
Introduction
Established in 1991, Van Berkom and Associates (“VBA”) is an investment management firm specializing in small-capitalization equities. Our aim is to safeguard and sustainably grow our clients’ assets through selecting undervalued, high quality, and well managed companies that will prosper over the long term.
This philosophy leads us to focus inherently on the fundamental long-term prospect of our investments. In our view, material environmental, social and governance (“ESG”) considerations are business issues that can impact all companies and their capacity to deliver long-term performance. Therefore, a thorough analysis of the company’s governance practices and principles has always been an integral part of our research process, while company’s environmental and social policy and behaviors are growing and gaining in importance in our view as well as in our investment process.
We believe that the inclusion of material ESG considerations into our investment process is part of our fiduciary duty and integral to mitigating financially material risks and identifying opportunities. In addition to carefully analysing financially material topics, we also regularly engage with companies to discuss their governance and ESG strategy and we strongly encourage companies to align their ESG processes and policies with market best practices as they grow over time.
Scope
VBA’s Responsible Investment (“RI”) Policy (the “Policy”) covers all of VBA’s investment strategies and provides a framework for our responsible investment approach and the integration of financially material ESG factors throughout the investment process and our stewardship activities. Given our commitment to continuously evolve, we expect this policy to change over time and, therefore, it is subject to annual reviews.
Responsible Investment Governance and Oversight
The governance and oversight of the implementation of VBA’s RI strategy are embedded within the roles of various individuals and committees. Activities are monitored by the Executive Management Committee and the Board of Directors.
- Board of Directors: Responsible for the oversight of overall RI activities and approval of RI policies.
- Executive Management Committee (“EMC”): Responsible for providing strategic vision, leadership, direction, and guidance regarding the firm’s RI guidelines. The EMC is also responsible for reviewing, endorsing, and approving ESG-related decisions and reporting on VBA’s RI activities to the Board on an annual basis.
- ESG Committee: Responsible for formalizing and recommending RI processes to the EMC and providing framework, support and guidance on ESG integration to the investment team. It also oversees and monitors the progress of VBA’s RI implementation strategy.
- Independent Advisory Committee: Responsible for providing ESG expertise, recommendations, feedback, and guidance and is comprised of three independent members who have RI expertise.
- Investment team and portfolio managers: Responsible for implementing VBA’s RI strategy and guidelines described in the Policy throughout the investment process.

Materiality Definition
At VBA, our approach is pragmatic: We focus on identifying and mitigating ESG factors that could have a material financial impact on the performance of our investments. ESG risks or/and opportunities identified are assessed and imbedded within VBA’s investment thesis and strategy.
Systemic Sustainability Risks
Systemic risks are referred to as risks that can potentially destabilize capital markets and lead to significant negative impacts on the financial system and the broader economy.[1] At VBA, we similarly consider systemic sustainability issues, which we define as risks that could impact all companies regardless of the sectors they operate in.
The ESG Committee, supported by the investment team, is tasked with identifying long-term risks, which are considered in our assessment of individual portfolio companies as well as at a macroeconomic level. The ESG Committee meets quarterly to evaluate the main risks and review how they are integrated within investment considerations and portfolio construction. Additionally, we systemically assess these risks and frequently engage with companies on sustainability issues to understand how they may impact their business strategy and track their evolution. We particularly focus on the following sustainability issues: Climate change, diversity, equity and inclusion (DEI) and cybersecurity.
[1]Guidance to Assess the Systemic Importance of Financial Institutions, Markets and Instruments: Initial Considerations, prepared by Monetary and Capital Markets Department, International Monetary Fund Monetary and Economics Department, Bank for International Settlements and the Secretariat of the Financial Stability Board, October 28, 2009.
Climate Change
We acknowledge that climate change is a systemic risk that can materially impact all potential and current investments. We are committed to assessing climate-related risks and opportunities in all investments. Climate-related risks include physical risks caused by climate change (i.e., floods and forest fires) and transition risks arising from changes in technologies and policies related to the transition to a lower-carbon economy. Where material, climate-related risks and opportunities are assessed by each member of the investment team throughout each step of the investment process.
Diversity, Equity and Inclusion
At VBA, we are committed to promoting a diverse, inclusive, and equitable society where gender, race, ethnicity, national origin, age, sexual orientation or identity, education or disability, is valued and respected.
We recognize that inequities related to DEI are a systemic issue addressed and that can affect a company’s performance. Diversity of thought and background fosters innovation, a creative environment, and a sense of belonging. It has been proven that a diverse workforce contributes to improving a firm’s performance. We encourage all investee companies to adopt practices that promote DEI across their organization and assess these initiatives for alignment with our beliefs.
Cybersecurity
Organizations worldwide are increasingly relying on the digitization of their information infrastructure and the use of mobile platforms. The number of cyber threats and attacks is growing globally, and the cost and magnitude of these incidents are increasing at a fast pace. Organizations are not immune to these risks, cannot easily diversify from them, and must continuously invest to improve their cybersecurity and data privacy. In this fast-paced environment, we believe all organizations should pay close attention to cybersecurity to ensure the resilience of their systems and we are committed to consider how investee companies meet cybersecurity and data privacy requirements.
ESG Integration in the Investment Process
At VBA, analysts and portfolio managers take material ESG factors into consideration at every stage of the investment process. We look for companies that are best-in-class in all aspects of their operations, including the management of their material ESG factors.
Idea Generation
As we source investment ideas in the pre-investment phase, we use screenings by third- party service providers, attend conferences, and meet management teams. During this step, our investment team identifies material ESG topics in its initial assessment of potential investments that could represent risks or opportunities.
Given VBA’s investment philosophy and its long-term focus, it has always favored companies with management teams that have leading governance practices, strong governance structures, promote a good corporate culture and that have no history of conflicts with stakeholders. We believe that well-aligned management teams with interests of shareholders have a positive impact on how environmental and social factors are managed and ultimately, on the long-term value of companies we invest in and partner with over time. Thus, in the early stage of the investment process.
The Value Reporting Foundation’s Sustainability Accounting Standards Board (SASB) Standards are leveraged by our investment team to identify relevant material ESG topics in any given industry. Since each company is different, every investment professional uses his/her knowledge of the company’s operations and sector to complement his/her research by identifying additional financially material ESG risks.
Research and Analysis
Once we have identified that a company complies with VBA’s initial criteria and could represent a viable investment opportunity, we conduct a deeper analysis. This stage of the investment process includes our due diligence process which comprises deep research to ensure that we understand how the company operates and the management teams’ vision, which feeds in the development of our financial models. The research and analysis phase entails interviews and dialogues with management teams to understand the firm’s competitive advantages, risks and opportunities, ESG strategy and macroeconomic landscape. We also undertake interviews with competitors, customers and suppliers, where relevant.
Based on the material ESG risks and opportunities identified in the idea generation phase, members of the investment team analyze and document all relevant information related to these topics and conduct an ESG assessment. This assessment is included in each investment thesis presented by analysts and portfolio managers during regular meetings where they introduce new investment opportunities. It is the responsibility of the senior portfolio manager(s) overseeing the strategy to ensure the ESG assessment is complete. The weight allocated to various ESG elements as part of this assessment can vary by sector and company and will be embedded in our financial analysis. Given our focus on governance topics, we have rejected numerous investment candidates solely or primarily as a result of significant concerns and issues with companies’ corporate governance practices.
Monitoring and Risk Management
It is the responsibility of the portfolio manager overseeing each strategy to determine how the ESG assessment influences the inclusion of an investment in the portfolio as well as how it can potentially impact weighting decisions. In collaboration with analysts, the portfolio manager leading the strategy is responsible for overseeing the entire portfolio and monitoring ESG risks and opportunities on an ongoing basis throughout the life of the investment.
Once identified, ESG risks and opportunities could impact the investment decision in different ways. If the risk could ultimately impact the financial results, we would act based on the potential impact. Such actions could be:
- Invest anyway but follow the risk closely and engage with the company to mitigate it.
- Use a higher discount rate in our discounted cashflow (DCF) model, which results in a lower estimated value of the company and then engage with the company to mitigate it.
- Walk away from the opportunity.
Exclusions
The investable universe is adjusted to exclude industries significantly exposed to certain risks. Van Berkom does not invest in securities issued by an entity with material revenues from, namely, adult entertainment, controversial weapons (cluster munitions, cluster bombs, anti-personnel mines), gambling, tobacco and fossil fuel extraction. Given VBA’s investment philosophy, carbon-intensive sectors such as Energy and Materials are typically avoided.
Based on Van Berkom’s proprietary internal ESG scoring model, investment candidates with a total score of 2 or lower out of 5 will be excluded from our investment universe. Companies with lower scores already in our portfolios will be prioritized for engagement, aiming to enhance their ESG performance and promote sustainable and responsible business practices.
Stewardship
Engagement
Direct engagements are at the core of VBA’s investment strategy and philosophy. Regular engagements and dialogues with companies’ management teams enable us to inform our views on potential and current investments and can contribute to continuous improvement of portfolio holdings over time. VBA conducts direct engagements with companies to discuss a variety of topics, including ESG factors. ESG-related engagement priorities are determined on a company-by-company basis and are guided by a company’s specific material ESG considerations. We understand that engagements are a long-term process of dialogue with companies and our philosophy is to partner with companies and help them improve their policies and practices, including ESG-related ones.
Members of the investment team meet with company’s management teams on a quarterly basis and discuss opportunities, goals and trends as well as ESG issues, and encourage companies to align with market best practices. The investment team also documents all engagements by tracking information such as the engagement’s topic, type, persons engaged, and outcomes.
Escalation Strategy
In a case where a portfolio company’s practices do not align with VBA’s overall investment guidelines, we will first initiate a dialogue with the management team. Should this dialogue fail to resolve the issue, we will escalate the matter to the Board of Directors. The next action would involve integrating our views into our voting decisions. If this action also fails to resolve the issue, VBA will write a formal letter to the Board of Directors and, as a last resort, will ultimately divest from the holding.
Collaborative Engagement
In addition to our direct active engagements, VBA believes that collaborative initiatives both internal and external, represent an effective way to promote the advancement of ESG best practices, improving transparency and ultimately, contributing to the performance across our portfolios.
Proxy Voting
Exercising our proxy voting rights is an essential part of VBA’s fiduciary and stewardship responsibilities. Each proxy statement is reviewed by members of the investment team, to ensure alignment with VBA’s RI guidelines. While the firm subscribes to Glass Lewis to facilitate the proxy voting process, each member of the investment team makes their own voting decisions. In cases where VBA’s clients delegate their proxy votes to us, VBA aims to ensure that all proxies are voted in alignment with shareholders’ long-term interests, considering material ESG issues.
Please refer to VBA’s Proxy Voting Policy for more details on the firm’s proxy voting guidelines.
Reporting
ESG activities conducted by VBA’s team is reported quarterly to the ESG Committee, who subsequently reports to the EMC on a quarterly basis. The EMC, in turn, reports on the firm’s ESG activities to the Board of Directors annually.
VBA also provides clients with quarterly reports on investment activities and performance for each strategy, including ESG activities. It also reports annually to the UN Principles for Responsible Investment (UN PRI) on its approach to responsible investing and stewardship activities.
VBA’s Own Initiatives
Given the importance we place on ESG principles for the planet, humanity and the financial performance of companies, we have implemented our own policies and set our own goals for environmental, social and governance aspects.
Please refer to VBA’s Sustainable Investment Annual Report for more details on our firm’s objectives.
Policy Review
This policy reflects VBA’s responsible investment integration process as of November 2024 and is reviewed annually.