ESG policy – sustainable and responsible investing

Introduction

We fully support the significantly greater focus which sustainable and responsible investing has attracted in recent years in the financial services industry and which is often referred to as ESG, or Environmental, Social and Governance.  These concepts are not new however and have been referred to by many names over a long period of time, all having a slightly different focus or emphasis.  This helps explain why there is no one-size fits all approach and why ESG means different things to different people.  No two people are the same, and equally no two companies are the same.  We must all embrace our uniqueness.  We therefore thought it would be helpful to set out for interested parties what ESG, or sustainable and responsible investing, means to us and how we incorporate this ethos into our culture and working practices.

What ESG means to us

We define ESG investing as being based on two fundamental investment principles: investing sustainably and investing responsibly.  We think of this in terms of what we do and how we do it.  Environmental, social and governance factors provide a framework to explore the principles of sustainable and responsible investing.  Using this framework, we can establish best practice in each part of our business and set targets to monitor our progress against agreed objectives.

This investment approach is embodied by the following statement on our home page:

We believe that our investments should deliver not only for our investors, but also create a positive impact for the communities in which we operate.

Below, we explore what we mean by this statement and explain how investing for more than just profit has been part of our journey since we commenced business in 1998.  We hope you find these insights interesting and helpful.

How the company started

Prior to forming Ingenious Media in 1998, Patrick McKenna was chairman and chief executive of Andrew Lloyd Webber’s The Really Useful Group, the fastest growing media company in the world at that time and, prior to that, was a partner at Touche Ross (now Deloitte), where he ran the media group.  As the name suggests, Ingenious was conceived as a unique business to build on Patrick’s expertise and provide a company of his own through which to pursue his broad-ranging interests in the media sector.  Completely ignoring the dotcom bubble of that era because none of the opportunities made any commercial sense, Patrick quickly assembled a team of executives with hands-on operational expertise in the media sector, a model which was to be repeated in subsequent years.

Ingenious was established as a private enterprise but operated with the rigour of a listed company.  Its purpose was simple yet unique: to establish a business that would be trusted both by investors and the creative community at a time when the media sector was generally characterised by deep mistrust between the talent and the money.

Ingenious’ vision was to build a business which would bring financial investors together with creative talent for mutual benefit.  The vision would be realised by providing much needed capital, deep sector knowledge and hands-on expertise to help grow successful businesses based on original creative concepts, whilst simultaneously enabling artists and producers (the talent) to achieve greater financial reward for their work.  In parallel, the company would help investors to develop a better understanding of the creative process and the financial rewards associated with the ‘creative industries’, whilst providing access to investment opportunities that would otherwise not be available to them.

In short, the aim was to provide a bridge between the worlds of ‘creativity’ and finance.

This approach to the media sector was highly innovative, a similar independent investment model did not exist.  We have subsequently added a select number of industries to our investment portfolio, but always based on the same guiding principles of a macro thesis, supported by compelling investment opportunities and blended with deep expertise in that sector.

Motives beyond profit

Like any commercial business, making profit for our investors and shareholders has always been a core part of what we do.  It’s what keeps investors coming back and provides us with capital to reinvest alongside those investors, as well as to invest in new ideas and sectors and, importantly, reward our people.  Making money for investors and shareholders has never been our only aim, however.  Indeed, had that been our sole focus it is questionable whether our business would have been around for very long.

This is because for our unique business model to be successful, to be that bridge between creativity and finance in the media sector, we needed to do so much more than just make money.  Making money was only possible if we were equally successful in educating investors, building collaboration and supporting government policy on the creative industries, helping to transform what back then was often referred to as a ‘cottage industry’, into the vibrant, professionalised and globally admired sector of the economy that it has since become.

Accordingly, we developed a fully integrated independent business encompassing investment, asset management, corporate finance, consulting and securities expertise to meet the needs of a wide range of clients in the sector, whilst simultaneously deepening relationships within the higher education and independent research sectors in order to equip emerging talent with the skills required to succeed in the industry.  This gave rise to the development of several long-standing relationships focusing on creative enterprise, public policy and entrepreneurialism, including partnerships with Goldsmiths in the University of London (Institute for Creative and Cultural Entrepreneurship), De Montfort University (DMU), Nesta (formerly NESTA, National Endowment for Science, Technology and Arts), the Judge Business School, University of Cambridge, the British Council and the National Film and Television School (NFTS).

As Ingenious grew, so our support for other organisations in the creative sector increased too, including work with award-winning businesses such as Hat Trick Productions, as well as not-for-profit organisations and social enterprises like the Young Vic Theatre Company, MeWe 360 and Cockpit Arts, amongst others.  With increasing profitability, we were also able to support a broad range of charities in the sector with sponsorship of the NFTS annual gala, the Music Industry Trust Awards (the MITs) and music therapy charity Nordoff Robins being prominent beneficiaries.

Looking back, we intuitively believed that this holistic and mixed model, combining commercial investment with a broader approach to stakeholder support, made good business sense.  Whilst it was never part of a fully mapped out theoretical masterplan, we did have a clear sense of wanting to do things differently and weren’t afraid to try things that had never been done.  Working in partnership with industry and everyone connected with it in a thoughtful, ingenious way has been the approach that has sustained our business over two decades and is deeply embedded in our culture.

If we were to set up the business today, perhaps we would characterise many of these support activities as being central to the objectives of something called an ‘ESG strategy’.

Investing for change

Along the way, our Media division has never shied away from the responsibility that comes with being able to bring important social messages to a global entertainment audience.  We have backed a range of culturally significant movies over the years, including Avatar (the future of the environment), Selma (Martin Luther King’s campaign for race equality), Suffragette (women’s right to vote), Pride (LGBT+ rights), The Roads Not Taken (Alzheimer’s and dementia), Vera Drake and Call Jane (abortion rights) and Whina (Maori land rights), amongst others.

Many of our films have featured strong female protagonists, such as Military Wives (Kristin Scott Thomas and Sharon Horgan) and the Oscar-winning Renee Zellweger as the eponymous Judy (Garland).  Behind the camera, we have actively supported equality and diversity agendas in films like Suffragette, A United Kingdom, Selma and Their Finest, directed respectively by Sarah Gavron, Amma Asante, Ava DuVernay and Lone Scherfig.  Our films continue to advance diverse story-telling just as we have continued to back the NFTS, notably by supporting its bursary programme which has been instrumental in assisting students from non-privileged backgrounds to enter the industry.

As we became established as one of the leading investors in the creative industries, so our investors began to ask what we were going to do next.  Given that we never wanted to be a generalist investor, believing that genuine sector expertise is the key to investment success, we began to look around for other sector opportunities, and so the next chapter began.

Ingenious and the environment

Our macro-led investment approach resulted in us starting to think about how we could play a role in the energy sector against a background of mounting evidence of the adverse impact of climate change.  Just as the media sector had been radically disrupted by digitisation and technological advancement, so the energy sector was also experiencing systemic upheaval with the growing realisation that to combat climate change the world needed to transition away from reliance on fossil fuels to cleaner and more renewable sources of energy. We concluded that our distinctive investment approach could equally be applied to the clean energy sector.

On an emotional level, this opportunity resonated with us just as much as the opportunity to tell great stories via our media interests.  There was a comparable chance to invest in innovation and talent, combined with a clear investment opportunity, so we felt that this transition was a natural extension of our business.  In a relatively short time span this led us to develop, construct and operate a large portfolio of solar, wind and anaerobic digestion plants in the UK.  Subsequently, we developed a portfolio of venture capital investments in clean-tech companies which are now at the cutting edge of supporting the transition from fossil fuels to low CO2 energy systems.

Ingenious and housing

Having successfully identified and integrated a new sector focus into our investment strategy in the form of clean energy, subsequently known as our Infrastructure division, we identified a further investment opportunity which was to help address the shortage of new housing being built in the UK.  This had been identified by successive UK governments as a national priority.  The investment thesis here was developed from a realisation that, following the financial crash of 2008, the banks had stopped providing liquidity to mid-market developers.  This was compounding the shortage of good quality new housing and we felt we could do something positive to remedy that.  Once again, we liked the social impact aspect of this investment strategy – the opportunity to help grow the national housing stock, both to buy and rent, in response to a widely recognised public need.

The implementation of our approach to housing investment was carefully calibrated.  For example, at the outset we decided to avoid high-end premium residential properties and to focus on the affordable end of construction for family homes and flats, where shortage of liquidity, market demand and public need were most pronounced.  We began by focusing on the market in the South-east, and this has now expanded to include developments throughout the UK.

Over time, our focus has broadened beyond quantity and quality of unit output to incorporate consideration of the sustainability of material inputs into these new homes.  We are proud to be focusing increasingly on low carbon schemes, evidenced by our membership of the Green Building Council and investment in the UK’s largest sustainable housing development in Leeds.

Ingenious and education

The most recent addition to our family of investment strategies is investment in the Education sector where we have focused to start with on ed-tech in the further education college sector.  By combining media and interactive technology with imaginative story-telling, thus producing a highly innovative way of engaging student audiences, this latest transition in one respect takes us back to the beginning of the Ingenious story.

From the very beginning over 20 years ago, we have always recognised that education is the key to a sustainable future.  Providing easy to access, flexible learning solutions is a critical way to help everyone, regardless of background, achieve their ambitions.  We particularly like the positive social impact that broadening access to education brings, and at a time when technology has utterly transformed the way in which we watch, read and learn, the investment thesis for education is especially strong.

Our investment in multi-award winning, ed-tech company of the year, Mindful Education, is a testament to this approach.  Mindful provides a highly innovative blended learning solution for students and apprentices at Further Education colleges enabling them to obtain professional qualifications in a flexible, tailored manner.  Testimonials from both colleges and students alike confirm the life-changing impact which Mindful is having, with higher-than-average pass rates and substantially lower drop-out rates being additional benefits.  We look forward to expanding our role in this sector further.

Investing sustainably and responsibly for the future

We hope that this introductory overview provides some helpful context on the evolution of our business and our approach to investing sustainably and responsibly.  We will continue to focus not only on the what but also the how to ensure we deliver for our investors and create a positive impact for the communities in which our businesses operate.

Each part of our business has established clear principles and metrics which support our company-wide approach to sustainability and responsibility in the broadest sense.  These are assessed and reviewed on an annual basis.  As a business, we will strive to continually develop these metrics so that we continue to play our part in delivering a better tomorrow for everyone.  To this end, our business supports many of the UN’s Sustainable Development Goals which are a universal call to action to end poverty, protect the planet and improve the lives and prospects of everyone, everywhere.  These goals were adopted by all UN Member States in 2015, as part of the 2030 Agenda for Sustainable Development which set out a 15 year plan to achieve these goals.  The goals which we actively support are those related to:

We are also reviewing other ESG-related frameworks to continue to enhance our support and reporting in this area, such as the Task Force on Climate-Related Financial Disclosures.

As a specialist investor we select our sectors for investment very carefully having regard for both the macro thesis as well as ensuring our investments are ethical and consistent with the wider themes of ESG.  We currently specialise in the media, real estate, infrastructure and education sectors.  If we were to offer specialist investment expertise in further sectors over time, these will be selected very carefully.  For the avoidance of any doubt, we do not and will not invest in sectors which we consider are unethical or inconsistent with the wider purpose of ESG.