Horizon 2022 ESG Report

“We seek to continuously improve and deepen our understanding and commitment to the principles of Responsible Investing and ESG.

We measure the extent and effectiveness with which we apply ESG factors in our assessment of each investment opportunity and throughout the life of our investments - our goal being to apply best practices and deliver constant improvement.”

Simon Hitchcock Managing Partner horizoncapital.co.uk

A message from The Partners

At Horizon we believe that the integration of ESG commitments is about pragmatic solutions to measuring, managing and improving ESG-related matters and its essential that we go beyond just identifying risks and opportunities. This approach forms the foundation from which we seek to build truly sustainable, market-leading companies that create value for society.

We drive our portfolio companies ESG practice, but at the same time we are driven by them and the commitment and enthusiasm they have in addressing critical challenges like climate change, diversity, equality and inclusion.

We believe that we will look back on 2020 and 2021 as the years in which we built the foundation of our ESG strategy and embarked on a journey of continuous amelioration.

Recent years have been an awakening for our industry on the importance of integrating ESG into usual business practices.

Our ESG Journey

Horizon has taken an active approach towards ESG and Responsible Investment at the beginning of 2020.

We have launched significant initiative to integrate ESG practices across all stages of the investment cycle. We have also taken a proactive stand against the upcoming regulatory pressures that our industry is facing.

We understand the influence we have as an investor and use that in educating and supporting ESG best practices at portfolio level, whilst also constantly elevating our own standards.

Equally we recognise the opportunity to mitigate risks and generate long-term financial returns for our investor by developing ESG practices that will not only ensure regulatory compliance, but will help us build leadingbusiness in their sectors that support their community, attract and retain best-in-class talent and protect our planet.

In the next few pages will look in detail at some of the key achievements of the last 2 years, summarised here:

Launched new extended ESG Policy in 2020 and annually review it

Prepared and adopted a comprehensive bespoke ESG Framework to monitor and measure ESG KPIs during the holding period of a company

Partnered with Social Value Portal to measure the impact on Social Value across the Portfolio

Developed our own ESG screening and diligence process which has been used in all investments in Horizon Capital II

Appointed Giuliana (Manager) as ESG lead

Partnered with Carbon Responsible in 2021 to calculate portfolio carbon emissions (Scope 1,2 and 3)

Commited to formal annual ESG training for each member of the team

Confirmed our ongoing commitments to UNPRI, Initiative Climate International (iCI)

Sponsored upReach charity as part of our commitment to more social mobility and a fairer workplace

ESG Insights from The Portfolio

£22.6m

of social and local economic value generated in 2021

1708

Apprenticeship weeks delivered

of the portfolio staff are paid at least the Relevant Living Wage 99% Volunteer hours delivered to communities

326

407

Governance hours of D&I training were provided to portfolio staff (vs. 18 in 2020)

of senior management is female across the portfolio (6% increase since 2020) 26%

The Social Element

We partnered with Social Value Portal (SVP) at the beginning of 2020 as we wanted to capture and express the vast social initiatives that our portfolio carried out, from charity fundraising, to employee mental health support, volunteering hours and much more.

With SVP’s support we learned about social value, how to calculate it, report it and grow it. Alongside the SVP team we developed Horizon Capital’s proprietary and comprehensive ESG Framework of ~60 measures that not only supports our ESG reporting, but provide our portfolio companies with a structure on which to base their own ESG strategies.

We collect, track and monitor data via an online portal:

Agilico Group Limited

Ascent

Horizon Capital Demo

Juniper Education

Sapphire Systems

STRAT7 Group

Topsource Worldwide

According to the data submitted, the portfolio has generated £22,612,548 of additional social and local economic value (SLEV) in 2021 (vs. 4,166,906 in 2020). The YoY improvement is however not only the result of more initiatives across the portfolio, but also represents a step up in data collection and quality of the data, which we are very happy to witness and expect to continue.

The data portfolio companies upload goes through a verification process from SVP consultants and data is accepted only if the appropriate evidence is provided (for example, if a company claims a certain amount has been spent with a local supply chain contract then the contract or invoice needs to be submitted).

All ESG measures in our proprietary ESG Framework that have a proxy value are mapped to the 17 Social Development Goals (SDGs) of the UN. The predominant SDGs that the portfolio showed contribution to in 2021 were:

The Environmental Element

At Horizon we understand the crucial role we hold as investor in making a positive impact to the environment, hence why in 2021 we started calculating our carbon emissions across the portfolio, as well as our Horizon Capital’s own emissions. We took a historic approach and looked at the 2020 emissions and following that the 2021 emissions. The two years of data we’ve been able to collect provide us with a benchmark for future target reduction setting.

We observe in Table 1 that overall carbon emissions across the portfolio have increased by only 1%, with the largest contributing areas been the emissions from vehicle usage and business travel, as companies have returned to normalised operations following Covid disruption which was most pronounced in 2020. Some year on year differences can also be related to the data quality and range provided by the companies.

Across the portfolio the greatest emissions are generated by Scope 2 type emissions – electricity consumption in particular (as seen in Figure 2). Electricity use has reduced significantly since 2020, however, this is assessed to be due to data availability and not targeted reduction initiatives. We have not set forward reduction targets for our portfolio at this time. We will look to set targets once we have completed further analysis of our emissions profile and our forward plans for the portfolio.

Our ambition and stated goal for portfolio reporting is to move a quarterly capture of data in order to embed it into their processes, enabling us to undertake ongoing assessment. This change will deliver improvements in data capture, reduction targets and the ability for each portfolio company to receive an individual emissions report to match their financial year end, being the common reporting period for companies. Finally, we believe these efforts will put us in a good position in front of upcoming regulatory frameworks like the Task Force on Climate-Related Financial Disclosure (TCFD).

Figure

Notes:

Portfolio companies that were in exit process in 2021 are excluded from 2021 carbon emission calculations (i.e. Coryton, Bellrock).

The Governance Element

Diversity

Data shows that 38% of the portfolio employees are female, that is 5-percentage-point above the average female representation in global tech firms (see Deloitte report). Horizon are aware that talent management has become the number two strategic priority across PE firms of all sizes, second only to asset growth. We encourage portfolio companies to think about their diversity and how it feeds through the top of the organization. We are pleased to observe a 6% increase in senior management female representation at portfolio level (from 20% in 2020 to 26% in 2021), but we know we have a long way to go when it comes to board representation (witnessing a 5% increase from 4% in 2020 to 9.4% in 2021). 407 hours of D&I training were provided across the portfolio in an effort to raise awareness on talent management and acquisition.

iCI / UNPRI signatory

We continue our commitment to the UNPRI and what it stands for. We signed up in 2020 to become one of the first members of the Initiative Climate International and have been since then actively participating in the Training Materials working group, which in 2021 produced a Climate Impact Training aimed at investment teams across the industry. Read more about iCI here

Training

We provide our investment team with formal annual training on ESG topics. In 2020 we ran the BVCA Responsible Investment training across the whole team and everyone obtained the Pass certifications. In 2021 we provided training around ESG pre-deal screening mechanisms and equipped our investment team with an “ESG Checklist” that supports them to the process of assessing ESG risks and opportunities when considering a new investment. In 2022 we will be provide training specific on climate impact, created by a Working Group in the iCI delivered by our ESG lead Giuliana Cian.

upReach

Horizon Capital are proud supporters of upReach a charity that works to create conditions for undergraduates from less-advantaged backgrounds to access and sustain top graduate jobs. We’ve sponsored the charity since 2020 and, as part of our commitment provided work experience to 2 graduates from their programme in the summer of 2021, and have committed to do the same in the current year.

“We’re delighted with the levels of portfolio engagement on ESG practices and look forward to continue supporting our companies on this journey.”

Giuliana Cian - ESG Manager, Horizon Capital

Thank you for welcoming us into the team and giving us the opportunity to learn so much about the work you do. It has been great to gain such a unique insight into private equity at such an early point in our careers. We really appreciate the way that you fully immersed us into the company during the experience.

Damola & Nour - upReach Associates

Portfolio Engagement

The Carbon Responsible Group (Alex Didcock) were introduced to us by Horizon to support our internal ESG strategy. The report generated by Carbon Responsible has not only galvanised our ESG strategy but is actively being used in all client tenders. Furthermore, the ESG networking event organised by Horizon helped us share ideas and challenges with other portfolio companies which gave us clarity and direction for future action and insight into what investors look for in relation to ESG.

Paul Mitchell COO of Agilico

As Bellrock entered its sale process we undertook an extensive programme of work on our ESG reporting processes. The Horizon team, lead by Giuliana Cian were instrumental in guiding us in reviewing our sustainability, social value and corporate governance data reporting, establishing a set of KPIs and workstream programmes. Their expertise was invaluable in supporting us through this.

John Hamilton

People, Safety & Sustainability Director of Bellrock

I have been very impressed by Horizon’s approach to ESG reporting and measurement. The measurement frameworks are thorough and rigorous, linked to the UN SDGs The process of data capture and entering has been clear and well supported, which is vital since this is a complex area involving many stakeholders in our business. I have been very grateful for the level of support throughout. Taking this kind of committed approach to ESG is a hugely positive move from Horizon and allows us to tell our employees that we are working with investors who share our values. It’s hard to put a value on intangible things like this, but I believe it’s extremely helpful in terms of motivating the team to work toward our commercial goals!

Simon McEvoy Head of Strategy at Omobono (part of The Marketing Practice)

Case Study Sapphire Systems

Local Schools AI Workshops

Sapphire is our digital operating platform provider to global mid-market and mid-enterprise customers. With over 400 employees across UK, US, Mexico, Argentina, Lebanon, India and the Philippines.

Historically, Sapphire has had a philanthropist approach to business and has been supporting its local community for 10+ years, whether that is by providing afternoon tea for the elderly at the Shard, or organising dedicated workshops to inspire young kids from less advantageous backgrounds. On a number of occasions, Sapphire has organised for working professionals from a number of sectors to go into schools and talk to kids about what their job entails, giving young ones an opportunity to find out more about the countless opportunities the job market provides. Our own Emily Hickley has participated in one of these workshops and described it as refreshing experience “The kids asked me thoughtful and spontaneous questions that I hadn’t properly ever stopped to think about, for example ‘who is your hero?’” said Emily.

In 2021, Sapphire decided to kick-off a new series of workshops focusing on what they are really good at: Digital Operating Platforms. Encouraged by a highly driven and inspiring Senior Management, the ESG & Responsible Business Team designed and ran a series of workshops aligned to what they do. “The new people that have joined us either through acquisitions or through Horizon’s appointment have brought in fresh ideas and helped us develop this exiting series of workshops aligned to our core business” says Janice Phayre, Head of ESG and Responsible Business at Sapphire.

The workshops targeted 2 group ages: the primary students (aged 8/9) and the secondary students (aged 16/17). The content for both workshops was developed internally by the Sapphire professionals with the help of the schools, to align as much as possible to their curriculum as well as that of our partners at Automation Anywhere (AA). AA is a software company leader in the development of RPA (robotic process automation) software. The collaboration via the workshops strengthened the relationship of Sapphire with its RPA partner AA. During the workshops a number of activities were organised including motivational speeches from Sapphire employees, practical exercised tasks and the introduction of Bots and bot technology.

After the workshop for the secondary school students, AA and Sapphire set up a competition to design a bot and 2 prizes were given to the best ideas (see photo). The feedback collected from the kids and young adults that attended the workshops was extremely positive, no doubt a positive impact was made. “Soo good to work with the children and hear their ideas – do it again!” – one of the Sapphire employees after the workshops ended. A testimony that social initiatives like these don’t only have a positive impact on external stakeholders, but on our own employees, making them feel accomplished and happy for giving back.

“We want to enable young kids to see the opportunities that technology can create for the future of the job market, and embrace new roles, instead of fearing them. We know that automation in the long run will result in certain jobs becoming redundant, but we want to position ourselves at the forefront of this digital transformation and create new jobs in tech.”

Chris Gabriel Head of Strategy at Sapphire Systems

The Workshops targeted 2 age groups 8/9yrs 16/17yrs