Environmental, Social, and Governance Policy Statement
Introduction
E2 Investment Advisors LLC (the “Adviser,” “E2 Energy,” or the “Firm”) and its affiliates believe that our environmental, social, and governance Policy (the “ESG Policy”) should be an integral part of our decision-making process within our Firm and within the governance of the Firm’s investment funds (the “Funds”). We believe that this policy is designed to help our Firm prosper through our energy transition while never losing site of our commitment to environmental stewardship. As such, the Firm’s ESG policy reflects our commitment to a high standard of integrity in our business conduct; our focus on workplace safety, diversity, equity and inclusion; an emphasis on strong partnerships with the communities where we live and operate; in addition to our efforts to act as custodians of the environment. The ESG Policy is based on guidelines that are principally consistent with the United Nations’ Principles of Responsible Investment and The American Investment Council Guidelines for Responsible Investment.
Overview of E2 Energy
E2 Energy is a high-conviction energy fund formed in 2020 and based just outside of Houston in The Woodlands, Texas. The Firm’s investment philosophy aims to capture growth and build positions in energy stocks during strengthening commodity cycles while maintaining a long-term focus to transition to the renewable assets and services that create a more sustainable future. We believe there will be an ever-growing demand for renewable energy sources, as these sources are expected to be the world’s main source of power within two decades and, according to BP, are establishing a foothold in the global energy system faster than any fuel in history. However, based on market research, we believe that oil demand will remain a predominant source of energy until its peak in the 2030s. Therefore, while this evolution is taking place, the Firm, without causing material undue burden on our mission to act in the best long-term interest of our investors, will continue to focus on investing with low-cost, environmentally responsible producers in the oil and gas space.
Investment Strategy and Approach
E2 Energy’s investment strategy seeks to focus on the inherent and fundamental value of the underlying assets of each investment and participate alongside responsible partners throughout the energy industry and with private management teams. To this end, the Firm is looking to develop a responsible investor strategy (“RI Strategy”) that ensures that our fundamental values are shared with the stocks and portfolio companies we purchase and associate with. The basis of the RI Strategy is to review companies for the possible risk that their business practices could jeopardize or do not align with the ESG values of the Firm. One way the Firm plans to monitor this is to review appropriate disclosures on ESG issues by the entities in which the Funds invest. With respect to our relationship with management teams, E2 Energy expects each portfolio company to have its own ESG policy, with ESG considerations addressed at each board meeting.
ESG: Our Commitment
E2 Energy understands that environmental, social, and governance related issues can have a meaningful impact on our employees, the companies we associate with, our communities, and our investors. Therefore, we believe that it is our responsibility to strive to create both an ESG policy and culture that reflect our commitment to safety and stewardship.
Environmental
We believe in taking a precautionary approach to the environmental challenges within the energy industry. Prior to considering an investment, the Firm will actively consider several factors that address the environment, which may include working with responsible partners who have a track record of adhering to environmental protection practices, laws, rules, and regulations as well as reducing their environmental footprint.
Social
We believe that having the right “Tone at the Top” is a crucial factor in the overall success of any policy. This includes a focus on our hiring and development practices as well as our policies on privacy and data security, human rights, and anti-corruption.
As part of the Firm’s social responsibility, we seek to attract the best talent while embracing diverse backgrounds and perspectives. We promote a culture that embraces differences, honesty, and teamwork. We look to create an environment that respects and values each individual employee’s contribution to the Firm through fair compensation, annual bonuses, and participation in the Funds’ carried interest.
We acknowledge the obligations that we have to the communities in which we operate and realize that safe, reliable, and environmentally compliant operations and supply chains guide our daily work. In this regard, we expect our third-party service providers and vendors to respect their workers and communities and avoid conducting business in ways that harm people by holding them to the same standards we expect of our own employees.
E2 Energy also understands that it is important to give back to our community and recognizes the impact that its operations could have on local communities. E2 Energy generally focuses its philanthropic efforts along several key themes, including helping underprivileged youth and providing hunger relief in the Houston area. The Firm is proud of the volunteerism and willingness to give back by our employees, who participate in an annual day of volunteering to directly support these efforts in addition to their individual efforts.
Governance
E2 Energy’s executive team is responsible for the Firm’s ESG policy, reinforcing the “Tone at the Top” approach. The Firm seeks to maintain alignment of interests between the Firm’s management, partners, and other stakeholders through regular communication and transparency. The Firm has a significant compliance program with quarterly reporting expectations for all of its employees. Moreover, E2 Energy has detailed financial reporting requirements, including monthly Net Asset Value statements and annual audited financial statements, that adhere to the Firm’s financial and valuation policies. Finally, the Firm’s executive team provides levels of oversight that it believes are appropriate in the areas of risk management and potential conflicts of interest, and it regularly monitors its ESG policy for areas of improvement.
Employees or portfolio management company members who do not adhere to the Firm’s ESG policy could be subject to disciplinary action, including suspension or termination.
While E2 Energy intends to self-monitor its activities and progress toward implementing this ESG policy, it also anticipates soliciting feedback on an annual basis from the Firm’s investors to have a constructive and transparent relationship on environmental, social, and governance activities of the Firm.
Disclaimer
This document has been prepared for the underlying Fund investors of E2 Investment Advisors LLC. It does not carry any right of publication or disclosure, in whole or in part, to any other party. This document is for discussion purposes only. The information and opinions in this document constitute the judgment of E2 Energy at the time specified and may be subject to change without notice; they are not to be relied upon as authoritative or taken in substitution for the exercise of judgment by any recipient. Under no circumstances is it to be used or considered as an offer to sell securities, or solicitation of any offer to buy securities, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or be taken as investment advice.