Responsible investment
Mercia has a history of making a difference to the regions and within our communities.
That is as much a representation of our core values, which focus on generating long-term growth and a positive social impact, as it is a financial return motivation.
“Our commitment to diversity isn’t just good governance; it’s a strategic
imperative that strengthens our insights and decisions.”
Alice Grieve, Head of ESG
Our journey
As a UK domestic investor focused on moving capital into regional economies, we see our own business model as purpose led and for that reason, we will continue to act as the voice for change. Our model is predicated on searching for businesses that make a difference to the world around us. Our natural gravitation towards these businesses can be traced back to some of our Group’s earliest investments including –
- 2010 – Lithium battery developer, Faradion
- 2014 – Electro acoustic panel technology, Warwick Acoustics
- 2015 – lightweight metal manufacturer – Impression technologies
We believe that:
- Building businesses in a way that is sustainable will build better, more successful businesses;
- Good ESG performance is associated with better business performance; and
- ESG issues can have a material impact on our investments and on the communities in which we operate, which, in turn, has a material impact on the risks and opportunities generated by our investment activity.
Nova Pangaea Technologies
Unlocking the path to sustainable aviation fuel
After recently successfullly completing a £5.3million funding round with Mercia and the Northern Powerhouse Investment Fund, we spoke to CEO, Sarah Ellerby as she explains how Nova is helping the aviation sector with its biofuel. Sarah discusses the future with its new commercial plant, NOVAONE and Dr. Neil Hindle is also on hand to talk us through the Nova process.
Who makes it happen
Value-based support from across Mercia
We have set out key considerations and documented our ESG reporting baselines. These are not arbitrary targets simply to be ticked off a list, but fundamental principles that we must adopt to drive behaviours.
The ESG arena continues to be subject to rapid change which is why we have adopted regular responsible investment committee meetings. The committee is made up of employees from across the business representing a range of business functions, seniorities and backgrounds and it is this team which help to drive our strategy and initiatives.
We recognise that we operate in an industry where much more can be done, we feel it is our responsibility to push the boundaries on what can be achieved. This is why Mercia has gone further and, in 2023, we added a core value of ‘responsible’ – a belief and principle that guides and influences all of our behaviours, decisions and actions.
Environmental
Mercia is committed to investing in companies that are aware of their impact on the environment and as part of our investment process, the risks associated with potential portfolio companies are evaluated. If during the evaluation we believe the environmental risks are too high then we will walk away from the process regardless of the potential returns, we do not believe the risks justifies the reward when our reputation and environment are at stake.
During our period of stewardship, we use our influence to encourage portfolio companies to map their own carbon footprint and implement initiatives such as adopting environmentally friendly practices and policies to reduce their environmental impact. We take an active role in connecting our management teams with organisations that can help.
Mercia’s carbon emissions
Since 2022, Mercia has worked with Positive Planet, a specialist environment consultancy to map our own corporate carbon footprint. Mapping our data set provided us with a benchmark, and during 2023, we were able to refine this data through both employee and supplier engagement. With ‘scope three’ emissions account for the majority of our carbon footprint, our current focus is to target the complexities of addressing this key area.
We continue to engage with key stakeholders to measure, trac and implement strategies to reduce emissions throughout our value chain. Through engagement and the implementation of sustainability initiatives, Mercia is taking steps towards setting a targeted carbon reduction based on a per head of staff basis.
- Video conferencing – we encourage face to face meetings for office days but where we have remote work, we have a video first meeting policy.
- Public transport – all team members are encouraged to use public transport where possible. Not only does this reduce carbon emissions of private vehicles but it also provides additional time for our colleagues to relax listening to podcasts or focus on personal development reading.
- Electric cars – We launched our company wide electric vehicle (EV) leasing scheme in 2022 and now 7% of staff have now moved to an EV via the scheme.
Governance
Investment Process
As part of our standard investment process, we look for companies with independent and diverse boards, robust internal controls, and a commitment to ethical behaviour and transparency.
Management due diligence is performed as part of the investment process, feeding into the investment decision.
Each investment appraisal includes a dedicated section discussing ESG specific risks and value creation opportunities, encouraging our investment teams and management teams to engage.
Encouraging best practice and value creation
By attending board meetings and engaging with management teams, Mercia encourages best practice. Examples of this over the past 12 months have been:
- working with management teams to ensure they had support during the recent banking sector issues, including strengthening their treasury policies
- enacting our 2022 corporate KPI, for the year to 31 March 2023, we ensured that ESG is raised regularly for all of our portfolio companies
- bringing portfolio CEOs together for events to network and learn from each other.
ESG in action
In 2022 we launched our first knowledge-intensive impact investment Fund which was a natural progression of our gravitation towards impactful businesses that operate in fields like Biomedicine and Clean Tech.
The Knowledge-intensive Impact EIS Fund only invests in businesses that provide solutions to environmental or societal challenges. To ensure these businesses affect real and quantifiable change, we will judge their qualitative and quantitative impact in three ways:
- In relation to our three guiding principles developed from the UN’s sustainable development goals.
- By referencing our portfolio against the IRIS+ system (developed by the Global Impact Investing Network) for measuring, managing and optimising impact.
- With our own approach to measurement, which we will refine in line with industry standards as recognition of impact develops in the years ahead.
Impact investment spotlight
- Aceleron – developer of sustainable and reusable battery solutions,
- Axis Spine Technologies – implant systems that achieve and maintain superior spinal alignment for improved clinical outcomes.
- CanSense Group – Delivering an accurate, non-invasive, inexpensive blood test to diagnose bowel cancer early.
- Corrosion Radar – global leader in remote sensing technologies and advanced analytics for smart infrastructures.
- Dxcover – liquid biopsy and artificial intelligence for early detection of cancers.
- Eventum Orthopaedics – developer of innovative sensor technology to improve outcomes for knee replacement operations
- Invizius – clinical stage biotech developing second generation complement therapies to treat inflammatory, fibrotic and autoimmune disorders
- Medherant – developer of transdermal drug delivery patch
- Optellum – lung health company, developing products to help clinicians in the management, diagnosis and care of patients.
- Social Value Portal – Technology platform to measure social impact against ESG frameworks.
Our ESG vision
We will continue to work with portfolio companies to develop initiatives and support the Company’s ESG journey, as well of course as our own.
From a company perspective, our ability to effect change and close that gap at investment enquiry level or employee application is limited and whilst we have robust processes in place to help address diversity, we believe that the investment industry should refocus its efforts returning to grass roots level, and help educate younger people. This is clearly a longer-term approach and we do not expect to see change from year to year, but we believe that by actively encouraging young adults from diverse backgrounds to consider careers in investment, technology or healthcare and educating them on the impact they can make, then we can pave the way to a much brighter future over the longer term.
Social
Mercia understands the importance of social impact both internally and across the portfolio.
We have committed to encouraging this with several initiatives in place including: