Responsible Investing Policy

Mandate

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

In particular, 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 in its portfolio companies 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 and works together with management to implement strategic, financial and governance initiatives that create significant value. Additionally, Birch Hill leverages portfolio companies conservatively, 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 long term nature and structure of the Funds that Birch Hill manages on behalf of its investors.  Birch Hill is committed to encouraging the companies in its 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 its mandate, is to maximize investment returns without undue risk of loss;
  • Responsible corporate behaviour with respect to environmental, social and governance (“ESG”) factors can generally have a positive influence on long-term financial performance, recognizing that the importance of ESG 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 ESG factors on a company’s performance;
  • Investment analysis should incorporate ESG 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

In the context of our investment horizon, Birch Hill aspires to integrate ESG factors into investment management processes, where relevant. As stated in our principles above, it is our belief that responsible corporate behaviour with respect to ESG factors can generally have a positive influence on long-term financial performance. ESG factors are evaluated, where applicable, in the due diligence process and monitored over the life of the investments.

Birch Hill’s investment strategy and mandate is focused on Canadian companies that generally operate in a strong, transparent regulatory environment that offers protections to a broad range of constituents.  Birch Hill does not invest in industries with significant ESG challenges, 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 ESG 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.

Responsible Investment Activities

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, Birch Hill’s commitment to RI is communicated to the Boards of Directors and Senior Leadership of our portfolio companies. We work with the management team and other Board Members to conduct a review in order to prioritize key ESG issues using a risk-based approach.  We then work with the management team to determine the appropriate activities to pursue.

Environmental: Birch Hill is committed to being environmentally responsible, energy efficient and will continue to work towards improvements in this area.

Social: Birch Hill is committed to providing proper labour and working conditions, to safeguard the health and safety of its employees and to promote the social development of the communities in which we operate. Please see the Birch Hill website for a list of community organizations that Birch Hill supports.

Birch Hill maintains a culture that values fairness, transparency, intellectual honesty and meritocracy.

Governance: Birch Hill follows a code of conduct that emphasizes honesty, integrity, fairness and respect in all business dealings.  Birch Hill is committed to striving to meet reasonable stakeholder expectations and to provide clear and transparent relevant information.

Industry Dialogue

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

  • UN Principles of Responsible Investment
  • Canadian Venture Capital and Private Equity Association
  • Institute of Corporate Directors

Responsibilities and Reporting

Birch Hill’s Investment Committee approves and oversees responsible investing strategies and activities.  This policy will be attested to by all Birch Hill staff in addition to Birch Hill’s general code of conduct that provides further direction regarding specific RI activities. Training on the implementation of both this RI policy and Birch Hill’s code of conduct will also be periodically provided to Birch Hill staff.

Birch Hill is committed to appropriate and timely disclosure of our RI activities to our investors.