HarbourVest's Annual ESG Report

Human rights

At the end of 2019, HarbourVest became a member of Business for Social Responsibility (BSR), a global non-profit business network and consultancy dedicated to sustainability. We partner with BSR to provide strategic training and advice on ESG themes and in 2023 BSR delivered two tailored training sessions for HarbourVest investment teams on the “S” in ESG:

  1. Social risks in technology investing: a course to identify complex risk factors associated with technology investing and growing investor expectations on the responsibility of technology companies.
  2. Labor as a complex and evolving topic: a course to support assessment of labor-related risks in investment analysis and help identify best practices in high-risk sectors.

The objective of the trainings was to broaden our mindset to the scope of social issues and how they can present as investment risk, beyond a tick-box approach. Throughout the training courses, BSR specialist consultants identified human rights as a common thread. In the context of technology investing, human rights-related risks were identified for the HarbourVest investment team to be more broadly aware of in relation to disruptive technologies:

Disruptive technologies
  • 5G
  • Alternate/virtual reality
  • Artificial intelligence
  • Big data analytics
  • Blockchain
  • Facial recognition
  • Human sensing
  • Internet of things
  • Machine learning
  • Robotics
  • Sentiment analysis
Illustrative human rights impacts/risks
  • Benefits of scientific advancement
  • Bodily security rights
  • Child rights
  • Freedom of assembly and association
  • Freedom of expression
  • Non-discrimination
  • Privacy
  • Right to health
  • Right to life, liberty, and security

Source: Business for Social Responsibility

Training also included a specific review of human rights-related labor risks such as child labor, forced labor, and human trafficking. BSR provided HarbourVest with considerations for managing potential risks within its investment portfolio, including how to frame engagements with lead sponsors and GPs on labor risks. Notably, the training highlighted sectors that are most at-risk—including services, manufacturing, and construction—which underscored the importance of a sector-based approach to identifying where risk may be concentrated.

Which sectors are most at risk of forced labor?

No Data Found

Which sectors are most at risk of forced labor?

No Data Found

Source: ILO, WalkFree, IOM

These trainings surfaced important learnings and takeaways for HarbourVest’s ESG and investment teams, and HarbourVest reflected its commitment to managing human rights-related risks in its investment portfolio by adding a dedicated “Human Rights” section to its ESG policy during its 2023 update. This section was added in addition to HarbourVest’s longstanding commitment to not invest into companies that it knows are engaged in forced labor, child labor, or human trafficking in contravention of applicable laws.

HarbourVest recognizes the UN Guiding Principles on Business and Human Rights (UNGPs), which sets out expectations for human rights due diligence and access to remedy. We implement the UNGPs’ framework through our broader ESG framework as follows:

Identify and assess

We use RepRisk, an external database, to support due diligence, monitor ESG and business conduct risks, and collect relevant data. RepRisk risk categories specifically include human rights abuses and corporate complicity, forced labor, and child labor. Investments are screened according to investment strategy to identify any potential red flags (see “Due diligence” for specific application).

Prevent and mitigate

In general, HarbourVest-sourced investments are monitored through RepRisk and subject to a regular, periodic review process to screen for potentially material ESG incidents. We have protocols in place to engage with the lead sponsor on incident reports where events are considered relevant and material, and place high importance on reports related to human rights impacts. During this process, we consider the potential severity based on the perspective of potentially impacted stakeholders and will prioritize our level of engagement accordingly. We also consider what leverage we have to help identify and engage on the remediation of practices that are contributing to or causing harm.

Track and communicate

We centrally record our RepRisk and incident-related engagements with lead sponsors and report an aggregated summary of these engagements in annual reports for certain programs. Where more immediate communication is warranted, we will notify clients and may also utilize the LPAC to share updates about any potential portfolio issues.

Access to remedy

As an investor, HarbourVest may be inadvertently linked to adverse human rights impacts within portfolios, rather than causing or contributing to direct impacts. As a result, our principal role may be to support or contribute to the remedy “ecosystem” to the extent practicable, typically via engagement with the related fund sponsor rather than directly at the company level.

We believe our enhanced ESG policy and heightened commitment to managing human rights-related risks within our investment portfolio is an important step toward improving our ESG program and ensuring our investments are driving value for our investors through channels that avoid harm and prioritize basic human rights.

Source

[#] source

Continuation solutions encompass a host of transaction types in which a GP secures interim liquidity and/or additional primary capital for their LPs in a strongly performing asset, or set of assets, that the GP will continue to own and control. Specifically, they include continuation funds, new funds created by GPs for the purpose of acquiring the asset(s) that continue to be managed by the same GP and capitalized by one or several secondary buyers, or equity recapitalizations involving a direct equity or structured equity investment into a portfolio company. These transactions can also include a parallel investment from the GP’s latest fund into that same pool of assets (a “cross-fund trade”).