Core Focus on Sustainability
Hudson is exclusively focused on investments that promote sustainability, which Hudson defines along three factors: environmental sustainability, business growth, and human development. Specifically, Hudson will invest in companies that focus on the promotion of low carbon sources of energy, resource efficiency, efficient production methods, sustainable forms of transport (including electric vehicles and companies that promote the efficient use of transportation vehicles), infrastructure resiliency, and human development and safety.
Hudson believes that companies that operate with sustainability in mind or incorporate ESG factors are in many instances better positioned for higher growth, building more employee talent and intellectual capital, accessing more investor capital, and often involve less risk than comparable companies whose business models do not incorporate such principles.
Hudson integrates its focus on sustainability characteristics through multiple stages of its investment process, due diligence, and portfolio management. Hudson believes that sustainability is fundamentally cultural to the firm and seeks to continuously improve its practices through iterative feedback with the market and industry participants.
Investment Screening and Due Diligence
Hudson has reviewed thousands of investment opportunities since inception. Investments made by Hudson must undergo a rigorous screening and due diligence process where sustainability characteristics or ESG issues are taken into consideration. Specific sustainability characteristics are considered at the fund level depending on the focus of the fund. Deal team members will take these characteristics into account when deciding to pursue an investment.
For example, a major criterion of Hudson’s first fund is that in order for a company to be considered by Hudson, its technology, products (including inputs into and components thereof) or processes must reduce the environmental impact of energy production, delivery or consumption in a more efficient or rational manner. This criterion, initially evaluated by Hudson’s Investment Opportunities Team, helps to determine whether an investment opportunity will advance to preliminary due diligence, during which an investment professional will look to determine whether the opportunity meets appropriate social and governance standards. Hudson also reviews any relevant consultant recommendations along this basis before investment.
Through its active management oversight, Hudson regularly monitors portfolio company activities, which allows the firm to influence corporate governance if the implementation of ESG principles could be improved upon. Most of Hudson’s investments involve positions on the board, and Hudson actively works with the management team to implement its philosophy on sustainability, including working with the company to demonstrate industry leadership when necessary.
Hudson reports on sustainability progress and objectives to its investors. Specific metrics for the reports are determined at the fund level by the Investment Committee. Hudson is broadly focused on reporting quantifiable environmental factors, particularly carbon emission reductions or levels of renewable generation constructed by Hudson portfolio companies.
Hudson’s staff stays current on sustainability and ESG issues through a variety of sources, including but not limited to updates and advice from external legal counsel, attendance at conferences and seminars, receipt of newsletter, articles and recent developments, and information received from service providers such as administrators and auditors of the funds managed by Hudson. Hudson also works to continuous refine its sustainability objectives through continuous feedback with the market, its investors, and industry participants.