1. Initial screening

During the initial screening phase, the Sustainability Team works with the Investment Team to complete a red flag checklist to identify potential sustainability red flags. This checklist rules out investments that operate in excluded sectors including tobacco, pornography, and controversial weapons, and assesses whether the company operates in industries or regions new to Oakley, where our understanding of climate-related risks may be less developed.

2. Due diligence

During the due diligence phase, the Investment Team and Sustainability Team collaborate to identify current and future sustainability risks and opportunities, including climate-related factors, and assess how these can be managed or mitigated after investment.

When material risks are identified, the Sustainability Team conducts a detailed review and, if necessary, consults with external advisers to gain a deeper understanding of these risks. This phase also marks the start of the Sustainability Team’s collaboration with the portfolio company’s management team.

The findings from the sustainability due diligence process are included in the investment memoranda and presented to the Investment Advisory Committee for review as part of its decision-making process.

3. Stewardship programme

Our aim is to empower management teams during our ownership phase, providing them with the knowledge and tools to identify and manage sustainability risks and opportunities in their business and sector.

3a. Onboarding programme

If an investment is successful, the findings are incorporated into the business’s 100-day plan, which includes a sustainability onboarding session with the management team. During this session, the Sustainability Team introduces Oakley’s sustainability processes, presents due diligence findings and agrees on an initial sustainability action plan.

3b. Engagement and support

Sustainability initiatives and action plans are led by each portfolio company’s management team, with the Sustainability Team providing ongoing guidance during the ownership phase. The team offers support and tools to help drive progress on key initiatives.

We hold annual on-site meetings with most of our portfolio company management teams and organise events and webinars to encourage collaboration, knowledge-sharing, and the exchange of best practices. These touchpoints facilitate discussions on shared sustainability challenges and provide opportunities to learn from leading industry experts.

As all our portfolio companies face some level of physical and transition climate risks, emerging challenges such as data collection and reporting are regularly addressed at these meetings. Through these efforts, we aim to advance sustainability and climate practices while strengthening our partnerships with portfolio companies.

3c. Monitoring and reporting

Our goal is to enhance the sustainability and ESG performance of our portfolio companies during their time with us, including with respect to climate-related matters. Monitoring and reporting help us regularly assess performance and identify opportunities for improvement at both the fund and portfolio company levels.

We require portfolio companies to report annually on their progress and KPIs through our annual sustainability survey, which tracks data from the previous calendar year. For the second year, our data collection of climate and broader ESG information has expanded to include both majority and minority investments. The KPIs and questions are based on a mix of the Sustainability Accounting Standards Board (SASB) industry guidelines, EDCI metrics, and our knowledge of the sectors we invest in.

At a minimum, all portfolio companies are asked to report on Oakley’s core ESG KPIs in line with these frameworks. Climate-related metrics include GHG emissions, renewable and non-renewable energy consumption, and progress on decarbonisation. In 2024 we have seen growth in the number of portfolio companies providing sustainability data as well as improvements in the completeness and robustness of data.

In addition to the major post-reporting touchpoint with the Sustainability Team between the end of Q1 and early Q2, the Investment and Sustainability Teams regularly discusses sustainability topics with portfolio company management teams throughout the year and present material updates to Oakley on a quarterly basis as part of our Quarterly Portfolio Review.

4. Exit

We see the communication on sound management of sustainability-related risks and opportunities as an essential part of a business’s exit strategy.

To achieve this, throughout the exit process we remain transparent about the current and reflect on how the business has progressed against its sustainability action plans and related KPIs, including climate where material, and the value creation opportunities resulting from these initiatives and risk mitigation practices.