ESG Policy

PACELINE EQUITY PARTNERS, LLC

ENVIRONMENTAL, SOCIAL AND GOVERNANCE POLICY

Adopted January 5, 2022

I. OUR VALUES

Paceline Equity Partners, LLC (“Paceline”) is committed to investing in the spirit of responsible business ethics and practices. Paceline believes that in business there are not only regulatory and financial obligations, but also a set of community and personal principles to which we all should adhere. Paceline operates by that broader mandate and is committed to integrating environmental, social and governance (“ESG”) principles into its investment and oversight process. Paceline recognizes that ESG issues may affect investment performance, and furthermore, that the effective management of ESG issues can create better risk-adjusted returns. Paceline also supports the goal of the Paris Agreement and the goal of the Task Force on Climate-Related Financial Disclosures and this Policy aims to implement such support.

II. POLICY SCOPE

This policy will apply to all portfolio companies (and other relevant investments which may be deemed by Paceline to be portfolio companies, as appropriate, hereunder) considered by Paceline for investment or made by Paceline following the date thereof. Paceline will consider material ESG issues in connection with the due diligence and monitoring of portfolio company investments. To the extent Paceline determines in its sole discretion that it has limited ability to influence or control the integration of ESG considerations in an investment and that such considerations are commercially reasonable and appropriate, Paceline will make reasonable efforts to encourage a portfolio company to consider relevant ESG-related principles in the conduct of its business, as more fully described below.

To support the implementation of the principles set forth in this ESG policy, Paceline will enhance ESG management capacity among its investment professionals by providing all employees with this policy and related ESG documentation and continuing to build ESG awareness among investment professionals through training on ESG issues, where appropriate.

III COMMITMENT TO RESPONSIBLE INVESTING

Paceline shall become a signatory to the United Nations Principles for Responsible Investment (“UNPRI”). These guidelines apply during the due diligence process and ownership period for each completed Paceline portfolio company investment. Specifically, Paceline will:

  • incorporate ESG issues into investment analysis and decision-making processes.
  • be active owners and incorporate ESG issues into our ownership policies and practices.
  • seek appropriate disclosure on ESG issues by the entities in which we invest.
  • promote acceptance and implementation of UNPRI within the investment industry.
  • work together to enhance our effectiveness in implementing UNPRI.
  • report on our activities and progress towards implementing UNPRI.

IV. INVESTMENT ANALYSIS AND DUE DILIGENCE

Paceline will conduct an assessment of ESG-related opportunities and risks with respect to each prospective portfolio company investment. Paceline’s investment professionals complete an ESG diagnostic review on each new investment to assess material ESG topics. Paceline also consults the Sustainability Accounting Standards Board (SASB) standards along with its own internal industry expertise and third-party advisors to generate material topics. Paceline would also evaluate each new investment for advancement of the Untied Nations’ 17 Sustainable Development Goals. When material ESG issues are identified, they may be included in discussions with the deal team and/or the investment committee, and external advisers may be engaged to conduct additional ESG-related due diligence, as needed. In situations where Paceline determines that a material ESG issue needs improvement, Paceline will work with company management to support the development of a corrective action plan. Any material ESG-related issues identified during the due diligence process, including any related corrective actions or next steps, will be appropriately documented in the relevant investment materials.

V. RESPONSIBLE PORTFOLIO COMPANY OWNERSHIP

In situations where Paceline identifies material ESG issues during the diligence process for a completed portfolio company investment, the transaction team will include the management of these issues in the post-closing plan or otherwise monitor ongoing progress on the ESG issues, as applicable. To the extent the management of, or performance related to, a material issue is considered by Paceline to need improvement, Paceline will work with company management to support the development of a corrective action plan.

Paceline will work with its portfolio companies to increase awareness of ESG issues, mitigate ESG risks, and create value through applicable ESG opportunities. Paceline will seek to implement this commitment by:

  • Distributing this policy to portfolio company management teams;
  • Ensuring that material ESG risks identified in due diligence are addressed and material negative impacts mitigated, where practical to do so;
  • Enhancing portfolio company management’s awareness of ESG principles and related risks, opportunities and considerations; and
  • Monitoring material ESG issues throughout the ownership of a portfolio company by including ESG-related inquiries, initiatives and review of material negative incidents in quarterly board meetings.

Additionally, Paceline will assist each portfolio company in creating a workplace where teams are encouraged to voice ESG policy-related concerns to an appropriate director or board member.

All actions taken or proposed to be taken in relation to the identification and/or remediation of ESG-related risks and opportunities will in all cases be subject to Paceline’s determination of what is reasonable and appropriate under the circumstances, taking into consideration the fiduciary and other obligations owed by Paceline to its clients.

VI. SPECIFIC ESG CONSIDERATIONS

A. Environmental Responsibility Considerations

The following are a list of considerations for maintaining an environmentally responsible policy:

General

  • Meet or exceed all applicable, material environmental legal requirements for all company activities, products and services.
  • Be an environmentally responsible neighbor in the communities where each portfolio company operates and act promptly and responsibly to correct incidents or conditions that endanger health, safety or the environment where materially possible.
  • Advise each portfolio company’s partners, contractors and suppliers of its ESG policy and work with them to achieve consistency with this policy.

Prevention and Leadership

  • Recognize that pollution prevention, biodiversity and resource conservation are key to a sustainable environment and seek to integrate these concepts into each portfolio company’s business decision-making.
  • Conserve natural resources by reusing and recycling materials, purchasing recycled materials and using recyclable packaging and other materials where feasible.
  • Utilize products that are safe for their intended use, energy efficient, protective of the environment and reusable or recyclable.
  • Utilize processes that do not adversely affect the environment, including developing and improving operations and technologies to minimize waste, prevent air, water and other pollution, minimize health and safety risks and dispose of waste safely and responsibly.
  • Ensure the responsible use of energy throughout each portfolio company’s business, including conserving energy, improving energy efficiency and giving consideration to renewable over non-renewable energy sources when feasible.
  • Assess the environmental condition of each portfolio company’s property interests and appropriately address the environmental impacts caused by these properties.
  • Minimize the environmental risks to employees and communities in which each portfolio company operates.
  • Promote employee awareness of environmental concerns, actions and responsibilities.
  • Cooperate with each portfolio company’s supply chain to improve environmental protection and promote the use of environmentally preferable technologies.

Continued Improvement

  • Strive to continually improve each portfolio company’s environmental management system and related policy, programs and performance based on the results of periodic reviews and taking into account regulatory changes, company needs, customer needs, technical developments, scientific understanding and community expectations.

B. Social Responsibility Considerations

The following are a list of considerations for maintaining a socially responsible policy:

General

  • Maintain high standards of integrity and corporate governance practices to ensure excellence in daily operations and to promote confidence in each portfolio company’s governance systems.
  • Conduct business in an open, honest and ethical manner.
  • Recognize the importance of protecting all of each portfolio company’s human, financial, physical, informational, social, environmental and reputational assets.
  • Advise each portfolio company’s material partners, contractors and suppliers of its ESG policy and seek to cooperate with them to achieve consistency with this policy.

Stakeholder Relations

  • Engage stakeholders clearly, honestly and respectfully.
  • Maintain timely and meaningful dialogue with all stakeholders, including but not limited to shareholders, customers and employees, local communities, governments, regulators and landowners.

Employee Relations

  • Provide a safe and healthy workplace and ensure that employees are properly trained.
  • Ensure that employees and workplaces have appropriate safety and emergency equipment.
  • Treat employees fairly and with dignity, taking their goals and aspirations into consideration.
  • Embrace diversity in the workplace.
  • Apply fair labor practices while respecting the national and local laws of the countries and communities in which each portfolio company operates.
  • Provide equal opportunity in all aspects of employment and not engage in or tolerate unlawful workplace conduct, including discrimination, intimidation or harassment.
  • All employees are responsible and accountable for contributing to a safe working environment, for fostering safe working attitudes and for operating in a socially responsible manner.

Human Rights

  • Strive to work with governments and agencies to support and respect human rights within each portfolio company’s sphere of influence.
  • No tolerance for human rights abuses and refusal to engage or be complicit in any activity that solicits or encourages human rights abuse.
  • Strive to build trust, deliver mutual advantage and demonstrate respect for human dignity and rights in all relationships each portfolio company enters into, including respect for cultures, customs and values of individuals and groups.

Community

  • Encourage and promote collaborative, consultative and partnership approaches in community investment programs where feasible.
  • Integrate community investment considerations into decision-making and business practices and assist in a local capacity building to develop mutually beneficial relationships with communities where feasible.
  • Seek opportunities to contribute to local communities’ quality of life by supporting innovative programs in health, education, social services and the environment, as well as cultural and civic projects.
  • Strive to provide employment and economic opportunities in the communities in which the company operates.

Continued Improvement

  • Strive to continually improve the company’s social management system and related policy, programs and performance based on the results of periodic reviews and taking into account regulatory changes, company needs, customer needs, technical developments, scientific understanding and community expectations.

C. Governmental Responsibility Considerations

The following are a list of considerations for maintaining a governmentally responsible policy:

  • Strive to create a system of internal procedures and controls that creates a balance of power between the CEO and the Board of Directors.
  • Seek to improve employee relations through attention to diversity and the establishment of ethical corporate behaviors and strong values.
  • Periodically evaluating executive pay within the company.

VII Accountability

Paceline will seek to create accountability within the firm and to be transparent in its approach to incorporating ESG considerations in its investment and oversight process, including by responding to requests from, and actively engaging in discussions with, its clients and other stakeholders.

Where appropriate, throughout the investment and oversight process Paceline will seek to actively engage relevant stakeholders in an effort to make informed decisions that may affect these stakeholders.