• Environmental, Social, & Governance Policy

Environmental Considerations ESG

Environmental Considerations

  • Greenhouse gas emissions
  • Air pollution
  • Waste management (including land and water impact)
  • Energy management and efficiency
  • Land use
  • Climate risk

Social Considerations

Social
Considerations

  • Diversity, equity and inclusion (including anti-discrimination)
  • Human rights and modern slavery
  • Employee health and safety
  • Labor relations and practices
  • Customer privacy and security
  • Product quality and safety

Governance Considerations

Governance Considerations

  • Corporate governance and oversight
  • Risk management
  • Conflicts of interest
  • Transparency (including financial and operational reporting)
  • Fraud, anti-bribery and anti-corruption controls

Environmental, Social, and Governance (ESG) Policy

Introduction

Watterson believes that Environmental, Social, and Governance (ESG) principles are crucial to developing resilient companies and assets that deliver long-term value for our Clients. We are committed to integrating ESG into our Client processes and operating philosophy.

This ESG Policy outlines our company-wide approach to integrating ESG in our business and Client activities. Our employees are involved in maintaining and implementing our ESG policies, along with industry expertise which is regularly consulted.

ESG at Watterson

Watterson is committed to integrating ESG factors throughout its own Corporate and Client operations and we focus on matters that are meaningful to our employees and Clients. We seek to lead by example and apply our insights to drive change across our portfolio, including by:

  • Measuring and reducing GHG emissions resulting from our business operations as well as those of our Clients, and are committed to increasing the use of clean energy across our Corporate offices
  • Driving social change in communities where we operate by providing opportunities for the people in those communities to collaborate with our nonprofit and educational partners and employee base
  • Training applicable full-time employees and certain other temporary personnel, consultants and advisers and select key suppliers through Annual Compliance Training, which includes topics such as data protection and privacy, our Code of Ethics and Anti-Corruption policies and procedures, among others, in addition to an initial training during their onboarding
  • Engaging the entire company annually to educate our employees to recognize suspicious activities and report them for investigation

ESG Integration in the Outsourcing Process

The integration of material ESG factors into our business decisions is an important part of fulfilling our mission to create added value for our Clients.

Based on our experience, we think that consideration of ESG factors not only enhances our assessment of risk – it helps us identify opportunities for transformation and value creation. We believe that our ESG program can strengthen companies, drive value, and help to create better outcomes for people and communities.

As applicable and material to any given investment, the ESG factors that may be incorporated into both our Corporate and our business evaluation and monitoring processes include, but are not limited to, the following:

Environmental Considerations

  • Greenhouse gas emissions
  • Air pollution
  • Waste management (including land and water impact)
  • Energy management and efficiency
  • Land use
  • Climate risk

Social Considerations

  • Diversity, equity and inclusion (including anti-discrimination)
  • Human rights and modern slavery
  • Employee health and safety
  • Labor relations and practices
  • Customer privacy and security
  • Product quality and safety

Governance Considerations

  • Corporate governance and oversight
  • Risk management
  • Conflicts of interest
  • Transparency (including financial and operational reporting)
  • Fraud, anti-bribery and anti-corruption controls

ESG expertise is embedded across Watterson, through the experience of our workforce within our business units, Client teams, and corporate functions. We strive for a highly integrated approach, coordinating our efforts together through our Corporate ESG resources that look to apply best practices, champion company-wide initiatives, and regularly report to stakeholders where applicable.

Pre-relationship
We consider ESG factors a key part of evaluating new businesses. By considering applicable ESG factors in the Client engagement process, we aim to identify and address material operational risks and drive value.

In some cases, as the Company deems appropriate, our team may engage external subject matter experts to assist in conducting ESG due diligence.

ESG Monitoring and Engagement

Post Engagement

Post-engagement, we generally use an annual ESG survey and data collection process to monitor certain participating Clients. Participation in our survey and data collection is strongly encouraged and even expected, for Clients where we hold significant influence. In addition, Clients that are in scope of our Emissions Reduction Program are expected to track utility spend. This data can be used to calculate annual greenhouse gas (GHG) emissions, allowing us to measure progress and focus our efforts on the largest opportunities for achieving reductions within the Client’s portfolio. We also encourage Clients to report internally regarding ESG on a regular basis, with respect to priority ESG topics that they deem to be material to their business.

Client Engagement

Watterson’s operations teams seek to partner closely with participating Clients. We seek to help them implement best practices through offering tools, training, and expertise; manage material ESG factors; implement Watterson-specific initiatives; and measure progress.

We also have company-wide programs in which in-scope Clients engaged after January 1, 2024 are expected to participate, including:

  • Our target to reduce carbon emissions of new Clients where we control energy usage by 5% in aggregate within three years of engagement; and

For Clients that are not controlled or otherwise not in scope, we seek to encourage participation in our company-wide ESG programs, offering resources and expertise to support implementation and improvements.

Focus Areas

Across our corporate and Client activities, we have identified priority ESG topics that we believe can most affect our ability to assist in building strong companies of enduring value.

Climate Change Mitigation, Resiliency, and Adaptation

We recognize that climate change is a systemic issue, affecting all sectors and geographies. Our goal is to partner with Clients across sectors to help them reduce carbon emissions through Emissions Reduction Programs – a commitment that is guided by climate science. We also see energy transition as an important operational, cost and social theme. Finally, over time we intend to assess physical and transition risks to Clients from climate change, and develop resiliency responses to these risks, where applicable, as part of our management process.

Diversity, Equity, and Inclusion (DEI)

We are highly focused on driving diversity within Watterson and across our managed Client portfolio. Moreover, we are working to foster employment opportunities and career mobility for diverse and historically underrepresented talent at our Client teams. We are also committed to hiring veterans and their spouses and caregivers across Watterson and our Client teams.

Good Governance

We believe that good corporate governance is essential for financially sound companies. We support our Clients at various stages of their life cycles to implement good governance.

Stewardship

We regularly engage with our Clients, stakeholders, and industry on ESG matters. As applicable, ESG matters are discussed at Watterson’s management meetings, board meetings, and regular Client meetings.

Reporting

We are committed to being transparent with our stakeholders about Watterson’s ESG initiatives, successes, and goals. Our ESG report provides updates regarding our ESG program company-wide on an annual basis, and we are committed to provide periodic ESG updates as well. We value regular, frequent engagement with our stakeholders on ESG matters.

Roles and Responsibilities

Watterson’s President/CEO has ultimate responsibility for overseeing the Watterson’s ESG Policy. The corporate ESG team coordinates initiatives across the Company to maintain consistency in approach. The Legal & Compliance team of Watterson, along with the Lead of ESG, are responsible for supporting and ensuring compliance with additional ESG policies and related standards and overseeing their annual review. The corporate ESG team also monitors changes or updates to industry trends, policy, and regulations and provides specialized expertise to the Corporate and Client teams as needed.

Watterson’s ESG Steering Committee, which consists of professionals from across the Company’s Corporate and Client groups, advises on ESG matters across Watterson.

Watterson has a Lead of ESG for reporting, who works with Watterson’s Client teams to integrate the consideration of material ESG factors throughout the managed portfolio. The Client teams are responsible for operationalizing key ESG programs across the managed portfolios.

Scope

This ESG Policy applies to Watterson’s Corporate and Client managed business units and is reviewed annually to reflect changes to the business. Watterson’s ability to influence and exercise control over ESG matters with respect to the Client companies in which it provides management services will vary depending contractual terms. In cases where Watterson determines it has limited ability to conduct diligence or to influence and control the consideration of ESG issues in connection with a managed Client portfolio, Watterson will only apply those elements of this ESG Policy and the foregoing approaches that it determines to be practicable considering the underlying facts and circumstances. Examples of such cases may include where Watterson has limited governance rights or other circumstances where Watterson has limited ability to assess, set or monitor ESG-related performance.

This ESG Policy was last updated in April 2023 and is subject to change as Watterson considers necessary or advisable. This policy is intended to be reviewed approximately annually.