The mission of Ariel Alternatives, LLC (“Ariel Alternatives”) is to scale sustainable minority-owned businesses. Our initial strategic initiative (“Project Black”) aims to acquire middle-market companies with $100 million to $1 billion in revenue that serve as leading diverse suppliers to Fortune 500 companies. Currently, 95% of all minority-owned businesses have revenues of equal to or less than $5 million–to that end, Project Black will primarily invest in companies that are not currently minority-owned, transforming these entities into certified minority business enterprises and positioning them as leading suppliers to Fortune 500 companies. Project Black’s investments will seek to support Fortune 500 companies’ stated objective to dramatically increase supply chain diversity while also driving economic growth and equality within underrepresented populations from the entry level to the boardroom and forging a new class of Black and Latino/a entrepreneurs and senior executives.
At Ariel Alternatives, we strongly believe leadership matters, and we will work to dramatically increase representation at the senior levels of our portfolio companies, cultivating diverse and inclusive management teams. We see our partnership with management teams as critical to making lasting impact by creating good jobs and careers, fostering equity ownership to build wealth, elevating business diversity and giving back with targeted philanthropy. We believe that diverse perspectives, knowledge and cultural identities foster better ideation, generate incremental business insights and lead to better decision-making. Our engagement with senior leadership of portfolio companies to gain complete alignment around business and impact objectives will drive success.
Ariel Alternatives believes in the systematic and explicit inclusion of ESG considerations as an integrated part of our approach. We seek to incorporate financially material and relevant ESG risk considerations at every stage of our decision-making process. ESG issues can affect investment performance and the effective management thereof is expected to generate better risk-adjusted returns for Ariel Alternatives’ investors. Our responsible investment program seeks to address each touchpoint across the lifecycle of an investment and generates measurable data at each stage of the investment horizon, including sourcing, pre-investment due diligence, ongoing monitoring and reporting during ownership and active ESG management.
Ariel Alternatives will seek to implement this Policy in the spirit of the six principles promulgated by the United Nations Principles for Responsible Investment (PRI)(please refer to Appendix A of this Policy.) PRI serves as a framework for our conduct and establishes programmatic standards regarding ESG management.1
Sourcing and Categorical Exclusions
We seek to integrate ESG criteria into our deal sourcing process, considering the societal impact of the products and services produced by each company we diligence and any exposure to material ESG risks (e.g., regulatory changes, labor and human rights issues, climate-related concerns and financial/reputational liabilities.)
We do not invest in companies principally engaged in the manufacture and production of firearms, military weapons, tobacco and adult entertainment nor in the operation of for-profit prisons. We also do not invest in the following high fee alternative financial services: payday lenders, check-cashing outlets and pawnshops. Further, Ariel Alternatives declines to invest in businesses principally engaged in the manufacturing of any product or service identified by the Bureau of International Labor Affairs to involve child labor, forced labor, or human trafficking.2
Upon exclusivity in the deal process, Ariel Alternatives investment professionals complete an ESG diagnostic on each new platform investment to assess material ESG risk factors. Ariel Alternatives consults the Value Reporting Foundation’s SASB Standards along with its own internal industry expertise and, at times, third-party advisors to scope material topics. Our approach to integration of these considerations directs individuals and external resources to engage in both quantitative and qualitative research and to explicitly consider company-specific and industry ESG factors. The below list reflects categories which may be assessed on a transactional basis, as determined by Ariel Alternatives to be appropriate:
Project Black Impact Evaluation
As noted above, Project Black is Ariel Alternatives’ effort to scale minority-owned businesses to serve as Tier 1 suppliers to Fortune 500 companies and, in turn, close the wealth gap within underrepresented communities by generating jobs and economic growth. A critical part of our commitment is integrating Project Black impact goals throughout the investment process.
This integration begins at deal sourcing and the identification of senior talent. We begin our effort to dramatically increase representation at the senior levels of our portfolio companies at the beginning of the investment process, not as an afterthought. By aligning as early as possible on key business and impact objectives, we know we will drive greater success within the investment. We seek to identify Black and Latino/a wealth-building potential as a critical component of our diligence and will seek to develop and regularly consult with our Impact Council, a set of leaders and practitioners across corporations, foundations, academic institutions and community-based organizations in the impact and wealth-building space who serve in an advisory role to our efforts.
At the conclusion of due diligence efforts and preceding the finalization of a post-investment value creation plan, deal professionals make a final presentation to the investment team wherein it is required to include a discussion of specific ESG considerations. These obligations do not compel Ariel Alternatives to act in a manner which would negatively affect the go-to-market strategy or investment objectives of its portfolio investments.
Ariel Alternatives takes an active approach to engagement regarding ESG issues, and we believe that the engagement of senior executive talent is the most critical aspect of driving impact. Ariel Alternatives works with portfolio company leaders to ideate together and build a bespoke ESG plan, assisting them to manage ESG goals and monitor performance against ESG considerations. Each portfolio company in which Ariel Alternatives has a majority stake will have an Impact and ESG Committee at the Board level.
For Project Black acquisitions, we seek to leverage ESG data via a combination of tailored and portfolio-wide key performance indicators (KPIs) to monitor and evaluate risks and opportunities among portfolio investments, particularly those that relate to the creation of Black and Latino/a wealth. Material changes to the ESG status of portfolio investments are, to the extent identified, reported to the investment committee as well as the legal and compliance coverage teams for periodic review.
Ariel Alternatives is committed to transparency with respect to its ESG initiatives. Ariel Alternatives’ legal and compliance coverage teams are engaged throughout the investment diligence and ownership processes. They receive access to investment presentations and correspondence and provide oversight to help confirm adherence to ESG regulatory requirements and commitments to investors.
Ariel Alternatives monitors and regularly reports on the ESG performance of its investments to its Advisory Board. During the period of time in which Ariel Alternatives holds any particular investment, we will seek to evaluate representative ESG issues as part of our internal, proprietary assessment of current investment status and performance via ESG data and KPIs. At the request of investors and other stakeholders, Ariel Alternatives is prepared to provide detail on its ESG activities as well as internal management of ESG issues.
Each portfolio company will be asked to assign a dedicated ESG and Impact team or designee to be directly responsible for oversight and implementation of ESG initiatives. These teams or designees will work closely with the Managing Director, Head of ESG and Social Impact as well as with our Portfolio Operations team when established, along with subject matter experts, to advance ESG considerations at the company-level.
Ariel Alternatives recognizes it faces ESG risks within the course of its own operations in addition to those among its portfolio investments. As such, we integrate ESG into our structure and internal dynamics. All employees are provided the Code of Ethics upon hire and review its contents during annual compliance training. Further, Ariel Alternatives has a zero-tolerance policy toward workplace discrimination, harassment, retaliation, and/or misconduct. All employees receive training on these expectations annually.
Ariel Alternatives is also a part of a broader ESG Committee in coordination with Ariel Investments, which committee reviews all affiliates’ ESG policies annually and meets quarterly to report and communicate among ESG Committee members regarding ongoing ESG related investing and engagement topics, third party research, trends in the marketplace and the regulatory landscape.
Ariel Alternatives will seek to enhance the competency and awareness among its investment and professional staff regarding its commitments to responsible investing and the roles employees play in managing ESG issues. We will accomplish this by providing ongoing training for emerging ESG issues relevant to our investment theses and by developing tools for internal teams to improve the ESG diligence process.
Ariel Alternatives reserves the right to amend this Policy at its sole discretion. Ariel Alternatives plans to review and revise this Policy annually.
The six Principles for Responsible Investment (“Principles”) are a voluntary and aspirational set of investment principles that offer a menu of possible actions for incorporating ESG issues into investment practice.
The Principles were developed on behalf of investors, for investors. In implementing them, PRI signatories contribute to developing a more sustainable global financial system. They have attracted a global signatory base representing a majority of the world’s professionally managed investments.
- Principle 1: We will incorporate ESG issues into our investment analysis and decision-making processes.
- Principle 2: We will be active owners and will incorporate ESG issues into our ownership policies and practices.
- Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.
- Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.
- Principle 5: We will work together to enhance our effectiveness in implementing the Principles.
- Principle 6: We will each report on our activities and progress towards implementing the Principles.