Trill Impact | Case study

PRI AWARD 2022

Describe how you identify positive and negative sustainability outcomes related to your investments.

Trill Impact is committed to developing and applying leading industry tools for the identification and assessment of positive and negative sustainability outcomes. Therefore, principles, frameworks and tools are evaluated and developed for our practices, in collaboration with investors, portfolio companies, industry peers, and wider stakeholders. All are applied on a portfolio level and on each company.

Throughout the investment process, we use the following frameworks and tools:

• Impact: Impact Management Project, Operating Principles for Impact Management, IRIS+ metrics catalogue, green/sustainability-bond reporting recommendations, as well as other sectors/industry and national specific standards and measurement initiatives.
• ESG: UN Principles for Responsible Investment, including Taskforce for Climate-related Financial Disclosures recommendations, SASB, UN Global Compact and GRI.

Trill Impact identifies and assesses a target company’s potential to address societal challenges – guided by the Sustainable Development Goals – to grow and develop its businesses through high-quality impact due diligence before investing. Trill Impact also uses the five dimensions of the Impact Management Project (What, Who, How Much, Contribution and Risk) to systematically assess each investment. These assessments are integrated with Trill Impact’s propriety rating model to evaluate current and potential impact outcomes and risks.

Trill Impact also aims to comply with the objectives of the EU Taxonomy and DNSH (do no significant harm) guidelines. To further broaden insights on potential ESG risks when sourcing new investments, we have several data and analytical tools at our disposal. RepRisk, MSCI, Upright and Maplecroft allow us to conduct extensive in-depth research in line with SASB and SFDR standards. These, in addition, help us define the relevant impact KPIs for each investment. IRIS+, managed by the Global Impact Investor Network, is another impact-optimisation system we use to weigh social and environmental data against risk in our decision-making. Furthermore, Trill Impact is a signatory of Operating Principles for Impact Management and the Principles for Responsible Investment (PRI).

Trill Impact focuses on both positive and negative outcomes. DNSH (do no significant harm) indications are integrated into our evaluation process. The Impact Management Project is primarily used to identify current and potential positive outcomes.

We believe it is critical to assess potential negative outcomes to avoid harm and manage risks proactively. These insights are critical to understanding the entire value chain.

 

Give an overview of your sustainability outcome policies and/or targets, explaining the methodology for establishing them.

We believe ambitious objectives and targets are required to succeed in a business per se, and more particularly in impact investing to ensure focus and resources achieve real impact and measurable success.

We identify business opportunities that have the potential to address societal challenges. These include clean and efficient energy, resource efficiency and circularity, sustainable food and ecosystems, education, health and wellbeing, inclusion and equality, resilient and sustainable communities, good governance, and security.

Trill Impact aims to target attractive businesses with the potential to accelerate their contribution to the SDGs and EU-prioritised challenges.

We use the following questions to prioritise sustainability outcomes:

• Is there a regional/local prioritised problem the company is addressing?
• Can the company’s offering (products and services) create a measurable positive impact on the planet and people and towards solving the problem?
• If not, can the company influence its industry through its value chain that creates a measurable positive impact?
• Is the positive outcome related to one or several of the 17 SDGs in a local or global context?
• Is there a serious known conflict with other SDGs that cannot be mitigated?
• How underserved are the stakeholders experiencing the impact?
• What is the scale, depth and duration of positive impact?

Impact KPIs and targets are unique for each company. Examples of impact KPIs in Trill Impact’s portfolio companies are CO₂  avoided by customers, patients reached, learning needs addressed, and the number of identities protected from cybercrime.

Impact KPIs and actual numbers as stated in our Impact Review 2021  for all portfolio companies (page 41-56) include entire portfolios and then also each investment.

 

Explain how you have sought to increase positive and decrease negative sustainability outcomes.

Trill Impact only targets businesses where it believes there is a strong potential to increase positive outcomes for future generations (SFDR Article 9 fund) – creating a healthier planet and society in alignment with the 17 SDGs. Through an active engagement approach, Trill Impact aims to address global challenges and seek investments that provide impactful solutions in mature, emerging and frontier markets, and across business sectors benefitting from sustainability trends.

Collaborating with investors, industry peers and wider stakeholders, Trill Impact is engaged in the following networks and working groups supporting the wider ecosystem:

1. Global Impact Investing Network (GIIN): The GIIN convenes impact investors to facilitate knowledge exchange – highlighting innovative investment approaches, building the evidence base for the industry, and producing valuable tools and resources.
2. Swedish National Advisory Board for Impact Investing (NAB): The NAB is an open, not-for-profit membership association whose objective is to stimulate and mobilise private, institutional and non-governmental funding for solutions to societal challenges.
3. UNDP SDG Impact Seal Implementation Working Group: The SDG Impact Standards are practices that the private equity industry can apply to provide a common language and best-practice guidance for integrating impact management into investment practices and decision making.
4. Bundesinitiative Impact Investing (BIII): The BIII is a membership association in Germany, functioning as the German National Advisory Board to the Global Steering Group. The objective is to build a strong impact investing ecosystem in Germany to increase capital mobilisation.

Furthermore, we work with academia and NGOs to develop impact assessment, measurement, and monetisation concepts.

 

Describe how you are tracking performance against your sustainability outcomes targets and/or policies (qualitative and quantitative).

Trill Impact invests with intention, meaning that impact logic and evidence are integral throughout the investment process and holding period. Draft impact and ESG KPIs are typically signed-off by portfolio company management before signing and finalised as part of the onboarding process, generally within 6-12 months. We have worked with a third party to provide us with assumption-based PAI data.

Each portfolio company selects impact-related KPIs to empower the customer and other stakeholders. The KPIs focus on key priorities relevant for the company to improve or become an impact leader. Impact KPIs and targets are unique for each company.

Trill Impact seeks to tailor ESG KPIs and targets to each company based on materiality, but Trill Impact also recognises three areas where we see a gap in most companies: Greenhouse gas emissions from the company’s footprint (measured with the external company), diversity, and lack of a formal process for tracking business ethics.

Transparent and consistent reporting is central to Trill Impact’s approach and commitment to its investors. Trill Impact provides quarterly reports to its investors, including impact and ESG progress versus predefined targets for each portfolio company. In addition, from the fiscal year 2021, Trill Impact publishes an annual impact review.

Lessons learned

• Ensure that all regulatory reporting requirements are matched. Adjust the impact assessment and tracking accordingly.
• Involve experts to ensure that targets are measured correctly and data is collected credibly.
• Make use of external validation to ensure the process is the latest and greatest (e.g., blue mark).
• Be as straightforward as possible in communicating impact thresholds. Understand the impact and how it is linked to business acceleration and value creation.