ESG Due DiligenceQuestionnaire for Private Equity Investorsand

ESG Due Diligence Questionnaire

for Private Equity Investors and

their Portfolio Companies

Invest Europe ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies

Acknowledgements

Invest Europe would like to thank the members of the working

group for their valuable input and contributions during the

development of this Due Diligence Questionnaire.

Members of the Working Group:

James Holley – KPMG

Sue Woodman – Equistone Partners (now retired)

Marta Jankovic – APG Asset Management

Graeme Ardus – Triton Partners

Isabelle Combarel – SWEN Capital Partners

Blaise Duault – PAI Partners

Lola Fornari – SWEN Capital Partners

Jarlyth Gibson – Advent International

Hanna Grahn and Julia Wikmark – EQT

Maurice Klaver – PGGM

Therése Lennehag – EQT

Caterina Romanelli – PAI Partners

Alex Scott – Pantheon

Thomas Slater – APG Asset Management

Disclaimer

The information contained in this Due Diligence

Questionnaire (DDQ) has been produced by Invest

Europe, based on contributions by the Invest Europe

Responsible Investment Roundtable and the Invest

Europe Professional Standards Committee.

This DDQ is of a general nature and is not intended to

constitute legal or other professional advice and should

not be treated as such. Appropriate legal or other relevant

advice must be sought before making any decision, taking

any action or refraining from taking any action in respect

of the matters covered by this document. Neither Invest

Europe nor the members of the Invest Europe Professional

Standards Committee or the Invest Europe Responsible

Investment Roundtable, or other contributors or their

respective ﬁrms accepts responsibility for or makes any

representation, express or implied, or gives any warranty

with respect to the DDQ, and they shall have no responsibility

for any decision made, any action taken/not taken which

relates to matters covered by the DDQ.

The content of this DDQ is protected by copyright and/

or other intellectual property rights and is the property of

Invest Europe. Unless expressly provided for in writing, you

are not granted any license on the content of this DDQ.

Invest Europe

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Invest Europe ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies

OVERVIEW

Introduction

Invest Europe is committed to responsible investing and wishes to provide support to its members by providing guidance on good

practice in ESG, to allow informed business decisions to be made in relation to ESG issues associated with potential investments

and post-completion.

Guidance

The purpose of this questionnaire is to support the ESG and transaction teams of GPs conduct ESG due diligence on potential

investments. This questionnaire provides a non-exhaustative list of ESG questions that can be used to assess how far progressed

a company is in relation to management of ESG matters. The questionnaire is not supposed to be a tick box exercise. It is there

to assist GPs to identify risks, improvement opportunities and good practices and should be regarded as a tool to facilitate

investment and to identify and monitor ongoing ESG concerns.

The questions focus on ESG policies and reporting, and should be used to identify whether there may be any signiﬁ cant issues,

and opportunities, that require either more detailed technical assessment or need to be managed post-investment. The

questionnaire can also help identify relevant ESG factors that may be used to support ESG reporting during the ownership period.

The questions do not cover all ESG factors which will vary depending on the company’s geographic location and sector, and

therefore should complement a member’s existing due diligence processes. It can be used in conjunction with Invest Europe’s

Professional Standards Handbook and Responsible Investment Bibliography, which provide sources of additional ESG guidance

(available here). The questionnaire is split into two sections: Section 1 provides a set of generic questions, and Section 2 is aimed

at addressing more speciﬁ c ESG issues.

Some companies may be more advanced in their ESG thinking than others and the questionnaire is designed to elicit detailed

information where possible. Companies are encouraged to answer all questions and not leave any blank, providing relevant details

where possible. This questionnaire is one tool that can help companies to develop more formal and comprehensive systems to

manage risk and leverage potential opportunities.

Invest Europe will welcome feedback from members. The aim is to update the questionnaire on a regular basis to keep it

relevant and to ensure best practice standards are maintained. Any comments should be directed to

professionalstandards@investeurope.eu.

This questionnaire is designed to support General Partners (GPs) in their consideration

of Environmental, Social and Governance (ESG) factors during the investment process,

particularly at the due diligence stage. It is also envisaged that this guide can be used

post transaction to help the transaction and management teams focus on developing

and enhancing existing ESG processes. ESG stands for the environmental, social and

governance factors that can impact the performance of a portfolio company and/or an

investment, including the GP itself. It is a phrase commonly used alongside responsible

investment and relates to an investment approach that integrates ESG factors into

corporate conduct, investment decisions and ownership activities. Other terms to consider

in conjunction with ESG are sustainability, corporate social responsibility (CSR), ethical

responsibility, and environmental, health and safety (EHS).

Invest Europe ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies

SECTION

Invest Europe ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies

SECTION 1

GENERAL

Business

overview

Describe the geographical location/key countries you operate in. Please provide details of operations

in emerging markets.

Describe the type of operations associated with the business e.g. ofﬁce, manufacturing/production,

warehousing, logistics etc.

List the countries your key suppliers/distributors operate in.

Please provide details of the total number of employees (split by permanent/full-time equivalent

(FTEs) and part-time). If your operations use a signiﬁcant number of contractors, please also

provide a breakdown.

What does the company consider to be the material risks and opportunities in relation to ESG for

the business?

ESG/SUSTAINABILITY GOVERNANCE

Maturity of

ESG systems

and processes

What is management’s view of the overall maturity status of its existing ESG policies, processes and

systems, where 1 = mature (policy, procedures, systems are coordinated centrally, are well established

and embedded, reviewed and continuously improved; management system certiﬁcation e.g. ISO);

2 = partly developed and implemented at a departmental level (developed and implemented within

departments but not centrally coordinated, and are not subject to regular review and improvement,

and not consistently applied; 3 = immature (no formal policies and systems in place).

Resources (roles

& responsibilities)

Have you assigned a designated point person for day-to-day ESG matters? Please provide details.

Competence

and training

What relevant experience/qualiﬁcations do they have? Is this person speciﬁcally trained in ESG?

Do you provide ESG training to staff? If so please provide details of the type of training, how often,

whether it includes senior management.

ESG committee/

steering group

Have you established an ESG committee/steering committee to monitor performance and if so who

is it chaired by and how often does it meet?

Corporate

risk register

Please summarise the key ESG issues which are included within the corporate risk register.

Monitoring

& reporting

Please describe arrangements in place for monitoring and reporting ESG issues and performance to

senior management/the Board. In your response please conﬁrm what KPIs are monitored (if any)

and how frequently reporting is undertaken and how information is collated and stored (e.g. use of

IT systems etc.?)

Do you publish an external ESG/CSR/Sustainability report or a designated section in your annual

accounts? If yes, please provide a copy.

Memberships Is the company a member of the PRI, UN Global Compact or the Institutional Investors Group on

Climate Change, or any other relevant organisation?

[Answer]

Invest Europe ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies

ENVIRONMENT

Environmental

Policy

Does the company have an environmental policy which sets out clear commitments and targets to

improve the company’s environmental footprint? Does this also cover climate change issues that could

be relevant to the company? Please provide details and indicate who in the organisation signs off the

policy e.g. CEO or equivalent.

How often is the policy reviewed and updated?

Organisational

arrangements/

resources

Please provide details of who is responsible for environmental management on a day-to-day basis

including key roles and responsibilities, if different to the above (e.g. Board member responsibility,

ESG/Sustainability manager).

Training Please provide detail of any environmental induction/training provided to staff and

senior management.

Certiﬁcation/

standards

Has the company implemented an environmental management system to manage environmental

matters and has this been externally certiﬁed e.g. to ISO 14001 or equivalent standard?

Environmental

improvements

Provide details of any signiﬁcant projects/initiatives that have been implemented to improve

environmental performance/standards/compliance at the company; for example: waste/energy

projects that have resulted in carbon/consumption reductions as well as cost savings; enhanced

communications to improve environmental awareness.

Permits/licences/

consents

Please conﬁrm that the company is fully compliant with all relevant environmental permits/licences/

consents and that there have been no regulatory issues/cases of non-compliance/enforcement action

in the last three years.

Incidents/breaches Provide details of any serious incidents/regulatory breaches in the last 3 years. In your answer,

provide details of the nature of the incident, what improvements were made/lessons learnt and

whether there was any regulatory action (enforcement/prosecution/quantity of ﬁne).

Carbon emissions/

climate change

Does the company monitor and report its carbon and/or other greenhouse gas (GHG) emissions such

as methane, nitrous oxide etc.? Are you legally required to do so and how is this done? Investors

are also encouraged to consider the IIGCC/PRI “A Guide on Climate Change for PE Investors” when

assessing climate change issues.

Has the company conducted a climate change risk assessment to ascertain whether its operations

could be at risk from current/evolving climate change regulation and/or physical changes brought

about by climate change (including increased ﬂooding, drought or other severe weather events),

for example: business disruption or damage to assets and production? If yes, please provide key

outcomes/actions from the assessments.

Resource efﬁciency/

management

What are the company’s primary energy (e.g. gas, coal, diesel, heating oil, electricity) and water

sources (river/lake or groundwater extraction, public mains) and what initiatives/plans (if any) have

been put in place to monitor, reduce consumption and improve efﬁciencies?

Waste management Provide details of key waste streams generated and how these are managed/disposed of, including

any particular waste management initiatives that have been implemented to minimise or reuse/

recycle wastes. In your response, please provide tonnages (if available) and conﬁrm the method of

data collection.

SECTION 1 (CONTINUED)

[Answer]

Invest Europe ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies

Chemicals/hazardous

substances handling

& supply chain

Describe any chemicals/hazardous substances used or present on site, including storage and handling

arrangements (drums, tanks, aboveground/underground storage etc.). Is management aware of any

potential disruption to the supply of these e.g. through regulatory phase-out? Have there been any

spills/leaks in excess of 200 litres?

Is the company considering the use of more environmentally friendly and safer raw materials/

chemicals in the production process? How is this being addressed? Please provide details. In your

answer please provide details of any work you have done in relation to engaging with your suppliers

on this topic.

Soil and groundwater

contamination

Is the company aware of any former or current soil/groundwater contamination issues at the site(s)

and is there a need to conduct remediation and inform the local regulator? In your response please

provide details of the type of contamination and the associated costs for clean up, including status on

any remedial plans.

Please explain how the company assesses contaminated land risks in the acquisition of new assets.

SOCIAL

Health and Safety

(H&S) Policy

Does the company have a H&S policy which is signed off by the CEO or equivalent?

Does the company have a H&S risk register and is this reviewed on a regular basis? If yes state how

often it is reviewed and by whom.

Has the company implemented a formalised H&S management system, which sets out clear

organisational responsibilities and management arrangements for implementing the H&S policy?

Has the management system been certiﬁed by a third party? Please provide a high-level overview

of the key elements of the management system.

Does the company have formal processes for undertaking workplace risk assessments, providing

communication and training to employees, and conducting audits? How often are these risk

assessments reviewed/updated?

Accidents/incidents Does the company monitor incidents/accidents? If so please provide a breakdown of statistics for

the last three years, including near misses, number of lost days, frequency rates etc.

Enforcement Has the company been subject to enforcement action by the regulators for breaches of relevant

H&S legislation in the last three years? If so please provide details of the nature of the incident,

enforcement action, ﬁnes, remedial actions and lessons learnt.

Social related claims Have you had any serious social related complaints/claims/enforcement actions over the last three

years, associated with employees or key stakeholders such as customers or suppliers? If so, please

provide details.

SECTION 1 (CONTINUED)

[Answer]

Invest Europe ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies

Human Resources Do all employees have a formal contract of employment?

What is the minimum age of workers and contractors?

Provide details of the company’s grievance mechanism for its employees and contractors.

Please provide evidence that the company adheres to local minimum wage standards.

Does the company have any involvement in employment practices of sub-contractors? What is done

to ensure their fair and ethical treatment; are any minimum standards applied?

Does the company employ migrant workers and if so, please describe details of the processes used

to ensure minimum standards of human rights are adhered to. In your response, please detail any

associations/NGOs you are associated with in relation to migrant workers e.g. Migrants’ Rights

Network (UK).

Anti-discrimination

Policy

Do you have a policy that supports anti-discrimination? If so, please provide details of your key

commitments/control measures.

Diversity Policy Does the company have a policy that supports diversity and equal opportunity? If so, please provide

details of your key commitments/control measures.

Data privacy and

security

Please provide details of the company’s data security policy. Have there been any breaches in cyber

security within the last three years?

Certiﬁcation/

standards

Has the company implemented an IT security management system? Is it certiﬁed to the international

standard ISO 27001 for information security?

Responsible

Purchasing Policy

Does the company have a responsible purchasing policy/Code of Conduct for suppliers? If so, please

provide details of this and evidence of how this is being applied/monitored.

Supply Chain Risk

Management

Does the company conduct supply chain risk assessments involving its procurement, supply chain and

logistics departments? Please provide further details and examples of the risk assessments/strategy

implemented. Please provide examples of key issues identiﬁed and dealt with.

SECTION 1 (CONTINUED)

[Answer]

Invest Europe ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies

GOVERNANCE

Corporate governance How is corporate governance managed across the company and its operations? Please provide details

of any associated key policies.

Board structure and

role

How is the composition of the Board determined? Please provide details.

How is diversity taken into consideration when appointing members?

Are shareholders consulted in relation to Board composition? If so, how?

Is a member of the Board assigned responsibility for ESG/sustainability/CSR matters within the

company? If yes, please state the individual responsible and details of any relevant training.

How many of the Board are Executive Directors and Non-Executive? Please provide names/positions

of each individual.

Is there an independent Chairman of the Board?

How are issues raised by the Board communicated with management?

How many women are on the Board?

Is ESG discussed at the Board level? If so, how often does this take place and does this follow

a set agenda/terms of reference? Provide details of the key issues regularly discussed.

Is there a remuneration committee in place? Does this committee engage with the Board?

What other committees are in place e.g. Risk, Audit, ESG/sustainability/CSR? Are these championed

by a dedicated person? Please provide details.

Corruption/

fraud detection

What does the organisation currently do to safeguard against illegal practices? Has the organisation

had any issues in relation to illegal practices (i.e. corruption/fraud) in the past? How has this been

detected and resolved?

Breaches/

enforcement

Please provide details of any corporate governance and/or ethical related employee claims/breaches/

enforcement/litigation action relating to issues such as anti-bribery and corruption, cases of unfair

labour practices, human rights abuses, and other malpractices. Please provide details of any

prosecution (ﬁnes, imprisonment) and corrective/improvement action post the event(s).

SECTION 1 (CONTINUED)

[Answer]

Invest Europe ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies

SECTION

Invest Europe ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies

SECTION 2

ESG/SUSTAINABILITY GOVERNANCE

ESG Policy Does the company have a separate standalone ESG policy (i.e. in addition to an environmental or

safety policy) which provides details of your approach and commitments to management of key

ESG risks and opportunities? Please provide details.

Please describe the key commitments included within the policy e.g. compliance with regulations,

continuous improvement, training, monitoring etc.

Improvement

programme

Has the company developed an ESG improvement programme? How is this implemented?

Materiality

assessment

Please detail the process you have been through to determine what key ESG topics are relevant to

your business and have therefore formed the basis of your policies. What stakeholders were engaged

in this process?

ESG Risk register Does the company have a separate ESG risk register? If yes, please provide details of key risks and

control measures.

Are speciﬁc KPIs used to monitor performance and if so please provide details of these e.g. carbon

emission, safety statistics, cases of ABC?

Standards,

certiﬁcations

and member

associations

Please provide details of any additional ESG relevant standards applied and certiﬁcations and/or

memberships held such as the application of the IFC Environmental, Health and Safety Guidelines;

International Labour Standards; G4 Sustainability Reporting Guidelines; members of the Carbon

Disclosure Project.

ESG audit and review Are ESG processes and systems reviewed/audited either internally or externally on a regular basis

and are the results reported back to the Board? If yes, please provide details of the types/frequency

of these audits, who they are conducted by and key issues identiﬁed in the last audit.

Reputation risk

assessment

Has the company conducted an ESG risk assessment of media, stakeholders and other public sources

external to the company?

ENVIRONMENT

Risk & opportunity

assessment

Has an environmental risk and opportunity assessment of the company’s activities been completed?

If yes, please provide details of the key risk(s)/opportunities, control measure(s) and improvements.

Environmental

permits

Please provide a list of the key environmental permits/licences/consents which you are required to

comply with and provide an overview of what data is collected to evidence compliance.

Carbon and other

GHG emissions

Has the company conducted a baseline assessment of its carbon/GHG footprint and has it

implemented any measures to make any reductions? If yes please provide details of the emissions and

any targets/initiatives implemented.

Organisational

arrangements/

resources

Do you regularly engage third-party specialists to support you manage your environmental

(broader sustainability) requirements and performance? How are these contractors selected?

[Answer]

Invest Europe ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies

Resource efﬁciency/

management

Has management considered the opportunities to generate its own sources of energy/power at its

sites? If so, please provide details of the source of energy (e.g. solar, wind) and associated energy,

carbon and cost savings.

Provide details of key ﬁndings/recommendations from any resource efﬁciency (e.g. energy, waste,

waster) audits completed within the last three years. Please summarise any improvement measures

implemented.

Emergency

preparedness

and response

Please provide details of what arrangements are in place to respond to/manage any environmental

and safety incidents such as oil/chemical spills, gas leak/explosive atmospheres and other

environmental nuisances. Please indicate whether scenario testing is undertaken as part of these

and if environmental insurance cover is in place.

Product Stewardship Do you take responsibility for the environmental impacts of your products throughout their lifecycle?

For example, do you take into consideration at the end of life, the disposal options available for the

product? Are these considerations considered at product design stages? If so please provide details.

Supply Chain Is the organisation’s choice of suppliers inﬂuenced by their sustainability performance? What factors

are considered?

Financial provisions Has the company recognised any ﬁnancial provisions in the accounts to address any environmental

liabilities such as contaminated land/environmental restoration and aftercare requirements/removal

of asbestos etc.? Please provide further details.

SOCIAL

Safety Culture Has management conducted a safety culture review across the organisation? Provide details of

key ﬁndings and associated improvement actions identiﬁed from the assessment.

Modern Slavery/

Human Rights/

Child Labour

What policies and processes do you have in place to identify, assess and address risks across the

company and its supply chain with respect to human rights, labour standards and modern slavery?

Are you compliant with any local regulations relating to modern slavery, for example the Modern

Slavery Act 2015 in the UK?

Insurance/

Compensation

Policy

Please conﬁrm the insurance policies in place and the extent of cover with regards to employee

industrial injury claims. Please conﬁrm the total number of open and potentially pending claims

including details of claim reserves and potential ﬁnancial/legal implications.

Community

investment

and stakeholder

engagement

programmes

Are you involved in any community investment/stakeholder engagement activities (including

engagement with the NGO sector, if any)? If so please provide detail of the NGOs involved,

type of activities, amount of time/resources invested, level of engagement etc.

Freedom of

Association

and Collective

Bargaining

What form of worker representation is there at the company? Are all staff able to share their

views and concerns?

Are workers free to join a union and engage in collective bargaining? Please provide details of the

associated unions.

SECTION 2 (CONTINUED)

[Answer]

Invest Europe ESG Due Diligence Questionnaire for Private Equity Investors and their Portfolio Companies

Does the organisation comply with ILO standards? Is this stated in associated HR policies etc.?

For suppliers in countries/regions that have experienced labour issues, is a policy in place to identify

such issues? Please provide details.

What steps are taken to ensure the health and safety of consumers?

Please describe any formal programmes in place to promote company involvement with the

community (volunteering, philanthropic activity, etc.). How much is invested in these projects?

Does the company have a code of ethics? Please provide details and conﬁrmation of how this is

delivered to staff within the company.

How is compensation between individuals within the company aligned to take into consideration

performance and pay ratio?

Please provide details of the company’s corporate code of conduct. How is this delivered to staff

within the company?

Please provide details of the company’s gifts/corporate entertaining policy. How is this regulated?

Have there been any recorded breaches? Please provide details.

Does the company have an audit committee? Please provide details of its composition,

Terms of Reference and policies.

Does the company have a whistle-blowing policy? Is this service independently managed, and is it

anonymous? Is it available at all times of the year?

Who is responsible for resolving the grievances resulting from the whistle-blowing service? Are these

incidents reported to the Board?

Human resources

and International

Labour Organisation

(

ILO) standards

Supply Chain

Consumer Health

and Safety

Community

Involvement

GOVERNANCE

Ethics in Business

Activity

Executive

Compensation

Code of Conduct

Gifts policy

Audit Committee

Whistle-blowing

Policy

Anti-bribery or

anti-corruption

(ABC) Policy

Please provide details of the company’s ABC policy? How many employees have received ABC training

to date?

Does the company have a process in place to conduct ABC due diligence on new suppliers, contractors

etc.? Please provide details of the process and how it is implemented.

SECTION 2 (CONTINUED)

[Answer]