3i has focused on the social responsibility and environmental agenda for a long time. Nevertheless, the issues have gained prominence in the past few years.
The company was formed just after the second world war, and from the start it framed its mission in terms of the social value of helping companies to grow. It developed a strong corporate culture and set of values – to the degree that it was behaving in some ways more like a listed company (for instance, in its reporting and disclosure) even before it eventually chose to go public in 1994.
Patrick Dunne, 3i’s communications director, recalls this from his arrival at the company 25 years ago. “When I joined back in 1985, one of the first things I remember was being taught about the values of the firm and how we do business.”
Dunne believes that the company’s listed status has been a factor. “One of the benefits of being a FTSE 100 company since 1994 has been that we have learned from our peers in other sectors, particularly through membership of organisations like Business in the Community, of which we were a founding member.”
3i has an activist approach that means it is very engaged in what responsible business practice means at every phase of the investment cycle. It encompasses initial fundraising, investment decisions, stewardship of portfolio companies once investment has taken place, and then the final exit.
In particular, when 3i is looking at investment decisions it explicitly builds in an assessment of corporate responsibility issues – with an option to pull the investment if the management team seems unable to achieve compliance with 3i’s standards in a reasonable time.
That said, Dunne says that often 3i’s reputation means the issue does not even arise. He says: “It has been a deliberate part of 3i marketing to be clear about the high standards we expect in corporate responsibility and governance. It becomes self-filtering, as companies will often only approach us for investment because they are confident that they match up to those criteria.”
Once the investment has taken place, formal portfolio reviews take place every six months, which will include environmental, social and governance issues.
The company encourages sharing lessons learnt across the portfolio. Dunne says: “If you go through the full cycle of investment we are actively engaged on being clear what responsible practice is. The degree of influence we have with portfolio companies obviously varies depending on the percentage stake we own, but we have an energetic approach to engagement and sharing best practice.”
As well as engaging its portfolio companies, 3i also focuses on its own performance as a corporate entity. It has an active carbon reduction programme for its own operations, builds environmental considerations into its procurement policies, and is a founding sponsor of the European Venture Philanthropy Association.