The investment and control process are strongly bottom-up focused and ESG assessment, monitoring, and management is an integral part of the investment process and life cycle of the Fund’s investments.
To qualify as an investment the assets must successfully pass through an evaluation process involving the Investment Committee. The process is as follows:
Examination of a broad selection of potential investment entities and identify those that they believe are most likely to meet the standards required for inclusion in SIGNATURE's portfolio of assets and businesses.
Eligibility and risk analysis
An initial risk assessment takes place to see whether the prospective investment falls within the Fund’s risk-return profile and passes the ESG screening phase.
Appraisal and the Investment Committee
The investment team seeks to further substantiate its knowledge of the proposed investment by conducting an initial appraisal (financial, agronomical, and operational information).
This is both a backward-looking and forward-looking process, involving reviews of past performance and future business plans and projections. If the appraisal has a positive conclusion, a formal investment proposal is drafted and presented to the Investment Committee.
Due diligence and final approval
The due diligence will consist of a full financial, legal, and tax review of the business and its operator, plus technical due diligence of the potential investment entity. An important aspect of the due diligence will be a technical and agronomical assessment of the property to be done by an external agronomical advisor.
Apart from evaluating the commercial attractiveness of an investment, the social and environmental aspects of the potential investment entity are also evaluated, including the possibilities on how to implement adequate social and environmental management plans.
An ESG assessment is a non-financial check by means of an on-site audit performed by an external audit company and is done on all new investments prior to acquisition.
Drafting of contracts and closing
Transactions will be structured around an appropriate tax structure. Most investments will be structured by setting up new investment entities, for example holding companies or special purpose vehicles that are more efficient in view of tax, legal or regulatory constraints.
With respect to the legal, fiscal, and administrative setup of investment entities, to the extent, possible standardization of contracts will be pursued, by way of engaging the same advisors for each investment.
Contractual requirements of all parties specify environmental and social responsibilities, which will include implementation and monitoring of Bond requirements.
Monitoring and Reporting
After closing, SIGNATURE will monitor the investment closely regarding all financial, operational, ESG, and technical aspects. At the project level, the agri-tech system allows for detailed analysis and monitoring of the performance on a continual basis.
As an example, the system can provide detailed information on how crops and/or trees are developing at individual farms.
Moreover, in-person visits are frequently performed to track the action plan implementation and provide guidance on both agricultural and ESG issues.
Quarterly reports are produced for investors and other interested parties, giving an overview of the Fund and underlying investments performance, as well as any significant events during the quarter. In addition to the numbers provided, comments and explanations of any variances are included.
Although the investments are long-term, exit provisions are already considered on acquisition. In many instances, the operating partners negotiate the first right of refusal should the assets not be rolled over into succession funds.
The latter is the preferred route to safeguard the long-term alignment of interest between the different stakeholders.