2018 Environmental, Social, and Governance Report Who We are Who We are The paper used in this report is 100% Legal Statement post-consumer waste, FSC* certified, This Report was created to summarize Cerberus’, and certain of its portfolio companies’, and made with wind power. Environmental, Social, and Governance (“ESG”) program only. It is not intended to summarize or describe any investment performance of the Cerberus Funds and Accounts * Forest Stewardship Council. FSC certification ensures that products come from or individual investments. The information contained herein may contain “forward looking responsibly managed forests that provide environmental, social, and economic benefits. statements”. Such forward looking statements, which can sometimes be identified by the use of terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “target”, “intend”, “believe”, “continue”, or other variations or comparable language, are subject to various risks and uncertainties and actual events or results may differ materially. As such, they should not be relied on in any manner. This Report is provided solely for informational purposes only. It is not intended to be, nor should it be construed or used as, an offer to sell or a solicitation or any offer to buy, an interest in any Cerberus Fund or Account. Cerberus personnel generally adhere to the Cerberus ESG policy stated herein in connection with the exercise of their professional responsibilities, including their duty to manage various investments held by the Funds and Accounts. The ability and rights of Cerberus personnel to impose the Cerberus ESG policy on a portfolio company or other related investment is strictly limited to the rights such personnel may exercise (or elections they may make) as the representative of an investor, member or partner in the entity that owns such investment, subject to the organizational documents relating to such investment. Nothing herein shall imply (or be construed to suggest) that Cerberus (or any of its personnel or representatives) controls the management, policies, or actions of any other company (including portfolio companies) to any extent beyond that which may be expressly set forth in the organizational documents of such company. It is the policy of Cerberus to respect the corporate structure and to require that each of its affiliated companies (including portfolio companies) govern themselves in accordance with their respective organizational documents.
2018 Cerberus ESG Report | 1 Contents 1 Who We are
Message from the ESG Committee Chairman 7 Introduction About Cerberus 8 Cerberus’ Proprietary Operating Capabilities 10 At Cerberus, we believe responsibly addressing certain environmental and social issues, as well as prudent governance, helps to mitigate risk 2 and create more valuable companies and properties in the long run. This perspective is reflected in our culture and approach to evaluating ESG within Cerberus 4 transactions and managing investments. Our focus on Environmental, The Evolution of Our ESG Program 14 Social, and Governance (ESG) risks and opportunities spans the Conclusion Our ESG Journey 15 entire investment lifecycle, from pre-investment diligence through Looking Forward 56 acquisition, from F-100 (First 100 days of transition) through portfolio The Cerberus ESG Committee 16 management, and, ultimately, exit. The Cerberus ESG Policy 17
This report is intended to demonstrate the history, depth, and breadth Comparison to Other ESG Principles 18 of ESG work at Cerberus, as well as our current ESG operating rhythm. SGI Acquisition: The “Frontier Plus” Investment 20 It also describes our most recent efforts to measure and improve our performance with regard to ESG principles as applied to our portfolio 5 of companies, investments, and properties around the world. 3 Appendix Through our ongoing commitment to ESG best practices, Cerberus has realized practical and tangible benefits for our investments and, ESG in the Cerberus Portfolio Glossary 60 ultimately, our investors. The Cerberus ESG Formula 26 Biographies of ESG Committee Members 61
The Cerberus ESG Process 28 Biographies of Other Cerberus ESG Resources 64
ESG Integration Throughout the Investment Lifecycle 29
Technology Resources Deployed in the ESG Program 30
The Cerberus ESG Evaluation Tool 31
Collaboration Throughout the Investment Lifecycle 32
Spectrum of Collaboration 33
Cerberus General Counsel Summit 2018 34
Commercial Value Through Consistency and Collaboration 36
Overview of Cerberus' ESG Activities 38
Case Studies 40
Cerberus ESG Incident Reporting Process 52 1 Who We Are
Cerberus is a global leader in alternative investing with industry- leading operating expertise. Founded in 1992 and headquartered in New York, with 18 offices worldwide, we have approximately $39 billion in assets under management across complimentary credit, private equity, and real estate strategies. For over 26 years, Cerberus has been a trusted partner to many respected investors from around the world. Message from the Whether investing in private equity, real estate, or global credit, we have provided operating expertise, capital, and innovative solutions to improve performance and drive greater value for our funds’ investments. And we will continue to do so in the future. We believe that our team, our multi-disciplinary investment ESG Committee Chairman platforms, our vision, and our operating capabilities can generate strong risk-adjusted returns regardless of the marketplace. We also believe that our ESG initiatives have similarly improved performance and contributed to the returns of our investments.
2018 has been an exciting year for our ESG program. We have increased the size of our committee, engaged in new geographies, expanded the use of technology, and actively partnered with our professionals – both internally and at our portfolio companies. At the same time, we continued to build out our ESG capabilities for the future.
Before embarking on a recitation of our 2018 ESG accomplishments and reviewing our 2018 Annual Report, it is always worth remembering that our commitment to ESG as a driver of value goes back many years. We are not new to assessing and analyzing ESG matters – it is part of the Firm’s overall commitment to excellence and compliance. We were sensitive to environmental impact and sustainability long before others recognized the need to diligence and address these issues; we were concerned with factory safety, wage and labor issues, and supply chain touch points before many regulations were even imposed; and we have focused on corporate governance, compliance, culture, and responsibility since our inception in 1992.
This past year, our efforts intensified around consistency and collaboration in order to drive greater commercial value. From a consistency perspective, we continued to obtain better data and metrics in order to track meaningful and accurate information. From a collaborative perspective, we established key contacts at each investment and customized our ESG efforts and expectations to make them more practical and consequential according to specific needs and requirements.
In 2018, we also added several important members to our ESG Committee: Frank Bruno, the Co-CEO of Cerberus, Sheila Peluso, the Head of Human Resources; and Jayne Binzer, a Senior Operating Executive in Cerberus Operations and Advisory Company. Toward the end of the year, Cerberus Capital Management, L.P. made a strategic acquisition of SGI Frontier Capital (“SGI”), a leading private equity firm focused on frontier markets in Asia and Africa. SGI already has a robust ESG program and we look forward to merging our efforts and processes together and opening our aperture to include ESG issues in countries such as Ethiopia, Georgia, and Mongolia.
Finally, we remain committed not just to maintaining our excellent ESG program, but to proactively build upon it as we take our focus and initiatives into 2019 and beyond.
Andrew Kandel Global Chief Compliance Officer, Senior Legal Counsel, and Senior Managing Director, Cerberus Capital Management, L.P.
2018 Cerberus ESG Report | 7 Who We are Who We are Dublin About Cerberus London Baarn Who We Are Amsterdam Cerberus is a global leader in alternative Ulaanbaataar investing with expertise in credit, private Frankfurt equity, and real estate strategies, and San Francisco Chicago Tbilisi New York Beijing industry-leading operating platforms. Madrid Tokyo We were founded in 1992 and today Los Angeles comprise over 750 employees in 18 locations globally. Hong Kong Cerberus manages assets on behalf of many of the most respected institutional Addis Ababa
investors worldwide. Our investor Singapore base includes pension plans, insurance companies, endowments, foundations, and sovereign wealth funds. Sao Paolo
Cerberus Invests Across Three Complementary Platforms
1992 $39bn 750 18 Global Credit Real Operational Founded AUM Total Employees Global Offices 1 Opportunities 2 Estate 3 Private Equity
Multi-disciplinary platforms Global real estate platforms Value-driven investors in business with expertise investing in: with the flexibility to invest worldwide, focused on: Portfolio Companies Real Estate Assets across the capital structure in: » Corporate credit and » Businesses that can benefit $70 bn revenue 200 buildings distressed debt » Non-performing loans from improved operations
» Mortgage securities and assets » Commercial real estate » Complex corporate carve-outs 400,000 employees 12,500 units and divestitures » Middle-market direct lending » Residential real estate 4,000 buildings 11.5 m square feet » Private companies as platforms » Portfolios of real-estate for growth backed securities $600 m energy spend $19 m energy spend
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Cerberus' Proprietary About Cerberus Operations Operating Capabilities and Advisory Company (COAC)
Competitive Experts in Driving 13 Years of is an Cerberus Operations Cerberus Operations and Advisory Company (COAC) Advantage Transformation ESG Experience and Advisory industry-leading operations platform that is proprietary to Cerberus. Company (COAC) COAC has operating executives and functional experts that work Cerberus believes that there are COAC assists Cerberus in sourcing ESG is a core practice area within across Cerberus’ investment platforms to maximize financial and distinct competitive advantages opportunities, conducting highly COAC that has deep involvement in operating performance. to having a robust team of senior informed due diligences, executing transactions from the due diligence operating executives and functional acquisitions, and improving the stage through ownership, and ultimately experts in-house to work across our performance of portfolio investments. disposal. For over 13 years, Cerberus has investment activities and throughout COAC executives often hold senior been integrating ESG initiatives into Cerberus Technology Solutions employs expert technologists that the lifecycle of an investment. COAC, leadership and director positions our investment process as a proprietary Cerberus Technology work closely with Cerberus investment and operating professionals our industry-leading operations at Cerberus’ portfolio companies operating capability to help improve Solutions to apply new technologies, realize new sources of revenue and value creation, and accelerate technological transformation and differentiation. platform, comprises over 110 and its teams are regularly deployed performance and drive value. experienced operators across a range to provide practical assistance to of industries including manufacturing, help drive operational and strategic aerospace, energy, healthcare, and transformations. financial services, among others. Headquartered in the United Kingdom with offices in London, Cerberus European Amsterdam, Dublin, and Madrid, Cerberus European Servicing (CES) Servicing (CES) is Cerberus’ proprietary asset management, property management, and loan servicing platform. As of June 2018, Cerberus has directly engaged Sustainable operating improvements and accretive strategic initiatives are at the core of every CES on over 65 different loan portfolios and REO transactions spanning investment from start to finish: more than 40,000 loans and nearly 4,000 properties across Europe.
Experienced Functional Operating FirstKey Homes provides acquisition and property management Industry Executives Experts Initiatives Group services to a diverse portfolio of single-family rental homes across We employ seasoned Our functional experts in Our Operating Initiatives FirstKey Homes the United States. Services include leasing, rental collection, credit executives from top-tier operating areas such as Group provides management companies to provide manufacturing, supply chain, IT, with a pool of ready talent screening, repairs and maintenance, construction, renovation oversight senior advice, supplement human resources, treasury, and who knows the company and is services, and quality control. management teams, and other business functions. work ready to help drive initiatives. serve on boards. on interim and permanent bases wherever needed.
FirstKey Mortgage is a real estate finance business that is a global FirstKey Mortgage leader in acquiring, securitizing, and managing residential mortgages and related assets. Operating capabilities include sourcing loan opportunities, managing and providing servicing oversight of assets, and facilitating certain structuring and servicing activities. An experienced team provides collateral management and innovative Due Diligence Operational Exits / Governance deal structuring. It also has a dedicated technology group of software or Sourcing Execution Wind-Downs engineers and business analysts that develop and deploy solutions for complex mortgage trading, securitizations, and portfolio management.
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Cerberus has been integrating ESG initiatives into our investment processes for over 13 years. Our ESG Committee oversees a comprehensive ESG policy that we integrate into every stage of our investments in portfolio companies and properties worldwide. ESG within Cerberus ESG within Cerberus
The Evolution of Our ESG Journey Our ESG Program 2018
Added three senior leaders to our ESG committee
Cerberus has focused on components of ESG since our formation and Expanded use of technology to help commencement of investment activities in the early 1990s. Over the past 13 years, 2017 manage our ESG program Cerberus Operations and Advisory Company (COAC) has formalized and structured Added internal ESG resources and our focus on ESG through practice areas dedicated to Environmental, Safety, and Developed a detailed ESG scoring updated ESG reporting and reporting framework Health (EHS), Human Resources, Legal, and Compliance. Added additional ESG resources to support the ESG accounting elements 2016 ESG
Published our first ESG annual report Our Ongoing Commitment 2015
Formal ESG Committee established to provide oversight We continue to focus on ESG because for the Cerberus ESG program we see both commercial and more holistic benefits such as: ESG 2014 » Properly valuing the purchase price of Developed a technology round table an investment by considering remedial to monitor significant developments costs during diligence driving ESG innovations 2013 » Increasing operating efficiencies Environmental Social Governance through environmental and sustainability initiatives Formalized our ESG policy and developed our first ESG due » Increasing the competitiveness of our diligence questionnaire for investors portfolio companies given customers’ and other stakeholders’ demand for Going forward, we seek complete integration of ESG 2010 sustainability metrics programs and best practices in all of our investment and operational workstreams: » Avoiding safety, health, and Expanded from EHS, HR, Legal, labor-related issues and Compliance to more holistic » Anti-Corruption, » Insurance Risk Management Environmental, Social, and » Supporting more attractive exit Anti-Money Laundering, Governance issues » IT / Operations valuations, and minimizing post exit Sanctions 2000 indemnity obligations, with more » Regulatory and Legal » Corporate credibility for all parties » Strategy and Commercial Governance Structure Mid-2000s: COAC employs ESG Due Diligence » Preserving Cerberus’ reputation for » Environmental professionals to focus on due diligence investing with integrity and creating » Supply Chain and portfolio company monitoring, » Financial eliminating third-party silos lasting value through our investment » Tax and operating expertise » Human Resources 1990
1990s - Early 2000s: Focused on due diligence and retained liabilities
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The Cerberus ESG Committee The Cerberus ESG Policy
In 2015, Cerberus established our ESG Committee to formalize the oversight of our Cerberus strives to achieve best practices ESG activities across Cerberus and provide insight into emerging ESG issues and among alternative investment managers, guidance in reporting to our investors. particularly in the areas of governance, Cerberus ESG Policy Outline compliance, investor disclosure, valuation Each ESG Committee member is a statured, senior executive with numerous years procedures, and risk management. Cerberus will pay proper regard to the informational needs of investors of relevant, complementary business experience or subject matter expertise. in its funds and accounts, and when appropriate communicate adequate We have undertaken numerous efforts in information to them, including on Environmental, Social, and Corporate this regard, including becoming a signatory Governance (ESG) risks, in a way that is clear, fair, and not misleading. to the Standards Board for Alternative Cerberus’ investment analyses include, when relevant, a review of ESG The Cerberus ESG Committee Key Responsibilities Investments (formerly known as the Hedge issues. The particular issues considered vary based on the underlying Fund Standards Board). In addition, we operating business and investment involved. Andrew Kandel » Monitoring and Oversight » Quarterly Meetings have developed and implemented policies ESG Committee Chairman and procedures, employee trainings, and Cerberus ESG review includes the following topics where applicable: Global Chief Compliance Officer, Senior » Identifying Industry Trends » Annual Report Legal Counsel, and Senior Managing Director compliance certifications, and reporting, » Tracking New and Pending Legislation » Environmental factors including the impact of actual and potential all of which are designed to ensure a strong environmental costs. Frank Bruno culture of ethical behavior and compliance. Co-Chief Executive Officer and » Social factors including human rights, relations with indigenous people, child Senior Managing Director, Beyond legal and regulatory compliance, labor, worker and consumer health and safety, and bribery and corruption. Cerberus Capital Management, L.P. The Committee continues to drive our ESG program, meeting quarterly we seek to implement and adhere to ESG » Governance issues including but not limited to, director qualifications and to discuss a wide range of topics, and deriving effectiveness from the best practices in our private investments conflicts of interest, board structure, executive and director compensation, Chan W. Galbato following attributes: Chairman and Chief Executive Officer, in companies and properties worldwide. accounting and audit quality, code of ethics and business conduct, and Cerberus Operations and Advisory capital structure. Company, LLC ESG has been a focus for over 13 years through our industry leading operations » Cerberus evaluates ESG issues to determine their potential impact on investment performance. Paul Warmus ESG Committee members serve on other platform. In 2013, Andrew Kandel, our Integrated Cerberus Committees. They also sit on some Senior Operating Executive, Cerberus Global Chief Compliance Officer and Senior » Cerberus considers certain environmental, public health, safety, and social Operations and Advisory Company, LLC of the boards of Cerberus portfolio companies. Legal Counsel, took the lead in highlighting issues associated with target investments when evaluating whether to invest in a particular company or entity, as well as during the period of ownership. Cerberus’ focus on ESG with investors Pieter Korteweg Senior Advisor and Vice Chairman, and formalized our ESG Policy, as well as » Cerberus seeks to use governance structures that provide appropriate levels Cerberus Global Investment Advisors, LLC our first ESG Due Diligence Questionnaire. of oversight in the areas of audit, risk management, and potential conflicts The Committee follows industry trends, of interest and to implement compensation and other policies that align the Our ESG efforts and interactions with our interests of owners and management. Sheila Peluso Expertise reviews surveys and white papers, and portfolio companies and properties will Head of Human Resources participates in ESG conferences. » Cerberus is committed to compliance with applicable national, state, and local and Managing Director, continually be refined to ensure we are Cerberus Capital Management, L.P. labor laws in the countries in which we invest. focused on driving value for our investors. » Cerberus respects the human rights of those affected by its investments. Christopher A. Holt General Counsel and Legal Practice Leader, » Cerberus, when appropriate, provides information to its limited partners on the Cerberus Operations and Advisory Committee members are deeply involved in matters addressed herein, and works to foster transparency about our activities. Company, LLC Embedded portfolio company operations, which offers an important vantage point to closely monitor ESG To the extent possible, Cerberus encourages portfolio companies to Jayne Binzer programs and activities. advance these same principles in a way which is consistent with their Senior Operating Executive, Cerberus fiduciary duties. Operations and Advisory Company, LLC
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Comparison to Other ESG Principles
A Responsible Investor ESG issues can have significant impacts Cerberus monitors the following industry standards and on the financial performance of our www. unglobalcompact.org investments, as well as the communities incorporates key components as pertinent to the performance in which Cerberus and our portfolio of our investments versus a generic "one size fits all" approach. Cerberus’ ESG policy and practices meet all 10 of the UN Global Compact Principles. companies conduct business. Over the years, a variety of ESG codes Human Rights Environment and standards have been put forth by Principle 1 Principle 7 governments and Non-Governmental Businesses should support and respect the protection of internationally Businesses should support a precautionary approach to environmental www.gresb.com proclaimed human rights; and challenges; Organizations (NGOs) to provide a framework for managing ESG concerns. Principle 2 Principle 8 Cerberus’ ESG program meets all seven of the GRESB sustainability aspects. make sure that they are not complicit in human rights abuses. undertake initiatives to promote greater environmental responsibility; and While developing our ESG policy, Labour Principle 9 Cerberus has given consideration to Aspect 1: Management encourage the development and diffusion of environmentally friendly a range of these codes and standards, This aspect focuses on how the organization integrates ESG into its overall business strategy. Principle 3 technologies. including the United Nations Principles Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Anti-Corruption for Responsible Investment and the Aspect 2: Policy and Disclosure Principle 4 United Nations Global Compact. All The purpose of this section is to (1) describe the organization’s ESG policies and (2) Principle 10 the elimination of all forms of forced and compulsory labour; components of our policy are fully understand how the organization communicates its ESG performance. Businesses should work against corruption in all its forms, including extortion and bribery. aligned with each of the underlying Principle 5 the effective abolition of child labour; and principles found in these, and certain Aspect 3: Risks and Opportunities other, codes. This aspect investigates the steps undertaken by organizations to stay abreast of ESG related Principle 6 risks related to bribery and corruption, climate change, environmental legislation, market risks the elimination of discrimination in respect of employment and occupation. and other material ESG risks. Our Investment Principles Aspect 4: Monitoring and EMS In addition to our ESG principles, This aspect describes the processes the entity uses to support ESG implementation and www. unpri.org Cerberus’ investment strategies adhere performance monitoring. to five inter-related principles: Cerberus’ ESG policy and practices meet all six of the Principles for Responsible Investment. The Cerberus focus on ESG issues Aspect 5: Performance Indicators has existed since before the PRI effort began. » Flexibility This aspect collects performance data on energy and water consumption, GHG emissions and waste. » Innovation Principle 1 Principle 4 We will incorporate ESG issues into investment analysis and We will promote acceptance and implementation of the » Risk Management decision-making processes. principles within the investment industry. Aspect 6: Building Certifications » Discipline This aspect focuses on how the organization integrates ESG into its overall business strategy. Principle 2 Principle 5 We will be active owners and incorporate ESG issues into our We will work together to enhance our effectiveness in » Transparency ownership policies and practices. implementing the principles. Aspect 7: Stakeholder Engagement Principle 3 Principle 6 This aspect focuses on how the organization integrates ESG into its overall business strategy. We will seek appropriate disclosure on ESG issues by the entities We will each report on our activities and progress towards Find out more on our website in which we invest. implementing the principles.
cerberus.com
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SGI Investment Philosophy – Prioritize businesses that present – Environmental: Enhance the greatest potential to address environmental protection and SGI maintains a very focused the country’s most acute needs stewardship as a condition of approach to investing in frontier (education, healthcare, food investment. The companies are markets. These include: security, etc.). expected to go beyond compliance. » Maximizing Positive Impact – Prioritize businesses owned and – Social: With the creation of new SGI Through the Choice of Target run by locals rather than foreigners. jobs as a result of the capital Country: SGI has proven that investment, SGI focuses on – Prioritize women-owned businesses, investing in highly promising markets enhancing worker benefits such which are often the best managed in that are generally overlooked by the as healthcare and workplace safety. Acquisition the market. international investment community will promote local economic – Governance: An enhancement – Prioritize investments structure development and a multitude of of accountability and governance The “Frontier Plus” Investment so that SGI is a partner to the corresponding benefits. is always required. These include: entrepreneur – rather than taking financial management systems; » over the business. In November 2018, Cerberus acquired SGI Frontier Capital, a leading Deal Selection: Within most human resource management sectors, certain types of deals or private equity firm focused on frontier markets in Asia and Africa. » Proactive Implementation of practices; board operation and deal structures can be prioritized ESG Improvements to Create oversight; internal and external Headquartered in Singapore with over 20 professionals across six in order to maximize potential Maximum Benefits. The general audit practices; and tax reporting locations, SGI has an extensive track record of direct investment in financial and non-financial benefits. considerations post-investment are: and payment. dynamic frontier markets, including Ethiopia, Georgia, and Mongolia. SGI will generally: Since its founding over 10 years ago, SGI has completed more than 30 transactions and currently manages a diversified portfolio of investments in a variety of key sectors, including consumer goods, The Intersection of Two ESG Programs clean energy, real estate, healthcare, and building materials. Combined firms have: » Well-established ESG programs within their respective marketplaces. » An ESG focus of “beyond compliance” that yields commercial value. » Tools and frameworks that identify potential risks, operational improvements, and opportunities to enhance commercial value. » Insight into business and technical issues while staying abreast of emerging trends - with the ability to implement across multiple asset classes. » In-house investment professionals who understand the benefits of ESG.
Cerberus SGI follows these follows these standards and goals: standards and goals:
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SA-MED SGI Frontier utilizes the following SGI invested in a medical equipment company that standards and goals SGI Frontier manufactures locally in Ethiopia % Case Studies 52 The first IV bag manufacturing Number of employees increased company in East Africa by 52% between 2014 and 2017 ifc.org Impact in Action SGI Frontier’s ESG program meets all eight of the IFC Performance Standards.
State of the art facility Strengthening the National Cement Production and assembly takes supply chain place under aseptic conditions for hospitals and clinics country-wide SGI invested in a leading Ethiopian cement company sustainabledevelopment.un.org
SGI Frontier’s ESG program measures progress against Caucasus Clean Energy Fund addressable UN Sustainable Development Goals. Community Initiatives $2,654 1,446 Street lights, school fences, A dedicated fund backed by the development banks of Average wage Employees clean drinking water, and Austria and the Netherlands, as well as GEEREF, a clean 5x the national average wage Up from 360 at time of investment educational materials for more than 250 children energy fund of funds.
» The fund backs clean energy projects that will cumulatively generate up to 1 TWh per annum
» The fund will aim to offset 400,000 tons of CO2 emissions per annum » The fund will aim to supply an average of 150,000 households per annum sasb.org with clean power » Hundreds of jobs created during the construction process SGI Frontier’s ESG program Tree-planting Initiative Active health and » Impact on the development of the local rural communities in utilizes the SASB sector ISO 14001 environmental certification; safety Initiatives terms of improving their livelihoods and socio-economic needs accounting principles to alternative energy sources to replace Resulting in reduction of » Developments of infrastructure (roads, bridges) in the remote identify material aspects. coal as power source serious incidents mountainous areas provide improved access for agriculture and farming
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Cerberus employs a rigorous and analytical approach to monitoring and managing ESG issues throughout the lifecycle of our investments in portfolio companies and properties. ESG inin the the Cerberus Cerberus Portfolio Portfolio ESG in the Cerberus Portfolio
The Cerberus ESG Formula
After more than 13 years of engaging Consistency Collaboration with our portfolio companies and properties on ESG issues, Cerberus has developed a We have developed an ESG evaluation and Even though all portfolio companies have simple and effective approach, which we scoring process to systematically evaluate ESG access to the same tools, processes, and call the "Three C's formula: Consistency + performance on a consistent basis. This set of knowledge, we understand that each investment best practices and technological tools is a resource is different and requires bespoke treatment Collaboration = Commercial Value." available to all our portfolio companies across and customized solutions. We partner with industries and geographies and allows for a our portfolio companies and allow each to set We believe that the key to unlocking commercial value consistent approach to monitoring ESG issues. its own course, while being able to lean on us The analysis of the standardized data sets across as a partner. through an ESG program is to provide a consistent our investments over time also allows cross- framework and tools, while at the same time collaborating pollination of ideas and benchmarking. with management teams as a true partner. We have adopted a collaborative and consultative approach with our portfolio companies and properties, helping them to achieve their ESG goals and commercial success according to their varying needs.
Commercial Value
We believe that when ESG is done consistently and collaboratively, it can unlock significant commercial value. ESG topics are becoming increasingly relevant in today’s world and companies who are best able to leverage ESG principles to expand their businesses through new product lines and improved brand equity – for example – can enjoy increased commercial success.
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Consistency Consistency The Cerberus ESG Process ESG Integration Throughout
We deploy a consistent process to evaluate ESG performance across all of our the Investment Lifecycle portfolio companies and properties globally. Our consistent application of best Cerberus, with input from our proprietary platforms, has developed rigorous ESG practices and technological tools ensures consistency of data from deal to deal processes and frameworks for each industry and scope area. As part of the way we and from year to year, allowing us to accurately benchmark progress. It also allows do business, we evaluate ESG risks and seek opportunities for value creation. Years us to work with our partners more effectively to create bespoke action plans. of experience have been distilled into best practices that are employed throughout the lifecycle of a Cerberus investment.
Subsequent to due diligence, our ESG process starts by collecting data that we The Investment Lifecycle Phases and Activities analyze with management in order to develop and implement impactful programs. We track and monitor progress over time and continuously Due Diligence Portfolio Management Exit refine programs to drive results. » Analyze Phase I reports and » Conduct ESG evaluation in » Prepare for Sale process IPO property condition assessments collaboration with management team ESG disclosures, as applicable 1 » Characterize risks and opportunities » Implement ESG programs and track » Respond to investor inquiries
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Consistency Consistency Technology Resources The Cerberus ESG Evaluation Tool Deployed in the ESG Program Quantitative and Qualitative Scoring of ESG Performance We have developed a detailed ESG evaluation and scoring process that collects Our ESG process utilizes best-in-class technological tools information critical to monitoring ESG performance across our investments. to provide consistent execution of programs that help our The data we analyze helps us prioritize actions to address and identify where partners achieve their goals. best practices can drive impact. Our evaluation tool allows for a collaborative approach with our portfolio companies / investments to discuss techniques that will reduce risk and operational expense and provide continuous improvement. In addition, we also challenge our portfolio companies / investments to consider ESG components in marketing to potentially impact revenue, such as gaining market share with a sustainable product or driving safety as a key metric for winning projects. Our evaluation is driven by a series of qualitative questions and quantitative Power BI metrics that are industry-specific within each of the ESG categories. The results are captured in a dashboard for each investment, which enables our ESG professionals This cloud-based business intelligence to quickly identify priority action items and to track the performance over time on platform has enabled us to be consistent a portfolio-level basis. in the collation and storage of mass data in the collection process, and generate Cerberus ESG Evaluation Tool in-depth interactive dashboard visuals The evaluation tool focuses on both operational improvements along with revenue impact. The following are a few examples of the to enable sophisticated data analysis focus of our evaluation tool: and interpretation. This affords us global reach and access to procured data across Drone Technology Operational improvements and risk / expense reduction portfolios and territories. It also ensures consistency in the metrics measured and Drone technology has provided a new set » Supply-side and demand-side of eyes that add significant value to the energy management data collected. » Waste management and recycling execution of our ESG program. We have » Water management Commercial deployed this technology at both the due- Environmental » Responsible sourcing Value Creation diligence and post-acquisition phases of » GHG emissions deals and have been able to leverage it for ongoing data collection. The environmental » Health and safety management applications of drone technology helps » Employee diversity monitor pollution, emissions, natural » Human rights and fair labor practices Social » Corporate Social Responsibility (CSR) » Sustainable products disasters, and the maintenance of and services buildings at a fraction of the cost. » Customer satisfaction » Employee code of conduct and ethics » Enterprise risk management » Anti-bribery and corruption (e.g., FCPA) Governance » Political contributions
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Collaboration Collaboration Collaboration Throughout Spectrum of Collaboration the Investment Lifecycle
While our ESG process and tools are consistent, the action plans we develop In executing ESG action plans, we offer several modes of engagement that are are bespoke to each company or property and the outcomes for each investment tailored to the specific resources and requirements of each portfolio company are unique. or property. This is achieved through collaborative engagement with our management teams In situations where there are meaningful internal resources focused on ESG through a two-way dialogue. We do not dictate how it needs to be done, but instead initiatives, Cerberus can engage as a business advisor providing high-level guidance are a consultative partner who can be utilized to achieve success. and support. In other instances where the internal resources may be limited, we take a more active role to lead the planning and execution of ESG activities in partnership Our engagement throughout the lifecyle of an investment provides many interactions with a company’s management team. to partner with our portfolios companies and properties to provide bespoke input and assistance.
ESG Action Plan: Levels of Engagement
Due Diligence / Relationship-building and collaboration starts right Acquisition at the acquisition stage. Independent Hybrid Outsourced High level of autonomy; A blend of Cerberus No internal resources; Cerberus acts as a and internal resources Cerberus handling all consultant and advisor functions Ongoing Support Portfolio companies and partners can deploy the many resources within Cerberus to execute their own ESG / in Execution of an CSR programs. Keeping lines of communication open ESG Action Plan with partners and providing whatever they require.
Provide resources Supplement our portfolio Cerberus takes a Working with partners to distribute ESG questionnaires Data Collection / and help them co-ordinate their data collection. Cerberus and guidance companies to fill gap in leadership role resources Data Analysis leverages its in-house operational expertise to identify Example: Renovalia Energy Example: Isola areas for development. Renovalia Energy specializes in Example: ABC Technologies Isola is a leading global material the production of renewable energy. ABC Technologies is a global sciences company. The company The company was in the process Tier 1 supplier of automotive parts. was evaluating how to best expand of formalizing its ESG program The Cerberus ESG team assisted its safety culture and improve Adopting a non-prescriptive, partnership approach and requested assistance from the the company with the development performance. Cerberus led the effort Debrief: Co-Define enables us to position ourselves as a trusted business Cerberus ESG team. We provided of their 2018 Carbon Disclosure to conduct a detailed process safety ESG Action Plan advisor and invites a two-way dialogue. This promotes the company with guidance and Program (CDP) response. The results review, which resulted in developing buy-in from our partners and increases the chances of materials to develop a strategy, of this questionnaire are scored by a strategic work plan to improve successful execution of agreed action plan. conduct a materiality assessment, and CDP and publicly released, which performance. build a corporate responsibility report. are reviewed by a variety of ABC Technologies’ stakeholders.
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Collaboration Collaboration in Action: Cerberus General Counsel Summit 2018
Cerberus has always had a strong focus on a myriad of governance issues as part of General Counsel Summit Another element of our governance initiative is our Board Governance Working our ESG initiatives. Like other ESG considerations, identification, implementation, Attendees: Portfolio Group (BGWG). Comprised of representatives from the Firm’s Legal and Compliance monitoring, and improvement of governance-related matters plays an important role Companies Represented Departments as well as COAC personnel, the group was formed in 2007 and meets in the entire lifecycle of an investment. regularly. Among other things, the BGWG addresses changes in board structure and composition (including making recommendations for new or replacement directors), In continuation of our robust governance oversight, in 2018, Cerberus convened a committee formation and charters, and the development and implementation of General Counsel Summit. The purpose of the summit was to bring together the top governance best practices. Topics planned for 2019 include a systemic approach to legal officers of our portfolio companies and relevant investments with our in-house board education across the portfolio and a review of board effectiveness. legal experts in order to discuss best practices involving corporate governance and other practice areas. In all, 17 portfolio company general counsels and 22 members Like other elements of an ESG program, addressing governance issues can prevent of the Cerberus Legal Department attended the summit. problems from arising, mitigate any ramifications if a problem does occur, and can directly add to the value of an investment. One main focus of the summit was to emphasize our belief that excellence in corporate governance must be a cornerstone in each and every investment. We expect our portfolio companies to develop policies, procedures and tools to achieve this excellence. The Cerberus Legal and Compliance Departments regularly assist in these efforts. We are also constantly evaluating our approach and looking for opportunities to improve. While there is no “one size fits all” approach, there are common principles and Board Governance Working Group: Board Mix / Composition practices that help ensure proper governance. For example, our focus on having a well-designed organizational structure with clearly delineated roles and responsibilities is a first step. At the summit, we discussed additional high-level general principles, including charter documents that establish the culture and tone at the top; Representational Factors Skill Sets Individual Attributes procedures for Board orientation and continuing education; strong oversight and risk management; strategic plan review; and assessment of accountability. » Investment Professional » Industry Knowledge » Financial Acumen We also discussed specific governance considerations, such as separating the offices » Co-Investors » SOX Financial Expert » Ability to Make Independent of the Chairman and Chief Executive Officer where appropriate; the optimal size Analytical Inquiries » Operations Team » Public Company Experience of a Board; the role of an Audit Committee; internal resources; and delegations of » Willingness / Ability to Devote » Diversity Substantive Expertise authority. Each company board is expected to have the proper composition and » Adequate Time and Effort (Marketing / Sales, representation, as well as the appropriate skill sets and individual attributes for the » International Manufacturing, Turn Around » Integrity needs of each company. Expert, Regulatory / Compliance) » Team Player Additional topics discussed at the summit, and focused on throughout the year, include anti-corruption (e.g., the Foreign Corrupt Practices Act, UK Bribery Act, and local anti-corruption laws); anti-money laundering, sanctions, privacy, and data protection (including the EU General Data Protection Regulation (GDPR); litigation management; e-billing and law firm management; and attorney-client privilege.
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Commercial Value Commercial Value Generated Through Consistency and Collaboration
Valuable insights are derived by executing our ESG process year upon year. When coupled with our collaborative and interactive approach ESG Growth Levers Detail Commercial Value Created with our partners, this often leads to identification of several ESG-related The Cerberus ESG team worked with CTA Acoustics, a The development of a CSR report can help growth levers. These levers can help manufacturer of acoustical and thermal fiberglass insulated cultivate a company’s relationship with their unlock significant commercial value Increased Transparency products, to assemble its first CSR report and proactively customers, build trust in the marketplace, and contribute to a positive impact communicate its progress on key sustainability topics. and increase brand equity. on the bottom line. and Accountability Here are some examples of how commercial value is created through this process. As one of the largest food and drug retailers in the United States, Sales of Albertson’s O Organics line grew by 15% Albertsons Companies carries over 2,000 SKUs of sustainability in 2017 with total revenue surpassing $1 billion Development of Sustainable themed products to capture consumer trends and stakeholder for the first time. The Company added 200 new interest. This includes its private label product line, O Organics, products in 2017 and announced plans to introduce Products and Services which consists of USDA certified organic, non-GMO products. 500 or more new items, as organic foods continue O Organics was launched with a mission to make a wide variety of to be a significant contributor to revenue growth. certified organic products available to more people at a great value.
Automotive manufacturers are increasingly focused on ESG Meeting and exceeding customer ESG performance as part of supplier selection. Some manufacturers expectations can help ABC Technologies Meeting Customer’s now require suppliers to achieve minimum performance levels on stay competitive against peers, protect their ESG scorecard in order to be eligible to compete for contracts. current market share, and drive increased sales. ESG Expectations We have worked with ABC Technologies, a global Tier 1 supplier of automotive parts, to formalize its CSR program, thereby improving its score on supplier scorecards.
1000 Wilshire Blvd. is a 476,000 sq. ft. office building located LEED and Energy Star certified buildings tend in Los Angeles, CA. The building is LEED Gold certified and has to have higher occupancy rates, larger rental High Performance an Energy Star rating of 91 out of 100. Significant sustainable premiums, lower building maintenance costs, Building Certifications attributes include LED lighting in common areas and parking and higher sales prices per square foot – all of areas, water efficient landscaping, and recycling programs. which contribute to increased bottom line results.
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Overview of Cerberus’ ESG Activities The ESG Dashboard (Continued) A robust program that is systematically integrated throughout the investment’s strategy and operations with targeted opportunities for improvement Implemented several programs and / or initiatives with broad opportunities to increase scale and depth Cerberus’ 2018 ESG Dashboard provides a sample of results from our ongoing ESG Substantial opportunities to expand program evaluations. Overall, the performance of our investments are increasing across all four categories, which indicates the success of our collaborative engagements. Company Environmental Social Governance Commercial Value Creation CSR Report 2018 YoY Change 2018 YoY Change 2018 YoY Change 2018 YoY Change Following the ESG Dashboard are a set of case studies that provide an in-depth look Real Estate at some of our collaborations with selected investments. Company 1 • • • • In progress Company 2 • • • • In progress Company 3 • • • • In progress The ESG Dashboard Real Estate Portfolio Portfolio 1 • • • • Published A robust program that is systematically integrated throughout the investment’s strategy and operations with targeted opportunities for improvement Portfolio 2 • • • • - Implemented several programs and / or initiatives with broad opportunities to increase scale and depth Portfolio 3 - Substantial opportunities to expand program • • • • Portfolio 4 • • • • Published Portfolio 5 - Company Environmental Social Governance Commercial Value Creation CSR Report • • • • Portfolio 6 • • • • - 2018 YoY Change 2018 YoY Change 2018 YoY Change 2018 YoY Change Portfolio 7 • • • • - Manufacturing, Industrial, Automotive Portfolio 8 • • • • - Company 1 In progress • • • • Portfolio 9 • • • • - Company 2 In progress • • • • Portfolio 10 • • • • Published Company 3 In progress • • • • Portfolio 11 • • • • Published Company 4 In progress • • • • Portfolio 12 • • • • Published Company 5 In progress • • • • Portfolio 13 • • • • Published Travel and Leisure Portfolio 14 • • • • - Company 1 • • • • In progress Portfolio 15 • • • • Published Consumer and Retail Portfolio 16 • • • • - Company 1 • • • • Published Portfolio 17 • • • • - Company 2 • • • • In progress Company 3 • • • • In progress Company 4 • • • • Published Financial Services Company 1 • • • • In progress Company 2 • • • • In progress Company 3 • • • • In progress Company 4 • • • • In progress Continuous monitoring coupled Company 5 • • • • Published Healthcare with collaboration yields continuous Company 1 • • • • In progress improvements and commercial value. Government Services Company 1 • • • • In progress Paul Warmus, Senior Operating Executive, Cerberus Operations and Advisory Company, LLC Energy and Natural Resources Company 1 • • • • In progress Company 2 • • • • In progress Company 3 In progress • • • • The following pages provides case studies that highlight examples of noteworthy ESG accomplishments in our portfolio during 2018.
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Project Rubicon ESG Issues Identified reserve estimation process. In several instances, the process revealed the remedial In 2018, Cerberus completed pre-acquisition project life was underestimated, resulting in Investment Phase due diligence of an alternative energy an increase to the reserve by a factor of two. company with a successful 100+ year Diligence Ownership Exit During the site visits, the health and safety history. The company reported legacy program was also characterized and found to environmental issues that required remedial be above industry standards in most cases. activities. These legacy issues required a detailed analysis of decommissioning, demolition, environmental remediation, Value Added Project and waste management. Additional ESG The detailed diligence of the environmental areas of focus included health and safety, reserves was appropriately factored into the supply chain, human resources, governance, deal considerations. Although the Cerberus and procurement. bid was ultimately not selected, the accurate Rubicon assessment of the environmental liability Actions Taken was vital to appropriately evaluating the viability of the deal and ensuring the future Due diligence To diligence the environmental reserves, success of the investment had the outcome Cerberus performed site visits across the been different. Rubicon portfolio to characterize the
The diligence assessment evaluated environmental performance at each step in the operational lifecycle
Manufacturing Decommissioning / Demolition Remediation Waste Management
» Health and safety » Financial assurance » Project life » Risk-based End-of-Life » Compliance » Health and safety » Financial assurance assessment » Reserves » Health and safety » Financial assurance » Remedial technologies
In 2018, Cerberus conducted a Numerous site visits performed across operational footprint comprehensive due diligence of a multi-national alternative energy company. A major focus was on the potential liabilities associated with current and historical environmental issues.
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Canyon
Investment Phase Canyon Diligence Ownership Exit
Diligence ESG Issues Identified
As part of the technical due diligence, a Property Condition Assessment (PCA) was completed. The PCA focused on all building components condition and remaining useful life. The mechanical systems on all buildings were the original equipment dating back to the late 1980’s. Most other building components were recently refurbished with a more energy efficient replacement.
Actions Taken
In addition to an $8 million cosmetic upgrade of the facility, new mechanical systems for each building are scheduled for replacement over the investment period (approximately a $4 million investment). Energy costs will be monitored on a regular basis to characterize the impacts of the upgrade. As part of the regular utility review, Cerberus ESG team may also recommend additional actions to aid in the eco-efficiency In mid 2018, Cerberus acquired of the property.
a 14-building, 874,000 sq. ft. Value Added
office campus in Orem, UT. Along with the cosmetic upgrades, the change in mechanical systems are anticipated to increase Prior to the acquisition, both property value by reducing energy costs for all environmental and technical tenants and attracting tenants that desire more eco-efficiency buildings. due diligence were performed.
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CTA Acoustics Number of Recordable Incidents (2015-2016)
Investment Phase 2015 2016 2017 Diligence Ownership Exit % ESG Issues Identified 69 reduction CTA Acoustics has been a manufacturer of over 3 years high-quality acoustical and thermal fiberglass CTA 29 insulated products since 1972. Recently, the company recognized the increasing importance 25 of systematically addressing a wide range of Acoustics topics that fall under the ESG umbrella, such as product sustainability features, employee 2 % engagement, and strong management oversight. 79 Building commercial value through This is in part due to many of the company’s reduction customers adjudicating it’s ESG performance via 10 over 3 years 9 balanced ESG performance an annual supplier scorecard, which factors into 6 the broader relationship and can influence terms 4.77 4 3.21 and commitments. 3.12 2.57 1.01 0.67 Actions Taken e r b e st i e n i ents n i ents CTA Acoustics identified key portions of its operations that fall under ESG and implemented initiatives to improve performance, such as:
» Environmental compliance and continuous improvement: Recertified September 2016 to the ISO 140001:2015
» Environmental footprint reduction: Installed a water recirculation project which has reduced annual consumption by 70%
» Sustainable products: Purchases Since 2001, CTA Acoustics recycled glass and recycled polyester as inputs for production
has made substantial strides » Supplier sustainability performance: across its operations to improve Developed a supplier handbook that GM 2017 outlines required policies and performance % SUPPLIER its ESG performance. expectations 70 Annual reduction in OF THE Value Added water consumption from a recirculation project The company’s balanced commitment to YEAR ESG has yielded a variety of benefits, including recognition from one of its top customers, General Motors, which awarded the company with its supplier of the year award in 2017.
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Renovalia Energy ESG Issues Identified shareholders. The three main pillars of the program are environment (commitment to Renovalia Energy specializes in the environment respect), social (investing in Investment Phase production of renewable energy. Its the community), and people (development of customers have been increasingly Diligence Ownership Exit people and social integration). Several tools, assessing its internal ESG performance including a materiality assessment, impact on topics like community engagement and Renovalia matrix, and stakeholder mapping, have been employee relations. A structured and well utilized to help develop the program and communicated ESG program can become achieve maximum impact potential. Formalizing a CSR Program a catalyst for value creation by facilitating strategic growth and strengthening brand image. Although the company had a variety Value Added of ESG related policies and actions in place, Developing a structured CSR program it lacked a defined CSR program to enable has enabled Renovalia to pursue and central alignment and strategic focus. communicate activities that support its broader organizational strategy. Actions Taken Additionally, the program has enhanced the company’s brand image and reputation The company, with help from Cerberus, in the marketplace and enabled market is in the process of developing a CSR share growth by better aligning with program that is integrated into the general customer expectations. strategy of the company and aligned with
Key Highlights
CO2 By building out and formalizing its ESG program, Renovalia will use ESG to improve financial 1,113,295 805 17 performance. Tons of CO2 avoided each year as MW in operation and Number of water wells a result of Renovalia projects under construction constructed for regional between 17 wind farmers as part of a farms and 11 solar community engagement photovoltaic plants program with the Union Hidalgo community
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Steward Health Care
Investment Phase Key Highlights
Diligence Ownership Exit
ESG Issues Identified The program has generated Steward Health Care is the largest physician-led, $6.7m cumulative savings-to-date private health care network in the United States Steward — annually caring for 2.2 million people during more than 12 million physician and hospital os it l visits. It has a significant operational footprint with 18 hospitals that occupy millions of square Carney Health Care feet. Hospitals are typically large consumers of Good Samaritan Cu ul ti e S in s energy because of how they are run (open 24 Holy Family hours a day, 7 days a week) and the large number Morton Implementing a Strategic of people they serve. Steward recognized there Norwood Energy Management Program were significant potential annual savings that St Annes could be unlocked through implementing a St Elizabeth’s systematic and comprehensive approach to energy management. Actions Taken
The company has implemented a multi-faceted 2 energy optimization program that consists of a supply-side procurement plan, an energy efficiency strategy, and a deferred capital replacement strategy. Key initiatives included: » Implementing a strategic energy program 2 2 2 2 2 2 2 » Identifying improvements to limit and reduce energy utilization
» Developing a system-wide approach for With operations spanning nine campus energy management » Reducing and stabilizing supply-side energy states, Steward Health Care costs by decreasing utilization and locking- developed a best-in-class in lowest possible rates energy management program » Identifying utility rebates and tax incentives to increase speed to payback 322.1 17% that significantly reduced Value Added Total Annual Energy Total Annual Saved (kBtu / ft2) Energy Savings annual energy costs. The company achieved significant benefits as a result of the energy optimization program, including annual savings of $1.9 million,
avoiding 37,545 tons of CO2 emissions, and reaching an energy intensity performance that is better than 65% of all U.S. hospitals.
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Max Maxim
Investment Phase Key Highlights
Diligence Ownership Exit
Max ESG Issues Identified “B” EPC Rating Real estate investments have increasingly been scrutinized on their ESG performance, which has been brought on by a wide range of factors A B C D E F G Maxim including new regulations and stakeholder interest. Environmental issues are frequently Selecting partners with most emphasized because buildings account for more than one third of global greenhouse shared ESG objectives gas emissions and energy consumption.
Actions Taken
When selecting a partner, Cerberus looks for a company that can provide a suite of value-added ISO 14001 services, including ESG-related programs which Certification are aligned with our own interests and mutually beneficial. Broadoak Asset Management helps oversee a comprehensive sustainability strategy at this investment, which includes a set of operating principles along with a detailed action BREEAM plan. The company works with the property Excellent manager to engage the tenants on key issues through a range of methods including a monthly Rating sustainability dashboard that describes key performance metrics. The Max Maxim investment Value Added
began as an NPL, but was later Broadoak's sustainability strategy and converted to an REO. While the subsequent initiatives have yielded a long list of achievements including BREEAM excellent initial portfolio consisted of rating, “B” EPC rating, system wide upgrade to LED lighting, ISO 140001 certification, and zero 11 commercial properties in a waste to landfill. These accomplishments have Zero Waste helped to optimize building performance, attract to Landfill business park, nine have been and retain top-tenants, and increase overall sold and only two remain. market value.
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Cerberus ESG Incident Reporting Process
Our monitoring approach uses formal and informal methods to keep track of ESG events across the portfolio. ESG events have the potential to materially impact a company’s financial performance and / or reputation in the marketplace. The formal method consists of our ESG evaluation, which enables us to collect and track relevant ESG data for each investment. The informal method requires the ESG point of contact at each investment to immediately notify members of the Committee in the event of a significant ESG-related incident. In the event of an incident, the information is immediately discussed with the Committee Chairman and, if necessary, a Committee meeting is scheduled. Notifications to appropriate stakeholders are then performed along with any corrective actions.
Incident Reporting Process
Report Action Notify
Formal Stakeholder reporting ESG Committee process ESG evaluation Chairman notified 0 Stakeholder Incidents reported Notification Negative to ESG Chairman of stakeholders ESG incidents Informal ESG Committee reported in 2018 reporting meeting scheduled process ESG contact Stakeholder notifies committee
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We will continue to work with our portfolio companies and properties, as well as our executive leadership team, to broaden and deepen our ESG programs at Cerberus. Conclusion Conclusion
Looking Forward
An Ongoing Commitment to our Portfolio Companies, Properties, and Investors Issues that fall underneath the ESG umbrella continue to be omnipresent in today’s business landscape. History has continued to demonstrate that investment managers who proactively identify and manage these issues are best positioned to deliver strong risk-adjusted returns. As such, the Cerberus ESG program will continue to move the needle on ESG performance in our portfolio by using our consistent processes coupled with our collaborative approach. We will continue to be a trusted partner for our investments through targeted involvement that includes the use of our tools, resources, and expertise. We recognize that the ESG landscape is evolving quickly and we will continue to monitor industry developments and integrate what we think is best suited for supporting an investment thesis and driving results. This includes keeping abreast of ESG related groups and frameworks, such as GRESB, GRI, PRI, SASB, and the United Nation’s SDGs, and being cognizant of current and proposed ESG related rules and regulations around the world. Additionally, we will continue building out our capabilities to improve the efficiency and effectiveness of our program, such as deployment of technology applications to improve data gathering and reporting. Our commitment to excellence is unwavering and we believe our ESG program is a key instrument to provide that result now and into the future.
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Glossary Biographies of ESG Committee Members
BREEAM Building Research Establishment Environmental Assessment Method CES Cerberus European Servicing
CO2 Carbon Dioxide Emissions Andrew I. Kandel CDP Carbon Disclosure Project Global Chief Compliance Officer, Senior Legal Counsel, and Senior Managing Director, Cerberus Capital Management, L.P. CSR Corporate Social Responsibility Mr. Kandel joined Cerberus in 2007 and oversees compliance for Cerberus and its global operations. Mr. Kandel is a member of CTS Cerberus Technology Solutions the Compliance and Risk Management, Allocation, Brokerage Selection, and Financial Risk Management Committees. He is also COAC Cerberus Operations and Advisory Company the Chairman of the firm’s Environmental, Social, and Governance (ESG) Committee. As Chief Compliance Officer, Mr. Kandel works with the firm’s business units and its professionals worldwide to ensure Cerberus is maintaining the highest standard of DART Days Away, Restrictions, and Transfers compliance and ethical behavior. He has been instrumental in integrating best practices into the firm’s day-to-day operations, EH&S Environmental, Health, & Safety including through the development of a robust compliance program that, among other things, regularly monitors activities and EPC Energy Performance Certificate conducts trainings to ensure the safeguarding of the firm’s integrity and reputation. In addition, Mr. Kandel leads Cerberus’ ESG ESG Environmental, Social, Governance efforts and is a key driver in incorporating ESG into the activities of the firm, its portfolio companies, and investments. Prior to joining Cerberus, Mr. Kandel was First Vice President and Assistant General Counsel at Merrill Lynch, where he was in charge F100 First 100 days of transition of state regulation, legislation and government relations and also handled various SEC, NYSE, NASD, and compliance-related FCPA Foreign Corrupt Practices Act matters. From 1995 to 1998, Mr. Kandel was the Chief of the Investor Protection & Securities Bureau at the New York State Attorney FSC Forest Stewardship Council General’s Office, where he also served as Assistant Deputy Attorney General, assisting in oversight of the Antitrust, Charities, GEEREF Global Energy Efficiency and Renewable Energy Fund Consumer Fraud, Civil Rights, Environmental, and Real Estate Finance Bureaus. From 1993 to 1995, he was Senior Special Counsel, then Trial Counsel, at the Enforcement Division of the New York Stock Exchange. He was also an Assistant District Attorney in GHG Greenhouse Gas Manhattan for seven years. Mr. Kandel is a graduate of the University of Pennsylvania and received his J.D. from the University of GRESB Global Real Estate Sustainability Benchmark Pennsylvania Law School. He is a Lecturer and Adjunct Professor at the University of Pennsylvania Law School. GRI Global Reporting Initiative HR Human Resources IFC International Finance Corporation ISO International Organization for Standardization IPO Initial Public Offering Frank Bruno KPI Key Performance Indicator Co-Chief Executive Officer and Senior Managing Director, Cerberus Capital Management, L.P. LED Light Emitting Diode As Co-Chief Executive Officer of Cerberus Capital Management, Mr. Bruno is responsible for leading the firm’s global LEED Leadership in Energy and Environmental Design investment activities across credit, private equity, and real estate strategies, working closely with Co-CEO and CIO Steve Feinberg and the rest of the firm’s long-tenured leadership team. Prior to this role, Mr. Bruno was President of Cerberus Global NASD National Association of Securities Dealers Investments, where he was responsible for leading the firm’s European, Asia, and Latin American businesses. Since joining NGOs Non-governmental Organizations Cerberus in 1998, Mr. Bruno has overseen the investment of more than US$32 billion in equity capital in Asia and Europe, alone. NYSE New York Stock Exchange Under his leadership, Cerberus expanded its international presence significantly, opening global advisory offices across Asia, OIG Operating Initiatives Group including Beijing, Hong Kong, and Tokyo; and across Europe, including Baarn, Belfast, Dublin, Frankfurt, London, and Madrid. Mr. Bruno is a graduate of Cornell University and received an M.B.A. from the Wharton School at the University of Pennsylvania. PRI Principles for Responsible Investment He currently serves on the Wharton School’s Graduate Advisory Board and the Cornell University ILR School Advisory Board. SASB Sustainability Accounting Standards Board He is an active supporter of Hire Heroes, a U.S. military veteran transition resources organization and Save the Children. Mr. SEC Securities and Exchange Commission Bruno is a member of numerous Cerberus committees, including the Cerberus Capital Management Operating / Management SDGs Sustainable Development Goals Advisory Committee, Private Equity Investment Committee, Real Estate Committee, Valuation Committee, and NPL Committee. SKU Stock Keeping Unit TRIR Total Recordable Injury Rate USDA United States Department of Agriculture YoY Year Over Year
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Biographies of ESG Committee Members (continued) Biographies of ESG Committee Members (continued)
Chan W. Galbato Paul J. Warmus P.G Chief Executive Officer, Cerberus Operations and Advisory Company, LLC Senior Operating Executive, Cerberus Operations and Advisory Company, LLC Mr. Galbato joined Cerberus in 2009. He serves as Chairman of Avon Products, Inc., Chairman of YP Holdings, LLC, Director Mr. Warmus joined Cerberus in 2007 and is the COAC Environmental, Health, and Safety (EH&S) Practice leader. In of New Avon, Director of Blue Bird Corporation and Director of DynCorp International, and as a director on the Executive the 22 years prior to joining Cerberus, Mr. Warmus worked in the environmental and engineering consulting industry Committee of Steward Health Care, LLC. Previously, Mr. Galbato served as a director of the publicly-traded Brady Corporation working for international consulting firms. In his last position, Mr. Warmus was a Principle and Senior Vice President at ATC for seven years, including as Lead Director. He also served as Chairman to North American Bus Industries, Inc. and Guilford Associates where he was responsible for environmental remedial programs. Mr. Warmus has worked with various industries Mills until their sales in 2013 and 2012 respectively, and as director of Tower International, Inc. until Cerberus’ exit in 2014. and governmental agencies developing EH&S management / compliance programs, assessing / remediation soil and groundwater, Prior to joining Cerberus, Galbato was President and CEO of the Controls Group of businesses for Invensys PLC and President and providing consulting services with respect to water resources. His clients include companies in the oil, automotive, of Services and of the commercial distribution arm of companies for The Home Depot. Mr. Galbato also served previously as pharmaceutical, transportation, manufacturing, paper, retail, industries as well as the Department of Defense and Department President and Chief Executive Officer of Armstrong Floor products and Chief Executive Officer of Choice Parts, a joint-venture of Energy. Mr. Warmus is a graduate of the University of Wisconsin Oshkosh and is a registered professional geologist in start-up. He spent 14 years with General Electric Company, holding several operating and GE Finance leadership positions multiple states. Mr. Warmus is a member of the Cerberus Capital Management Environmental, Social, and Governance within their various industrial divisions (including Transportation (Locomotive) Systems, Aircraft Engines, Medical Systems and Committee and a board member of FirstKey Homes. Appliances), as well as holding the role of President and CEO, Coregis, a G.E. Capital company. Before beginning his business career he played professional baseball with the Montreal Expos in their minor league system. Mr. Galbato holds a Master degree in Business Administration from the University of Chicago and a Bachelor of Arts in Economics from the State University of New York. Mr. Galbato is a member of the Cerberus Capital Management Operating / Management Advisory Committee, Private Sheila Peluso Equity Investment Committee, and Environmental, Social and Governance Committee. Head of Human Resources, Senior Legal Officer, and Managing Director, Cerberus Capital Management, L.P. Ms. Peluso joined Cerberus in 2005. From 2001 to 2005, Ms. Peluso was an Associate with Chadbourne & Parke LLP in New York where her practice focused on representing private equity clients in M&A and securities and general corporate matters. Ms. Peluso is a graduate of Binghamton University and Cornell Law School. Ms. Peluso is a member of the Cerberus Pieter Korteweg Capital Management Securities Compliance Committee. Vice Chairman and Senior Advisor, Cerberus Global Investment Advisors, LLC Dr. Korteweg joined Cerberus in 2002. Prior to joining Cerberus, Dr. Korteweg was Chairman and CEO of Robeco Group from 1986 to 2001. From 1981 to 1986 he served as Treasurer General for the Dutch Treasury, and from 1971 to 1981 as Professor Christopher A. Holt of Economics at Erasmus University in Rotterdam and Carnegie-Mellon University from 1973 to 1974. He currently serves as Chairman of the Board of Directors of AerCap Holdings NV (Amsterdam), as Member of the Board of Showa Jisho Co. Ltd. General Counsel and Legal Practice Leader, Cerberus Operations and Advisory Company, LLC (Tokyo), as Member of the Supervisory Board of BawagPSK Bank (Vienna) and as Non-Executive Member of the Board of Mr. Holt joined Cerberus in 2006 and is a member of the firm’s Office of the General Counsel. In his capacity as General Counsel Lucida plc., all of which are Cerberus portfolio companies. Dr. Korteweg also serves as Member of the Supervisory Board of of COAC, Mr. Holt serves as a senior legal advisor to the firm on a broad array of matters involving the acquisition, oversight and Mercedes-Benz Nederland B.V. and as a Senior Advisor to Anthos Amsterdam. Dr. Korteweg served as Vice Chairman of the monetization of companies in the Cerberus private equity, lending, distressed debt and other investment portfolios. He also Supervisory Board of the Dutch Central Bank, Chairman of the Supervisory Board of the Netherlands Pension and Insurance supports the legal needs of COAC and its operations executives and handles special projects for Cerberus portfolio companies. Authority, and Chairman of the Dutch Central Bureau of Statistics. Dr. Korteweg also served as Member of the Board of Directors Prior to Cerberus, Mr. Holt held executive leadership positions as the chief legal officer, corporate secretary, and senior vice of SSA Global Technologies, Inc. (Chicago), non-executive Member of the Board of Aozora Bank Ltd. (Tokyo), and Member of the president of regulatory and external affairs at several public and private companies, including a Cerberus portfolio company. Governing Board of SONA, the Development Fund of the Netherlands Antilles. Mr. Korteweg has been a director of the Cerberus Before that, he practiced law for nine years at two highly rated law firms in Washington, D.C. Mr. Holt is a graduate of Drew affiliates in the Netherlands since 2001. Mr. Korteweg received a Ph.D. (cum laude) in Economics from Erasmus University University in Madison, N.J. and earned his law degree from The Columbus School of Law at Catholic University, Washington, D.C. Rotterdam. Mr. Korteweg is a member of the Cerberus Capital Management Environmental, Social and Governance Committee.
Jayne Binzer Senior Operating Executive and Head of Strategic Initiatives, Cerberus Operations and Advisory Company, LLC Ms. Binzer joined Cerberus Operations and Advisory Company, LLC in 2004. During her tenure she has participated in numerous transactions and turnarounds, focusing on human capital and social issues. Prior to joining Cerberus, Jayne was a Principal and East End Consulting Partners, LLC. She spent her early career in positions of increasing responsibility at Bloomingdale’s where her last role was a VP of Human Resources. She sits on the Boards of New Avon LLC, and New Avon Canada, as well as Friends of the East River Esplanade, where she is Treasurer and a member of the Executive Committee. Jayne is a graduate of Hofstra University.
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Biographies of Other Cerberus ESG Resources
Steven K. Hatfield Senior Associate, Cerberus Operations and Advisory Company, LLC Mr. Hatfield joined COAC in 2017. He specializes in ESG including due diligence, strategy, operations, and reporting. Prior to joining COAC, Mr. Hatfield was an ESG Consultant at PwC where he advised his clients, including many F500 companies, to drive total business value through ESG initiatives that mitigate risks, reduce costs, and grow revenue. Mr. Hatfield holds a Masters of Business Administration in Renewable Energy from Marylhurst University and a Bachelors of Business Administration in Accounting from James Madison University. He is a licensed CPA in Maryland and Virginia and holds several ESG related certifications including LEED GA, SASB FSA, and GHG-IQ. He has co-authored several sustainability related white papers including “Considering Sustainability Disclosures in an IPO” and “Environmental Implications of e-Waste Management Practices.”
Jan Magee Associate, Cerberus Operations and Advisory Company, LLC Ms. Magee joined Cerberus in 2009. Prior to joining Cerberus, Ms. Magee worked as a senior head hunter with Wilton & Bain and went on to set up and run her own executive search business in the City of London for five years, recruiting senior executives within the strategy consulting sector for blue chip companies. In 2009, Ms. Magee joined the London office of Cerberus, supporting the European Head of Real Estate. She has been working on the Firm’s ESG program since 2017 and transitioned to a dedicated role in 2019. A graduate of the University of St. Andrews, Scotland (2002) with a Joint Honours Masters in English Literature and French, Ms. Magee speaks fluent French.
Kevin J. Rooney Managing Director, Senior Compliance Officer, and Associate General Counsel, Cerberus Capital Management, L.P. Mr. Rooney joined Cerberus in 2008. From 2005 to 2011, he also served as an Assistant Professor at Fordham University’s Graduate School of Business and College of Business Administration. From 2003 to 2008, Mr. Rooney served in various legal and compliance roles including: Global Anti-Corruption Officer for American International Group, Inc., Global Head of Bank Anti-Corruption Compliance for Credit Suisse, and Director and Senior Counsel in the Government & Regulatory Compliance Group at Merrill Lynch. Prior to that, Mr. Rooney was a litigation associate at the law firm of Condon & Forsyth in New York. Prior to joining Condon & Forsyth, Mr. Rooney served as an Assistant District Attorney in the Trial Division of the Manhattan District Attorney’s Office from 1996 to 2000. Mr. Rooney is a graduate of Fordham College and received his J.D. from Fordham Law School.
Richard Alexander Chief Technology Officer and Managing Director, Cerberus Capital Management, L.P. Mr. Alexander joined Cerberus in 2008 as a member of the Operations and Advisory Company, which focused on driving value across Portfolio Companies. In 2010, Mr. Alexander became Head of Technology, Facilities, and General Services for Cerberus Capital Management. Prior to joining Cerberus, Mr. Alexander spent 12 years at GE. He is a former Chief Information Officer and Quality Leader within GE Commercial Finance where he became certified in Six Sigma and Operational Excellence. Prior to joining GE, Mr. Alexander held various IT and Operator roles within the U.S. State Department and UST, Inc. Mr. Alexander is a graduate of Loyola University Maryland and has taken technology courses at MIT.
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