Beach Point Capital Management LP (“Beach Point” or the “Firm”) believes that incorporating the consideration of material environmental, social and governance (ESG) factors into its investment research process can contribute to long-term investment returns, particularly from a risk-mitigation perspective. The Firm also understands that ESG factors can be employed in a variety of ways and that some clients may have specific ESG-related requirements to which their investment managers must adhere.
Beach Point believes its approach will help the Firm better partner with its clients who have ESG-related priorities and will aid in enhancing the scope of the Firm’s investment research process. Importantly, in implementing this ESG Policy, Beach Point has been mindful of its fiduciary duty to seek to achieve its clients’ investment objectives. The Firm is committed to integrating the consideration of material ESG factors into its investment research and issuer engagement processes, where appropriate and consistent with its fiduciary duty. Beach Point intends to develop and implement additional ESG-related policies and procedures, as needed (e.g., in connection with evolving regulatory requirements or industry standards).
This ESG Policy is intended to provide a broad framework for the Firm’s approach to incorporating the consideration of material ESG factors into its investment research process. Portfolio managers, in conjunction with the ESG team, are responsible for integrating the consideration of material ESG factors into the investment research and portfolio management processes. The specific approach to ESG integration employed by each portfolio manager will depend on multiple factors, including, among others, the objectives of the strategy, the asset class and the investment time horizon, as well as the specific research and portfolio construction, philosophy and process used by the portfolio manager. Beach Point’s approach to ESG integration can also be customized for an investment vehicle to allow a portfolio manager to take into account the specific investment goals and values of an investor.
Materiality Assessment and Due Diligence
Beach Point’s investment team, in conjunction with the ESG team, seeks to identify material ESG factors as part of the research and ongoing monitoring processes. To aid both the investment and the ESG teams in their identification of material ESG factors for a given investment, Beach Point may utilize globally recognized sustainability frameworks, data providers, and other third-party resources. Examples of material ESG factors that may be considered include, but are not limited to, the following:
Beach Point does not apply ESG-related investment exclusion lists at the firm level. However, the Firm can implement ESG-related exclusion lists when directed by a client in their separately managed account or fund-of-one.
Stewardship and Engagement
Beach Point seeks to monitor material ESG factors throughout the investment lifecycle and may engage with an issuer, where appropriate and practicable. Beach Point may also take a collaborative approach to engagement, with a focus on working together with other investors and stakeholders to better amplify our voice and potential influence over outcomes. Beach Point’s ESG Engagement Policy, as well as its Proxy Voting Policy and Guidelines, provide additional information regarding the Firm’s engagement and stewardship activities.
Transparency and Reporting
Through our engagement activities, Beach Point often advocates for increased transparency and ESG disclosure by the issuers in which the Firm invests. In line with this commitment, where applicable and upon request, Beach Point may provide clients with reporting with respect to its ESG program.
Beach Point’s ESG Committee (the “Committee”) has oversight responsibility for the Firm’s approach to incorporating the consideration of material ESG factors into its investment research process. The Committee includes executive-level staff from across the organization, including the Co-Chief Executive Officer, Chief Operating Officer, Chief Compliance Officer as well as senior professionals across Research, Portfolio Management, and Investor Relations. Beach Point believes having senior-level representation on the Committee provides the support required to implement an ESG program.
The Committee’s broader responsibilities include:
As detailed in this ESG Policy, Beach Point is committed to integrating the consideration of material ESG factors into its investment research and company engagement processes, where appropriate and consistent with our fiduciary duty. Beach Point remains subject to the provisions of the constituent documents (e.g., partnership agreement, investment management agreement, private placement memorandum, and articles of association) of the funds and accounts it manages, and to its fiduciary duty to seek to maximize the returns on investment for fund investors and separate account clients. For the purposes of this ESG Policy, Beach Point has sole discretion in determining the “material” ESG factors that have, or have the potential to have, a direct substantial impact on an organization’s ability to create, preserve, or erode economic value, as well as drive environmental and social value for itself and its stakeholders.
In addition, due to the nature of the investments typically held in client portfolios, Beach Point generally has limited ability, if any, to influence and control the integration of material ESG factors by an issuer. Furthermore, Beach Point may have limited ability to conduct extensive ESG-related due diligence in connection with investments.