Shortlisted for PRI Awards 2024: Recognition for Action – Climate
Organisation: SAIL Investments
Signatory type: Investment manager
HQ country: Netherlands
The approach, initiative, or process
SAIL Investments, founded in 2017, is a global sustainable investment manager in private markets, headquartered in The Netherlands. SAIL Investments provides bespoke, non-sponsored direct lending to mid-market companies operating in food and agricultural supply chains across emerging markets.
Since inception, SAIL has, through its global investments, protected 3.5 million hectares of natural tropical forest, generated climate benefits of 6.5 million tCO2e and benefitted 55,000 people, whilst protecting biodiversity through its unique Biodiversity Net Gain approach.
SAIL’s key strategic approach is to incorporate, pre-investment, a robust sustainability framework and transition plan into its target investee companies’ growth plans. By doing so, SAIL enhances the company’s market position, driving margin growth and ultimately economic value for SAIL’s investees.
The sustainability framework and transition plan form part of the sustainability maintenance and sustainability transition covenants agreed with investees.
SAIL’s investment strategy is aligned with SFDR Art. 9 and covers SDGs 2, 5, 6, 8, 12, 13, 15 and 17. SAIL reported under TNFD in 2024 and will report under TCFD in 2025.
SAIL’s first fund, &Green, an evergreen fund, was founded in 2017 with a seed investment of US$100m provided by the Norwegian Government. The seed investment was followed by further investments, such as from Unilever, GEF, MFF (British Government), FMO (Dutch Government), Green Climate Fund (GCF), CAFI and a German reinsurer. By the end of June 2024, the total committed and invested capital in &Green amounts to over US$400m, expected to reach US$500m by the end of 2025.
The proof of investment concept has been delivered on the back of successful implementation of the strategy globally. Based on the &Green fund’s mandate to catalyse investments from the institutional investor space, SAIL’s capital raise and new fund launch efforts help to address the global institutional investor community’s sustainability requirements.
The challenge
High-biodiversity forests and peatlands globally are storing vast amounts of carbon but are under threat from agri-commodity expansion and unsustainable practices.
SAIL starts its investment process with a macro (top-down) analysis of supply chain verticals that are well suited to deliver growth in the coming decades, focusing on those with the greatest opportunity to protect valuable ecosystems.
Investment objective
Our goal is to serve the growing demand for sustainable products from importers in major global markets. We meet this demand by financing and facilitating the transition to deforestation-free, sustainable and biodiversity-protected food and agriculture supply chains.
Investment philosophy
SAIL looks at the world from a global perspective. We see supply chains serving industries that are well suited to and need to deliver consistent growth in the coming decades. We see that natural raw materials are often sourced from landscapes which have hugely valuable ecosystems that the world needs to protect. Growth in demand risks negatively impacting these ecosystems.
Furthermore, the buyer markets (particularly in Europe) are increasingly pushing for imports that reflect net zero, biodiversity protection and deforestation-free standards. Yet the financial industry is not built to drive this transition. In most countries, these markets are heavily funded by traditional bank loans. There is a lack of non-bank, bespoke capital to support the market leaders in driving a new normal of sustainable growth.
SAIL sees a clear investment opportunity to structure bespoke transactions with the leading management teams and entrepreneurs in food and agriculture supply chains, who see the opportunity to lead industry transformation by:
- Capturing market value
- Building resilience against climate change
- Promoting social justice
- Advancing long-term financial sustainability.
Investment strategy
By financing sustainable growth, SAIL is turning the sustainability agenda into an alpha-generating machine. SAIL’s borrowers will deliver better risk-adjusted total returns exactly because of the sustainability transition they are investing in. They are increasing their market access in core buyer markets (e.g. Europe/UK/US), managing their climate risks (i.e. increasing resilience), and ultimately becoming more robust businesses.
SAIL supports value creation by borrowers through its approach of sustainability safeguarding coupled with setting clear transition planning in motion.
SAIL’s strategy focuses on the food and agriculture supply chains for which this climate and biodiversity transition is most critical, and where regulatory and market tailwinds are increasingly prevalent.
Strategic approach
SAIL’s strategic approach to investing is to incorporate, pre-investment, a robust sustainability framework and transition plan into its target investee companies’ growth plans.
SAIL’s sustainability framework takes from existing best-in-class systems and adapts and focuses them for the food and agriculture transition. The borrower, with support from SAIL’s sustainability team, will build a framework including:
Institutional-level Environmental and Social Management System (ESMS): Designed in accordance with IFC Performance Standards as well as best practices of ESG management for funds, such as those provided by leading development finance institutes (FMO, BII, etc.), IUCN and other toolkits.
Environmental and social risk safeguarding: SAIL performs detailed due diligence (covering all IFC Performance Standards) during deal execution phase, and from that develops a Sustainability Transition Plan, also known as Environmental and Social Action Plan (ESAP), which details environmental and social risks, but also identifies gaps in the borrowers’ processes and milestones for addressing them. Areas covered include:
- Environmental impacts
- Labour / working conditions as well as health and safety
- Indigenous Peoples and local communities
- Biodiversity
- Gender and human rights.
Beyond environmental and social risk safeguarding and building what is essentially a management system (ESMS) for the borrower, SAIL sets forward-looking milestones and targets with each borrower which is the agreed transition plan. This plan will be captured within the Sustainability Transition Covenants in the loan agreement with the borrower.
This transition plan is also an output of the due diligence process and typically covers factors such as traceability target setting, Biodiversity Net Gain Strategy, supply chain mapping, management, engagement and monitoring. Post-investment SAIL’s sustainability effort remains engaged via:
- Verification: Transaction-level independent verification annually through a global big-four consultant. (SFDR Art. 9 compliant.)
- Assurance: KPMG for Sustainability Assurance process (from 2025 on).
- Corporate safeguards: Public corporate commitment to no deforestation, no peat development and no exploitation (NDPE) following WWF-convened Accountability Framework.
- Annual impact reporting: Reporting under PRI, TNFD, TCFD and SFDR (Article 9).
The measures to ensure transparency
To experience our direct approach to transparency equally shared across the public, please access the &Green fund website.
Note that the &Green fund Annual Report 2023 (including TNFD and SFDR Art. 9 pre-disclosure) is expected to be released on the website early November 2024.
SAIL’s investee companies have to agree to a public disclosure that they will protect forest (no-deforestation), valuable ecosystems (e.g. no peatland destruction), and provide for no exploitation (social safeguarding).
Sustainability KPIs
- Natural forests conservation and restoration. SAIL tracks the extent of natural forests its investees protect and restore, focusing on the forests’ net positive biodiversity and the ecological services they provide.
- Climate benefits. SAIL measures the greenhouse gas sequestered by protected forest and the reduction in greenhouse gases achieved through sustainable agriculture practices.
- Ecosystem resilience. SAIL assesses the extent to which ecosystems, including non-forest and agricultural areas, benefit from enhanced climate resilience through its transition plans. This includes improvements in forests, in other natural terrestrial ecosystems and agricultural areas.
- Improved livelihoods. SAIL evaluates how people benefit from its investments, particularly in terms of essential community services, enhanced climate resilience, education and capacity building.
PRI disclaimer:This case study aims to contribute to the debate around topical responsible investment issues. It should not be construed as advice, nor relied upon. It is written by a guest contributor. Authors write in their individual capacity – posts do not necessarily represent a PRI view. The inclusion of examples or case studies does not constitute an endorsement by PRI Association or PRI signatories.
SAIL Investments disclaimer:The current information is for discussion and informational purposes only. This communication is only intended to be provided to professional investors. This communication does not constitute any offer, or any solicitation or invitation to make an offer or recommendation, to buy or sell securities or other financial instruments or other investment instruments, nor to effect any transaction, nor to provide portfolio management or investment advisory services, nor to provide any advice to conclude any legal act of any kind whatsoever in any jurisdiction. It is not intended to constitute marketing, placement, advertising, or offering of any investment in any fund, financial instruments, or otherwise. It is intended to provide general information on the team and expertise of SAIL Investments only.
