Responsible Investing Policy

Mandate

Birch Hill Equity Partners (“Birch Hill”) was founded in 1994 to make value-oriented private equity investments in Canadian mid-market companies with the potential for substantial capital appreciation through growth, improved capital efficiency, margin expansion and enhanced strategic positioning.

Birch Hill targets companies that are at an inflection point in their development or are undergoing a significant transition, such as succession in ownership or change in senior management. Birch Hill typically seeks to be the controlling shareholder and, for each investment, will exercise significant influence through positions on the boards of directors as well as via structural and governance rights.

Since inception, Birch Hill has developed a reputation as a preferred partner within the Canadian business community. It is an active and constructive partner with top management teams to implement strategic, financial and governance initiatives that create significant value. Birch Hill portfolio companies use conservative levels of debt, allowing them to take on increased operational risks to achieve their aggressive growth targets.

Principles

Birch Hill is a long-term private equity investor consistent with the nature and structure of the Funds that we manage on behalf of our investors. Birch Hill is committed to encouraging the companies in our portfolio to adopt policies and practices that enhance long-term corporate financial performance.

We are guided by certain principles as they relate to responsible investing. These include, but are not limited to the following:

The overriding duty of Birch Hill, consistent with our mandate, is to maximize investment returns without undue risk of loss.
Responsible corporate behaviour has a positive influence on long-term financial performance, recognizing that the importance of sustainability factors varies across industries, geography and time.
Transparency and access to information is critical for Birch Hill to best understand, evaluate and assess potential risk and return, including the potential impact of sustainability factors on a company’s performance.
Investment analysis should incorporate sustainability factors to the extent that they affect risk and return.
Employees, customers, suppliers, governments and the community at large have a vested interest in positive corporate conduct and long-term business performance.

In making investment decisions and managing our portfolio of companies, we strive to be both principled and pragmatic, taking into account industry norms, corporate performance, competitive issues, regulatory requirements and other factors necessary to put specific issues into a fair and practical context.

Investment Strategy

Birch Hill aspires to integrate sustainability factors into our investment management process, where relevant. As stated in our principles, we believe that responsible corporate behaviour, with respect to sustainability factors, can generally have a positive influence on long-term financial performance.

Birch Hill’s investment strategy and mandate is focused on Canadian companies that operate in a strong, transparent regulatory environment that offers protections to a broad range of constituents. Birch Hill does not invest in industries where significant and inherent adverse sustainability or Climate Change challenges are known to exist, like casinos, tobacco, weapons, natural resource extraction and other commodity-oriented companies.

Consistent with our belief that constraints decrease returns and/or increase risk over time, we do not screen or eliminate investments based solely on sustainability factors. We believe that engagement is the most effective approach through which owners can best effect positive change and enhance long-term financial performance. Moreover, we believe engagement is consistent with our mandate to maximize investment returns without undue risk of loss.

Climate Change

Birch Hill recognizes the importance and impact of Climate Change and understands that all businesses have a long-term responsibility to work towards limiting global warming. We are committed to ensuring our portfolio companies appropriately identify, evaluate, and manage the risks and opportunities associated with Climate Change, commensurate with our objective of maximizing investment returns.

Annually, we measure our internal operational Scope 1, Scope 2, and Scope 3 emissions and explore opportunities for reduction. Through our participation in the ILPA ESG Data Convergence Initiative (“EDCI”) we measure and report the Scope 1 and Scope 2 emissions of all Fund VI and future investments on a best-efforts basis.

Birch Hill monitors and evaluates the evolving best-practices in Climate Change for both our investments and our own organization.

Acquisition Considerations

Sustainability risk and opportunities are assessed in all new investment decisions and are monitored over the life of the investment. We evaluate new investments against the United Nations Sustainable Development Goals and Global Compact Principles.

Ownership Considerations

All Responsible Investment (“RI”) activities are selected taking into consideration the cost versus the potential benefit of the engagement process. Successful engagement is defined as lower risk profile and/or improved investment return. For each portfolio company, commitments to RI are communicated to the Boards of Directors and Senior Leadership of our portfolio companies. We employ a risk-based approach and monitor annual key performance indicators (“KPIs”) to identify significant sustainability risks and opportunities. We then work with the management team and other Board Members to determine appropriate activities to pursue.

Birch Hill considers corporate culture as a cornerstone underpinning all our sustainability and RI related efforts. Ensuring that employees are engaged and working with purpose is critical to meeting all corporate objectives and to ensuring the financial success of a company.
Birch Hill recognizes the impacts of climate change and is committed to being environmentally responsible and energy efficient. We strive to identify and manage the environmental impact of our portfolio companies and commit to working towards improvements in this area.
Birch Hill is committed to providing proper labour and working conditions, to safeguard the health and safety of employees and to promote the social development of the communities in which we operate, at both our portfolio companies and our own organization.
Birch Hill maintains a culture that values fairness, transparency, intellectual honesty, and meritocracy. We follow a code of conduct that emphasizes honesty, integrity, fairness and respect in all business dealings.
Birch Hill requires the companies it controls to adopt policies and practices that enhance positive corporate conduct, and long-term business and financial performance. As responsible investors and UNPRI signatories, we support our portfolio companies’ efforts on sustainability initiatives. For investments in public companies, we have a strong voice on the board and work closely with the other board members and management on the governance and strategic direction of the company.

Birch Hill is committed to striving to meet reasonable stakeholder expectations and to provide clear and transparent relevant information.

Exit Considerations

Birch Hill recognizes that meaningful RI initiatives often outlast our typical investment lifecycle. In an exit process, Birch Hill highlights relevant and material sustainability aspects of the company to potential new investors.

Industry Dialogue

Birch Hill participates in broader domestic and international discussions about definitions, priorities, standards and best practices in responsible investing and stewardship. Birch Hill participates in the following organizations:

Please see the Birch Hill website for a list of community organizations that we support.

Responsibilities and Reporting

Investing responsibly is core to Birch Hill’s success and is embedded in our organization. Birch Hill’s Investment Committee is responsible for approving and overseeing all responsible investing strategies and activities. All Birch Hill Staff annually attest to this RI policy in addition to our general code of conduct, which provides further direction regarding specific RI activities.

Training on the implementation of this policy, and our code of conduct are provided annually to Birch Hill’s Staff. Other sustainability and Climate Change training is also provided as appropriate.

Birch Hill assesses this policy regularly, considering evolving sustainability standards and investor feedback.

Birch Hill is committed to appropriate and timely disclosure of our RI activities to our investors. An annual report, highlighting sustainability KPIs and initiatives across our organization and portfolio, is made available to investors, staff, and our portfolio companies each year.

Birch Hill recognises that sustainability incidents may occur at portfolio companies through our ownership. Material sustainability incidents at portfolio companies are to be immediately reported to the board of directors, and in turn to Birch Hill. Additionally, all material incidents are documented as part of our portfolio company KPI monitoring. Where incidents are material, Birch Hill commits to informing investors of the challenges as well as any and all ongoing remediation efforts through our annual sustainability report, or more frequently if appropriate. All material incidents across the portfolio are discussed at Birch Hill’s Investment Committee, such that lessons learned can be applied to other investments.