FY25 Responsible Investment & ESG highlights

Michael Lukin: So, Jenna, FY25 has been a big year, big impactful year in our responsible investment program. What are some of the key changes that we've seen to our ESG program and what are some of the highlights?

Jenna Lindbeck: It has indeed been a very big year for us in FY25, but the fundamentals of our responsible investment approach and philosophy remains largely the same. If I can talk through the key changes in FY25, it's really around the depth and the rigour of our approach.

Our ESG integration process is not set and forget. So whilst we've spent the last couple of years really building up our frameworks and setting a great foundation for our portfolio and our ESG playbook, we've really focused the last 12 months on strengthening our implementation and really adopting that partnership approach with our portfolio companies to get the ESG Playbook up and running.

If I can talk to a couple of examples of how that's been operationalised in the last 12 months and talking to some of the key highlights from the last 12 months, We have first of all, our cyber Security Centre of excellence.

So if you cast your mind back to FY24, we set our minimum baseline expectations for our portfolio for cyber maturity aligned with the CMMC and the NIST framework. Looking forward to FY25, we thought how can we assist our portfolio in really implementing these maturity expectations.

So we developed the Cyber Security Centre of Excellence, which is a collaborative platform type of approach with our chosen cyber specialist advisor, and it provides access for portfolio companies to access cyber expertise resources and provides a cost effective but also very collaborative approach to cyber performance improvement.

Separately, we've got the evolution of our natural capital framework in the last 12 months as well. So again, casting your mind back to FY24, we established version one of our natural capital framework and we spent the last year expanding on that and mapping our agriculture portfolio against that framework.

So we looked at risks, opportunities, impacts and dependencies and really sought to understand the intersection of our portfolio with nature.

Excitingly, we're working on a refreshed version of that framework moving into the next 12 months and we're working with an advisor really to focus on evolving our due diligence processes when we're acquiring a new asset and understanding how can we develop really tangible value creation opportunities related to nature.

Michael Lukin: Fantastic. Well done. Obviously, a very busy year in the RI team. And Jenna, how about our investors? How are their expectations evolving?

Jenna Lindbeck: It's a great question, Mike. And they have been evolving over the last 12 months.

Two key themes that have really come out for us is alignment of objectives on responsible investment outcomes. And the second is rapid transparency around our process. So increasingly our investors are asking us to evidence of substantiate not only the what but the how that we are doing it.

And I think what this comes down to is ultimately investors want confidence that we can manage ESG risks and opportunities and that ESG is truly embedded throughout the organisation.

So there's a few ways in which we align with these investor requests. The first is a really exciting one to talk through. It's our alignment with the Sustainable Finance Disclosure Regulation.

So Food Fund II, which we'll be raising for towards the end of the year, is excitingly an Article 8 fund.

It's aligned with environmental outcomes and sustainable food production.

So that rapid transparency of that disclosure helps provide confidence to future investors within that fund.

Separately, we do our UNPRI transparency reporting. It's in the name. We've transparently reported against the UNPI for the last two years and we've recently submitted our third report.

We've also got another externally validated a review process for our ESG integration and responsible investment approach and that's our annual external operational due diligence process. So that's part of a broader firm wide reporting that we do where ESG is really tested against market and peers to understand are our process, well, one, are we doing what our processes say we're doing and how does it compare to market.

So that really keeps us accountable to the evolving expectations, not only in Australia, but more broadly with our investor base as well.

And the last one, which I think is really key to building confidence with our investors is training development and capability building internally. As we know for ESG integration to be successful, it can't be siloed within one team.

And that's one thing I think Roc Partners has done exceptionally well historically, but particularly in the last 12 months, we have spent a lot of time doing internal training and development, over 15 training sessions internally and externally facilitated in the last year.

And those have been focused on a breadth of ESG training, training factors as well. We've got human rights, natural capital, cyber security, nature, what I can't even think of anymore more.

Michael Lukin: So many, absolutely, yeah.

Jenna Lindbeck: And it's really helped build the competency, ensure ESG integration is firm wide, not just sitting within one team.

Michael Lukin: I must say, I think that's one piece of feedback I'll get a lot from our investors is not only do we talk the talk around responsible investing at Roc Partners, but we actually walk the walk as well. So well done, Jenna, and to your team.

It's great to hear about all the benefits that the responsible investment team has brought to our portfolio companies, but I think there's as an organisation and I think that the team here are also looking to contribute more to their local communities.

Jenna, can you tell us more about the Roc Philanthropic Program?

Jenna Lindbeck: Absolutely. The Roc Philanthropy Program officially launched in December last year. But we've always been involved in community-based initiatives and supporting partner organisations. But it was really exciting for Rock to establish a formal process and really try and maximise the impact that we can have on our partner organisations.

It was a long and detailed process working with the team…

Michael Lukin: I remember, yeah.

Jenna Lindbeck: But it was a really fantastic one. We've got really great results. So we started with a committee and developing an internal working group. And I think what was most special about that process was it was truly cross functional.

So we had members in the investment team, compliance, HR, marketing, ESG across the firm. Yes, a really broad spectrum of team members and really broad input from the business.

When we were starting to explore, well, what themes and impacts do we want to have, One of the key discussion points early on in the agenda for the committee was what's the difference between charitable giving and strategic philanthropy?

The first being treating more the symptoms or the causes or the outcome, the symptoms or the outcomes of challenge. Whereas strategic philanthropy is really focused on treating the underlying cause or help supporting the really root causes of the issues that we're trying to tackle.

With that in mind, we developed a suite of frameworks and processes to really start to assess well where can we have the most meaningful impact and overwhelmingly with feedback from the business, the team wanted to focus on breaking the cycle of disadvantage, which is an amazing cause to support.

The next most really exciting step was determining what partner organisations we wanted to work with this year and we are very pleased to report I'm very proud to say that we're working with two great local organisations.

The first is Stepping Stone House.  Stepping Stone House supports young people who are at risk of homelessness and it supports them with either accommodation, care, education, life skills and career development opportunities and really helps to champion young people to be the best versions of themselves they can be.

The other organisation we've worked with for a few years now, it's ID Know Yourself and that's an Aboriginal LED grassroots organisation that helps Aboriginal children who are in out of home care to really again, champion them to be the best versions of self they can be…

Michael Lukin: and engage in their own culture and community as well, right, which they don't necessarily always get.

Jenna Lindbeck: Correct. Belonging is a really key focus for that organisation.

Michael Lukin: Yeah, Thanks, Jenna. I've had some great feedback on how we went about that process of selecting the two organisations.

And I think, you know we've come up with two that really instil the spirit and we are as Roc Partners, we want to kind of spend our time and capability in terms of helping the next generation coming through.

So well done on curating that process and that program and we look forward to hearing more about it next year.

Jenna Lindbeck: Thanks, Mike.