Investing responsibly for a better tomorrow
Our approach is built on best practices of incorporating ESG factors into investment considerations and active ownership.
At Scale Capital we take our approach to investing sustainably and responsibly seriously. We invest responsibly to manage risks, add operational value, identify strategic opportunities, and create positive, lasting impact through our companies.
To help identify the environmental, social and governance (ESG) factors that are most material to our portfolio companies, we have formalized an extensive responsible investing framework for how we would like to incorporate ESG materiality into our investment considerations and active ownership.
The framework (as seen below) consists of two parts; the first being how Scale Capital can utilize ESG factors pre-investment to mitigate risks; and the other being how we can create value in our companies and engage them on their ESG materiality.
At Scale we do not believe ESG to just be a method for risk minimization by simply shying away from the worst performing ESG companies. On the other hand, we strongly believe that to contribute to building a better world and ensuring long term sustainability of our portfolio companies, we must actively pursue an ESG-approach.
We have, based on this idea, implemented a set of goals that we and our portfolio companies are actively working towards. We have chosen 6 of the UN Sustainable Development Goals (SDGs), where we can maximize our impact, to be the basis for Scale Capital’s Sustainability Goals.
The 6 chosen goals align with our broader investment philosophy and strategy, and we believe that by actively focusing on these goals we can make real positive impact while also creating significant value for our companies, investors and the world as a whole.
Our standards must be fulfilled to ensure that our companies are compatible with our approach. To ensure that we do not invest in any companies violating our standards, we conduct two set of screenings; norm-based screens and activity-based screens. Companies in violation of either of these will be excluded from the investment process.
Scale Capital invests in companies adhering to our minimum standards of good governance. Before investing, we conduct a screening of potential investments based on internationally recognized norms and standards of the UN Global Compact principles, among others.
UN Global Compacts 10 principles guides Scale Capitals approach to investing. The principles provide a standard of human rights, workers right, environmental protection and well as business conduct that we expect from all our portfolio companies.
Scale Capital excludes any investments in companies deriving more than 5% of their revenue from the from the following industries:
- Controversial weapons
- Thermal Coal
- Fossil fuel extraction
- Palm Oil
- Illicit drugs
Companies with revenue from any of these industries, and where the total revenue from any of the selected industries is below the 5% threshold, are set to be actively engaged in both the pre- and post-investment process to make the business model more sustainable.
Scale Capital is committed to improving the performance of our portfolio companies, both their financials and their impact on the world. In fact, a core belief of ours is that the two are intrinsically linked.
We acknowledge that every company is different, thus we review each company on an individual basis. While some standards will be uniform across all our portfolio companies, we also utilize an approach that maximizes impact for the given company and sector.
In our work, we incorporate ESG factors into all investment decisions and active ownership. We take great pride in introducing ESG on our companies’ board meetings and likewise engaging our founders on ESG materiality.