulation in Europe and the UK. We run a successful series of sustainability workshops for our portfolio companies, for instance providing guidance on carbon measurement and reporting, with participation by external expert speakers.