While Silver Lake believes that the ESG credentials of portfolio companies are relevant to current and future value and can provide meaningful enhancement either directly or through the mitigation of relevant risks, Silver Lake does not pursue an ESG-based investment strategy or limit its investments to those that meet specific ESG criteria. Activities which seek to address ESG factors in portfolio company value chains can add value and reduce risk, though no guarantee is made that there will be such outcomes. Silver Lake believes that engaging with portfolio companies on ESG matters is an important component of seeking to deliver maximized risk adjusted returns to its investors. ESG initiatives described in this ESG policy may not apply to some or all of a fund’s investments and none are mandatory features of the manager’s investment strategy. There can be no assurance that ESG initiatives will continue or be successful.
1. Commitment to Mitigating Risk and Creating Value
Silver Lake Technology Management, L.L.C. (“Silver Lake” or the “Firm”) has been delivering value to a variety of stakeholders – including investors, portfolio companies and employees – since its founding in 1999. The Firm takes a proactive approach to evaluating and managing Environmental, Social and Governance (“ESG”) factors that can impact the performance and long-term success of the Firm and the portfolio companies that it supports, as well as the communities where the Firm operates. This ESG philosophy is consistent with Silver Lake’s investment approach.
2. Background
Silver Lake’s approach to ESG is tailored to the particular investment strategy. The Silver Lake Partners (“SLP”) and Silver Lake Alpine (“SLA”) strategies principally target larger investments in later stage companies, and Silver Lake frequently has varying degrees of governance rights and varying degrees of ability to influence a company’s trajectory. In contrast, Silver Lake Long Term Capital (“LTC”) principally target companies or funds, which often include smaller, more passive investments than SLP or SLA, and therefore Silver Lake is likely to have a more limited ability to influence the company or fund.[1]
Material ESG factors (including both opportunities and risks) are considered as part of the diligence process to evaluate new investments and inform related policies and procedures. For purposes of this policy, material ESG factors include considerations that Silver Lake believes may meaningfully affect a portfolio company’s value and performance or otherwise subject the company to substantial risk.
We have developed an ESG framework to guide our approach to diligence, monitoring and engagement with portfolio companies. Priority areas include: data privacy and cybersecurity, business ethics, corporate governance (including ESG governance), employee engagement, equity, diversity and inclusion (“ED&I”), health and safety, GHG emissions and energy management. Our ESG framework also takes into account respect for human rights, which is embedded across several of these priority areas. We monitor policies, practices and disclosures as available in each area, as well as compliance with applicable laws and regulations (e.g., labor and anti-corruption laws and information security regulations).
The strategic and systematic consideration of ESG factors is an integral part of Silver Lake’s investment management activities. Silver Lake seeks to promote responsible business practices and is committed to lawful and responsible behavior by its portfolio companies in order to maximize risk adjusted investment returns through creating, enhancing and preserving the long-term value of the investments made by our Funds. Accordingly, Silver Lake incorporates the review of ESG factors in its processes when assessing potential investment opportunities, when engaging in investment management and when preparing for exit, in each case where appropriate and feasible.
3. Purpose
The purpose of this policy is to define Silver Lake’s approach to integrating the consideration of ESG risks and associated value creation opportunities with respect to potential and current investments. Silver Lake is a member of the American Investment Council (“AIC”), which developed the Guidelines for Responsible Investment (“Guidelines”).[2] These Guidelines incorporate the UN Global Compact’s principles and have been used to inform Silver Lake’s approach and commitment to ESG integration.
Silver Lake is committed to evaluating material ESG factors (both opportunities and risks) during the initial investment process, and throughout the investment management and exit processes to the extent reasonably practicable under the circumstances, and subject to the provisions of the Confidential Private Placement Memorandums, Limited Partnership Agreements and other legally binding documents associated with the Funds.
The Firm considers relevant portions of various globally accepted standards, frameworks, guidelines and guidance, including the Sustainability Accounting Standards Board’s sustainability framework. Silver Lake will continue monitoring various standards, legal requirements, industry research and emerging best practices, among other things, to evolve the Firm’s approach to ESG integration as appropriate. Starting in 2024, Silver Lake joined the ESG Data Convergence Initiative (“EDCI”) to facilitate streamlined and effective collection and reporting of ESG data.
4. Scope
This policy is intended to apply to the investments considered or made across all strategies, although Silver Lake’s ability to influence the Funds’ investments and integrate the consideration of ESG priorities will vary across each of its investments.
As such, the ESG framework for the SLP and SLA strategies is more extensive than the framework for LTC’s strategy, anticipating a lighter touch and higher level approach for LTC than the other strategies within Silver Lake. Certain of the practices described below are expected to be modified based on limitations regarding, among other things, a company’s own infrastructure and ability to gather, or practices relating to gathering, ESG-related information. For example, LTC is not expected at this time to conduct portfolio company surveys on an annual basis.
It may not always be feasible for Silver Lake to engage directly with portfolio companies on material ESG factors or influence their behavior, especially where a Fund has a small relative ownership interest in the company.[3] Where Silver Lake does not expect to be in a position to influence material ESG factors, this is taken into account in the investment decision and the Firm will nonetheless consider whether there are other appropriate reasonable efforts for Silver Lake to take in furtherance of the goals of this policy.
5. Investment Process Integration
Silver Lake seeks to integrate the consideration and thoughtful management of ESG factors throughout the investment cycle of each portfolio company, subject to the limitations outlined in sections two (2), three (3) and four (4) above.
Initial Investment Process: During the initial investment process, Silver Lake professionals, as well as third-party advisors that the Firm may engage, such as outside counsel and/or third-party expert consultants, perform legal, industry and company-specific due diligence[4] that aims to identify potential material risks and opportunities, including relating to ESG factors. Due diligence may include, among other items, evaluation of important and complex business, operational, financial, tax, accounting, corporate governance, environmental, social and legal issues.[5] Silver Lake may seek to collect relevant ESG-related information from a potential portfolio company via questionnaires, publicly available information, engagement with company management teams, or other means. Material findings relevant to the considerations for transactions are to be documented and shared with the Investment Committee, where appropriate.
During Investment: Silver Lake works to monitor each portfolio company’s focus on applicable ESG-related factors. Where an ESG issue is considered by the Firm to require action (including an issue identified during the initial investment process), the responsible investment professionals, in consultation with others, are tasked with determining the appropriate course of action. Consideration of ESG topics has been incorporated as part of the Portfolio Company Review process as well.
At Exit: Silver Lake will determine the manner in which it addresses any ESG-related efforts during the exit process of any portfolio company on a case-by-case basis.
6. Portfolio Monitoring
Silver Lake undertakes certain documentation efforts as part of this ESG Policy:
Initial Investment Process: For the SLP and SLA Funds, Silver Lake will document material ESG findings as part of the due diligence process, which will be considered in connection with analyzing material risks or value creation opportunities regarding a new investment.
During Investment:[6] Silver Lake will conduct an annual survey of some or all of the portfolio companies in the SLP and SLA Funds (depending on, among other things, the size of the stake). The survey has historically incorporated metrics identified by the EDCI and select metrics from other frameworks, standards and regulations, including the Task Force on Climate-related Financial Disclosures and the EU’s Sustainable Finance Disclosure Regulation. The survey is updated periodically. Aggregate data will be used to help identify trends or opportunities for improvement across companies and inform engagement plans. Company-level findings will be shared with deal teams as appropriate, including issues or risks believed to be in need of action. Portfolio company assessments will take into account survey responses, observed progress and insights from third-party data sources.
Ad Hoc: In the event a material ESG issue is identified at a portfolio company, either through third-party sources or engagement with the company, Silver Lake will review and consider the appropriate course of action including, where appropriate, in partnership with the company’s management team (depending on, among other things, Silver Lake’s level of influence).
Silver Lake values transparency with its investors. Where relevant and practicable, the Firm will consider what, if any, disclosure may be appropriate or permissible, either verbally or in writing.
7. Portfolio Engagement
The Silver Lake portfolio represents a diverse group of companies, each in a unique stage of its ESG journey. Where feasible, the Firm’s goal as a partner is to assist portfolio companies in promoting robust governance and helping them to advance ESG performance in areas that are considered material. Where Silver Lake employees serve on the Board of Directors of a portfolio company, they will to the extent practicable seek to promote progress regarding material ESG factors.
In addition, for SLP and SLA Fund portfolio companies, the Silver Lake team has historically hosted sessions on ESG topics of shared interest so that portfolio company ESG program leaders can learn from each other and from outside advisors that bring additional expertise. The Firm also maintains an ongoing dialogue with individual companies on ESG topics and has shared research and observations with companies that are earlier in their ESG development. Silver Lake recognizes the role that other stakeholders, including other investors, may play in advancing ESG-related practices at a company. As such, the Firm will seek to collaborate with other investors and stakeholders on an ad-hoc basis.
8. Management and Accountability
ESG is a shared responsibility across the Firm. The Firm has an ESG Committee, which is chaired by the Chief Compliance Officer and Head of Litigation and is comprised of senior members of the Firm across relevant functional areas. The Managing Partners are ultimately accountable for oversight of this policy with support from the ESG Committee and other leaders across the Firm. It is the responsibility of Silver Lake’s Head of ESG & Impact, who reports directly to the Managing Partners, to ensure that the policy is properly and reasonably applied and that ESG training occurs periodically, covering this policy and a range of key ESG-related topics and issues. This has historically included a new hire training for Analysts and Associates as they join the Firm as well as an annual ESG governance session designed for Board members and other investment professionals to stay current on key ESG topics. Additional ESG updates are shared with the ESG Committee and Silver Lake professionals on an ongoing basis.
Silver Lake professionals are responsible for following this policy and identification of ESG factors during due diligence and throughout the investment cycle for each company. Through the Firm’s Portfolio Company Review process, investment and operating professionals are to report on material ESG factors identified in the SLP and SLA portfolios during or subsequent to the investment process. The Head of ESG & Impact is responsible for oversight of the monitoring process. The Fundraising and Investor Relations team helps to coordinate the reporting of ESG-related information to investors and other relevant third-parties. The Legal team manages the Funds’ legal risks.
Recognizing the importance of ESG to many of Silver Lake’s Limited Partners, the Firm seeks to share relevant ESG updates during Limited Partner Advisory Committee meetings, the Annual General Meeting, investor communications, or other forums, when practical and appropriate. Silver Lake publishes an ESG & Impact report annually to summarize programmatic changes and updates. Members of the Fundraising and Investor Relations and ESG teams are available to discuss the Firm’s ESG program upon request.
This policy will be reviewed and revised as needed to reflect changes in Silver Lake’s business and the context in which the Firm operates.
9. Firm Alignment
Silver Lake is committed to conducting itself in accordance with this ESG policy. Silver Lake holds its employees to the highest of standards and demands that they act ethically, professionally and responsibly. Silver Lake views compliance with this policy as part of each employee’s responsibility to abide and uphold the Firm’s commitment. This policy will be furnished or made available to all Silver Lake employees.
[1] Under the current sub-advisory agreement with Silver Lake Waterman (“SLW”), the SLW team will execute on its own ESG policy and procedures.
[2] American Investment Council, Guidelines for Responsible Investment, published 2009, https://www.investmentcouncil.org/guidelines- for-responsible-investing/
[3] For example, in cases where a Silver Lake Fund(s) holds a minority investment in the publicly traded securities of a company, Silver Lake may have limited control or influence over any ESG risks or opportunities that may affect such company.
[4] ESG due diligence will vary based on, among other things: (i) the nature of Silver Lake’s investment, (ii) the transaction process and timeline, (iii) the level of access to information, specifically as it pertains to ESG factors, and (iv) the target investment’s sector or business model.
[5] Silver Lake Waterman and LTC are expected to conduct more limited due diligence given the size of the strategies’ investments and focus on investments in earlier-stage private companies and/or funds.
[6] Assumes access to requisite information.