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Annual Sustainability & ESG Impact Report2016

Publisher:

Pegasus Capital Advisors, L.P.

Headquarters:

99 River Road

Cos Cob, CT 06807

Phone: +1 (203) 869-4400

Fax: +1 (203) 869-6940

New York Office:

850 Third Avenue, 18th Floor

New York, NY 10022

Phone: +1 (212) 710-2500

Fax: +1 (212) 355-2303

Website:

www.pcalp.com

Published:

October 2017

Reporting Period & Cycle:

January through December 2016 (annual reporting cycle)

Publication Details

2 Pegasus Capital Advisors | Annual Sustainability & ESG Impact Report 2016 3

Authors & Contact Information:

Delilah Rothenberg

Operating Advisor, ESG & Impact Strategy | [email protected]

Amber Marie Beard

Operating Advisor, Sustainability | [email protected]

Design:

Dustin O’Neal

Co-Founder, DNA Consulting LLC. | [email protected]

Featured photographs by Dustin O’Neal

Interior paper is 100% post-consumer waste, FSC certified, and made with wind power.

4 5Pegasus Capital Advisors | Annual Sustainability & ESG Impact Report 20164 Pegasus Capital Advisors | 2016 Sustainability, Responsible Investment and Impact Report

Notice to Recipients

Definitions

Letter from the Chairman

About Pegasus Capital Advisors, L.P.

Overview

Our Commitment

Governance

Cybersecurity

Diversity & Inclusion

Membership Associations & External Initiatives

Philanthropy

Sustainability within Pegasus Operations

Portfolio Company Reporting

Introduction & Approach

Pegasus’ Portfolio of Investments

Partner Investments

Future Goals

6

8

12

14

16

24

46

62

64

66

71

73

74

76

79

182

196

Contents

5


Notice to Recipients

This report (the “Report”) is for information purposes only and may not be reproduced or distributed

under any circumstances without our prior written consent. This Report is intended to summarize

Pegasus’ and its portfolio companies’ progress in implementing environmental, social and governance

(“ESG”) principles and impact strategies into its investment process and the ongoing management of

the portfolio companies. Pegasus makes no representation or warranty regarding the information set

forth in this Report, including, but not limited to, the accuracy or completeness of the information or

that Pegasus will successfully identify or mitigate any particular ESG-related risk or capitalize on any

ESG-related opportunity.

This Report does not constitute an offer to sell, or solicitation of an offer to buy, any securities. This

Report has been provided to you for information purposes only and may not be relied upon by you in

evaluating the merits of investing in any securities referred to herein and does not contain all of the

information necessary to make an investment decision, including, but not limited to, the risks, fees

and investment strategies. This Report is indicative only and is subject to updating and/or amendment,

as applicable. No information contained in this Report, or any oral or written communication with an

interested party, should be relied upon as a representation or warranty, and no liability shall attach to

any person or entity as a result of such information. Nothing in this Report constitutes advice relating

to legal, taxation, accounting, regulatory or investment matters and potential investors are advised to

consult their own professional advisors in connection with making an investment decision.

Any offering will only be made pursuant to the relevant information within a private placement

memorandum, limited partnership agreement and subscription documents, all of which must be read

in their entirety. No offer to make an investment will be made prior to receipt by a potential investor of

these documents and the completion of all the appropriate documents.

The distribution of this Report in certain jurisdictions may be restricted by law. This Report is only

directed at persons to whom it may lawfully be distributed and any investment activity to which this

Report relates will only be available to such persons. It is the responsibility of any potential investor

to satisfy itself as to the full compliance with the applicable laws and regulations of any relevant

jurisdiction, including obtaining any governmental or other consent and observing any other formality

prescribed in such jurisdiction.

Certain information contained herein has been obtained from the applicable portfolio company,

published sources and from third parties. While such information is believed to be reliable for the

purpose used herein, none of Pegasus, its affiliates or any of its or their respective directors, officers,

7

employees, advisors, partners or agents has independently verified or assumes any responsibility for the

accuracy or completeness of such information. Except where otherwise indicated herein, the information

provided herein is based on matters as they exist as of the date of preparation, and may not be updated

or otherwise revised to reflect information that subsequently becomes available, or circumstances existing

or changes occurring after the date hereof. This Report contains forward looking statements which are

identifiable by words such as “anticipate”, “estimate”, “project”, “plan”, “intend”, “expect”, “believe”,

“forecast” and similar expressions. The recipient should be aware that these statements are estimates,

reflecting only the judgment of Pegasus or company management, as applicable, and the recipient should

not place any reliance on any forward looking statements. The analyses, goals and targets contained

in this Report are based on assumptions believed to be reasonable in light of the information presently

available. Such assumptions (and the resulting analyses, goals and targets) may require modification as

additional information becomes available and as economic and market developments warrant. Any such

modification could be either favorable or adverse. The goals and targets have been prepared and are set

out for illustrative purposes only, and no assurances can be made that they will be achieved.

Pegasus and its directors, officers, employees, partners, affiliates, advisors and agents do not accept

any responsibility whatsoever or liability for any direct, indirect or consequential loss or damage suffered

or incurred by the recipient or any other person or entity, however incurred (including, but not limited

to, negligence) in any way in connection with (i) the materials or any other written or oral information

made available to the recipient or such other person or entity, including, without limitation, the information

contained in this Report; (ii) any errors or omissions or the materials or any other written or oral information

however caused; (iii) the recipient or any other person or entity having placed any reliance on the

materials or such other information; or (iv) the reasonableness, authenticity, validity, adequacy, accuracy,

completeness or reliability of the materials or such other information. This Report does not constitute and

should not be considered as any form of financial opinion or recommendation.

Past performance should not be viewed as a guide to future performance. Actual results could differ

materially from those discussed or implied herein, as a result of various factors, including future economic,

competitive, political, regulatory or market conditions of future business decisions. There can be no

guaranty that Pegasus will successfully implement any of the ESG policies or procedures outlined in this

Report or that, if implemented, such policies and procedures will mitigate any particular ESG risk or identify

any particular ESG opportunity. The value of an investment in products such as described herein may fall

as well as rise and any investment carries the risk of a total loss of capital. An investment in such products

is suitable only for sophisticated investors and requires the financial ability and willingness to accept the

high risks and lack of liquidity inherent in such an investment.

8 9Pegasus Capital Advisors | Annual Sustainability & ESG Impact Report 20168 Pegasus Capital Advisors | 2016 Sustainability, Responsible Investment and Impact Report 9

Advanced Product Manufacturing

Assets Under Management

bMuse Group LLC

Commercial & Industrial

Community Benefit Agreement

Chief Compliance Officer

Chief Executive Officer

Climate Finance Advisory Committee

Chief Financial Officer

Clinton Global Initiative

Community Healthcare Worker

Council of Institutional Investors

Compressed Natural Gas

Chief Operating Officer

Slipstream Communications /

Creative Realities

Corporate Social Responsibility

Equity of Access Initiative

Environmental, Health & Safety

Environmental, Health & Safety

Equator Principle

Environmental, Social & Governance

APM

AUM

bMuse

C&I

CBA

CCO

CEO

CFAC

CFO

CGI

CHW

CII

CNG

COO

CRI

CSR

EAI

EH&S

EHS

EP

ESG

ESG-MS

FCPA

Fiberon

Firm

Fund V

GAPP

GIIN

GRI

Gyro

Halo

Heartland

Hosts

HPS

HSUS

IC

IFC

ILPA

Impala

INCR

IP

IRIS

ISO

KGS

KPI

LEED ND

LNG

LP

LSG

MSC

MSW

NSI

NYLCV

Olympus

Organix

ORS

OSHA

PBF

Pegasus

PRP

QHSSE

R20

ReEF

Report

ESG Management System

United States Foreign Corrupt Practices Act

Fiberon LLC


Pegasus Partners V, L.P.

Global Animal Partnership Program

Global Impact Investing Network

Global Reporting Initiative

Gyro International, Ltd.

Halo Purely for Pets

Heartland Capital Strategies

Employees of Six Senses Hotels

Resorts Spas

High Pressure Sodium

The Humane Society of the United States

Investment Committee

International Finance Corporation

Insitutional Limited Partner Association

Impala Energy Holdings LLC

Investor Network on Climate Risk

Investment Professional

The Impact Reporting & Investment Standards

International Standards Organization

KGS Agro Group

Key Performance Indicator

Leadership in Energy & Environmental Design

Neighborhood Development

Liquified Natural Gas

Limited Partner

Lighting Science Group

Marine Stewardship Council

Municipal Solid Waste

National Strategies

New York League of Conservation Voters

Olympus Insurance Company

Organix Recycling

Oral Rehydration Solution

Occupational Health & Safety Organization

Pure Biofuels del Peru S.A.C.


Plastic Reclamation Partners

Quality, Health, Safety, Security & Environment

R20 Regions of Climate Action

Reegineered Feedstock

Pegasus’ 2016 Sustainability, Responsible

Investment, & Impact Report

Term Term Term TermDefinition Definition Definition Definition

S&W

SASB

SDG

SEC

SPI

Spirit Music

SSA

STEM

T&M

UNFCCC

UNiS

UN-PRI

USAID

V2G

VP

WHO

ZeroBase

ZEV

Sustainability & Wellness

Sustainability Accounting Standards Board

Sustainable Development Goal

United States Securities

& Exchange Commission

Sustainability Performance Indicator

Spirit Music Group

Sub-Saharan Africa

Science, Technology, Engineering

& Mathematics

T&M Protection Resources

United Nations Framework Convention on

Climate Change

Urban Nodes in Suburbia

United Nations Principles for

Responsible Development

United States Agency for

International Development

Vehicle to Grid

Vice President

World Health Organization

ZeroBase Energy

Zero Emission Vehicle

Definitions

10 11Pegasus Capital Advisors | Annual Sustainability & ESG Impact Report 2016

Letterfrom the Chairman


Letter from the Chairman

Pegasus’ commitment to sustainability and wellness remains as strong as ever,

accelerated by a number of environmental, social and market factors currently at

play. Despite political and legislative uncertainty, it’s clear that members of our

society are personally invested in sustainability and are more aware than ever of

the importance of health and wellness.

The role that sustainability and wellness can play in driving real environmental, social

and economic change has never been clearer - whether this be promoting preventative

care to create a more sustainable healthcare system, or taking action to face the

numerous challenges facing the planet’s climate, population and natural resources.

We believe the increased affordability of renewables such as wind and solar

are making renewables a more attractive option for consumers globally, while

innovations in sustainable waste management are creating new and interesting

investment opportunities.

In our view, the current environment makes it more logical than ever for private

sector firms to take the lead in finding solutions to these global problems, not only

to deliver attractive returns, but to make a positive impact.

We firmly believe that Pegasus is uniquely positioned to provide scalable solutions

to global challenges. We have responded to these challenges by pursuing

Environmental, Social & Governance (“ESG”) and impact investment opportunities

as well as striving to manage ESG investment risks, such as:

Sustainable waste management and

pollution prevention

More sustainable energy solutions

Solutions for prosperous, inclusive,

sustainable, and resilient cities

Preventative healthcare

Inclusive health solutions

13

Our proactive ESG efforts seek to not only ensure our investments align with the

Firm’s mission and values, but we also view ESG as a potential value driver for our

portfolio companies. In effect, we believe that we can both protect and enhance the

value of our investments through an ongoing program of risk management and pursue

impactful opportunities that meet the needs and demands of society.

This is Pegasus’ first Annual Sustainability & ESG Impact Report, and it is a step

in a broader journey. A key priority for the firm for the remainder of 2017 and into

2018 is to work with our portfolio companies to formalize our combined approach

to ESG and impact reporting, and we have set strategic goals for enhancement of

our strategy.

We thank our stakeholders for their ongoing support as we continue to focus on creating

fundamental value and lasting impact in the sustainability and wellness sectors.

Best regards,

Craig Cogut

Founding Partner & Chairman

Evaluating our investments

and strategy for climate risk

Striving for best practices in worker,

customer and community health

and safety

Increasing focus on stakeholder and

public engagement and human rights

Increasing focus on enhancing

diversity, inclusive growth,

and quality jobs


Pegasus Capital Advisors

1716 Pegasus Capital Advisors | Annual Sustainability & ESG Impact Report 2016

Overview

Pegasus Capital Advisors, L.P. (“Pegasus” or the “Firm”), is an alternative asset

management firm that provides strategic growth capital to companies within the

middle-market focused on sustainability and wellness.

Pegasus was founded in 1996 by its current Chairman and President, Craig

Cogut. From 1990 to 1995, Mr. Cogut was a founding partner of Apollo Global

Management, L.P. The Firm has an experienced team of approximately 50

Investment Professionals and Operating / Strategic Advisors. Pegasus currently

manages approximately US$1.9 billion in assets across four private equity funds.1

While historically, the Firm’s investment strategy has focused on North America,

certain portfolio companies are either based in or operate in other regions, as

described in this report.

As global awareness of climate change and health and wellness has continued to

evolve, Pegasus has recognized the need for solutions to these issues, culminating

in an increasing focus on sustainable industries with positive environmental

and social impacts. This philosophy is demonstrated by the Firm’s increasing

exposure to the sustainability and wellness sectors across its funds, and the strong

performance of investments with robust ESG and/or positive impact features,

which has led Pegasus to the point where 100% of its most recent fund, Pegasus

Partners V, L.P. (“Fund V”), is invested in these sectors.

Today, Pegasus’ investment strategy is focused on sustainability and wellness

(“S&W”) broadly, and within these themes, the Firm concentrates on water, food,

energy, waste, recycling, living spaces, microbiome, nutrition, brain health, and

sleep and mind-body, among other sub-themes. Pegasus maintains a commitment

to long-term value creation and continuous improvement in ESG integration.

Introduction

1 Assets Under Management (“AUM”) as of 31 December, 2016.


Investment Focus

Wellness

Sub-Sectors:

Microbiome

Sleep & Mind-Body

Nutrition

Wellness Destinations

Complementary Medicine

Brain Health

Potential Advantages

Demographic shifts

Increased average lifespan

Consumer demand

Job creation

Political desire

Education

Technology advances

Pegasus believes this investment focus is less susceptible to short-term

economic downturns and more likely to benefit from global thematic trends.

The Firm’s investment thesis focuses on investments within both the

sustainability and the wellness sectors.

Sustainability

Sub-Sectors:

Energy

Water

Food

Built Enviroment

Waste & Recycling

Pegasus seeks to leverage its deep operational expertise and industry

knowledge to provide structured growth capital and take control-oriented

positions in middle-market companies, to create fundamental value by building

businesses, creating jobs, and generating long-term growth.

Investment Approach

ESG IntegrationPegasus seeks to invest in purpose-driven companies and believes in actively managing ESG risks and opportunities

throughout the investment cycle.

Proactive Deal CreationDeals are typically sourced by thematic strategic focus and Investment Professional, Operating / Strategic

Advisor relationships. Capital is typically not the primary catalyst of the investment.

Emphasis on KnowledgeOperating / Strategic Advisors are senior professionals with backgrounds in diverse disciplines including

government and public policy, science and engineering and business operating backgrounds.

Dif

fere

nti

ate

dC

on

serv

ati

ve

Low LeveragePegasus seeks to build equity value from operational improvements and strategic initiatives rather than

producing financial returns thought balance sheet engineering.

Downside Risk MitigationPegasus believes it brings substantial pricing and structuring expertise to each transaction, seeking to

mitigate downside risk while preserving significant equity upside.

Ha

nd

s-O

n

Expanding Our Strategic NetworkPegasus’ strategic relationships include firms with global reach into developing countries, emerging markets

and those with a focus on S&W domestically. Pegasus believes these links enhance the Firm’s ability to

reach important business partners and customers that can have an impact on the growth and profitability

of our investments and distribution channels.

Active Business BuildingPegasus generally plays an active role in intrinsic value creation and portfolio company management post-

investment, including intensive work alongside management to establish strategic initiatives, relationships

and distribution channels.

The Firm’s approach has historically been to seek disproportionate reward

relative to risk since its inception.


The above information is based upon data as of December 31, 2016.


Fund V investments are focused on Pegasus’ S&W investment strategy, and the

Fund V investment strategy has been led by the Firm’s current leadership team.

Delivering on the Firm’s Sustainability & Wellness strategy

Wellness

A medical nutrition company focused on developing products that address the special dietary needs of children with infectious diarrhea which represents 9% of child deaths worldwide, 2nd only to pneumonia

WellnessA technology-based tool allowing users to measure and improve the quality of their sleep

Sustainability

A leading processor of recycled commodities across the

US and operates material recovery facilities which receive,

sort, bale and resell recyclable materials originating from

curbside recycling streams; approximately 1.8 million tons

of commodities recycled annually, reducing GHG emissions

by approximately 5.3 million metric tons

SustainabilityA Peru-based company specializing in liquid fuels storage, distribution and marketing and biodiesel handling

Sustainability A post-consumer recycled plastic reclaimer

Sustainability

A leading provider of advanced building technology solutions and energy services to commercial building owners, property managers, hospitals, industrial facilities, states and municipalities; reducing energy usage by approximately 200,000,000 kWh annually

Fund V

Sustainability

Sustainability

& Wellness

A company formed to develop ReEngineered Feedstock, a differentiated product produced from municipal solid waste materials

Sustainability

& Wellness

An award-winning, sustainable luxury resort and spa management company with branded properties in Asia, the Middle East, the Americas and Europe

A global leader in LED lighting solutions that are environmentally

friendlier and more energy-efficient than traditional lighting

products; saves 11 billion kWh through products sold each year,

and biological lighting improves the health and wellness

of customers

Sustainability

& WellnessA suburban downtown revitalization company focused on inclusive growth

Sustainability

& Wellness

An incubator of technology companies focused on creating wellness, publishing, gaming, education, and entertainment products for the digital age

Sustainability

& Wellness

Redefining the smart home by providing the home with intelligence through a neural network that constantly improves customers’s surroundings

Sources: Company Management, UNICEF, 2016.Excludes Climatec, which is no longer a Fund V portfolio company.


Our Commitment

Pegasus’ commitment to responsible investment is the product of the Firm’s

ongoing evolution, commencing with the identification of investment opportunities

that have the potential to not only produce market-rate or above returns, but also

positive societal impacts. Pegasus’ success in executing against this strategy has

led the Firm to take a more deliberate approach to integrating ESG and investing in

the sustainability and wellness sectors.

Pegasus’ responsible approach to investing is summarized in the following diagram:

Sustainable Investment

ESG Integration

Corporate Social

Responsibility (“CSR”)

Investing with Impact

Pegasus seeks to invest in industries focused on sustainability and wellness

Pegasus believes in actively managing ESG risks and pursuing opportunities throughout the investment cycle

Both Pegasus and its portfolio companies are active in a number of philanthropic engagements that enhance our positive impact

Pegasus seeks to invest in industries and companies that have global and/or local positive impacts for their stakeholders, while targeting competitive rates of return

Pegasus believes that adherence to ESG principles can serve as a significant risk

mitigant and has the potential to deliver enhanced value to the Firm’s investments

to improve the bottom line for investors.

Throughout our history, Pegasus has increasingly evaluated ESG risks and

opportunities as applicable on a deal-by-deal basis. For instance, investments

in companies operating in the industrial sector have typically involved deep due

diligence and ongoing reporting on environmental, health and safety issues, while

an investment in a small business services company in a leased office space does

not necessarily require such an approach.

Introduction


"Responsible investment is an approach to investing that aims to incorporate

ESG factors into investment decisions to better manage risk and generate

sustainable, long term returns." (Source: PRI)

Pollution Prevention

Creating Climate-Change Solutions

Protecting Health& Safety

Creating Wellness Solutions

Transparency & Reporting

Creating B2B Security Solutions

Managing Risks to Biodivsersity & Ecosystems

Reducing Resource Use Across Companies

RespectingHuman Rights

Fostering Economic Development

Maintaining Systems of Accountability

Creating Solutions for Governments & Municipalities

Managing ESG Risks Examples

Pursuing ESG Opportunities Examples

E

S

G

Formalizing Our Approach to ESG

Pegasus’ success in integrating ESG into the Firm’s investment practices, combined

with the wealth of research and evidence1 supporting the benefits of formalized ESG

integration led to the Firm to commence an initiative to formalize and communicate the

approach to ESG in 2014.

As part of this program, the Firm launched an ESG Leadership Plan in the same year to

serve as a guiding aspirational document that lay the foundation for more comprehensive

ESG integration. This plan was published to the Pegasus website and reaffirmed the

Firm’s commitment to ESG.

27

Studies are continuing to demonstrate that integrating

ESG factors can lead to outperformance

Firms with good performance on material sustainability issues have been shown to demonstrate higher future

stock performance—generating an annualized alpha of 6.0%—even where such firms show low performance

on immaterial issues. Firms that make no sustainability investments have been shown to demonstrate the

worst performance, with an estimated alpha of -2.9%.

In a recent survey of private equity general and limited partners, approximately 70% of respondents saw

ESG issues materially impact their investments. The most significant ESG enhancements seem to come from

firms that managed to deliver portfolio company programs that:

Well-designed Corporate Responsibility programs can lift sales, increase shareholder value and improve

employee productivity. They can:

Increase revenue by as much as 20%

Command price premiums up to 20%

Increase customer commitment by as much as 60%

•

•

•

Focused on material ESG issues

Were linked to the companies’ strategies

Had board-level visibility

Had business outcomes well communicated to relevant stakeholders

•

•

•

•

Sources: “Corporate Sustainability: First Evidence on materiality”, Harvard Business School; Verizon, Campbell, IO Sustainability, Babson College; ERM

Following the launch of Pegasus’ ESG Leadership plan in 2014, the Firm held a series

of internal strategy discussions the following year to build on the plan and secure

additional specialist support to drive the ESG integration program.

In parallel, Pegasus also launched a pilot impact measurement initiative to assess the

ESG progress of its existing portfolio companies. The purpose of this data collection

was to enable Pegasus to work with the companies to mitigate and avoid ESG risks,

enhance the Firm’s positive ESG impacts, and pursue new opportunities.

As part of the pilot data collection project, each company was asked to assign a

manager or officer responsible for sustainability (if not already in place) and report on

any additional in-house and external expertise relating to sustainability. Questions were

asked relating to materials, energy, emissions, effluents, waste, water, and biodiversity.

Data was collected and reviewed internally at Pegasus, which helped the Firm to fine-

tune a more robust approach moving forward.1See, for example, the text box on the following page.


Toward the end of 2015, Pegasus decided to develop an ESG Management

System (“ESG-MS”), comprising of policies and procedures to guide ESG practices

across the Firm, beginning with a focus on the investment process. The ESG-MS,

developed throughout 2016 and internally approved for launch in February 2017,

is an internal-use document that includes guidelines on ESG integration at each

stage of the investment cycle, including:

The ESG-MS outlines the relevant policies, roles, responsibilities, management

plans, reporting frameworks and performance management structures to guide

Pegasus’ ESG and impact approaches.

The ESG-MS was developed to provide a more comprehensive framework by which

Pegasus can enhance its positive environmental and social impacts and strive to

mitigate or avoid potential negative impacts of its investments, while seeking to

implement good governance structures for the benefit of Pegasus investors in the

long-term.

Various ESG frameworks were evaluated for their appropriateness and applicability

to Pegasus’ investment strategies and investment decision making processes. The

ESG-MS is guided by adherence to applicable local and national laws at the fund

manager and investee levels including:

The World Bank’s International Finance

Corporation (“IFC”) Performance

Standards on Environmental & Social

Sustainability

IFC Environmental, Health & Safety

(“EHS”) Guidelines

The Equator Principles (“EPs”)

Pegasus’ Compliance Manual

Which includes a significant focus on governance issues,

including compliance with the United States Investment

Advisers Act of 1940, the United States Foreign Corrupt

Practices Act (“FCPA”), and reporting requirements,

transparency requirements, matters relating to conflicts of

interest, ethics, among other topics

As part of Pegasus’ goal to make a positive impact, the Firm works with its

companies and investments to align their strategies with the United Nations

Sustainable Development Goals (“SDGs”).

The ESG-MS is summarized in the Firm’s ESG Policy, which was developed in

parallel to the ESG-MS.

At times, additional tools and resources may be referenced, as applicable, including,

but not limited to:

The CDC ESG Toolkit for Fund Managers

The Sustainability Accounting Standards

Board (“SASB”)

International Standards Organization (“ISO”)

The Impact Reporting & Investment

Standards (“IRIS”)

Please note that Pegasus references these frameworks as guiding principles only and may not implement every aspect of each framework. Pegasus is not currently a member of the Equator Principles Association, but may consider joining if we continue to pursue significant investment opportunities involving project development and project finance.


ESG Trainings

GHG Savings

Incident RateESG Certifications

GHG Emissions


Responsible Supply

Chains

ESG Policies &

Procedures

Compensation &

Benefits

Water Recycling

Waste Recycled

Infections Cured

CSR /

Philanthropic

Programs

Examples of ESG Metrics

& Key Performance Indicator (“KPI”) Themes

In order to develop and manage the ESG-

MS, Pegasus launched an ESG Working Group

comprised of ESG specialists and other professionals

from across the Firm, as well as a Sustainability Committee

with senior management to provide oversight. The ESG-MS was then

developed by the ESG Working Group throughout 2016 and approved

for implementation by the Sustainability Committee in February 2017.

It includes an updated ESG Policy, which summarizes the ESG-

MS and is published to the Pegasus website.

Reporting Progress

Pre-2015 Pegasus invests in sustainable industries, making a positive impact; Publishes ESG Leadership Plan

2015 Pegasus begins a more formal annual “sustainability reporting” initiative across companies

Second Half 2016Customized metrics to focus on ESG risks and opportunities material to each company

First Half 2017 Launched ESG-MS

Goal to regularly include ESG updates in quarterly and/or annual LP reporting, as well as non-confidential ESG highlights in a publicly available sustainability report


ES

G-M

S A

cti

vity

In

vest

me

nt

Sta

ge

Dir

ec

t R

esp

on

sib

ility

Ove

rsig

ht

Re

spo

nsi

blit

y Provide input to the IC, including a section in the investment memo on the material risks, mitigants and opportunities for positive impact

If the deal is to be pursued, then develop a time-bound ESG Action Plan to close any gaps, enhance opportunities and track KPIs

Primary: Investment

Professional

Secondary: ESG Specialist

Partner &

Investment

Committee

Investment Decision

Ensure compliance with Exclusion List

Identify key risks in order to categorize the investment

Create due diligence plan and allocate deal responsibilities

Prepare any Investment Comittee (“IC”) papers necessary at this stage

Primary: Investment

Professional


Partner

Screening

Conduct and review ESG assessments, as appropriate, based on category A, B or C

Sensitize management team to ESG standards

Assess capacity, committment and track record of management team

Engage consultant(s) as necessary

Primary: Investment

Professional


Partner

Due Diligence

Snapshot of ESG Integration in the Investment Process

Report on the portfolio’s ESG performance and the fund’s ESG-MS to investors

Manage the grievance mechanism for external parties

Assemble the annual sustainability report

Play an active role in relevant organizations and convenings

ESG Working Group, Investor Relations Team

Sustainability

Committee

External Stakeholder Engagement

Note: The above information about Pegasus’ ESG-MS is (a) subject to change in Pegasus’ sole discretion; (b) is based on matters as they exist as of the date of preparation of this presentation; and (c) may not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring thereafter. Pegasus reserves the right to modify, amend, supplement or replace this ESG-MS as elements of it are implemented or as Pegasus determines is necessary or appropriate. There is no guaranty that the ESG-MS will enable Pegasus to identify all ESG risks and opportunities.

Key Components of the ESG-MS

Sets the ESG Policy

Establishes Roles, Responsibilities & Oversight

Sets Policies & Procedures for ESG Integration

Establishes Reporting & Communications Framework

Establishes Performance Management Protocols

ESG terms are negotiated and incorporated into the legal agreement(s). Including time-bound ESG Action Plans to close gaps, enhance performance and key elements of the reporting framework

Legal counsel is engaged for technical support

Primary: Investment

Professional


Investment

Committee

Investment Agreement Exit (if applicable)

Prepare documentation for potential buyers (with legal counsel support)

Provide evidence of ESG improvements; identify material risks and opportunities

Provide business case for maintaining ESG values post-investment to avoid mission drift

Primary: Investment

Professional


Partner &

Investment

Commitee

Monitor ESG Action Plan and compliance with laws/standards

Monitor ESG performance and provide support/guidance

Address unexpected events

Periodic ESG reporting for the IC, investors and the public, as appropriate (e.g. quarterly or annual)

Primary: Investment

Professional


Holding, Monitoring & Reporting

Partner

Evaluate adequacy and efficiency of the ESG-MS as a whole

Approval and implementation of changes to the ESG-MS

Develop and deliver training for staff (including consultants) on ESG standards, policies nd procedures to ensure effective implementation

ESG Working Group

Sustainability

Committee

Performance Management


ESG & Impact Policy

Pegasus places a focus on ESG standards at the core of our investment thesis.

Our principal investment theme is providing strategic growth capital to companies

within the middle-market focused on sustainability and wellness. We believe that by

investing in such industries and companies, we are not only poised to capitalize on

global demographic and economic trends that have the potential to yield significant

financial returns, but we are also contributing to sustainable solutions to global

issues. In each investment, Pegasus seeks to create fundamental value through

its creative investment structures while leveraging its operational expertise and

deep industry knowledge. Furthermore, Pegasus believes that adherence to ESG

principles can serve as a significant risk mitigant and potential value-enhancing

approach for our investments, and that it has the potential to improve the bottom

line for our investors.2

Pegasus is committed to integrating ESG principles throughout its investment

processes. As such, we are implementing a comprehensive ESG-MS, which

includes guidelines on ESG integration at each stage of the investment cycle. The

ESG-MS is guided by adherence to applicable local and national laws at the fund

manager and investee levels; the IFC’s Performance Standards on Environmental

& Social Sustainability; IFC’s EHS Guidelines, the EPs; and, Pegasus’ Compliance

Manual. At times, additional tools and resources may be referenced, as applicable,

including, but not limited to, the CDC ESG Toolkit for Fund Managers, ISO, SASB

and IRIS. As part of Pegasus’ mission to make a positive impact, the Firm works

with its companies and investments to align their strategies with the SDGs.

35

ESG activities throughout the investment cycle are summarized in the below stages:

Screening Stage

Pegasus Investment Professionals (“IPs”) will seek to identify how or

whether an investment opportunity fits within Pegasus’ investment

themes and ensure that the investment opportunity is not on Pegasus’

Exclusion List. Additionally, the IPs may work alongside ESG

Specialists, as appropriate, to identify the potential investment’s ESG

risks and opportunities. Each investment opportunity that moves

to the next investment stage will then be categorized based on the

level of ESG risk, and an ESG due diligence plan will be created.

Categorization is based upon the IFC’s methodology and EPs.

Due Diligence Stage

Pegasus IPs will conduct due diligence on ESG risks and opportunities,

engaging one or more ESG Specialists, as necessary (may be internal

at Pegasus or external, depending on Pegasus’ capacity and the level

of risk), as appropriate. The depth of the due diligence procedures

should be based upon the categorization of the investment

opportunity and guided by the IFC Performance Standards, EPs and

CDC ESG Toolkit. Category A and B investment opportunities should

undergo a more in-depth risk and impact assessment. Depending

on the circumstances, technical consultants may be engaged for

additional expertise. The capacity, commitment and track record of

the management team should be assessed. The management team

should also be briefed on Pegasus’ ESG standards and requirements

of portfolio investments. Any circumstances that would result in a

decision to not move forward into the investment decision stage

should be identified and recorded.

Investment Decision Stage

The assigned Pegasus IP(s) (and ESG Specialist(s), as applicable)

will present findings from the screening and diligence stages to the

Investment Committee (“IC”). ESG risks and opportunities should be

identified, and specific short-term and long-term recommendations

should be made to close ESG performance gaps and enhance ESG

practices. A portion of each investment memo (depending on the

1

2

32Past performance is no guaranty of future results. Please see page 6 “Note to Recipients” for important information about potential risks.


On a regular and ongoing basis, Pegasus is committed to providing ESG training

to all of its staff to ensure effective implementation of the ESG-MS. At times,

Pegasus may procure additional external expertise to assist in such training and

build internal capacity.

level of risk identified) should be dedicated to the ESG assessment. An

ESG Specialist should be engaged to develop the appropriate materials

and present findings for the IC at this stage for all Category A, and as

appropriate, Category B investments.

Investment Agreement Stage

ESG terms will be negotiated and incorporated into the legal investment

agreement(s), as appropriate; depending on the nature of the investment,

time-bound ESG action plans to close ESG performance gaps, set ESG

targets and requirements to report on performance may be included in

the definitive documentation. Alternatively, Pegasus IPs and company

management may incorporate such action plans, targets, and reporting

requirements into management’s ongoing KPIs.

Holding, Monitoring & Reporting Stage

Pegasus IPs will monitor the investment’s ESG action plan and

compliance with applicable laws and standards, as well as opportunities

for improvement. Capacity building support and guidance may be

provided or retained for the management team, as needed. Quarterly

and annual investor reports will seek to include ESG updates on an

investment-by-investment basis to inform LPs of progress on ESG-

related initiatives for each portfolio company. Additionally, non-

confidential ESG highlights are expected to be shared annually through

a Sustainability Report available on Pegasus’ public website. Pegasus

will seek to ensure that each of its investments have appropriate

grievance procedures for their stakeholders (commensurate to the level

of ESG risk of the investment), and maintains a grievance mechanism

at the fund manager level as part of its compliance program, as well.

Pegasus’ ESG-MS is supported by the ESG Working Group, which is overseen

by Pegasus’ Sustainability Committee. Each is comprised of senior Pegasus

professionals and ESG Specialists. Together, these parties will evaluate the

adequacy and effectiveness of its ESG-MS on an annual basis. This process is

expected to include annual approval and implementation of upgrades to the ESG-

MS, including the training programs.

Pegasus is a Signatory to the United Nations Principles for Responsible Investment

(“UN-PRI”) and maintains membership in the Global Impact Investing Network

(“GIIN”), Ceres Investor Network on Climate Risk (“INCR”), Council of Institutional

Investors (“CII”) and Confluence Philanthropy. Additionally, Pegasus Chairs the

Climate Finance Committee of the R20 Regions of Climate Action. More information

on Pegasus and its activities related to ESG and impact investing may be found on

Pegasus’ website.

This ESG Policy may be updated from time to time.

GoodNightTM LED Lamp

Part of LSG’s health-oriented lighting series.

4

5


Sustainability Committee Members

Craig Cogut

Committee Chair (Founding Partner and Chairman of Pegasus)

Eric Gribetz

Senior Management Representative (Co-Managing Partner at Pegasus)

Rick Davis

Senior Management Representative (Chief Operating Officer & Partner at Pegasus;

Chairman of the ESG Working Group)

Alec Machiels

Senior Management Representative (Partner at Pegasus)

Anne Frank-Shapiro

Governance Professional (Chief Compliance & Administrative Officer at Pegasus)

Delilah Rothenberg

ESG & Impact Specialist (Operating Advisor to Pegasus)

Amber Marie Beard

Sustainability Specialist (Operating Advisor to Pegasus)

Terry Tamminen

Sustainability Specialist (Strategic Advisor to Pegasus)

39

As a next step, Pegasus has launched internal trainings on the ESG-MS and is

rolling-out implementation. Although the effectiveness and performance of the

ESG-MS is expected to be formally reviewed by the Sustainability Committee at

least annually, in the first year of implementation, the Firm is planning to conduct

a mid-year (approximately 6 month) review. Additionally, at any point in time, the

ESG-MS may be adjusted with the intent to enhance its effectiveness, pending

review and approval by the Sustainability Committee.

It should be noted that Pegasus has identified additional goals to enhance its

ESG commitments, which may not be reflected in the ESG-MS or ESG Policy.

Such goals are noted throughout this report, as well as in a dedicated section on

future goals at the end of this report.


Pegasus believes the Firm’s extensive network of advisors and industry experts

supports sourcing of proprietary transactions with innovative companies in target

industries. A group of approximately 50 IPs, Operating Advisors and Strategic

Advisors have shaped, and continue to enhance, the Firm’s operational expertise

and deep industry knowledge.

The Operating and Strategic Advisors are experienced professionals in diverse

disciplines including: (i) business and operations; (ii) engineering and science; and

(iii) government and public policy. Pegasus believes the combination of these three

lenses, combined with the IP’s financial acumen, is a key strategic advantage to

the performance of Pegasus-sponsored funds by design. By leveraging the Firm’s

network of Operating and Strategic Advisors across the entire portfolio, Pegasus

believes it can bring a level of expertise that would typically not otherwise be

accessible to any individual portfolio company in the middle market.

Pegasus has and continues to hire advisors for their general sector and ESG expertise

to be applied across the Firm’s needs as they arise. In addition, on behalf of itself and

/ or the funds and their respective portfolio companies, Pegasus engages specific

ESG professionals as consultants or advisors for specific tasks (e.g. working with a

particular portfolio company on energy efficiency initiatives or helping conduct due

diligence on ESG risks in a particular potential investment opportunity).

Pegasus has a number of advisors who each specialize in one or more of the

following ESG areas: ESG integration in the investment process and overall best

practices, impact investing, economic development, sustainable building design

and architecture, environmental engineering, social and environmental policy,

and conservation and biodiversity. Notably, many the Firm’s advisors are globally

recognized leaders in advancing climate change solutions.

It should be noted that governance at Pegasus is overseen by Pegasus’ Chief

Compliance Officer (“CCO”) and Associate General Counsel, as well as the

committees and functions referenced in the Governance section of this report.

Human Capital

Dr. Paul Anastas

Scientist, policy-maker, professor, inventor, teacher, and entrepreneur widely known

as the Father of Green Chemistry and a leader in the area of sustainable technology;

Trained as an organic chemist and has worked in the Administrations of Presidents

Clinton, Bush and Obama; Currently the Teresa and H. John Heinz III Chair of Chemistry

for the Environment at Yale University

Amber Marie Beard

Specialist in global sustainable construction, development, real estate finance and

hospitality with over 10 years of experience; Significant knowledge of LEED and ISO

certifications, as well as construction and real estate in Asia

David Crane

Most recently President & CEO of NRG Energy, a Fortune 250 company and a member

of the S&P 500; Global thought leader in the push towards a clean energy economy

and sustainable development, having won numerous industry, community, and

environmental awards; Previously Executive Director of London-based International

Power and Senior Vice President of Global Power at Lehman Brothers

Costas Christ

Sustainable tourism expert, editor and writer for National Geographic Traveler, Senior

Sustainability Advisor for Virtuoso Ltd, and Chairman for the National Geographic

World Legacy Awards

Jennifer Hickman

Former CEO of an agricultural company that developed food security initiatives in the

UAE; Focused on food, water and identifying and researching “best in class” sustainable

technologies for agricultural production and the residential and commercial building

industry; Member of Sustainia100 Advisory Board, Advisor to Community Investment

Management LLC and IOU Central

Examples of Advisors Focused on Environmental & Social Investment Approaches

Pegasus Operating and Strategic Advisors may change from time-to-time. At the time of this report’s publication, several changes were made, including the addition of Gina McCarthy as an Operating Advisor in 2017.


Gina McCarthy

A 35-year career in public service, most recently as former Administrator of the U.S.

Environmental Protection Agency under President Barack Obama, where she was

the nation’s leading advocate for common-sense strategies to protect public health

and the environment, including efforts to address the challenge of climate change

and ensure protection of the country’s water resources; Since leaving Washington,

she serves as a fellow at Harvard’s Kennedy School of Government’s Institute of

Politics and the Menschel Senior Leadership Fellow at Harvard’s T.H. Chan School of

Public Health

Elodie Michaels

Most recently Vice President of Energy and Sustainability at CBRE, leading the

Americas Energy and Sustainability teams serving Fortune 500 clients; Areas of

technical expertise include biomass, cogeneration, cryogenic pumps, and polymers

Delilah Rothenberg

ESG and impact specialist with over 12 years of experience in financial services and

over eight years focused on developing countries, including application of the EPs,

IFC Performance Standards, and EHS Guidelines with companies such as Citigroup

Peter Scarpelli

Most recently CBRE’s Global Director, Energy & Sustainability, helping to build and

lead a team of over 200 dedicated professionals and subject matter experts on

efficiency and sustainability (e.g. LEED, CDP, GRESB); Received CBRE’s Global

Corporate Service Leadership Award in 2012 and Realcomm’s Julie Devine Digital

Impact Award in June 2016

Rajiv Shah

Currently president of The Rockefeller Foundation; Previously served as Administrator

of the United States Agency for International Development (“USAID”), Under Secretary

and Chief Scientist in the U.S. Department of Agriculture, and spent eight years at

the Bill & Melinda Gates Foundation from its inception, where he led efforts in global

health, agriculture, and financial services

Leslie Tamminen

Consultant for Seventh Generation Advisors, a nonprofit environmental organization;

Director of the Ocean Program, a coalition pushing states to strengthen laws

reducing plastic pollution; Currently appointed as a California Ocean Science Trustee;

Spearheads a number of efforts to create and pass environmental legislation and

promote environmental education

Terry Tamminen

Currently CEO of the Leonardo DiCaprio Foundation; Former Secretary of the

California Environmental Protection Agency and Cabinet Secretary for Governor

Arnold Schwarzenegger; Currently advises governmental leaders globally on energy

and environmental policy matters; Co-founder and Executive Board Member of the


Jamila Yamani

Specialist with a doctorate in chemical engineering from Yale University, with a focus

on green engineering and sustainability; Her research, supported by an EPA STAR

fellowship, included sustainable wastewater management systems and renewable

material development; Previously researched at the National Renewable Energy Lab

Anthony Zolezzi

Environmental entrepreneur and expert in creating greener and more profitable

businesses, having worked with Nestlé, Bumble Bee Seafood, Horizon Organic Dairy,

Wild Oats Markets, Viacom, Paramount Pictures, The Bubba Gump Shrimp Co., Pet

Promise Pet Food, The New Organics Co and Greenopolis

Dr. Julie Zimmerman

Professor at Yale University with joint appointments at the Department of Chemical

and Environmental Engineering and School of Forestry and Environmental Studies;

Established a fundamental framework for the sustainable technology field with

her seminal publications on the “Twelve Principles of Green Engineering” in 2003,

manifesting in breakthroughs on the integrated biorefinery, designing safer chemicals

and materials, sustainable water treatment technologies, and analyses of the water-

energy nexus


Governance

Pegasus believes that strong management of environmental and social issues begins

with governance. Pegasus is led by Craig Cogut, who is supported by a senior

partnership comprised of Eric Gribetz as a Co-Managing Partner, Rick Davis as

Chief Operating Officer (“COO”) and Partner, and Alec Machiels as a Partner. These

Partners comprise the Executive Committee, which reviews material operating

decisions, as well as the IC of the private equity funds Pegasus manages. The

IC reviews and approves transactions, material changes to transactions including

co-investments, and quarterly portfolio company valuations. The CCO, Associate

General Counsel and Chief Financial Officer (“CFO”) and are also included in

Investment Committee meetings.

Craig Cogut

Founding Partner & Chairman

Craig Cogut has spent a career building successful investment

businesses. Mr. Cogut founded Pegasus in 1996 and serves as

its Chairman and President. Through Mr. Cogut’s leadership,

Pegasus has focused increasingly on areas influenced by global

resource scarcity and the need for resource efficiency, as well

as on the growth in demands for human wellness. In 1990

Mr. Cogut co-founded and was one of the original partners at

Apollo, a position he held for five years preceding the creation

of Pegasus. Mr. Cogut is an active philanthropist in the fields

of improving education, building civil society, and championing

environmental and health issues. Mr. Cogut serves as Chairman

of The Polyphony Foundation, an organization that he co-founded

to provide equal opportunity music education for Arab and Jewish Israeli youth. In

addition, Mr. Cogut serves as a board member for Arizona State University’s Global

Institute of Sustainability, for The McCain Institute for International Leadership at

Arizona State University, for the R20 Regions of Climate Action, for Six Senses,

for Lighting Science Group and for PanTheryx. Mr. Cogut is an alumnus of Brown

University and Harvard Law School. Mr. Cogut is a member of the Firm’s Executive,

Investment, Compliance, and Sustainability Committees.

Composition of the IC during 2016: Effective September 25, 2017, David Cogut and Joel Haney, both Principals at Pegasus, were added to the IC.


Eric Gribetz

Co-Managing Partner

Eric Gribetz is Co-Managing Partner of Pegasus and has

been with the firm since 1997. Mr. Gribetz is a member of the

Firm’s Executive, Investment, Compliance, and Sustainability

Committees. He has over 20 years of private equity investing and

investment banking experience. Previously, Mr. Gribetz worked

in the Mergers and Acquisitions Group at Salomon Brothers,

Inc. in New York where he worked on transactions in a broad

array of industries. Investments in which he has been highly

involved in include AmWINS Group, Coffeyville Resources,

Organix, ReCommunity, Traxys and T&M Protection Resources.

He currently serves on the boards of T&M Protection Resources,

Halo, and Spirit Music Group, as well as the New York League

of Conservation Voters Education Fund, Congregation Kehilath Jeshurun and

Hebrew Free Loan Society. Mr. Gribetz graduated with honors from the University of

Pennsylvania’s Wharton School of Business.

Rick Davis

Partner & Chief Operating Officer

Rick Davis is a Partner and COO at Pegasus. Mr. Davis joined

Pegasus as an Operating Partner1 in 2005 and became Partner and

COO in 2010. Mr. Davis is a member of the Executive, Investment,

Compliance, and Sustainability Committees. Mr. Davis has a long

and distinguished career in both the public and private sector.

Having served on President Ronald Reagan’s political team,

Mr. Davis also served in three Reagan Administration Cabinet

Agencies, including as White House Special Assistant to the

President for the Domestic Policy Council. In his capacity in the

White House, Mr. Davis managed all domestic policy development

including issues related to Climate, Energy and Environment.

President George H.W. Bush appointed him as Deputy Executive

Director for the White House Conference on Science and Economic Research

Related to Global Climate Change. While in the private sector, Mr. Davis built

one of the most influential and successful public affairs companies in the United

States. In 2000 and 2008, Mr. Davis served as Senator John McCain’s national

campaign manager leading all aspects of the campaign activity. While serving as

Senator McCain’s chief strategist and political advisor, Mr. Davis was integral in the

development of some key legislative initiatives including groundbreaking Climate

Legislation and Campaign Finance Reform. Mr. Davis currently serves on the Boards

of The McCain Institute for International Leadership at Arizona State University and

Allied Minds. Mr. Davis also serves on the Board of The Environmental Defense

Action Fund developing initiatives and ties to the corporate community that promote

better stewardship of the environment.

Alec Machiels

Partner

Mr. Machiels joined Pegasus in 2002 and is a Partner. Mr. Machiels

is a member of the Executive, Investment, and Sustainability

Committees, as well as the co-chair of the Energy and Wellness

Committee. He has over 17 years of private equity investing and

investment banking experience. Previously, Mr. Machiels was a

Financial Analyst in the Financial Services Group at Goldman Sachs

International in London and in the Private Equity Group at Goldman

Sachs and Co. in New York. Investments in which he has been

highly involved in include Molycorp Minerals, Traxys, Pure Biofuels,

Olympus, Slipstream Communications, Coffeyville Resources, and

Merisant Company. Mr. Machiels currently serves on the boards

of Pure Biofuels, Olympus, Slipstream Communications, NSI, and

Valogix. He was also a member of the Board of Trustees of the American Federation of

Arts and Chair of its Endowment Committee from 2011 to 2013. Mr. Machiels also co-

founded Potentia Pharmaceuticals and Apellis Pharmaceuticals – two biotechnology

companies in the complement immunotherapy space – as well as Revon Systems, a

healthcare IT company. Mr. Machiels is a graduate of Harvard Business School, KU

Leuven Law School in Belgium and Konstanz University in Germany.

1Operating Partner was a prior title for Pegasus Operating Advisors.


Joel Haney

Principal

Joel Haney is a Principal at Pegasus and has been with the

Firm since 2012. Mr. Haney is a member of the Investment

Committee, as well as the co-chair of the Built Environment and

Waste Committees.1 Prior to joining Pegasus, Mr. Haney was an

investment banker at Moelis & Company, where he focused on

mergers & acquisitions, corporate restructurings and financing

transactions across the telecommunications, industrials and

consumer retail sectors. Mr. Haney was previously a research

analyst at Lakeview Investment Group, where he evaluated value-

based investment opportunities for its flagship long-short portfolio.

He currently serves as a director on the boards of the following

Pegasus portfolio companies: Lighting Science Group (“LSG”),

Global Value Lighting (a subsidiary of LSG), Organix Recycling, Plastic Reclamation

Partners and ReCommunity. Mr. Haney also serves on the boards of Impala Energy

Holdings and ZeroBase Energy. Past investments in which he has been highly involved

include Fiberon. Mr. Haney graduated magna cum laude from Northwestern University

with dual majors in Economics and Political Science.

David Cogut

Principal

David Cogut is a Principal at Pegasus Capital Advisors and has

been with the Firm since 2014. Mr. Cogut is a member of the

Investment Committee, as well as the co-chair of the Food &

Agriculture and Wellness Committees.2 Prior to joining Pegasus,

Mr. Cogut was an investment banker at Moelis & Company,

where he focused on mergers & acquisitions, corporate

restructurings and financing transactions across the gaming and

lodging, industrials, media, real estate, and technology sectors.

Investments in which he has been highly involved include Halo,

HTS, Pantheryx, Renaissance Downtowns, Six Senses, and T&M

Protection Resources. He currently serves on the boards of the

following Pegasus portfolio companies: Pantheryx, Six Senses

and Halo. He also serves on the board of ZeroBase Energy and the Advisory Council

for the Institute at Brown for Environment & Society. Mr. Cogut graduated from Brown

University with a major in Economics.

Ethics & Compliance

In terms of ethics and compliance, the Firm has a Compliance Committee comprised

of the Partners, CCO, and Associate General Counsel. The Compliance Committee

oversees the Firm’s adherence to the Compliance Manual and all the rules and

regulations of being a registered investment adviser with the U.S Securities and

Exchange Commission (“SEC”). The Compliance Manual outlines the Firm’s Code

of Ethics and policies and procedures relating to corrupt practices, fraudulent

practices, obstructive practices, abuse, conflicts of interest, retaliation against

whistleblowers and witnesses, money laundering, terrorist financing, among other

good governance factors.

Pegasus is regulated by the SEC under the Investment Advisers’ Act of 1940, as

amended. The Firm’s Compliance Manual was developed with the support of outside

attorneys and an outside compliance advisory firm and is intended to enable us to

meet applicable regulations, as well as to identify and address any potential or actual

violations. Pegasus’ CCO oversees implementation of the Compliance Manual across

the Firm and reports directly to the Compliance Committee.

Employees of Pegasus complete certifications regarding various aspects of the

compliance program on a quarterly and an annual basis. Training on the entire

compliance program is provided annually, and periodically on specific aspects of

the program to all Supervised Individuals, as defined in the Compliance Manual.

For example, a training session for all Pegasus’ Supervised Individuals was held on

the FCPA separately from the annual training session. Additionally, employees and

Operating Advisors complete an Annual Compliance Policies and Conflicts of Interest

Questionnaire.

Pegasus has an external compliance consultant, which conducts an annual

compliance audit of Pegasus. Additionally, an annual U.S GAAP financial audit of the

private equity funds managed by Pegasus is conducted by a third-party auditor.

Each fund has an advisory board comprised of Limited Partners (“LPs”). Pegasus

confers with its fund advisory boards to update them on material developments.

In addition, the advisory board has the right certain approvals as set forth in the

applicable fund’s limited partnership agreement.

Some portfolio company names have been abbreviated in this section. Please see the Portfolio Companies section of this report for full company names.1As of 2017.2As of 2017.


Investment Professionals & Management of the Portfolio

Sourcing

Opportunity Assessment & Due Diligence

Pegasus typically does not participate in auction processes. Instead, the majority

of our transactions, including all of our portfolio companies in Fund V, were

sourced by our IPs or through our network of Operating and Strategic Advisors.

By sourcing deals away from the typical auction process, we believe we mitigate

the risk of overpaying for an asset while also allowing ourselves the flexibility to

negotiate deal terms in a way that further mitigates risk.

In many instances, the Firm employs a top-down method to investing in which

it identifies particular sectors to evaluate growth potential. Pegasus holds

strategy sessions with IPs, Operating Advisors, Strategic Advisors, and portfolio

company executives to explore industries that are well-positioned to capitalize on

such growth. Once a sector is identified, Pegasus assembles a team of IPs and

appropriate Operating / Strategic Advisors with expertise in the identified sector.

The team meets regularly to discuss companies within the sector and explore a

potential fit within the applicable fund.

Once a potential investment opportunity is identified, an investment team is assembled

and assigned by a Partner responsible for staffing assignments to initially screen the

transaction, assessing its suitability and potential return profile. The Firm typically

engages in extensive due diligence prior to any potential investment including, but

not limited to, financial, operational, regulatory, accounting, legal, and tax in addition

to the ESG diligence described above. As every company is different, there are no

set due diligence procedures, with the exception of the ESG-MS procedures.

For each investment, the investment team typically prepares a due diligence request

list to be provided to the target company, makes follow up requests, as necessary,

and engages in multiple on-site visits. The investment team engages outside experts

to conduct due diligence in specific areas as needed, such as general industry, legal,


Once the due diligence process is concluded, the applicable investment team

prepares an investment memo for formal presentation to the IC. The IC reviews both

information found during the due diligence stage and the deal structure proposed

by the investment team. Often, the investment team and the IC will collaborate on

the structure of the potential investment and may meet several times before the IC

is prepared to make a final decision on the proposed transaction. The IC will then

make a formal determination on whether to proceed with the transaction. Once the

IC has determined to proceed with the transaction, any material changes relating

to the transaction will need to be further approved by the IC.

During deal structuring, Pegasus may identify opportunities for companies to

improve various ESG aspects, including those relating to health, safety, resource

efficiency, pollution prevention, contamination clean-up, stakeholder relations

and human rights, labor, biodiversity, cultural heritage preservation, controls and

accountability, policies and procedures, reporting, ethics, among others. Given

that Pegasus typically takes majority and/or control stakes in companies, the Firm

has typically sought to influence the improvement of such aspects through working

closely with the companies and/or participation on their Boards of Directors. This

activity takes place throughout the investment cycle, and opportunities for continuous

improvement may be identified throughout the investment period.

Structuring, Investment Committee Approval & Post-Investment Value Creation

tax, regulatory, insurance and / or environmental. Operating and Strategic Advisors

often assist the IPs in conducting due diligence, as well. A forecast model is built to

project the company’s or an asset’s potential earnings.

From the time of identifying the potential opportunity and throughout the due diligence

process, the investment team is in frequent communication with IC members through

informal conversations to gauge overall interest and discuss the opportunities and

risks associated with the potential investment. Pegasus believes this transparency

provides the Firm with better expense management, as it prevents the accrual of due

diligence costs when the Partners do not support the transaction at any stage, and

it also allows IC members to have greater insight and input into each transaction.

Molycorp was a rare earth oxide mining asset with product end-markets including

hybrid vehicles, consumer electronics, energy efficient lighting, wind turbines,

among others of key importance to global markets. Molycorp was based in a

desert, where water reserves are limited. In acquiring the asset, Pegasus

identified an opportunity to recycle the water used in operations, thereby

lowering the company's costs of water, and resulting in longer duration

of the water resources available. Furthermore, as part of the recycling

process, reagents were extracted and reused, thereby further lowering

costs. Molycorp had continuous and ongoing reporting to the Board

of Directors on matters relating to health, safety, the environment,

and other material ESG topics. During the investment period, a Health,

Environment, Safety, and Sustainability Committee was formed to assist

the Board in fulfilling its responsibilities by overseeing the establishment and

administration of the company's policies, programs and procedures that relate

to health, safety, environment, and sustainability matters.

ESG Improvements Resulting from Pegasus’ Investment

Case Study:

Moving forward, the ESG-MS contemplates the development of time-bound

action plans to close ESG gaps. These action plans are designed to be developed

during the due diligence stage together with management, and then reviewed and

approved by the IC prior to investment. Depending on the situation, commitment

to implement such action plans may be structured into investment agreements, loan

documentation, and / or executive compensation structures moving forward.

It should be noted that since Pegasus typically takes majority and / or control

positions for its private equity investments, the Firm works closely with the respective

management teams on board structure, reporting, compensation, ethics, controls,

among other governance factors.


Holding, Monitoring & Reporting

The Firm’s IPs, led by the Partners, are responsible for the investment process

and are in regular communication with the portfolio companies, receiving frequent

updates from companies on material developments. Pegasus has internal weekly

update meetings involving IPs to discuss such material updates regarding the

portfolio. This includes incident reporting and management. Higher impact incidents

may be reported on a faster timeline.

Regarding incidents, the ESG-MS that was developed throughout 2016 and launched

in 2017 contemplates that incidents with material negative / positive impacts and

their management should be reported to investors. As a goal for 2017, Pegasus

seeks to set more specific parameters and timelines for reporting. The purpose of

this exercise is to ensure good governance, and specifically that:

In 2017, following the initial approval of the ESG-MS, an opportunity for improvement in the ESG-MS was identified in that follow-on acquisitions by portfolio companies should also have similar ESG due diligence and structuring policies and procedures as the portfolio companies themselves. While this was a 2017 activity, it is noted for reference in this 2016 report as a 2017 goal.

Material incidents are defined appropriately for each company

Each company has appropriate policies and procedures for material incidents to be

discussed and addressed immediately, with involvement of the company’s senior

management and board of directors

The above information is communicated appropriately to company personnel

Each portfolio company has its own governance structure, including a board of

directors/managers who also support the responsible management of business

plans and budgets. Pegasus may hold numerous board seats for each of its

portfolio investments. Investments are typically structured to allow Pegasus to

exert significant influence over the direction and management of the relevant

businesses. For investments that Pegasus does not control, Pegasus will generally

obtain negative control rights. One or more Partners share responsibility for

investment decisions and monitoring of the portfolio company with assistance

from the investment team.

Information is shared with the Investor Relations team for quarterly and annual

reporting to investors, as applicable and appropriate. Moving forward, Pegasus will

seek to include ESG Specialists and relevant ESG information in such annual and

quarterly reports.

Pegasus’ funds are audited annually and are required to report using U.S. GAAP

standards. At the portfolio company level, each company has its own systems

for financial management, accounting, and reporting. Each company typically

undergoes an annual financial audit.

Realization

Historically, Pegasus has provided information on various ESG aspects of

investments in their exits on an ad hoc basis, as deemed applicable and appropriate.

For instance, for industrial companies, environmental, health, and safety issues are

typically included in the due diligence information.

Moving forward, the Firm is taking a more formalized approach. As part of Pegasus’

ESG-MS, launched in February 2017, Pegasus intends to communicate a business

case for maintaining ESG best practices post-exit to the buyer. Additionally,

Pegasus intends to communicate value it believes was created and / or preserved

from ESG best practices during the holding period to the buyer.


Pegasus is evaluating methodologies to standardize measurement of financial performance resulting from ESG activity across our portfolio of investments.

As an example of what the Firm aims to capture in development of these methodologies, for its portfolio company, Lighting Science Group, Pegasus

promotes reduction of materials in packaging and product. Reducing packaging on the unique Durabulb LED led to an over 10% decrease in product cost, promoting increased adoption. Using sustainable post-consumer packaging (from blister packs previously) decreased packaging costs by over 50%, leading to reduced prices for consumers and increased adoption of highly energy-efficient LED technology, resulting in over US $1 million of savings across the year.

As another example, a focus on the employee working environment, team building exercises, and incentive programs drove a 22% reduction in turnover

at ReCommunity facilities during winter 2016.

Sources: Company management.

The Business Case for, and Financial Value from, ESG Initiatives

Stakeholder Engagement

Investor & Public Relations

Pegasus’ Investor Relations team, overseen by the COO, is responsible for

managing communications with the Firm’s investors, potential investors, and the

public. Investors are primarily institutional investors, pension funds, insurance

companies, fund-of-funds, sovereign wealth funds, and high net worth individuals.

Engagement with investors typically takes place through quarterly and annual

reports, LP Advisory Board meetings, conference calls, the annual meeting and

other in-person, phone, and written interactions, from time-to-time.

The Investor Relations team also manages the Firm’s website and press releases,

which have been its main methods of external communications to the public.

Moving forward, this annual report is also expected to be made available for the

public through our website. The report is co-managed with ESG Specialists from

the Sustainability Committee and is intended to follow a calendar year reporting

cycle. Given this report is Pegasus’ first Sustainability / ESG / Impact Report, it was

released in Q4 2017 and did not undergo external assurance (although it did go

through an internal review process). Since 2017 will be the first year that Pegasus

expects to leverage GRI metrics, the 2017 report also is not expected to undergo

external assurance. However, its publication is targeted for mid-2018 (earlier in the

year than this publication). The Firm may consider external assurance for the 2018

reporting cycle.

Pegasus also engages the public through its membership in organizations and

through summits and events. Various representatives from across Pegasus’

departments may engage in these initiatives, corresponding to their area of specialty.

Engagement with Portfolio Companies

Pegasus’ IPs and advisors are in contact with portfolio companies on a regular

basis. While the Firm typically works with each company individually, it may from

time-to-time organize group training sessions on various topics for the companies

to share best practices and lessons learned.

Managing Grievances & Feedback

Pegasus has policies and procedures in place to manage grievances from

investors, employees, and staff. Grievances from portfolio companies are managed

by the Firm’s IPs. As a goal for 2017, the Firm is working on enhancement of its

grievance mechanism for the broader public and other stakeholders. Currently,

contact information for the Pegasus team is provided on the Firm’s website for

stakeholders to reach out directly.

Ongoing Management of ESG Integration

In 2016, Pegasus hosted a series of internal meetings to build upon the Firm’s ESG

Leadership Plan. The Firm is also pleased to report that Pegasus has grown its

team of ESG specialists, focused on leading frameworks such as ISO 14001, the

IFC Performance Standards and EHS Guidelines, among others.

These specialists took a leadership role in the launch of the Firm’s ESG Working

Group, which was tasked with the development and roll-out of the ESG-MS.


Throughout 2017 and 2018, Pegasus expects to develop a more formalized approach

to ESG training programs for employees, advisors, staff, and portfolio companies.

Such approaches may include tracking the number of people and positions trained,

number trainings per person, types of training, consideration of additional external

expertise in training, and goals. We may also set ESG performance management

targets for individuals across the firm. New recruitment candidates are already

screened for their support and understanding of sustainability, ESG, and impact.

In 2017, Pegasus expects to conduct a review of its governing committees and

build out their terms of reference.

Annual approval and implementation

of upgrades to the ESG-MS,

including the training programs

Review of appropriate ESG

information in that year’s IC memos

Review of appropriate monitoring,

evaluation and reporting of investees’

ESG aspects

A landscape overview update of ESG

best practices in the private equity

industry

A landscape overview update

of positive impact trends and

opportunities in the private equity

industry

This process is expected to include:

The ESG Working Group includes dedicated ESG Specialists, as well as

representatives from the Investment Professional and Investor Relations teams and

the Associate General Counsel. The Working Group is Chaired by Pegasus’ Partner

& COO, Rick Davis, and overseen by the Sustainability Committee.

The ESG Working Group is also tasked with making recommendations regarding:

ESG best practices to be adopted by

the Firm and their implementation

ESG training programs for the Firm’s

employees, Operating Advisors, and

other consultants

Certification programs to pursue

Participation in ESG-related events,

groups, and gatherings

As previously mentioned, the Sustainability Committee was launched in 2016 to

oversee sustainability, ESG, and impact initiatives and strategy, as well as to oversee

the ESG Working Group’s activities and development and implementation of the

ESG-MS.

The Sustainability Committee is expected to convene semi-annually to review a

report from the Firm’s ESG Specialists on how the ESG-MS has been implemented,

lessons learned, potential risks and / or opportunities, stakeholder relations and

recommended improvements to the ESG-MS. A more formal review of the ESG-

MS is designed to take place annually by the Sustainability Committee, with

recommendations for enhancement considered.

ESG in Fund Documentation

Fund V documentation references Pegasus’ strategy to actively search for

companies offering, or poised to offer, resource-efficient solutions. Also outlined

in the documentation are Pegasus’ priority sustainably-themed investment areas,

as well as the Firm’s affiliation with the R20 Regions of Climate Action. Moving

forward, the Firm expects to reference the ESG Policy and / or ESG-MS in fund

placement documents, such as private placement memorandums. Historically,

Pegasus’ commitment to responsible investment in fund formation contracts

and limited partnership agreements has typically been limited to side letters, as

requested by LPs.

Additionally, in 2016, a review was conducted of the Institutional Limited Partner

Association (“ILPA”) Private Equity Principles, best practices, and tools for

incorporation into fund formation. Takeaways from this review are intended to be

considered in the development of future fund formation documents.


Pegasus’ overall security and risk management objective is to strive to implement

and maintain a TIER 3 Repeatable Security Framework as defined by the NIST

Framework for Improving Critical Infrastructure Cybersecurity. The Firm seeks to

build and maintain its infrastructure in such a manner as to protect the security,

integrity, and confidentiality of the information and applications that may be

deposited on or transition through this equipment. As such, Pegasus takes steps

and precautions intended to ensure that IT infrastructure is designed, purchased,

deployed, and configured in a consistent and secure manner.

Pegasus employs methods and technologies designed to restrict and track access

to facilities (e.g., card readers, biometrics, etc.) and deploys various intrusion

detection/prevention services to detect potential service attacks, as well as anti-

phishing/spam filtering. All Internet traffic coming from and going to the Firm’s

e-mail servers must pass through spam/virus filtering servers or services. These

devices (or services) are designed to filter, quarantine, and/or remove viruses, worms

and other known malware from the e-mail before the e-mail reaches a Pegasus mail

server. To prevent unauthorized disclosure of sensitive and valuable information, all

inbound connectivity that accesses Pegasus systems or networks must be encrypted

with the products approved by the Firm’s Information Security Officer.

Pegasus also follows a strict change management and permissions process

maintained by the Change Management Team. The Firm’s compliance program

includes employee training and the enforcement of its Information Security policies.

Pegasus performs an outsourced security review and vulnerability testing every

twelve months. This review provides for a complete assessment of the current

state of security of Pegasus systems and associated configurations, procedures

and access restrictions.

In 2018, Pegasus intends to conduct a review of cybersecurity best practices and

implementation across it portfolio of investments.

Cybersecurity



Pegasus values a work environment and culture that is inclusive and embraces

the contributions of all employees from a variety of diverse backgrounds. Pegasus

welcomes and supports differences in age, race, color, gender, religion, culture,

national origin, ethnicity, sexual orientation, physical ability, thinking style and

background, and the Firm recognizes that such differences enhance business

strategies and foster a creative, dynamic, and productive workforce. A diverse

workforce encourages a wider range of perspectives that help us reach better

business decisions. Pegasus also acknowledges the benefits of establishing a

network of diverse suppliers in serving the Firm’s clients.

In fostering a diverse and inclusive work environment, Pegasus seeks to:

As Pegasus grows and continues to integrate ESG at both the fund manager and

portfolio company levels, the Firm continues to enhance efforts around diversity

and inclusion. In 2016, Pegasus launched a formal Diversity and Inclusion policy,

assigned a senior manager, set review and evaluation plans, and rolled-out training

programs. In addition, Pegasus has related practices and/or policies regarding

equal employment opportunities, family care, and pregnancy-related absences.

In 2017 and 2018, Pegasus’ ESG Specialists are collaborating with Pegasus’

CCO and COO to identify opportunities for improvement in diversity and inclusion

at the fund-manager and portfolio company levels. Approaches to recruiting,

compensation, benefits, training and professional development, composition of

governance bodies, and others are expected to be covered in this process, as well

as identification of metrics to monitor and evaluate performance over time.

Establish diversity awareness through

periodic mandatory training programs

for all employees

Recruit, hire, retain and promote

employees that help advance a

diverse working environment

As practical, establish relationships

with a diverse supplier network


MembershipAssociations& External Initiatives

Pegasus makes a concerted effort to engage in external events, publications and

multi-stakeholder forums to share the Firm’s thought leadership, learnings, and

best practices with a wide audience, as well as to learn from others.

Pegasus is a Signatory of the UN-PRI, the world’s leading proponent of

responsible investment; UN-PRI works to understand the investment implications

of ESG factors and to support its international network of investor signatories in

integrating these factors into their investment and ownership decisions.

Pegasus is a member of GIIN, which signifies a commitment to deepening

our engagement in the impact investing industry. As part of our engagement,

Pegasus is an active member of the GIIN’s HoldCo Working Group, and a

Pegasus ESG Specialist facilitated a workshop on holding company structures

at the GIIN’s 2016 bi-annual conference in Amsterdam.

Pegasus is an active member of Ceres and its Investor Network on Climate

Risk; Ceres is an advocate for sustainability leadership and mobilizes a powerful

network of investors, companies and public interest groups to accelerate and

expand the adoption of sustainable business practices and solutions to build a

healthy global economy.

In 2016, Pegasus was an Associate Member of the Council of Institutional

Investors, a non-profit, nonpartisan association of corporate, public and union

employee benefit funds and endowments with a focused policy mission: to

be the leading voice for effective corporate governance practices for U.S.

companies and strong shareowner rights and protections.

Pegasus is Chair of the Climate Finance Committee of the R20 Regions of

Climate Action (“R20”), a non-profit organization under leadership of sub-

national and regional governments globally in collaboration with the UN; via

policy, technology and finance, the R20 helps members implement low carbon

economic development projects that measurably reduce GHGs.

2016 Membership Associations & Partnerships


Pegasus has partnered with the Clinton Global Initiative (“CGI”) on a wide

range of important Commitments, including utilizing LED technology to

measure air quality in businesses and bringing healthy LED technology to

residents of public housing. In 2017, CGI is moving forward with a limited

and curated number of commitment partners, and Pegasus is proud to have

been selected for that role.

Pegasus is active in Heartland Capital Strategies (“Heartland”), which

promotes infrastructure investments to both provide strong returns and

revitalize the economy. A Pegasus Director served on the marketing and

development committees for Heartland. Pegasus was a feature fund

in Heartland’s Responsible Investor Handbook published by Greenleaf

Publishing in 2016, highlighted as one of the two featured responsible

private equity advisors and managers.

Pegasus is partnering with Harvard University’s School of Public Health

to explore how lighting and other environmental factors affect health and

performance in schools, hospitals, and among first responders.

In 2017, Pegasus is focused on engaging in further external collaborative efforts

around development of best practices in ESG. For instance, one of the Firm’s

ESG Specialists recently joined the UN-PRI Supply Chains Working Group, and

one of Pegasus’ Partners recently spoke at the Private Equity International PRI

Responsible Investment Forum in New York. Pegasus is also supporting a group of

foundations, family offices, endowments, and high-net-worth individuals on ESG

integration. Through such engagements, the Firm aims to participate in a two-way

exchange of knowledge, learnings and best practices.

Pegasus has continued to take a leadership role in outside engagement, including Chairing

the Climate Finance Committee of the R20, and being involved with the UN Framework

Convention on Climate Change (“UNFCCC”)/COP21. The R20 is a non-profit organization

under the leadership of sub-national and regional governments globally in collaboration

with the UN. Via policy, technology, and finance, the R20 helps members implement low

carbon economic development projects that measurably reduce GHGs. This past year, the

leadership of COP21 engaged the R20 and Pegasus to demonstrate to investors how climate

goals can be achieved via finance. This initiative resulted in the publication of two public

reports, titled “Scaling Up: Local to Global Climate Action”1 and, “Climate Finance: A Status

Report & Action Plan”2. These reports are posted to the Pegasus website.

Additionally, through the Firm’s relationship with the R20, Pegasus is an active member of

the Climate Finance Advisory Committee (“CFAC”), which was established by the R20 to

close the gap between need and committed resources, in order to catalyze climate finance,

identified as a critical component to the global agreement signed at the UNFCCC’s COP21.

The aim of CFAC is to address these gaps through creating the best and fastest available

approaches to new funds and project development mechanisms, collaborating with

innovative developers, working with de-risking mechanisms, facilitating access to existing

green funds, and to share information and lessons learned in conferences, working groups,

events and online.


In Depth

1http://regions20.org/images/ScalingUp.pdf2http://regions20.org/images/ClimateFinance.pdf

Pegasus is an Advisor Member of Confluence Philanthropy, a non-profit,

membership-based network of foundations, family and individual investors,

and their investment advisors. Confluence seeks to advance mission-

related investing by supporting and catalyzing its members to integrate their

investment strategies into their social and/or environmental impact goals.


Thought Leadership

Internal Working Groups

In addition to investing activities, Pegasus strives to take a leadership role in global

environmental and social initiatives promoting responsible investment. Several

examples include:

Sponsoring summits and

publications, such as the Zero Waste

Summit in 2013, Public Pension

Fund Investments & Investing in

Renewables Summit in 2014,

and wellness summits

Working closely with municipal

governments in developing strategies

to achieve environmental goals

Speaking at various impact and ESG

events and participating in organizations

and external working groups

(please see select summaries on the company website: http://www.pcalp.com/thought-leadership/)

From time-to-time, Pegasus may establish working groups on various topics to

enhance internal knowledge and performance on matters of interest. Participation

in these working groups may also include representation from across the Firm,

including Operating and Strategic Advisors and external experts.

In addition to the ESG Working Group, in 2016 Pegasus maintained a Wellness

Working Group that is comprised of leading international experts and reputable

doctors in the field of health and wellness. The Wellness Working Group met

regularly to discuss aspects of global health, as well as associated risks and

opportunities for Pegasus to potentially address in future investments in technology

and/or services.

Pegasus representatives frequently participate in speaking engagements and

industry working groups relating to ESG best practices.

Philanthropy

In addition to Pegasus’ investing activities, a number of Partners, employees, staff,

advisors, and portfolio companies are engaged in philanthropic activities. Pegasus

encourages philanthropic work and is currently evaluating the development of a

Firm-sponsored foundation to pursue additional philanthropic initiatives. Examples

of current involvement include, but are not limited to:

Involvement: Organization founded by Pegasus Founder and Chairman, Craig Cogut

Description: Unites Arab and Israeli youth (currently over 6,000) through music programs, while providing employment and traning to over 100 teachers; through the common language of music, youth learn to look beyond their differences to see the culture, connection and humanity they share

Description: Six Senses engages in a number of philanthropic CSR initiatives, including:

Partnership with Yao Noi and Geo-Life to support clean water

projects in South East Asia; so far approximately 2,800

households have been provided clean water

Partnership with ENV to develop and manage an outpost on

Con Dao Island to reduce demand of marine turtles and their

eggs and eliminate the trade

Partnership with Blue Marine Foundation on a multi-year

grouper repopulation project in the Maldives; additional

partnership with the Manta Trust on manta research and

preservation projects


Involvement: Pegasus Partner and COO, Rick Davis, serves on the Board of Directors of EDF Action

Description: EDF Action is the advocacy partner of Environmental Defense Fund, building strong, bipartisan support for transformative environmental protections; EDF Action works toward revitalizing fragile wetlands, keeping toxic chemicals out of homes and bodies, and delivering climate change solutions

Involvement: Pegasus Co-Managing Partner, Eric Gribetz, serves on the Board of Directors

Description: The Hebrew Free Loan Society fosters economic self-sufficiency and economic security among New Yorkers in need through interest-free lending

Involvement: Pegasus Co-Managing Partner, Eric Gribetz, is on the Board of Directors

Description: The New York League of Conservation Voters (“NYLCV”) educates the public on environmental issues; its mission is to educate, engage and empower New Yorkers to be effective advocates on behalf of the environment — from clean energy and funding for parks, to solid waste and green buildings

Involvement: Pegasus Vice President & Associate General Counsel serves as a Board Member

Description: Mikey’s Way’s mission is to enrich the lives of children suffering from cancer and other life threatening illnesses; the foundation strives to create connection and diversion to help children face the emotional and physical hardships of long term, debilitating treatment; the foundation accomplishes this with the use of today’s technology—laptop computers, tablets, iPod Touch and other Wi-Fi ready electronics—to help children stay connected with their family, friends and school

Involvement: Pegasus CCO & CAO, Anne Frank-Shapiro, is on the Board of Directors

Description: Town Hall is a 1,500 seat national historic landmark venue in the heart of New York City created by suffragists in 1921 and home of countless cultural and musical milestones; it has played an integral part in the electrifying cultural fabric of New York City for more than 90 years

In 2016, Pegasus identified opportunities to improve its own office operations and

carbon footprint, by enhancing efforts around the reduction of disposable materials,

reuse of materials, and recycling. Pegasus is also identifying opportunities to reduce

and offset the Firm’s emissions, both in the office and for travel. Additionally,

while Pegasus does not have a significant water footprint, this is still an important

consideration for the Firm. Goals and training programs around sustainability are

being developed in 2017 and will be refined and updated as needed moving forward.

Environmental Sustainability

within Pegasus Operations


Portfolio Company Reporting


As part of the roll-out of the ESG-MS, Pegasus has committed to producing an annual

Sustainability & ESG Impact Report, commencing with the calendar year 2016. This

report is the first in the initiative.

Although the ESG-MS had not been completed by the end of 2016, Pegasus’ ESG

Specialists reached out to each portfolio company to collect available 2016 data

relating to the topics from the 2015 pilot reporting, as well as social and governance

matters, such as stakeholder engagement, labor relations, health, safety, security,

human rights, supply chain / responsible sourcing, positive impacts for beneficiaries,

philanthropic initiatives, among others. Each Fund V company was also asked to

identify the top two to three SDGs that align with their core business.

This process was led by two of Pegasus’ ESG Specialists, working together with the

Firm’s IPs and portfolio companies. It included an ESG training presentation that was

distributed to each of the IPs and portfolio companies. Pegasus’ ESG Specialists then

arranged calls with each portfolio company and its IPs to provide one-on-one training,

answer questions, and discuss a strategy for ESG engagement moving forward. Data

was collected that could inform both this report, as well as reporting to LPs at the 2016

Pegasus annual meeting.

Additionally, Pegasus ESG Specialists followed-up with each portfolio company in

early 2017 to systematically identify metrics and KPIs material to their businesses that

could be reported upon in future confidential quarterly and / or annual reports to LPs,

as well as non-confidential information for the 2017 annual public sustainability / ESG

/ impact report (for publication in 2018). While Pegasus has reported on material ESG

issues in the past to LPs on an ad hoc basis, the initiatives described here formalize a

more comprehensive process.

In addition to being used internally, out of this information, Fund V highlights were

summarized for investors in the 2016 annual LP meeting presentation. Pegasus also

developed an ESG / Impact Overview presentation using selections of this information

for various stakeholders interested in learning about ESG at Pegasus. The information

collected in this process serves as the basis for the data within this Sustainability

Report, in addition to incremental data that was then collected in 2017.

Introduction & Approach Global Reporting Initiative (“GRI”) disclosures were selected as the main reporting

framework for future reporting (commencing with the 2017 report, which is expected

to be published in early 2018). While most of Pegasus’ portfolio companies are much

smaller than the typical company that reports using GRI, and they do not have the

same internal resources for data collection and tracking, GRI is one of the most widely

used and comprehensive sets of sustainability and ESG disclosures, covering ESG

risks and opportunities relevant to numerous types of stakeholders.

GRI’s disclosures are either already mapped or are being mapped to other frameworks

of interest to Pegasus and its stakeholders, including the SDGs, SASB, and IRIS. In

order to account for the scale and capacity of each of Pegasus’ companies, the Firm’s

ESG Specialists worked with each company to review the GRI disclosures and select

those most material to them.

Some of this information is expected to remain within Pegasus to support the

Firm’s ESG capacity building with the companies. Information expected to be of

interest to Pegasus’ investors will be reported to the investors, and a high-level

non-confidential summary of each company and related ESG and impact activity is

expected to be published in the publicly-available (on the Pegasus website) Annual

Sustainability & ESG Impact Report.

Pegasus references SASB’s approach for determining what ESG factors are

material to each portfolio company, as well as to the Firm’s own operations.

At times, we may also reference ESG issues flagged by industry in the CDC

ESG Toolkit for Fund Managers. In 2017, we continue to evaluate various

approaches to defining materiality to ensure our approach is consistent

with best practices. Furthermore, we recognize that there may be issues

“salient” to human rights that may not always be captured by traditional

approaches to materiality. As such, we are evaluating best practices around

identifying these salient issues and how these might be applied to our

portfolio companies.

Materiality & Saliency


Pegasus Supports the United Nations’

Sustainable Development Goals

The 17 SDGs, each assigned its own number, define global sustainable

development priorities and aspirations for 2030

SDGs seek to mobilize global efforts around a

common set of goals and targets

SDGs call for worldwide action among governments,

business and civil society

Fund V companies each identified the "top 3" SDGs aligning with their strategies

As a firm, Pegasus contributes to both SDG 16 and 17 through events, publications

and global partnerships; we may consider aligning with additional SDGs as goals

for 2017 and 2018

Sustainability & Wellness Investments

80

90

92

100

106

110

118

128

140

148

152

Pegasus’ Portfolio of Investments

This section describes companies that were either in Pegasus’ portfolios since the beginning of 2016, or that entered the Pegasus portfolios in 2016.

This reporting excludes Fund II’s interest in Vaccinogen and Fund III’s interest in T-II Holdings, LLC. Both of these interests are legacy, minority positions remaining after the realization of their respective core assets.

All companies are headquarted in USA unless otherwise specified.

Not all company ESG-related policies and procedures may be mentioned in this report. We expect to review our approach to this for our 2017 report with the goal of more consistent and comprehensive data.

Investments Exited in 2016

Pantheryx

SleepScore Labs

ReCommunity

Pure Biofuels

Accordant Energy

Six Senses Spa Resorts Hotels

Lighting Science Group

Renaissance Downtowns

Halo

KGS

Organix

Legacy Investments

158

160

162

166

168

172

174

CRI

HTS

NSI

Spirit Music Group

T&M

Valogix

Olympus

178

Pegasus invested in Plastic Reclamation Partners (“PRP”) in 2013 within Fund V. Pegasus decided to shut down PRP’s lone facility in Chicago and discontinue operations. Pegasus has categorized PRP as a “Category B” using the IFC’s and Equator Principles’ E&S assessment approaches. PRP has EHS risks that are limited, largely reversible and manageable through mitigation measures, benchmarked to national and local laws and regulations.

Pegasus invested in LinkBee in 2016 within Fund V. Founded in 2016, and based in Sunnyvale, California, LinkBee sought to redefine the smart home with a proprietary end-to-end solution that they install for the customer. Due to substantial increased competition in the smart home market, Pegasus and the company have decided to halt additional capital investment and begin winding down operations. Pegasus has categorized LinkBee as a “Category C” using the IFC’s and Equator Principles’ E&S assessment approaches.

Pegasus invested in Ark Investment Partners (“Ark”) in Fund II in 2002. Headquartered in New York, NY, Ark is a special-ty finance company that makes secured loans and other structured investments in various entities and assets, including real estate and other industries. The company no longer has significant ongoing operations. As a small-scale specialty finance company operating in OECD markets, with limited supply chain activity, Pegasus categorizes Ark as a “Category C” investment using the IFC’s and Equator Principles’ E&S risk assessment approaches.

80 81Pegasus Capital Advisors | Annual Sustainability & ESG Impact Report 2016 | Sustainability & Wellness Investments

Pegasus invested in PanTheryx in 2015 within Fund V. PanTheryx is a vertically

integrated nutribiome company headquartered in Boulder, Colorado. Founded in

2007, the company is dedicated to developing and marketing innovative nutritional

interventions for major global health issues. Utilizing its broad-based, patented

technology platform, PanTheryx is developing products that contain natural

immunoglobulins, anti-microbial immune factors such as lactoferrin and lysozyme,

oligosaccharides, and other bioactive ingredients. Products target conditions that

affect the gastrointestinal microbiome, such as infectious diarrhea, environmental

enteropathy, and gut barrier function ailments such as Intestinal Barrier Disease,

and C-difficile. The company’s first commercialized product, DiaResQ, addresses

acute infectious diarrhea, a leading cause of death worldwide among children

under the age of five.

In addition to DiaResQ and the other platform products in its pipeline, PanTheryx is

a leading manufacturer of bovine colostrum products in the world. Through its APS

BioGroup and La Belle Associates subsidiaries, the company collects colostrum

from over one million cows at USDA Grade A dairies across the United States.

PanTheryx’s colostrum products are distributed globally for both human and animal

health indications. Bovine colostrum is widely recognized as a natural food for the

developing microbiome in all mammals and is a key ingredient in DiaResQ and

PanTheryx’s future platform products.

PanTheryx self-distributes its products in the United States. The company’s

international business model is to partner with leading pharmaceutical companies,

leveraging their local knowledge, market expertise, and distribution capabilities to

commercialize their products in countries where they operate. The company has

established marketing and distribution partnerships with leading companies in India,

Indonesia, Russia, Columbia, Vietnam, Ukraine, Malaysia, Myanmar, Singapore,

Nepal, Sri Lanka, Kazakhstan, Uzbekistan, Romania, Belarus, Brunei, Jamaica,

Mexico, Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica, Panama,

AboutPanTheryxPegasus 2016 Sustainability Report

Company Profile

PanTheryx E&S Risk Categorization: Pegasus has categorized PanTheryx as a “Category B” using the IFC’s and Equator Principles’ E&S assessment approaches. Clinical trials and regulations help manage risks to health and safety. Manufacturing facilities are periodically inspected for environment, health and safety. As the company grows, it will consider its supply chains / subsidiaries through which it sources in order to further manage ESG risks (e.g. the company sources dairy products and manufactures internationally).


packaged colostrum products in the form of capsules, tablets, individual sachets

and packaged powders for human and animal applications. PanTheryx also contract

manufactures more than 200 non-colostrum private label health supplements.

PanTheryx’s colostrum products are exported to more than 50 countries around

the world.

Dominican Republic, Argentina, Bolivia, Chile, Ecuador, Guyana, Paraguay, Peru,

Surinam, Trinidad y Tobago, Uruguay, Venezuela.

PanTheryx manufactures its products at its Phoenix, Arizona facility and has

established a manufacturing partnership in Malaysia to service certain international

markets. The company is actively seeking marketing and distribution partnerships

with leading pharmaceutical and consumer health care companies in select markets

in Asia, Africa, and the Middle East.

Additionally, partnerships with institutions such as NGOs, charitable organizations and

governments are an important element to the company’s overall business strategy.

DiaResQ

PanTheryx’s lead product, DiaResQ, addresses acute infectious diarrhea, a leading

cause of death worldwide among children under the age of five. DiaResQ

is a food for special dietary use that provides important nutrients

beneficial for people with diarrhea. The product is effective

in diarrhea caused by viral pathogens, such as rotavirus,

bacterial pathogens such as E-coli, and toxins. Studies have

demonstrated that DiaResQ has none of the side effects

commonly associated with common drug treatments.1

DiaResQ was selected in the IC2030 report, “Reimagining

Global Health” as one of the 30 leading healthcare innovations

with great promise to transform global health by 2030. This

recognition was led by the organization, PATH, and supported

by the Bill & Melinda Gates Foundation and USAID, among others.

The Innovation Countdown 2030 aims to accelerate high-potential

innovations to improve health and save lives. More than 500 innovations were

nominated for consideration. Dozens of leading international health experts

evaluated and ranked each innovation, selecting the top 30, of which DiaResQ

was one of only 12 innovations recognized in the maternal, newborn and child

health categories.

Through its APS BioGroup and La Belle Associate subsidiaries, PanTheryx also

produces a wide range of bulk colostrum products, as well as consumer-ready

Company Profile | Pantheryx

1Source: Company management.

Diarrhea is a life threatening top global health concern, representing 9% of child

deaths worldwide, second only to pneumonia.2 The World Health Organization

(“WHO”) estimates that worldwide there are 1.7 billion infectious diarrhea cases

annually among children under age five. Roughly 500 million children under five

die each year from diarrhea complications, killing nearly as many children as HIV/

AIDS, malaria, and measles combined.3

PanTheryx has been engaged in the discovery and development of its proprietary

technology platform, advancing clinical testing and the commercialization of its

products that both address the specific dietary needs of children with infectious

diarrhea, and support overall intestinal health.

Until now, there has not been a good solution to shortening the duration of diarrhea

episodes. The current standard of care recommended by the WHO recommends

the use of oral rehydration solution (“ORS”), along with zinc supplementation

during diarrhea episodes. ORS replenishes the necessary fluids and electrolytes

that are lost during diarrhea episodes, but does not have an impact on the duration

of the episode. Zinc supports cell-mediated immunity and reduces the duration of

a diarrhea episode by approximately 15%.4

DiaResQ helps to reduce the duration of diarrhea episodes by providing micro-

and macronutrients along with naturally occurring immunoglobulins and immune

factors to promote the innate intestinal repair mechanism of, and provide immune

support for, people with diarrhea.

ESG Highlights

2UNICEF, 2016.3Source: United States Center for Disease Control, 2016.4Source: Company management.


Foods for special dietary use, medical foods and dietary supplements must have

scientific substantiation for claims related to the product. In order to be compliant

with regulatory requirements globally, PanTheryx follows local regulatory and legal

requirements in each country of distribution.

Manufacturing

PanTheryx has established global manufacturing positions to support product

requirements and the growing needs of its customers. Commercial-scale production

is carried out in both the United States and Malaysia, enhancing efficient supply

of products on a regional basis. Manufacturing facilities seek to operate in

compliance with all applicable current Good Manufacturing Practices as well as

Hazard Analysis Critical Control Point requirements and are readily expandable to

rapidly increase production capacity.

Manufacturing is performed in compliance with applicable local laws and regulations.

PanTheryx’s La Belle subsidiary’s manufacturing operations also comply with

Purina’s SMETA – Sedex Members Ethical Trade Audit, which mandates ethical and

safe treatment of workers and the environment. The manufacturing plant in Malaysia

has a certified ISO 22000:2005 Food Safety Management System fully implemented.

An ESG goal for 2017 is reviewing manufacturing and sourcing operations to ensure

best practices in line with Pegasus’ ESG-MS. This includes a review of opportunities

for ESG enhancement in the company’s dairy supply chain, particularly in regards

to animal welfare and climate change (social aspects will also be reviewed).

All employees of PanTheryx’s colostrum manufacturing subsidiaries, including factory

workers, receive training on Quality, Health, Safety, Security & the Environment, at

least once per year. Trainings are done by the company’s regulatory specialists,

outside agencies (insurance companies), and/or employment law attorneys.

When PanTheryx purchased the manufacturing facility, APS, the company’s worker’s

compensation provider reviewed safety in its plant and has provided feedback as

to how the company can improve the safety of its operations. PanTheryx has taken

corrective action on nearly all of the items, with targeted completion by the end of

2017. Safety trainings are conducted on a plant-wide basis at least quarterly.

PanTheryx has identified the following as the top three SDGs that most align with

its core business and strategy. The company expects to expand upon how it

addresses specific underlying indicators for each of these SDGs in its 2017 annual

reporting to Pegasus:


Valuing Human Capital

With the acquisition of two colostrum manufacturers in 2016, PanTheryx expanded

its employee count from approximately 17 to 150 full-time equivalent employees

across its operations. The senior leadership team is comprised of 30% females.

PanTheryx offers medical, dental and vision insurance to all employees who work

over 30 hours per week. They also offer short-term disability, long-term disability,

life insurance and a 401K plan (with company matching up to a certain amount) to

all employees who work more than 30 hours per week. Compensation for each

position has been determined by industry standards, experience and/or education.

Pantheryx is an Equal Opportunity Employer and has a non-discrimination policy

in place.

Product Health & Safety

PanTheryx products are composed of specialized nutritional ingredients with a long

history of safe use. In three separate open-label clinical trials and one double-blind

placebo control trial, DiaResQ has demonstrated to be both safe and beneficial.

PanTheryx’s current and planned medical nutrition products fall into three specific

regulatory categories that govern how they are classified and marketed in various

countries. In the US, the FDA has oversight of these categories, which include

Medical Foods, Foods for Special Dietary Use, and Dietary Supplements. In Europe,

Foods for Special Medical Purposes are regulated by the European Commission.

Other countries have similar regulatory oversight for nutritional products.


Incidents (reportable injuries) are reported to the employee’s immediate

supervisor, then human resources, who reports to senior management. Worker’s

compensation injuries reviews are completed, claims are filed as necessary, and

then they are processed. Employees who have an incident are required to be

taken to a local industrial clinic for examination. All incidents are reported to the

company’s workmen’s compensation provider and the industrial commission. The

company is reviewing its policies and procedures on incident reporting to the

Board of Directors.

The company’s LaBelle manufacturing subsidiary had a number of claims filed in

2016 under their workman’s compensation plan. The type of claims filed varied

depending upon the injury. PanTheryx is working closely with the company’s

worker’s compensation insurance provider to reduce the number of claims filed by

25% in 2017. The La Belle facility reported 15 incidents, and the PanTheryx facility

reported zero incidents in 2016. Claims were minor in nature.

Grievance Management

Human Resource complaints are managed by the human resource department and

corporate counsel in accordance with the company’s written complaint resolution

procedure. Customer complaints are handled by the sales and quality control

departments. The company does not have a complaint reporting hotline, but does

have formal written anti-discrimination, anti-harassment, complaint reporting and

resolution, and non-retaliation policies. All complaints are reported to the General

Counsel and CEO, as appropriate.

Philanthropic Initiatives

The Equity of Access Initiative (“EAI”) is the cornerstone of PanTheryx’s social

responsibility program and represents the company’s strong commitment to

ensuring that the poorest, neediest, and most at-risk populations have access

to the benefits of DiaResQ regardless of how hard it is to reach them or their

ability to pay. The EAI is funded by charitable donations and in-kind support from

PanTheryx and its partners. All donations to the program are tax deductible. The

EAI is focused on providing, free of charge, diarrhea prevention and treatment

education, access to ORS and DiaResQ, and other medical supplies required

by underserved rural and low-income populations who are most susceptible to

diarrheal disease.


Working with its partner, Project C.U.R.E., PanTheryx has developed a comprehensive diarrhea prevention and treatment training that is offered free-of-charge and expense paid to community healthcare workers (“CHW”s). The design of the training program is based on internationally accepted standards for training on the management of diarrheal disease using information and guidelines from the WHO, UNICEF, USAID, and the World Gastroenterology Organization, as well as current peer reviewed literature.

Education

There are three key facets to the EAI program:

Prior to the training, Project C.U.R.E. will conduct a custom “needs analysis” for each clinic that participates in the program. Each CHW that participates then receives a free supply of DiaResQ and other donated medical supplies that are custom-tailored to their community’s specific needs. Each container of DiaResQ and donated medical supplies has an estimated value of US$600,000 to US$800,000.

Distribution

The cornerstone of the EAI is a commitment to measure the impact of the program on the communities served. This is accomplished by tracking key program performance and quality-of-life indicators such as the percentage of identified CHW’s that receive training, competency on post-training objective structured clinical examination, post-training use of DiaResQ by CHW’s, reductions in antibiotic and other disfavored therapies, hospitalization referral rates, and, where logistically possible, diarrhea episode duration. Monitoring and evaluation is an iterative process, initiated with the conception of the project and continued through its course. Data is collected in each country, and evaluations are performed at baseline, midline, and endline in order to support successful rollout, implementation and impact assessment.

Accountability


In addition to Pegasus’ ESG and impact goals for all portfolio companies, Pegasus

and PanTheryx have identified a number of company-specific goals for 2017 to

enhance current practices, including enhanced measurement and data collection

of outputs and outcomes from philanthropic initiatives.

Working with a private donor and Project C.U.R.E., the company distributed more

than 30,000 doses of DiaResQ in Haiti in 2016, where the product is demonstrating

excellent efficacy. In 2017, the company is implementing EAI programs for Mexico,

India, Pakistan and Guatemala.

Goals for 2017 to 2018



SleepScore LabsPegasus 2016 Sustainability Report

Company Profile

Pegasus invested in SleepScore Labs in 2016 within Fund V. Having been founded in that same year, the company operates out of San Diego, CA and was developed in order to address one of our largest underserved public health issues: sleep. SleepScore Labs licenses, develops, and uses technology to evaluate, assess, and stratify consumer sleep issues, and connect consumers with solutions to improve their sleep.

Sleep is critical component of human health. According to the United States Centers for Disease Control and Prevention, 35% or 40.6 million of American adults are sleeping seven or fewer hours a day.1

Sleeping less than seven hours per day is associated with increased health risks, including development of chronic conditions such as obesity, diabetes, high blood pressure, heart disease, stroke, and frequent mental distress. Night shift workers, particularly those in transportation, warehouse and health care industries, are at the most risk of not getting enough sleep. This has negative implications through potential accidents. Furthermore, in addition to physical well-being, sleep also has impact on emotional well-being. These conditions not only impact the individual, but also society, through decreased productivity and rising health care costs.

Pegasus is working closely with the management team to develop an approach to measuring its positive impacts, as well as best ESG practices as a foundation for the company’s growth.

SleepScore Labs has identified the following as the top two SDGs that most align with its core business and strategy. The company expects to expand upon how it addresses

specific underlying indicators for the below SDGs in its 2017 annual reporting to Pegasus:

About

SleepScore Labs E&S Risk Categorization: As a company which brings together technology with scientific knowledge to deliver sleep solutions to consumers with minimal supply chain inputs, Pegasus has categorized SleepScore Labs as a “Category C” using the IFC’s and Equator Principles’ E&S assessment approaches. 1Source: The United States Centers for Disease Control and Prevention, 2016.


Pegasus invested in ReCommunity in 2011 within its Fund V. Based in Charlotte,

North Carolina, ReCommunity is a platform investment dedicated to diverting

waste streams from landfills and directing recovered resources to their highest

and best use – as clean, efficient, and cost-effective commodities, value-added

recycled products and energy sources. The company is a leading processor of

recycled commodities across the U.S. and operates material recovery facilities

which receive, sort, bale and resell recyclable materials originating from municipal

solid waste streams.

About

Contributing to a Circular Economy

On ReCommunity’s road to a zero waste vision, there are a host of efforts, investments

and commitments to innovation and technology. These commitments include:

ESG Highlights

Conversion of dual stream recycling into single stream technology (an approach to recycling that doesn’t require consumers to separate their recyclable waste; this approach is adopted with the goal to enhance the overall rate of materials recycled)

More large, convenient, and innovative recycling bins

New ways and educational efforts to secure active recycling behavior at home, at work, and in schools

Utilizing state-of-the–art recycling equipment to maximize the recovery of the highest and best use recyclables

ReCommunity E&S Risk Categorization: Pegasus has categorized ReCommunity as a “Category B” using the IFC’s and Equator Principles’ E&S assessment approaches. ReCommunity has EHS risks that are limited, largely reversible and manageable through mitigation measures, benchmarked to national and local laws and regulations.

ReCommunityPegasus 2016 Sustainability Report

Company Profile


Additionally, a new facility is expected to divert 2 million pounds of plastic from

landfills annually.

ReCommunity has identified the following as the top three SDGs that most align

with its core business and strategy. The company expects to expand upon how it



Operating Responsibly

ReCommunity has a strong commitment to environmental, health and safety

measures for the company’s staff and surrounding environment.

ReCommunity has approximately 1,600 employees across its

operations, consisting of approximately 1,200 full-time

employees and 400 to 500 temporary employees. There

was no notable change in headcount in 2016. A benefits

package is offered to full-time employees, including

three options of medical and dental plans to choose

from depending on the employee’s needs, as well

as a vision plan. Basic life insurance and Accidental

Death and Dismemberment coverage is provided, and

additional coverage may be purchased. ReCommunity

offers flexible spending accounts, provides access to

a network of attorneys, and offers a 401k plan with an

employer match. An Employee Assistance Program (work life

balance assistance) and Travel Assistance (worldwide emergency

travel assistance) are available. ReCommunity’s temporary employee staffing

agencies are required to carry worker’s compensation, and recordable injuries

are listed in ReCommunity’s OSHA 300 log. The company continues to evaluate

opportunities to ensure that it does not just contribute to job creation, but also

provides quality jobs.

Positive Impacts

In 2016, ReCommunity took in and processed just over 1.8 million tons of material

collected by community partners as part of their recycling programs, and shipped

approximately 1.7 million tons of recyclable materials (“commodities”). The

variance between the inbound and outbound is non-program material (“residue”)

that generators commingle with recyclables. The company works with its municipal

customers in an effort to minimize residue and divert as much material as possible

away from landfill disposal, resulting in more environmentally friendly end-products.

ReCommunity is pleased to report that its operations in 2016 resulted in:

Since inception in 2011, ReCommunity has become the largest pure-play recycler in

North America and continues to grow. Currently, the company operates 27 facilities

across 14 states, crediting its success and growth largely to the communities it

serves that share its vision.

Company Profile | ReCommunity

A reduction of approximately 5.3 million MT in GHG emissions, or, by comparison, equivalent to:

Approximately a million fewer cars on the road

Over half a billion fewer gallons of gasoline burned

A reduced need for landfill space by approximately 2.6 million cubic yards, or, by comparison, equivalent to:

520,000 truckloads

The volume of two Empire State Buildings

Close to half the size of the Hoover Dam

A reduction in wastewater from landfill space by approximately 17.6 million gallons, or, by comparison, equivalent to:

25.2 Olympic sized swimming pools

220,000 bathtubs

2.2 million dishwasher cycles

11 million flushes of a low-flow toilet1




ReCommunity’s employees support many small, local efforts such as plastic drives,

Ronald McDonald House, etc. Every employee is allotted and encouraged to take

eight hours of paid time to volunteer every year. This could entail a full day at Habitat

for Humanity or an hour each day of reading to students. The company participates

in local activities such as Susan Komen Breast Cancer Walk, Jr Diabetes Walk and

community cleanup, among others.

2016 Highlight

In 2016, ReCommunity invested in a Ballistic Separator for its Camden, NJ facility.

This new piece of equipment utilizes a rotating section of boards to sift recycling

more effectively than previous machinery. It operates by moving the fiber (cardboard,

newspaper, mixed paper) up and over the machine, while allowing the 3-D items

(plastic water/soda bottles, aluminum cans) to roll backwards into another separate

component of the line for processing. This has resulted in more efficient separation

of the two distinct streams, leading to a number of beneficial environmental impacts:

Fewer missed recyclables in the residue (trash): Through the first several months of

production the company witnessed 1.7% fewer recyclables making their way into

its end of the line residue (this equates to landfill avoidance of approximately four

million pounds per year)

Increased capture of plastics: This more efficient separation keeps fiber out of the

container production line, allowing for more effective capture of high value plastics

(optical sorters are not blocked by pieces of cardboard/paper and can “see” the

plastic bottles better); annualized, the Camden facility is now able to capture two

million more pounds of plastic

Eliminated difficult manual sort positions and improved material quality at other

manual sort locations

ReCommunity has an Environmental, Health & Safety (“EH&S”) program overseen

by an EH&S Compliance Manager. Trainings take place upon employment and are

ongoing (monthly), with regular, pre-set daily safety meetings, tool talks, and special

training sessions. Training includes personal safety and equipment, spill prevention

and control, fire safety and the reporting of all accidents and unsafe conditions,

among other matters.

ReCommunity reports to senior management immediately on incidents and monthly

on safety statistics in terms of number of incidents, incident rates and days away

or restricted from work. Material incidents are reported to the Board. In 2016, the

company’s incident rate was lower than industry average. All such matters are tracked

in an online database to ensure they are reported correctly for Occupational Safety

and Health Administration (“OSHA“) purposes, and to ensure the implementation

of any necessary mitigation measures to maintain a safe working environment for

all employees.

An ethics hotline is reachable through the company’s website to encourage open

and honest communications for employees internally, as well as for the public to

communicate complaints, suggestions and feedback.

The Charlotte, Mecklenburg facility has been ISO 14001 certified for Environmental

Management Systems since 2009, and the facility’s staff are trained in standardized

environmental management. The company is considering opportunities to certify

additional facilities.

ReCommunity has a section of their corporate website dedicated to public education on the benefits of recycling. It is called the Education Station and includes videos, lesson plans for grade school children, virtual tours of a recycling facility, important definitions, along with other relevant information. ReCommunity also sponsors site visits to the majority of its operational facilities and works with its municipal customers on educational campaigns to keep non-program materials (contaminants) out of the recycling stream.

Education




and ReCommunity have identified a number of company-specific goals to enhance

current ESG practices for 2017, including:

Consideration of ISO 14001 certifications for additional facilities

Development of a more formalized approach to measuring GHG emissions

Enhancement of EH&S policies, procedures, implementation, and reporting




In 2012, Pegasus acquired a majority stake in Pure Biofuels del Peru S.A.C. (“PBF”)

through a transaction with Fund V. PBF is a Peru-based company specializing

in liquid fuels storage, distribution and marketing, and biodiesel handling. The

company’s core assets include an approximate one million barrel liquid storage

terminal, a private port facility, and a biodiesel production facility located in the

Lima region.

In addition to Pegasus, BP is another significant shareholder, who also serves

as a major supplier of PBF’s fuels. The support of such shareholders helps to

advance the development of innovative solutions using high quality products and

international certifications.

PBF’s key business activities include receiving and dispatching liquid fuel

shipments, liquid fuels storage, proprietary pipeline, gasoline distribution, and

blending and distributing diesel and biodiesel to provide government mandated

About

“Operating a company in an emerging economy presents a unique set of challenges with regards to sustainability. As such, PBF looks to standards and policies developed both inside of Peru and internationally to find the best possible solutions to the challenges of our impact on the environment, the health and safety of our employees, and the relationship with the communities in which we operate. We believe this perspective will become a

competitive advantage for PBF in the marketplace.”

- Carlos Alberto Pinto, CEO

Pure BiofuelsPegasus 2016 Sustainability Report

Company Profile

PBF E&S Risk Categorization: In addition to Peruvian laws and regulations, PBF has been reviewed by Equator Principle Financial Institutions for its adherence to IFC Performance Standards and EHS Guidelines. Pegasus and other financial institutions have categorized PBF as a “Category B” using the IFC’s and Equator Principles’ E&S assessment approaches.


low-sulfur fuel to the local markets. The company’s facilities are recently built, and

management believes that they are state-of-the-art and strategically located in the

Port of Callao, the largest port on the Pacific Coast of South America (near Lima).

PBF increased its employee count marginally in 2016, with approximately 120

people across its operations. As a business founded by Peruvian nationals with

mainly Peruvian management, PBF aims to hire locally and promote internally.

In 2016, only two employees were expatriates (one manager and one line role).

The company offers a competitive benefits package, including private medical

insurance, life insurance (required by law for employees of more than four years

at the company, but offered to all employees), daily meals (breakfast, lunch or

dinner based on schedule and location), transportation and parking (depending

on location), profit distribution (yearly, according to local regulation),

and some family recreational activities. The company maintains a

non-discrimination policy.

PBF has a Quality, Health, Safety, Security & Environmental

(“QHSSE”) Management System inclusive of trainings,

drills, weekly reviews on action plans, and regular internal

and external inspections for compliance and quality

assurance and control. The development of this system

has been informed by outcomes of various environmental

and social impact assessments since original construction.

There were no reported incidents in 2016.

The CEO is briefed on all QHSSE matters, and any significant

issues are discussed at a weekly leadership team meeting. Any significant

issues are reported to the Board of Directors, as deemed appropriate.

PBF has an online “suggestions box” available publicly, which, while not specifically

focused on ethical matters, it may be used as such. There is also a physical

suggestion box available at the company’s plant in Callao that both employees

and contractors may use.

PBF has an annual training plan, which is posted on an internal intranet. This plan

focuses on all areas of the company and includes courses required legally, as

well as training to promote internal development. Health, safety, and emergency

preparedness are a key focus.

The areas in which the company’s fuel storage tanks are located are checked

regularly to meet waterproofing standards; this helps to prevent soil contamination

and negative impacts on biodiversity, land usage, and conservation in case of

leakage. PBF is also certified with ISO 9001: 2008 for Maritime Operations with

1Peru has mandatory blend rates of 7.8% for ethanol and 5% for biodiesel.

Supporting Peru’s Economic Development Responsibly

In addition to supplying a cleaner fuel product for the growing Peruvian economy,

PBF seeks to identify opportunities to enhance sustainability in its daily operations.

The company values its relationships with its stakeholders and has a strong

commitment to environmental, health, and safety measures for the company’s staff

and surrounding environment.

Company Profile | Pure Biolfuels

Supporting Peru in its Transition to a Cleaner & Stronger Economy

PBF is contributing to the Peruvian government’s blended fuel targets, put in place

to reduce emissions.1 The company offers a transitional solution to cleaner fuel,

for instance, through its ultra-low sulfur (15 ppm maximum sulfur content vs. the

regulatory standard of 50 ppm) diesel products for both vehicles and off-road end

uses. In storing and selling high quality fuels, PBF aims to offer a differentiated

service that promotes the development of efficient, innovative and safe solutions

that prioritize their clients’ needs and add value to their businesses.

PBF has identified the following as the top three SDGs that most align with its core

business and strategy. The company expects to expand upon how it addresses

specific underlying indicators for each of these SDGs in its 2017 annual reporting

to Pegasus:

ESG Highlights


Case Study / 2016 Highlight

In December of 2016, a terminal based in the North of Peru (Paita) was purchased

by PBF to further expand its operations, and this terminal is expected to be modified

over the course of 2017. When complete, the terminal is anticipated to have a multi-

buoy system for receiving Panamax vessels of 60,000 DWT, one underwater pipeline

of 3.1km in length, and a terminal with approximately 200,000 barrels of capacity

distributed across 3 storage tanks built under API 650 standards. Additionally, the

terminal includes a set of two multiproduct islands for receipt and dispatch of the

different products marketed by PBF. Similar to its current facilities, PBF intends

to pursue the development of this new terminal in accordance with international

standards, including the Equator Principles.

Fuels, and has regular checks for undersea pipelines. The company maintains a

number of other certifications, as well.

During 2016, PBF reused 3.53% of the total volume of water consumed in

domestic and industrial use, and the company is considering opportunities to

further enhance its water recycling initiatives.

PBF has taken steps to promote compliance with international anti-corruption

laws, including the United States FCPA and the United Kingdom Anti-Bribery Act.

Employees are trained on anti-corruption, anti-bribery, and anti-fraud upon on-

boarding and every two years. Additionally, internal policies describe the conducts,

behaviors and practices expected from employees when dealing with suppliers,

clients, and political organizations.

PBF in the Community

In terms of community engagement, PBF is located in an industrial area, so

significant community impacts are limited. However, the firm does have a

Community Relationships Plan. PBF also aims to hire locally and

makes philanthropic contributions to the local fire department,

as well as other local social infrastructure, such as education.

An Emergency Response Plan is maintained and managed

with local authorities to support community health and

safety should such an accident occur. There were no

such accidents or incidents in 2016.

Separately, PBF currently has a recycling program

(paper and plastic) in place, in partnership with

ANIQUEM, a NGO that provides treatment for low income

children that have suffered burning injuries.

Company Profile | Pure Biofuels

In addition to Pegasus’ ESG and impact goals for all portfolio companies, PBF and

Pegasus have identified a number of company-specific goals to enhance current

practices for 2017, including:

Development of a more formalized

approach to measuring GHG emissions, and

specifically, conduct a baseline study of

gases (GEI) verified by a local certification

according to ISO 14064-1: 2006

Optimization of the water treatment plant

for industrial effluent to increase efficiency

Implementation of the recycling of solid

waste generated in Callao Plant

Review of grant-funding procedures to

ensure grant recipients are well-vetted,

maintain transparency and accountability,

and to measure and report on program

results and impacts



AccordantPegasus 2016 Sustainability Report

Company Profile

Pegasus invested in Accordant Energy in 2013 within the firm’s Fund V. Accordant

Energy is a Vermont-based company, developing ReEngineered Feedstock (“ReEF”),

a unique renewable energy product produced from the non-recyclable components

of municipal solid waste (“MSW”). The intellectual property of Accordant Energy was

established as part of the initial ReCommunity formation in March 2011. The product

was developed as a potential solution utilizing the entire MSW stream to create a

renewable fuel product that could displace coal and clean coal emissions. Originally

formed as ReCommunity Energy, the company spun out of ReCommunity in August

2013 and was renamed Accordant Energy.

Accordant Energy’s ReEF is developed and manufactured by the company’s

proprietary technology, for specific applications including gasification and combustion.

The process accepts post-recycling materials, which are then further processed in

an Advanced Product Manufacturing (“APM”) plant, to produce the specified ReEF

product incorporating carefully controlled air-emission control sorbents. The advanced

and innovative APM and ReEF technologies are designed to enable the ReEF to be

produced with significantly improved homogeneity and consistency, which are two

common issues that have traditionally challenged waste-derived fuel applications.

About

Accordant E&S Risk Categorization: As a company that has engineered a technology solution for licensing, the main E&S risks have been managed through the process of designing and testing the solution. As such, Pegasus categorizes Accordant Energy as a “Category C” investment using the IFC’s and Equator Principles’ environmental and social risk assessment approaches.

Improving Recycling Efficiencies & Reducing Emissions

Accordant Energy’s mission is to create economic and environmental value by

enabling communities to divert waste from landfills, advance recycling, and generate

clean and renewable fuel, with a lower carbon footprint. Accordant provides

enabling technology to others (licensees and end users of the product) to reduce the

environmental impact resulting from disposing waste in landfills (methane emissions),

ESG Highlights


reduce carbon emissions associated with fossil fuel combustion, and improve the

lifecycle GHG emissions from displacing virgin material with recycled materials.

As designed, the Accordant technology has potential to divert 65% of the waste

stream from landfills, recovering recyclables and creating an engineered fuel.

Engineering initiatives are underway to increase potential waste diversion to greater

than 75%.

Accordant has identified the following SDGs as the primary three with which it is

aligned. The company expects to expand upon how it addresses specific underlying

indicators for each of these SDGs in its 2017 annual reporting to Pegasus:

A patented technology, ReEF recovers high value recyclables and organic matter from

the mixed municipal waste stream and converts the remaining material, which to date

has been disposed of in landfills, into an engineered fuel. This fuel can then be co-

fired with coal, natural gas and biomass in power generation facilities, cement kilns

and industrial boilers. The first plant to leverage this technology is currently under

development by a licensee, with a launch expected in late 2018.

“At Accordant Energy, sustainability is our commitment to

enabling communities to build a better world. We provide

collaborative work environments, technologies, services and

solutions that make efficient use of limited resources, divert

waste from landfills, and create renewable energy, all with a

lower carbon footprint. We invest in innovation and enable

others to deploy new technologies to unlock the full potential

of sustainability to transform markets and societies. We see

sustainability as an opportunity for growth and innovation

and recognize progress involves a balance of environmental

leadership, social responsibility and economic growth.”

- Lawrence M. Clark Jr., CEO


Accordant Energy is a small company, and it does not have a significant environmental

footprint in terms of its core office and daily operations. Employees are offered a

benefits package that includes health insurance, with premium sharing between the

company and employees. The firm has problem solving and whistleblower policies in

place, vacation and sick leave, paid federal holidays, paid time off for serving on jury

duty, and parental, family and small necessities paid leave to attend to family matters.


Pegasus and Accordant are working together to support the company in meeting

Pegasus’ 2017 ESG goals for all portfolio companies.

Company Profile | Accordant


Six Senses Hotels Resorts SpasPegasus 2016 Sustainability Report

Company Profile

Pegasus invested in Six Senses Hotels Resorts Spas in 2013 within its Fund V.

Founded in 1995, and based in Bangkok, Thailand, Six Senses Hotels Resorts Spas is

an award winning eco-conscious luxury resort and spa management company with 11

hotels and 30 spas operating under the Six Senses Hotels Resorts Spas and Evason

brands in 20 countries. The company’s brands are built on the tenets of sustainability,

wellness, and local sensibility.

Six Senses Hotels Resorts Spas resorts are designed to be a part

of the local fabric and are heavily rooted in local culture. Design

and building practices frequently utilize local architects

and artisans, and food often comes from local farmers

and fishermen. The company has developed initiatives

aimed toward optimizing their hotels’ positive ecological

and social impact, while avoiding or mitigating negative

impacts.

Six Senses Hotels Resorts Spas also offers guests a full

suite of wellness programming. Guest options can range

from sleep programs designed to help guests obtain a better

night’s rest, to integrative wellness programs which measure a

guest’s biomarkers and assess ways for guests to live healthier.

The company is led by a team of industry veterans with extensive previous experience

at companies such as Four Seasons and Starwood Capital.

About

Six Senses Hotels Resorts Spas E&S Risk Categorization: Pegasus has categorized Six Senses Hotels Re-sorts Spas as a “Category A” using the IFC’s and Equator Principles’ environmental and social assessment approaches. Six Senses Hotels Resorts Spas is a management company with ability to influence locations, development, construction, design and operations of tourism destinations in ecologically and culturally sensi-tive areas. While the company’s potential negative impacts and risks are limited, largely reversible and can be mitigated through management plans, given the sensitive ecological and cultural areas in which it develops, Six Senses Hotels Resorts Spas is managed as a Category A investment.

113

VietnamCon Dao, a remote and lightly populated island off the

coast of Vietnam

Ninh Van Bay, a remote bay that is a short boat ride

away from Nha Trang

Ana Mandara (Evason Brand), located in downtown

Nha Trang; it is the only beachfront resort in the town

China

Maldives

Seychelles

Oman

Resort located at the edge of UNESCO World Heritage

Site, Qing Cheng Mountain, Chengdu

The only resort located in the Laamu Atoll on its own

remote private island in the Indian Ocean

Located on the very remote private island of Félicité in

the Indian Ocean

Located a few hours drive from both Dubai and Abu

Dhabi on the northern Musandam Peninsula in the

Sultanate of Oman

Many of Six Senses resorts are located in remote

areas with notable ecological and/or cultural value:Destinations

Company Profile | Six Senses Hotels, Resorts & Spas

ThailandYao Noi, located on a small island in Phang Nga Bay

Samui, located on a gently sloping headland at the

northern tip of Samui Island

Hua Hin (Evason Brand), located in Pranburi to the

south of Hua Hin Township on the Gulf of Siam

PortugalLocated in the Douro River Valley; the Douro ecosystem

comprises of roughly 3,500 different botanical species

and is classified as an UNESCO World Heritage Site


ESG Highlights

Organizational Capabilities and Sustainability Management System

ESG at Six Senses Hotels Resorts Spas is led by the Vice President (“VP”) of

Sustainability and Director of Sustainability at the corporate level. In addition,

each resort and hotel property is in the process of securing a full-time dedicated

Sustainability Manager (three properties had such managers in 2016), while each

spa has a Sustainability Champion (employee who serves as a point person on

sustainability within the spa, but also has additional core responsibilities). Monthly

Global Sustainability Team calls are held with the VP of Sustainability, Director

of Sustainability, General Managers, Sustainability Managers and Sustainability

Champions. Additionally, each property has its own sustainability committee,

comprised of representative heads of each department, who report to the General

Manager and convene monthly to maintain guidelines, share sustainability

practices, drive innovation, and assist in reporting. At the corporate level, there

is a Strategic Sustainability Committee, which includes the CEO, President, VP of

Operations, VP of Sustainability and Director of Sustainability.

Six Senses has a comprehensive Sustainability Management System, which

applies to both development of new properties and ongoing management of

existing properties. All properties are assessed annually against the management

system by either the VP of Sustainability or Director of Sustainability, with scores

attached to their performance against the standards. Each year, new targets

are set against the scores, and the General Manager of each property has 10%

of her or his annual bonus dependent upon achieving those goals (in addition

with other property-specific sustainability goals). Each property also reports on

“Sustainability Performance Indicators” (“SPI’s”) on a monthly basis. Those SPI’s

include energy, emissions, water, waste among others.

Focus on Local Employment

Six Senses seeks to hire the majority of employees (known as “Hosts”) from the

local community and provides professional training. In 2016, the group added

approximately 100 hosts for a total of approximately 3,600 hosts at the end of


Legal & Safety Training Safety awareness is promoted at each resort. Each property provides training for all Hosts in fire safety, accident prevention, wildlife and natural hazards, occupational health and safety in the workplace, and other legally required training.

Cultural Diversity Training All Hosts receive a special training, including culture and history specific to the location (as needed), as well as international etiquettes and behaviors (as preparation for interaction with guests, as needed).

Language Programs When English is a second language, or in locations where there is a predominantly multi-ethnic background, there is a professional designated English program/teacher that is tailored for specific needs of the job functions performed.

Community Relations

Six Senses plans and participates in community initiatives that help promote

the safety, health, cleanliness and wellbeing of the local community, as well as

support recruitment and development initiatives. Examples include blood drives,

yoga training, and investments in equipment for local hospitals.


the year, the vast majority of which were full-time and of which nearly 80% were

from the local community, with a gender ratio of appoximately 40% female and

60% male. As a goal for 2017, the company is reviewing opportunities to enhance

gender diversity.

Each property seeks to ensure that Hosts have coverage for general health

treatment, and where possible, insurance in the event of serious illness, death or

disability. The resort also provides health screening benefits to eligible Hosts as

part of their health benefit program for regular check-ups if it is a market practice

in the location.

Six Senses also offers a number of training and capacity building programs for its Hosts:

Six Senses Water

Located in many remote destinations around the world

without access to recycling programs, there is a need

to provide quality drinking water to Six Senses guests

in a sustainable manner. As such, the company chose

to incorporate water plants in each property so as

to minimize the plastic waste and carbon emissions

associate with shipping. The group provides both still

and sparkling options in reusable glass bottles. Six Senses

Water is complementary in guest villas and available for

purchase in food and beverage outlets. Any Six Senses water

sold dedicates 50% of those sales to the property’s Sustainability

Fund and is ear-marked for drinking water plant projects in the local community.


Six Senses is currently working to align its activities with all 17 of the SDGs. Given

current locations of operations, the company has identified the following as the

top three SDGs that most align with its core business and strategy. The company

expects to expand upon how it addresses specific underlying indicators for each of

these SDGs in its 2017 annual reporting to Pegasus:

Philanthropic Work

Recognizing the role that the company holds within the local communities, Six

Senses also has a Sustainability Fund at each property. The Sustainability Fund

is comprised of 0.5% of the property’s revenues, 50% of Six Senses Water Sales

and all soft-toy sales. Funds are dedicated to social and environmental projects

within, and for the improvement of, the local community. Funds are reported on a

monthly basis to senior Six Senses management. Any projects under US$5,000 are


at the discretion of the Property General Manager and the Owner. Anything above

US$5,000 requires approval by the Six Senses head office (VP and Director of

Sustainability), along with the General Manager and Owner. For example, a recent

investment of US$32,000 to the local hospital in the Maldives for the installation of

a drinking water plant was reviewed and approved by the home office.

Each property has developed NGO or local community partnerships through

its respective Sustainability Fund. Some global partners include Blue Marine

Foundation, Manta Trust and ENV. In addition, Six Senses has many partners

within the local community, including schools, hospitals and orphanages.


In addition to 2017 ESG and impact goals identified by Pegasus across its portfolio

companies, Six Senses and Pegasus have identified a number of company-specific

ESG and impact goals, including:


Securing Sustainability Managers for each property

Enhancing existing sustainability standards to include more robust requirements

around healthy and environmentally friendly (e.g. cleaner energy) building protocols

Creating and implementing screening and due diligence criteria based on IFC

Performance Standards for use during development stages of new projects

Enhancing community engagement initiatives that help promote the safety,

health, cleanliness and wellbeing of the local community, as well as support

recruitment and development initiatives

Review of best practices in grantmaking and partnerships to enhance and track the

quality of impact outputs and outcomes (e.g. enhancing policies and procedures

regarding partner selection, program selection, and tracking goals and targets)

Six Senses signed on to Hotel Owners for Tomorrow and collaborated on the Green

Lodging Benchmarking Survey and the Cornell Sustainability Benchmarking Index

Six Senses Laamu partners, Blue Marine Foundation and Manta Trust presented

research funded by Six Senses at the Maldives Marine Science Symposium (Oct 2016

at the Maldives National University)

The University of Amsterdam published research from Six Senses Ninh Van Bay:

“Competitive interactions between corals and turf algae depend on coral colony form”

2016 Highlights


Pegasus invested in Lighting Science Group (“LSG”) in 2007 through Fund IV, and

in 2015 through Fund V. Based in Providence, Rhode Island, LSG is a technology

company focused on deploying the science of light to create differentiated solutions

that sustainably improve human, plant, and animal health and productivity. Founded

in partnership with NASA in 1988, the company now ships over a million LED bulbs

and fixtures per month through retail, commercial, and infrastructure channels

throughout the US, and through key retailers such as Menards, The Home Depot

and 1000Bulbs.com.

About

Light and Wellness

LSG has been granted approximately 400 patents spanning advanced lighting applications, especially focused on spectrum control. The

company’s deep understanding of spectrum control and the biological effects of light enabled LSG to develop lighting

technology deployed on the International Space Station, which has now been leveraged to produce LED lighting solutions for the commercial and residential markets.

The biological benefits associated with LSG’s products focus on improving health and wellness for human beings. For instance, poor sleep has been linked to cancers and diseases, and LSG offers a non-chemical means to address these issues

through various lighting solutions, contributing to productivity, performance and alertness. LSG also has a number of ongoing

research and development initiatives, including projects that aim to impact vector borne disease control, reduce pathogens in medical

facilities, and impact circadian rhythm for better sleep and higher alertness.

Lighting SciencePegasus 2016 Sustainability Report

Company Profile

LSG E&S Risk Categorization: Pegasus has categorized LSG as a “Category B” using the IFC’s and Equator Principles’ E&S assessment approaches. LSG outsources its manufacturing and manages its supply chain risks through due diligence of and agreements with suppliers. As LSG grows its rel-atively new infrastructure business, it is committed to following local and national law in all countries and the IFC Performance Standards and EHS Guidelines in non-OECD countries, as applicable.


approximately 10 million LED lights sold annually reduce energy use by around 9

million MWh.2

Additionally, the company has launched innovative design initiatives to reduce

and encourage re-use of materials, as well as to use recyclable materials. In 2016,

LSG reduced packaging by 20% per bulb by replacing the bubble packaging with

recyclable paper boxes that fit three bulbs each. The company also launched

the Durabulb, a unique, light-weight design featuring 30% less material than a

regular LED, thereby reducing shipping weight and GHG emissions in the process.

To further reduce material used in packaging, the Durabulb is sold in a 10-pack

reusable bucket. The result is up to 40% less CO2missions than LEDs with standard

packaging materials. LSG sold 1.2 million Durabulbs in the fourth quarter of 2016,

resulting in savings of 91 metric tons of carbon equivalents.

Uses 30% less material compared to equivalent LEDs

Ships in bulk, diminishing use of paper packaging

Results in up to 40% less CO2 emissions than standard LEDs

1.3 million Durabulbs sold at launch in October 2016 alone

Uses 95% less material than a standard linear LED

Requires 80% less packaging, significantly decreasing waste

Collectively reduce CO2 emissions from shipping by over 90%

The HealthETM Series

SleepyBabyTM

A sleep enhancing LED nursery lamp designed with a proprietary light spectrum technology to reduce sleep-disturbing blue light exposure, and designed to help

infants develop a natural circadian rhythm, stay asleep longer and fall back asleep quicker.

GoodNightTM

An A19 LED bulb that uses patented spectrum technology originally developed in collaboration with NASA to support the circadian rhythms of astronauts while on the International Space Station. The proprietary light spectrum technology supports the body’s natural circadian rhythm.

GoodDayTM

An A19 LED bulb developed to replace general lighting in homes with a biologically adjusted spectrum, delivering users with wavelengths of light for productivity and alertness during waking hours. This light seeks to enhance energy levels throughout the day for improved performance and alertness.

The GenesisTM Dynaspectrum

Recipient of the “Best of What’s New Product” from Popular Science in 2016, and nominee for the 2017 Edison Awards, the Genesis light is a sleek minimalist design task lamp that can produce a biologically adjusted spectrum to offer users high control over their light exposure. Additional features include indoor air quality monitoring, light show creation of virtually any color selection, and a timed circadian rhythm lighting, cycling through natural spectrums so users can customize their lighting needs simply by telling the light when they wake and fall asleep.

Sustainability & Positive Impacts

Lighting accounts for nearly 6% of global CO2 emissions and approximately 19% of

global electricity consumption. A global switch to energy efficient LED technology

could save over 1,400 million tons of CO2 and avoid the construction of 1,250 power

stations.1 Approximately 90% more efficient than standard lighting products, LSG’s

Company Profile | Lighting Science

2Source: Company management.1https://www.theclimategroup.org/project/led-scale


(e.g. child and forced labor, gender and ethnic issues) and environmental risk (e.g.

heavy metals, pollution). This program includes audits with pass or fail grades and

opportunities to resolve issues. In 2016, there were no identified failures with these

audits. Audits cover the suppliers from which 99% of LSG’s revenue originates. LSG

has other smaller suppliers that are not audited to such criteria.

The company supports the goals expressed by the U.S. Congress in enacting Section

1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act: preventing

armed groups from benefitting from the sourcing of Conflict Minerals (which are

limited to tantalum, tin, tungsten and gold) in the region of the Democratic Republic

of Congo and adjoining countries (this list of derivatives may expand in the future).

LSG is committed to complying with reporting requirements by Section 1502 and SEC

Rules and confirms with suppliers that no conflict minerals are used in LSG products

or components. A 2016 report on this initiative is available on LSG’s website, outlining

the company’s due diligence procedures and outcomes of that process for the year,

as well as goals for improvement (including supplier engagement).

“LSG has been a longstanding advocate of wrapping energy efficiency, material

reduction and supplementary technologies into lighting solutions. We seek to

go beyond illumination, venturing into the realm of health care, social good,

and environmental stewardship. We understand that as we strive for logical,

globally beneficial technologies, we must continue to pursue increasingly

ambitious sustainability goals to remain competitive, socially responsible, and

true to our overall mission.”

-Ed Bednarcik, CEO

LSG has identified the following as the top three SDGs that most align with its core

business and strategy. The company expects to expand upon how it addresses


to Pegasus:


LSG employed approximately 50 people full-time across its operations in 2016.

Full-time employees are offered a number of benefits, including vacation, insurance

(medical, vision and dental, fully covered short-term and long-term disability

insurance, life, and a 401k with matching. Employees have access to optional life

insurance family counseling sessions (3 free a year per topic), and an ethics hotline.

LSG’s products are manufactured by third-party suppliers. In coordination with several

of its main customers (large American public companies), LSG has a comprehensive

supplier quality assurance program which includes a focus on reducing social risk

ESG Highlights


Certifications

DLC 4.0 Compliant

The LBar is DLC 4.0 compliant (has to meet the energy consumption criteria of DLC)

Energy Star

Approximately 80% of LSG’s portfolio is Energy Star certified3

ISO 9001 certified in 2016

99% of LSG’s suppliers were ISO 9001 certified for Quality Management Systems

in 2016

DLC is “DesignLights Consortium”- The DLC® is a non-profit organization

whose mission is to drive efficient lighting by defining quality, facilitating thought

leadership, and delivering tools and resources to the lighting market through

open dialogue and collaboration; as a qualification program that determines,

measures and drives energy efficiency within the lighting market, products on

the Quality Product List demonstrate a high level of energy performance

3Not all products in a lamp line can necessarily meet the standards to be certified due to the specific nature of requirements within Energy Star certifications.


Many cities in developed countries have successfully implemented LED streetlight

projects, but the city adoption rate in emerging markets is low. Per the World Bank,

only 4% of the 500 largest cities in developing countries are deemed creditworthy in

international financial markets, rising to 20% in local markets. This limitation inhibits

the development of innovative infrastructure projects that allow for sustainable

economic development.

LSG has been developing solar LED street light solutions in emerging markets to

promote sustainable economic development, jobs, and public safety, especially

for women and impoverished areas. In 2016, a main focus for the company’s solar

street lighting initiative was a project in Karachi, Pakistan. To advance this project,

Pegasus worked closely with LSG to develop an international partnership with

Amerigroup, USAID, Streetscape, Zaffar Enterprise, and the local government to

launch an initiative to install LSG’s FreeLED integrated LED lighting system, WIFI,

and advanced security features. This initiative is part of a broader US$200 million

plan to create a “Smart City” in Karachi, Pakistan, comprising of two phases, with

the potential to install over 55,000 lights. An MOU was signed and publicized in

national media in July 2015, and the company is continuing to pursue development

of the project.

LSG is also pursuing initiatives to improve the environmental impacts of its office

footprint, including recycling, water reduction, and energy reduction.

Case Study / 2016 Highlight

Safe, energy efficient, and reliable street lighting poses a major problem for the

infrastructure of developing countries. Some communities (particularly in rural

and remote areas) lack street lights entirely, resulting in potentially dangerous

and difficult living conditions (e.g. crime and road accidents). In other places,

large numbers of streetlights are no longer functional due to theft, neglect, and

/ or natural forces. Frequently, lights that are in place demand centralized grid-

connected power (which can be vulnerable to climate change disasters) and / or

are inefficient in terms of energy savings and GHG emissions.

LED lighting has the potential to result in significant financial and environmental

cost savings versus standard High Pressure Sodium (“HPS”) lighting that is typically

used. Furthermore, the potential to power LED street lights with solar technology

has a wide number of potential benefits, from increased resiliency (distributed

versus centralized grid-dependent power), to reduced GHG emissions, to the

ability to share surplus power from the lights for community purposes (e.g. fee-

based charging stations, schools, hospitals, community centers, marketplaces,

wireless internet, etc).

As a summary of environmental impacts:

Lighting accounts for nearly 6% of global CO2 emissions and approximately 19% of

global electricity consumption

A global switch to energy efficient LED technology could save over 1,400 million tons

of CO2 and avoid the construction of 1,250 power stations

Outdoor city lighting comprises about 20-40% of a city’s energy budget

Globally, there are approximately 300 million streetlights installed

Potential energy savings of 50-70+% can be realized from large-scale replacement

of aging street lighting with more energy efficient solutions (example: Los Angeles

upgraded over 165,000 street lights to LED and realized savings of 63% in energy,

over US$8 million, and 47,583 tons of CO2 per year)


Sources: The Climate Group; International Finance Corporation, “High Efficiency Solid State Street Lighting: Opening the Market”, Jeremy Levin Sept 2016; The Climate Group, “The Big Switch: Why it’s Time to Scale Up LED Street Lighting”, Sept. 2015

Safety

According to the Lighting Research Center, adequate street lighting has

been shown to reduce traffic accidents by 12-14%

Illumination supports safety at night (particularly for women and girls),

and smart systems on street poles support CCTV

Home Office Research found that overall reported crime is reduced by

20% with adequate street lighting

WIFI

Potential for smart poles to support enhanced connectivity and access to information

for local beneficiaries



and LSG have identified a number of company-specific goals to enhance current

ESG practices for 2017, including:


Reviewing opportunities to enhance resource efficiency and sustainability in core

operations (e.g. within the office)

Reviewing opportunities to enhance supply chain sustainability, including:

Environmental initiatives focused on resource efficiency, sustainable waste management,

product longevity and end-of-life uses

Social issues, including human rights


Cost Savings

Reduced maintenance expenditures for municipal beneficiaries

Economic Growth

Drives regeneration and business investment

Future hub for links to ‘smart city’ concepts

Sources: http://www.lrc.rpi.edu/resources/newsroom/pdf/2007/StreetLightingSafety8511.pdf; https://keyssonet/communitynews/May2003/improvedlightingstudy.pdf


Pegasus invested in Renaissance Downtowns in 2016 within its Fund V. Founded

in 2008, Renaissance Downtowns is a New York-based real estate company

focused on addressing the unmet demand for mixed-use walkable development

with a commitment to social, economic, and environmental sustainability. Their

triple-bottom-line mission is pursued through innovative land entitlements, which

Renaissance Downtowns produces through a number of business activities,

including stakeholder engagement, zoning creation, architecture and planning,

environmental reviews, community development, public private partnerships, and

project management.

The company enters into Master Developer1 relationships with municipalities while

simultaneously engaging local communities utilizing a proprietary Crowdsourcing

Placemaking process to gain input and foster support for future development.

The company works with the municipality to write zoning codes and garner land-

use approvals dedicated to the creation of long-term social, economic, and

environmental benefits for the community. Such benefits include safe and walkable

streets, healthy community designs, increased green space, new local economic

activity, additional municipal revenues and long-term job creation.

Renaissance Downtowns’ emphasis on compact, mixed-use, transit-oriented

development reduces reliance on automobiles and encourages walkability, mass

transit, and biking. This model aims to create healthier and more community-based

lifestyles that also benefit the environment. Furthermore, through its public-private

partnerships, the company receives rights to develop underutilized parcels of land

which serve as the catalyst for the overall revitalization effort.

About

Renaissance DowntownsPegasus 2016 Sustainability Report

Company Profile

Renaissance Downtowns E&S Risk Categorization: Pegasus has categorized Renaissance Downtowns as a “Category A” using the IFC’s and Equator Principles’ E&S assessment approaches. As a company that engages in real estate development and that influences urban planning, Renaissance Downtowns can have impacts related to the community, as well as the environment and stakeholder livelihoods, health and safety. It is not anticipated that Renaissance will negatively impact indigenous communities, cultural heritage, critical habitat or protected areas.1 A Master Developer is an entity that brings resources in planning, development, finance and public-private partnerships to create a detailed redevelopment plan to facilitate and implement projects. Master Developers are typically selected based on a municipality’s issuance of a Request for Qualifications and awarded contractual agreements with municipalities that are usually performance-based, with guarantees to protect the community. Master Developers typically have the capability to conduct the feasibility studies necessary to determine the market need and success of the project the city proposes. A Master Developer can also sometimes develop anchor projects that will be catalysts for further development.


Major city centers will not be able to accommodate the expected

increase in population caused by the rapidly growing

consumer preference for transit-oriented and mixed-use

communities. This provides a significant opportunity for

suburbs that offer compact and holistically designed

neighborhoods with public amenities, interesting

streetscapes and an urban lifestyle. These ‘Urban

Nodes in Suburbia’ (“UNiS”) represent the potential

to redefine suburban America by providing a living

option not previously available in any significant scale.

Furthermore, UNiS provides a desirable urban quality of life

which offers a more authentic “boutique” style of city living

without the high cost associated with living in major city centers.

Renaissance Downtowns believes it is the first developer in the United States

to utilize Crowdsourced Placemaking programs for large-scale redevelopment

efforts. Crowdsourced Placemaking combines traditional grassroots outreach with

social media and web-based applications to garner input from the community as

to what they would like to see built in their revitalized downtowns. Using online

forums along with an online “voting application,” local residents can offer ideas

and input, which are reviewed internally by the company’s planning team. The top

ideas undergo feasibility studies and are often incorporated directly into the Zoning

Codes and Master Plan. Additionally, the team will work with the community to

identify local or regional companies and entrepreneurs who may want to pursue

the idea as a business. If identified, the team will work with these companies

and entrepreneurs to write business plans, procure funding and implement the

targeted use in either vacant existing space or new space to be developed as part

of the revitalization.

Company Profile | Rennaissance Downtowns

This inclusive and participatory approach not only empowers the community’s role

in the planning process, but also provides keen market insight that traditional market

studies typically cannot garner. The Crowdsourced Placemaking community also

meets at least monthly, providing both in-person interaction, while offering those

without internet access the opportunity to have their voice heard. This mechanism

supports a positive atmosphere – both online and in person – while providing for

a feedback loop whereby the community can gain a better understanding of what

ideas are both feasible and appropriate for downtown, mixed-use development.

Over the past eight years, Renaissance Downtowns has been designated as Master

Developer for six municipalities throughout the northeast including:

These projects represent over 20 million square feet of development rights and over

US$10 billion dollars in real estate value. Through an 8 to 10-year buildout period,

these projects are expected to create over 60,000 construction and permanent jobs

and stimulate millions in tax revenue for local governments. Development has already

broken ground in Hempstead Village, Huntington Station, Nashua and New Rochelle.

Nashua, New Hampshire

Bristol, Connecticut2

Hempstead Village, New York

Huntington Station, New York

New Rochelle, New York3

Riverside, New York

2 Renaissance Downtowns was designated Master Developer for Bristol, Connecticut in May 2010. Although project finances were not feasible, Renaissance Downtowns was able to help seven local businesses open and completed its first successful Crowdsourced Placemaking process with the community.3 Renaissance Downtowns along with RXR was designated Master Developer for New Rochelle in December 2014, and completed all Master Developer obligations and goals by June 2017. Renaissance Downtowns is still actively involved in New Rochelle, concentrating on the vertical development of three sites in the development zone.

“The U.S. urban population is expected to double in the next

30 to 40 years, with over two-thirds of that growth expected

to occur in suburban regions.”

- Chris Leinberger

Brookings Institution & President of LOCUS (Urban Land Institute 2050 Study)


5Targets with penalties for not using best efforts. The goal is for construction and permanent jobs, as well as local contracting opportunities.

ESG Highlights

Renaissance Downtowns has identified the following as the top three SDGs that

most align with its core business and strategy. The company expects to expand

upon how it addresses specific underlying indicators for each of these SDGs in its

2017 annual reporting to Pegasus:

Goal #8: Decent Work and Economic Growth

Renaissance Downtowns is committed to promoting inclusive and sustainable

economic growth, employment and decent work for all. Throughout their entitlement

and zoning process, Renaissance Downtowns advocates for and supports local

hiring in their development zone. In many communities Renaissance Downtowns

targets 25% local hiring for construction, permanent and local contracting jobs

through Community Benefits Agreements (“CBAs”), with penalties in place for not

using best efforts to achieve these targets5. Their CBAs often also require a job

training center and advisory committee to be established in order to build up the local

workforce. Local community liaisons are also actively involved with local contractors,

employment centers, training programs, local entrepreneurs and business districts

to help support residents in securing positions and building careers.

Goal #11: Sustainable Cities and Communities

The Renaissance Downtowns revitalization toolkit includes sustainable urban

planning and green design methodologies that have been embedded into the

planning process. These include access to affordable housing, transit-friendly

developments, mixed-use buildings, complete streets, connected networks,

cultural centers, active frontages, and green public spaces.

Crowdsourced Placemaking1

Combines new media technology, marketing, and on-the-ground advocacy to

educate and engage community redevelopment at the grassroots, private and

public levels

Allows community members to suggest and vote on ideas, uses, retail concepts,

types of commercial or retail tenants and amenities they would like to see within

a redevelopment plan

Establishes a ’process before the plan’ approach by enlisting community

advocates’ feedback and support throughout the process which helps gain wide

approval across party lines from the outset

Unified Development ApproachTM2

A collaborative, public-private partnership-driven framework that brings together

disparate groups within a community to collectively transform their downtown

into a vibrant destination

The typical stakeholders for which Renaissance acts as the unifying force includes

residents, entrepreneurs, private property owners, local developers, the transit

agency, and the municipality

Emphasis on planning for the most marginalized and “hard to reach” populations

(e.g. single mothers, disabled veterans, at-risk youth ex-offenders, and artists)

that are often left out of the development process

Form-based Overlay Zone Entitlements3

Offers a powerful alternative to conventional zoning regulation that fosters

predictable built results and a high-quality public realm

Is guided by physical form rather than separation of uses and focuses on a united

sense of place, allowing use to remain open-ended and flexible

Embeds strong incentives for private owners to collaborate and build sustainably,

with communities’ needs included

Company Profile | Renaissance Downtowns


factors during discretionary decision making. For New York, this assessment is

called the State Environmental Quality Review Act and is considered one of the most

rigorous environmental assessments in the country. Renaissance Downtowns also

requires Leadership in Energy and Environmental Design Neighborhood Development

equivalency (“LEED ND”) through its form-based code.

Philanthropic Work

Renaissance Downtowns actively supports the communities in which they work

through charitable donations, grant programs, and community engagement. The

company maintains a firm belief that the success of the communities are directly

correlated to its own success. As such, active engagement in supporting local

initiatives both financially and socially is of high importance. Renaissance Downtowns

also supports organizations that are advancing research, innovation, and ideas

related to sustainable and social development through employees’ involvement

volunteering and leadership positions on boards.

Over the past year, Renaissance Downtowns was actively engaged in a participatory

grant program through it’s Crowdsourced Placemaking offices in Hempstead

Village, Huntington Station, and New Rochelle. Grant ideas were generated by the

community and had to fall into one of the main initiatives supporting downtown

revitalization that were chosen as priorities by the local residents. These community

priorities included:

Local Economic Business

Development Initiatives

Environment and

Beautification Initiatives

Public Safety Initiatives

Youth and Education Initiatives

Arts, Cultural and

Entertainment Initiatives

Goal #12: Responsible Consumption and Production

Through sustainable building design and sustainable waste management planning,

the company emphasizes the importance of resource efficiency, as well as healthy

and safe living and work environments throughout the development process.

Working with the municipality to upgrade infrastructure such as wastewater

systems, the company seeks to incorporate leading conservation technologies to

protect local environments and habitats.


In 2016 the company had under 20 full-time employees. Renaissance Downtowns’

corporate culture stresses the importance of health and wellness in order to achieve

sustainable results. The emphasis on dedication and hard work must be balanced

by a fulfilling life outside the office. This is encouraged by offering employees

competitive benefit packages, including a health insurance plan, holidays and

vacation days, maternity leave, and health club access. The company also has

policies on equal opportunity employment, maintaining a drug and alcohol-free

workplace, maintaining a safe work environment, non-harrassment, (which includes

policies against sexual harassment and discriminatory harassment), among others.

Renaissance Downtowns has a full-time Sustainability and Social Impact Manager

who is dedicated to managing ESG-related topics and reports directly to the

President. The Sustainability and Social Impact Manager has also integrated an ESG

Impact Framework to measure, monitor, and report on such initiatives. Upon the

launch of each project, the team collects both qualitative and quantitative baseline

impact data, including metrics on education, health, economic development, safety

and social equity, and surveys with local community members. This baseline data

is tracked and monitored over the course of the development period and analyzed

in order to determine optimal impact initiatives that can be implemented to

improve performance. The Impact Framework also helps to monitor, manage and

report on key ESG risks such as community opposition or unsustainable practices.

These risks are reported to senior management along with recommendations.

The company’s Board of Directors reviews and works with management to make

decisions on how best to address and respond to potential ESG risks.

All Renaissance Downtowns projects must undergo the state’s environmental

assessment to consider environmental impacts equally with social and economic

Company Profile | Rennaissance Downtowns


Science Technology Engineering and

Math (“STEM”) after-school classes for

children and youth in Hempstead Village

Health Fair for the Diabetes Health and

Wellness Academy of N.Y.C. with Retro

Fitness in Hempstead Village

Public Safety Program in Hempstead

Village, through which residents would

patrol neighborhood areas and receive

the necessary training to fill safety

positions, and have a direct relationship

with the local police department

Operation Cinderella’s 2nd Annual

Prom Dress Giveaway to help young

men and women in the Huntington

Station community who can’t afford

outfits for prom

Huntington Station Spring Clean Up,

which is an annual event that brings the

community together to clean up trash and

plant flowers

Huntington Township Housing

Coalition’s ‘Huntington Rental

Housing Summit’ with panels about the

importance of affordable rentals to keep

young people in Huntington

A Sustainable Garden to support the

Hope Center Soup Kitchen in New

Rochelle using eco-friendly techniques

and holistic practices to teach their clients

how to establish, sustain and harvest a

garden to be more self-sufficient and with

nutrition benefits

Youth Program to serve dinner, music

and warm weather items at the Oasis

Homeless Shelter in New Rochelle

Healthy Habits curriculum, which was

designed to teach young people about

the benefits of developing healthy habits

such as eating smart and being physically

active, and equip them with skills to adopt

healthier habits by participating in fun and

engaging learning activities

Helping to secure US$420,000 in

additional funding for programming and a

new building for the Children’s Museum

of the East End in Riverside

Helping to found and secure funding

for SEPA Mujer’s (Services for the

Advancement of Women) leadership

training program for Latino women in the

Riverside Rediscovered office

A few of the community grant recipients include:

Over the past year, Renaissance Downtowns has provided approximately US$55,000

in community grants to support over 120 impact initiatives across their communities

through their local Crowdsourced Placemaking community engagement efforts.

Graduates of the SEPA Mujer Leadership Training Course, which was

supported through Renaissance Downtowns’ Riverside Rediscovered

office (Photo Credit: Joe Werkmeister, Riverhead News-Review)

Dr. Donna Febres teaches a STEM after-

school class to children in Hempstead Village

Source the Station Community Liaison, Andrea Bonilla, and residents

cleaning up and beautifying the public space at Gateway Plaza in

Huntington Station

Jordan Campbell, a high school student who started ‘Jordan’s

Unity Project’ pitches her idea of hosting a dinner event for the

homeless at the NR Future monthly meet-up

In the Community



Key Partnerships & Stakeholder Engagement Activities

As part of this relationship building process, Renaissance Downtowns immerses

itself in each local community and meets regularly with local government planning

and development officials to engage them in the company’s vision. By engaging

stakeholders early in this process and developing a sense of trust and cooperation,

the team begins to build momentum that is critical to implementing their shared

vision. To achieve this goal, Renaissance Downtowns invests time in walking the

streets of communities, meeting with business owners, local residents, and opinion

makers to not only provide opportunities for neighborhood input on each project,

but to help shape the transactions in a way that will result in the most positive

economic and social impact for the community.

In addition, the Renaissance Downtowns’ team and their affiliates are members of a

number of professional organizations.


In addition to Pegasus’ ESG and impact goals for all portfolio companies in 2017,

Renaissance Downtowns and Pegasus have identified a number of company-

specific goals to enhance current ESG practices for 2017, including assessment

of opportunities for improvement in supply chain best practices and incorporating

new models and initiatives to improve, measure, and report upon environmental,

social and governance impacts via the Impact Strategy Framework. Additionally,

Renaissance Downtowns plans to review the effectiveness of its grant-making

and philanthropic activities and make adjustments as deemed appropriate (e.g.

measuring and evaluating outputs and outcomes, as well as a particular focus on

the effectiveness of the size of the grants).



HaloPegasus 2016 Sustainability Report

Company Profile

Pegasus invested in Halo Purely for Pets (“Halo”) in 2006 within the firm’s Fund

III. Founded in 1986, Tampa, Florida-based Halo has grown to be a leading

provider of naturally formulated, premium pet care products including food, treats,

supplements, and grooming aids.

The company’s products are sold in the United States, Canada, and Japan through

specialty pet retailers and natural grocery and health food stores, including Whole

Foods Markets, Sprouts, Petco, and PetSmart Canada, and are also available

for purchase online, including through Amazon and Chewy.com. The company’s

products are made with only whole meats, and no meat meals or byproducts,

providing pets with a more nutritious and digestible product than traditional pet

foods. Halo actively supports animal welfare programs through partnerships with

The Humane Society of the United States and other animal rescue organizations.

About

Halo E&S Risk Categorization: While the company mainly operates in OECD markets, it does have global supply chain ESG risks to consider through its manufacturing contractors and suppliers of raw materials. As such, Halo is categorized by Pegasus as a “Category B” investment, using the IFC’s and Equator Principles’ E&S risk assessment approaches.

“The responsibility we uphold to do the right thing is

contained in the very name of our brand: Halo. Throughout

history, halos have designated individuals who have done

good by others. That is one reason that a halo was chosen

30 years ago as the symbol for our brand. By providing truly

holistic, uncompromising nutrition and loving care to our

companion animals, we earn our halos by helping foster a

more complete and satisfying human/animal bond.”

- Myron Lyskanycz, CEO

BECAUSE WH O L E MEAT MAKES

A WH O L E L O T O F D I F F E R E N CE


Healthy, Sustainable Pet Food

In early 2016, Myron Lyskanycz, a leader in the fields of advertising, pet food,

health, sustainability and animal welfare, was appointed CEO of Halo, succeeding

Steven Marton, who left the company to pursue other interests1. Under this

new leadership, Halo’s team—from top management down—is expanding its

commitments beyond simply “selling pet food.”

A growing segment of pet parents (e.g. 54% of millennial pet parents) are dissatisfied

with their current pet food and see diet choices as directly connected to overall

health and wellness. This applies to human health, animal health, and the health of

our planet. Therefore, the ingredient choices and sourcing protocols that go into

making Halo’s foods ultimately serve a larger purpose.2

In 2016, Halo began a journey to extend its mission beyond companion

animals, to instead consider all animals and the resulting

impacts between people, pets and planet, connecting the

food we feed to our companion animals with the health and

sustainability of our agricultural system, farming practices

and the planet. Going forward, the Halo brand is focused

on the concept of “Holistic. Whole. Humane”. Since

2016, and continuing in 2017, the company is building

the foundational infrastructure for fulfilling this broader

mission, with implementation of the model planned for

fiscal 2018.

Halo’s mission identifies the interconnection between how

we farm, how we feed and how we sustain our environment.

It begins with a completely revamped sourcing and supply chain

developed with farmers and ranchers who are naturally and humanely raising

animals in an environmentally responsible manner. Halo has termed this process

“OrigiNative™ Sourcing,” and all of the company’s whole meat proteins are

ESG Highlights

1Additional information about Halo’s change in leadership in 2016 may be found in the company’s news release: https://halopets.com/myron-lyskanycz-new-ceo/.2Source: Company management.

targeted to be certified as humanely sourced via The Global Animal Partnership

Program. Additionally, Halo intends to continue to develop recipes containing whole

meat—never rendered powdered “meat meals,” the current standard in the pet food

industry. In regards to vegetable sourcing, the company is committing to source

100% from farms that eschew the use of GMO seeds. The result of this enhanced

sourcing and sustainability protocol is the delivery of what management believes is

tangibly superior nutrition and palatability for companion animals.

As Halo fulfills its broader mission and disrupts the status quo of the pet food industry, the company’s ability to make a meaningful impact on environmental sustainability has the potential to be truly transformative. Our agricultural and factory farming system today emits more greenhouse gas emissions than the energy sector. By broadly altering how we raise farm animals and steward our soil, we have the opportunity to shift the arc of our planet from being a carbon pump back to its original function as a carbon sink.

Addressing Climate Change

It should be noted that Halo also considers the impacts for farmers in its sustainable

sourcing initiatives. Economic sustainability protocol for Halo’s producers requires

that they receive full value on every part of the animal they produce. Halo aims to

deliver to those producers a profitable value for pet food ingredients.

In 2016, Halo was named Best Pet Food by the Eco-Excellence Awards, and

Corporate Citizen of the Year by the Michelson Found Animals Foundation.

Halo became “America’s Best Loved Holistic Brand” in 20163, in large part due to its

environmental, social and philanthropic commitments. The designation is based on

a comparison of 14 natural brands (collectively representing 2/3 of all natural sales

in independent pet stores). Halo maintained the #1 overall average rank across


Company Profile | Halo


seven categories: positive media sentiment (#1 of 14), positive social sentiment

(#2), Klout score (#2)3, Facebook people engaged (#3), Facebook engagement

rate (#2), Twitter followers (#1) and total Tweets (#2). Halo’s average rank across

categories was more than two full ranks better than the nearest competitor as of

the end of 2016.


There were no significant changes to employee headcount throughout the year.

The company provides a benefits package including family health coverage, dental

coverage, vision coverage, life and long-term disability insurance, as well as

flexible spending accounts for health care and dependent care and vacation days,

sick days, and holidays. Life management programs and services offered include

an employee assistance program, health and welfare planning tools, access to

health advocates, ADP personal discounts (Perks), and more. New associates are

provided training, often with company leadership.

Halo has a non-discrimination policy. The management team is dedicated to this

policy with respect to recruitment, hiring, placement, promotion, transfer, training,

compensation, benefits, employee activities and general treatment during employment.

Any employees with questions or concerns about equal employment opportunities

or other grievances in the workplace are encouraged to bring these issues to

the attention of the supervisor. Employees may also contact the company’s ADP

TotalSource Employee Service Center. The company seeks to handle customer and

consumer issues quickly and responsibly through its phone and email customer

service team, social media channels, and sales team. Management believes this

reputation is reflected in Halo’s positive social media and ratings sites.

Transparency & Accountability in Managing Incidents

At the start of 2016, Halo completed its actions related to a limited, voluntary recall

of one production run of one product in October 2015 due to reported mold. It

was the first and only recall in the company’s 30 year history. Though not required

by the FDA to do so, Halo worked with its retailers, customers (via halopets.com,

social media and the news media) and the FDA to safely recall the product lot

in question. Two issues of mild stomach upset were reported. Halo customers

3Klout is a website and mobile app that uses social media analytics to rate its users according to online social influence via the “Klout Score,” https://en.wikipedia.org/wiki/Klout.

praised the company on social media for its fast actions and transparency. Pegasus

is working with Halo to review incident reporting policies and procedures to the

board as a goal for 2017.

ESG Certifications

In 2016, Halo began an initiative to obtain two key certifications:

Global Animal Partnership Program (“GAPP”): GAPP was initiated

roughly a decade ago by Whole Foods Markets to reward agricultural

producers for continuous improvement in their animal husbandry

practices. Now, GAPP is moving rapidly into other retail channels. Halo

began working with producers who are raising chickens and turkeys in

compliance with GAPP Step 3 protocols.

Marine Stewardship Council (“MSC”): MSC is a leading global

certification agency assuring sustainable fishing practices around the

world. MSC certified fisheries are audited to determine that they are

protecting the fish species and their marine habitat. In 2016, Halo revised

its pet food formulas to remove any seafood ingredients that would not

qualify as sustainable, and began changing its sourcing protocols to

purchase seafood ingredients only from MSC certified fisheries.



Halo has identified the following as the top three SDGs with which it is aligned. The

company expects to expand upon how it addresses specific underlying indicators

for each of these SDGs in its 2017 annual reporting to Pegasus:

Goals for 2017-2019

In addition to Pegasus’ ESG and impact goals for all portfolio companies in 2017-

2018, Pegasus and Halo have identified a number of company-specific goals for

the 2017 to 2019 timeframe to enhance current practices, including:

Products are expected to use only wild-caught fish from sustainably certified

fisheries (MSC or Ocean Wise certified)

Use only OrigiNativeTM (NO factory farming, only cage-free, pasture-raised, wild-

caught certified, organic, humane) and non-GMO vegetables in products


Halo believes in “feeding it forward,” donating over 1.5 million bowls of Halo

food (300,000 lbs.) to shelter pets annually (#HaloFeeditForward), in partnership

with The Humane Society of the United States (“HSUS”), Freekibble.com and

GreaterGood.org. This philanthropic activity is more than five times the national

corporate average (as a percentage of sales or profits).

Highlights in 2016 included the company’s support of HSUS’ Giving Tuesday

efforts, with a 200,000 bowl commitment to their Animal Rescue Team, donations

to shelters across the country celebrating the Dog Film Festival, and the 10,000

Bowl Halo Donation Gift Certificates included in the famous Oscars Gift Bags

(room director, Lenny Abrahamson, Tom Hardy, as well as past nominees Julianne

Moore, Julia Roberts, Meryl Streep, Robert Duvall, Barkhad Abdi, Ethan Hawke

and more have donated Halo to their favorite shelters).

Halo has been recognized for its philanthropic work by various initiatives, including

finalist nods from the Social Good Awards, AME Awards for the #HaloFeeditForward

campaign, and PR News Social Media Awards for the Bark World Instagram campaign.



Pegasus’ Fund II acquired its interest in KGS Agro Group

LLC (“KGS”) in 2016 through its investment in The

Leiber Group, Inc. Founded in 2013 and based in New

Jersey, KGS is an agricultural technology company

that produces, distributes, and licenses organic plant

growth products. The company’s non-toxic, growth-

enhancing formulation was developed through 10

years of nano-molecular biosciences research. KGS

technology is made available to farmers and growers

as seed/soil treatments and foliar spray applications for

all crops including grains, vegetables, fruits, perennials, tree

crops and specialty crops. KGS products help farmers achieve

improved soil health from an increase in natural microorganisms and organic matter,

cost savings from reduced water and fertilizer usage, and increased revenue from

yield increases.

About

“KGS Agro is focused on creating a clean, healthy, secure and sustainable global food supply. Increasing agricultural quality and quantity, as well as farmer incomes, while decreasing harmful chemical usage and mitigating climate change is our business’ core mission.”

Arnie Simon, CEO

KGS E&S Risk Categorization: Pegasus categorizes KGS as a “Category C” investment using the IFC’s and Equator Principles’ E&S assessment approaches. Product risks have been screened through testing, and supply chain risks are mainly limited to sourcing manufacturing services and raw materials. The main ingredient of the products is sourced from a sustainable supplier. As the company grows, Pegasus will continue to review categorization to reflect any complexities in the supply chain.

KGS Agro GroupPegasus 2016 Sustainability Report

Company Profile



KGS is a small company and currently licenses product for distribution with selected

partners. The company sources its main ingredient from a responsible supplier and

is evaluating further opportunities for supply chain ESG management as it grows.


KGS has contributed to the following economic development initiatives:

From 2013 to 2016, donated product and technical assistance to smallholder farmers

for on-farm use in a number of countries, including Haiti, Rwanda, Malawi, Brazil,

Mexico, and China

Collaborated in Haiti and Africa with CGI and other foundations (e.g. Smallholder

Farmers Alliance, Impact Farming, Yunnes, Gates) in 2013-2016; research was

conducted independently by AGRA Africa with other smallholder farmers in 2015,

and KGS donated product to determine efficacy in local farming systems and future

use for smallholders; as an example, from 2014 to 2016, donated product to 2,500

smallholder farms in Haiti to support sorghum production and agroforestry initiatives

In its philanthropic initiatives, KGS aims to promote collaboration with farmers to

foster entrepreneurship and self-sufficiency.

In addition to Pegasus’ ESG and impact goals for all portfolio companies, KGS

and Pegasus have identified company-specific goals for 2017, including evaluation

of opportunities to grow supply chain ESG improvements and enhanced design

and strategy around philanthropic initiatives to identify strong local partners and

improve collection of data on outputs and outcomes.

Food Security

Soil & Environment

Potential to increase world food production by 20%+ and farmer sustenance

Drought resistance, and resistance against other environmental uncertainties, such as rising temperature

Farmer IncomeBetter income generation through higher yield and lower input costs

Potential to return 5-10x product cost for farmers

Health & Nutrition Reduction in use of harmful chemical traces in food

Can help increase protein content in food

Improves soil health by increasing natural microorganisms

Retains more Nitrogen and reduces GHG emissions

Up to 30% reduction in chemical fertilizers and other chemical inputs

Contributing to Sustainable Agriculture

KGS offers a product to the agricultural markets with the following benefits:

KGS has identified the following as the top three SDGs with which it is aligned. The

company expects to expand upon how it addresses specific underlying indicators

for each of these SDGs in its 2017 annual reporting to Pegasus:

ESG Highlights


Company Profile | KGS Agro Group


OrganixPegasus 2016 Sustainability Report

Company Profile

Pegasus invested in Organix Recycling (“Organix”) through Universal Lubricants (a

former portfolio company of Pegasus that now solely holds the assets of Organix)

within Fund III. Based in Mokena, Illinois, Organix was formed in 2010 and is one of

the largest collectors and recyclers of pre-consumer food waste in the United States,

helping supermarkets and other corporations

convert food waste reduction initiatives into full-

scale, cost-effective solutions.

Using its advanced route-optimization software,

Organix synchronizes food waste collected at

approximately 7,000 different locations with

sustainable back-end recycling alternatives,

focusing primarily on the conversion of collected

waste into nutritional livestock feed for farms

and feedlots. When conversion to livestock feed

is not possible, Organix delivers collected waste

to a network of anaerobic digesters and compost

facilities, diverting food waste to its best use

according to EPA guidelines.

About

Organix E&S Risk Categorization: As a company with manageable environmental, health and safety risks operating in an OECD market, Pegasus has categorized Organix as a “Category B” using the IFC’s and Equator Principles’ E&S assessment approaches.

Contributing to a Circular Economy

A vast majority of the over 30 million tons of pre-consumer food waste generated

annually in the United States goes directly to landfills. According to the EPA, food

waste is the largest component of all landfill waste, more than plastic, glass, metal,

ESG Highlights


In 2016, Organix acquired the Green Choice Compost facility in Dallas, TX.

2016 ESG Highlight:

In 2016, the company collected an estimated 400,000 tons

of food waste from approximately 7,000 supermarkets

and retailers across over 36 states. Upon collection,

waste is sorted, and approximately 80% is diverted to

farms and feedlots as an animal feed ingredient, displacing

traditional feeds produced from industrial agriculture,

thereby reducing unnecessary demand for land, fertilizer,

pesticide and water. The remaining 20% is diverted to

compost and anaerobic digestion facilities for recycling,

resulting in a significant reduction of GHG emissions, and

particularly methane.

Operating in Over 36 States


Organix has a strong commitment to environmental, health and safety (“EHS”)

measures for the company’s staff and surrounding environment. In 2016, the company

incrementally increased employment to approximately 220 people. Organix believes

that they are key to the success of its operations. To that end, Organix provides

salaries to its operational workers that are above the average for the same job in

related industries. This includes a full benefits package, inclusive of medical and

dental insurance and a 401K match. Additionally, employees have direct access

to, and frequent training and communications with, the company’s dedicated EHS

department to ensure they are fully prepared to perform their job duties.

Organix has an EHS Management System, inclusive of trainings, drills, and weekly

reviews on action plans, and there are regular internal and external inspections for

compliance and quality assurance and control. The company holds weekly safety

discussion calls with all employees, averaging over 125 participants per call. Topics

include recent incidents, steps to prevent reoccurrence, and discussion around a

general safety topic (defensive driving, slips/trips/falls, heat/cold stress, etc.). New

employees receive two weeks orientation training and a final training evaluation

with their regional manager, all of which is documented. Regional managers are

tasked with performing “drive-a-longs” to evaluate driver performance in addition

to unannounced area visits inspecting equipment and store services. Managers are

evaluated on safety performance as part of their bonus structure. Organix’s strict

adherence to high standards of worker safety has resulted in a 17% year-on-year

improvement in the company’s Experience Modification Rate1 in 2016.

Vehicle maintenance is monitored through on-board electronic recording devices

which send a message to the Safety & Fleet departments in the event of any

defects discovered during required inspections. The Safety & Fleet departments

monitor the inspection history of all equipment and routine maintenance.

Organix’s EHS Director has been with the company for over three years and is

responsible for all aspects of screening and training of new employees, Department

of Transportation compliance, worker safety, environmental reporting, and

compliance. All material issues with safety/compliance matters are immediately

reported to the CEO and CFO by the EHS Director, and weekly meetings are held

with senior management with status updates provided. The EHS Director reports

and paper. Furthermore, food waste in landfills is a major contributor to methane

emissions, a GHG significantly more potent than CO2. The Organix management

team is committed to providing economically and environmentally sustainable

disposal alternatives to its customers in order to work toward a “zero waste” future.

Organix has identified the following as the top three SDGs that most align with its

core business and strategy. The company expects to expand upon how it addresses


to Pegasus:

Company Profile | Organix

1A number used by insurance companies to gauge both past cost of injuries and future chances of risk.


“As a leader in the food waste recycling industry, we are

committed to supporting our customers’ corporate social

responsibility initiatives by reducing the amount of material

that is disposed of in landfills. Not only do our value-added

services provide key operational data for our customers,

but we also facilitate improvement of the environmental

footprint of their operations. We further strive to conduct

our own operations in a responsible and efficient manner to

promote our underlying values of sustainability.”

- Rick Shipley, CEO

directly to the CEO and is independent of operations in order to foster an environment

of autonomy. Any traffic-related incidents, accidental spills, or complaints from

the public or employees are handled directly by the EHS Department. Company

policy dictates that any incident, regardless of severity, is immediately reported to

the safety department by the affected individual. Incidents are documented and

investigated to determine preventability by the EHS Director and discussed with

senior management. The EHS Director follows all incidents from onset to closure.

Material incidents are reported to the Board of Directors, and Pegasus is working

with Organix to review best practices on incident reporting as a goal for 2017.

There were no critical incidents in 2016.

In terms of GHG emissions, vehicle fleet metrics (e.g. fuel efficiency and idle time)

are continuously monitored via GPS and evaluated for route optimizations to lower

environmental impacts.


Organix supports the EPA food waste hierarchy, which states that the preferred

method to reduce food waste starts with source reduction and donations to feed

hungry people. To that end, Organix contributes its services free of charge to

five food banks to remove food materials not suitable for donation. Such activity

helps to lower food banks’ disposal fees, allowing them to do more with their

limited operating budgets. In addition, Organix is in the process of partnering with

Feeding America to roll-out food waste services to all of their locations within the

existing Organix footprint, at cost.

Development of a more formalized approach to measuring GHG emissions, and

reduction of fuel usage and GHG emissions

Vertical integration through development of additional composting facilities

Review of the EHS Management System with Pegasus to ensure it meets

international standards

In addition to Pegasus’ ESG and impact goals for all portfolio companies, Organix

and Pegasus have identified a number of company-specific goals to enhance

practices for 2017, including:


Company Profile | Organix

158 159Pegasus Capital Advisors | Annual Sustainability & ESG Impact Report 2016 | Legacy Investments

SlipstreamPegasus 2016 Sustainability Report

Company Profile

Pegasus invested in Slipstream Communications / Creative Realities (“CRI”) in 2008

within Fund IV. Headquartered in New York, New York, Slipstream Communications

is a holding company for Creative Realities, Inc, which offers media technology to

generate shopper engagement in and around physical retail locations. The company

also installs and services high-end audio-visual networks for global retailers, luxury

brands, digital out-of-home companies, advertising networks, and outdoor clients.

CRI is a public company with four offices across North America and active installations

in 40 countries. In 2016 the company increased its employee count from 59 to 70 as

it transitioned from consultants to employees. CRI offers a 401(k) retirement plan (no

employer match) and an equity incentive. It also maintains a Code of Business Ethics

among other policies and procedures related to ESG.

In September 2016, Slipstream sold its subsidiary Gyro International Ltd (“Gyro”) to

an affiliate of Dentsu Aegis Network, a global provider of best-in-class expertise and

capabilities in media, digital and creative communication services. Gyro is a leading

global creative agency dedicated to business-to-business marketing.

About

Slipstream / CRI E&S Risk Categorization: As a business services company mainly operating in OECD markets with limited supply chain activity, Pegasus categorizes Slipstream / CRI as a “Category C” investment using the IFC’s and Equator Principles’ E&S assessment approaches.

In addition to 2017 ESG goals identified by Pegasus across its portfolio companies,

Pegasus is working with Slipstream / CRI to identify opportunities to enhance the

company’s positive impacts and support the SDGs.



HTSPegasus 2016 Sustainability Report

Company Profile

Pegasus invested in HTS in 2007 within Fund IV. Founded in 1992 and based in

Yokneam, Israel, HTS is one of the world leaders in image processing-based

solutions for automization of sea ports and the monitoring of containers. The

company also delivers value-added vehicle data for revenue control, automation, and

security applications. Driven by ever-increasing needs for automation and security,

the company’s products serve as core technology enablers for the automation of

revenue and control systems, traffic management, security, access control and other

container logistics systems. HTS provides customers with the ability to monitor and

control their operations, improve productivity and enhance security by providing

data solutions.

HTS employs approximately 55 people across its departments (research and

development, logistics and manufacturing, customer support, finance, and back

office administrations). The company offers competitive employment packages in

the regions in which it operates (Israel and the US), including pensions, educational

funds, and healthcare packages. A Human Resources Manager handles any

employee issues as they arise from time to time, and the company maintains a

support department for its customers, providing 24/7 coverage across it regions.

The company maintains ISO 9001 Quality Management certification in addition to

the European Economic Area’s “CE marking”, signifying that its products have been

assessed to meet high safety, health, and environmental protection requirements.

In addition to Pegasus’ ESG goals for all portfolio companies, HTS also expects to

review company-specific opportunities to enhance ESG best practices with Pegasus

in 2017.

About

HTS E&S Risk Categorization: Pegasus has categorized HTS as a “Category C” using the IFC’s and Equator Principles’ E&S assessment approaches.



NSIPegasus 2016 Sustainability Report

Company Profile

Pegasus invested in National Strategies (“NSI”) within our Fund IV in 2008.

Based in Washington, DC, NSI is a business-to-government consulting firm

providing companies with strategy, insight and execution support to successfully

navigate complex procurement, legislative and regulatory processes of state and

local governments.

Through its internal sector practices (technology; sustainability and energy;

healthcare; public safety and law enforcement; transportation and infrastructure;

education; and, financial services) and external network of more than 2,500 state

and local consultants, which covers each of the 50 states and all mid-sized and

large municipalities across the country, NSI provides core services including

market research, strategic planning, competitive scans, government sales strategy

and execution, identification, pre-qualification and prioritization of state and local

government sales targets, public sector organizational assessments, and legislative

and regulatory affairs.

2016 Sustainability Highlight

As an example of the company’s work related to sustainability, it advised clients

on grants from the California Energy Commission and South Coast Air Quality

Management District. The US$3.8 million program was to conduct a demonstration

project on Zero Emission (“ZEV”) School Buses in school districts in California

and develop studies that could lead to a cost-competitive ZEV School Bus. NSI

contracted to build six battery electric school buses with Vehicle-to-Grid (“V2G”)

technology (creating the largest fleet of ZEV V2G school buses in the world)1 and

deployed them in three school districts to transport students. This initial pilot was

deemed successful and moved to a Phase 2 project, where in December 2016, Blue

Bird School Bus Company and NSI were awarded an over US$10 million project

from the US Department of Energy and other entities to develop a purpose-built

commercially viable ZEV V2G School Bus. This project launched in July 2017 and

is already drawing widespread attention within the ZEV, student transportation and

About

NSI E&S Risk Categorization: As a business services company operating mainly in OECD markets with limited supply chain activity, Pegasus has categorized NSI as a “Category C” using the IFC’s and Equator Principles’ E&S assessment approaches1Source: Company Management


utility industries. NSI sees a path to where over 1,000 ZEV V2G school buses could

be in use by late 2020 – all based on original work designed and implemented by NSI.

Other examples of NSI’s work with clients beyond its ZEV school bus project, include:

NSI has worked with a leading solar client to secure the installation of over 170MW of

solar power on public sector buildings, ranging from elementary schools to airports.

NSI helped secure some of the first non-utility energy storage contracts (3MW) for

schools in California.

NSI assisted in launching innovative LED street lighting projects for a number of

cities with one of its international clients.


Select Environmental Highlights:

Intentionally selected office location in DC within one block of mass transit so that

employees do not have to drive to work

Designing its office space within an existing building, adopted numerous energy

efficiency technologies in its space, and continues to take steps to reduce its carbon

footprint

Makes an effort to operate sustainably, including recycling programs and initiatives, a

policy to not purchase plastic water bottles, and subsidized mass transit for employees

Select Social Highlights:

Employees, Year End 2016: No change from the end of 2015

Benefits:

Medical, Vision, Dental & Rx insurance

Health Care and Dependent Care Flexible Spending Accounts

Short and long-term disability benefits

401(k) plan with match for eligible employees

Group life insurance, with several additional benefits in the case of accidental

death & dismemberment

A commuter benefits program, offering employees the ability to pay all or a

portion of commuting expense with pre-tax dollars

In addition to the 2017 ESG goals identified by Pegasus across its portfolio

companies, Pegasus is working with NSI to identify opportunities to enhance and

measure the company’s positive impacts and support the SDGs.


Company Profile | NSI


Spirit MusicPegasus 2016 Sustainability Report

Company Profile

Pegasus invested in Spirit Music Group (“Spirit Music”) in 2009 within Fund IV.

Founded in 1995 and headquartered in New York, New York, Spirit Music owns and

manages over 75,000 copyrights and master recordings, spanning nine decades

and multiple music genres. The company offers many musicians an opportunity

to access cash flows early if needed and has built an asset base that includes the

catalogs of numerous well-known artists, such as The Who, T-Rex, and Graham

Nash. The Spirit Music portfolio includes over 450 charted hits, over 125 top 10

hits, and 52 #1 records. The company operates four offices across the major music

hubs of Nashville, Los Angeles, London, and New York.

In 2016, the company grew from 32 to 38 employees, Spirit Music is an equal

opportunity employer and maintains a non-discrimination policy. The company

organizes team building initiatives and development programs including annual

team meetings uniting global staff and featuring motivational speakers.

The company offers a competitive compensation and a generous benefit package

including a 401K matching program and paid maternity leave. Spirit is focused

on creating sustainable business practices within its day-to-day operations. The

company is launching a CSR program to support a local children’s hospital as well

as developing practices to track success of its other initiatives.

About

Spirit Music Group E&S Risk Categorization: As a business services company mainly operating in OECD markets with limited supply chain activity, Pegasus has categorized Spirit Music as a “Category C” using the IFC’s and Equator Principles’ E&S assessment approaches.

In addition to 2017 ESG and impact goals identified by Pegasus across its portfolio

companies, Pegasus is working with Spirit Music to identify opportunities to

enhance the company’s positive impacts and support the SDGs.



T&MPegasus 2016 Sustainability Report

Company Profile

Pegasus invested T&M Protection Resources (“T&M”) in 2007 within our Fund

IV. Founded in 1981 and headquartered in New York, New York, T&M is a global

provider of integrated security and intelligence services to leading businesses,

financial organizations, investment management firms, corporations, academic

institutions and private clients. T&M’s team of industry-recognized subject matter

experts, investigative and research specialists, global intelligence advisors,

security consultants and operations managers includes career professionals that

are former prosecutors, lawyers, previous members of federal, state and local law

enforcement and private sector security experts. The company’s Israel business

unit is one of the largest security companies in Israel and includes security and

protection, facility maintenance, and central monitoring and electronic protection.

About

ESG Highlights

T&M E&S Risk Categorization: As a business services company with limited supply chain activity, Pegasus has categorized T&M as a “Category C” using the IFC’s and Equator Principles’ E&S assessment approaches. However, Pegasus recognizes that human rights risks are prevalent throughout the security industry and therefore expects to work with T&M in 2017 and 2018 to ensure best human rights policies, procedures and practices are in place.


T&M is an Equal Opportunity Employer that does not discriminate on the basis of

actual or perceived race, creed, color, religion, alienage or national origin, ancestry,

Example

T&M, through its Sexual Misconduct Investigations division, provides training and

investigation services to various educational institutions and companies. A team

of former prosecutors assesses and develops organization-specific policies and

protocols and devises clear and detailed reporting procedures for incidents of

sexual misconduct that may occur. In addition, T&M consultants are experts in

Title IX and the Campus SAFE Act.


citizenship status, age, disability or handicap, sex, marital status, veteran status,

sexual orientation, genetic information, arrest record, or any other characteristic

protected by applicable federal, state or local laws. The management team is

dedicated to this policy with respect to recruitment, hiring, placement, promotion,

transfer, training, compensation, benefits, employee activities and general

treatment during employment.

At the beginning of 2016, T&M’s employee workforce consisted of approximately

280 employees and approximately 430 independent contractors. In 2016,

employee headcount grew by approximately 29% and independent contractors

grew by approximately 26%. The company offers competitive compensation

including health, dental, vision and life insurance, paid time off, a 401k plan,

flexible spending account, and TransitCheck.

The company makes an effort to use recycled and eco-friendly office products and

to promote energy savings. The Helmsley Building (location of T&M’s corporate

headquarters) is a NYC landmark with sustainability credentials including: U.S.

EPA ENERGY STAR, U.S. Green Building Council LEED Gold for Existing Buildings,

and BOMA 360 Performance Building.

In addition to 2017 ESG goals identified by Pegasus across its portfolio companies,

Pegasus is working with T&M to identify opportunities to enhance the company’s

positive impacts and support the SDGs. Additionally, Pegasus and T&M recognize

that human rights risks are prevalent throughout the security industry and therefore

have set a goal to work together in 2017 and 2018 to evaluate opportunities to

enhance human rights protections and best practices.


Company Profile | T&M


ValogixPegasus 2016 Sustainability Report

Company Profile

Pegasus invested in Valogix in 2007 within Fund IV. Founded in 2001 and

headquartered in Saratoga Springs, NY, Valogix is an independent software vendor

in the enterprise resource planning industry. The company produces an inventory

management system for small and medium-sized businesses and has been selected

as a Gold partner by SAP.

In 2016, Valogix had under 20 full-time employees, two part-time employees,

and three paid interns. Though small, the company prides itself in a strong

corporate culture, little employee turnover, and nearly even balance of male and

female employees. Employees benefit from a strong healthcare plan, flexible

work arrangements (including remote working options), and in 2016, the company

launched a retirement plan offering. It operates from a leased office space and

has a minimal environmental footprint, though the company does have a recycling

program, including for e-waste, in office operations.

In terms of community engagement, for over five years, Valogix has maintained a

partnership with a local high school to source and train interns (three paid internships

annually). The company has maintained contact with the interns, who have all moved

on to impressive academic institutions and careers after their internship experience.

Valogix also has an informal program to support Toys for Tots through both

company donations and encouragement of employee donations.

Valogix has identified the following as the top three SDGs that most align with

its core business and strategy. The company expects to expand upon how it



About

Valogix E&S Risk Categorization: As a business services company mainly operating in OECD markets with limited supply chain activity, Pegasus has categorized Valogix as a “Category C” using the IFC’s and Equator Principles’ E&S assessment approaches.


OlympusPegasus 2016 Sustainability Report

Company Profile

Pegasus invested in Olympus Insurance Company (“Olympus”) in 2007 within

its Fund III. Based in Orlando, Florida, Olympus was formed in 2007 to provide

voluntary-market property and casualty policies in the Florida homeowner’s insurance

market. The company was formed with the mission of providing capacity to a capital

constrained Florida homeowners insurance marketplace following the 2004 and 2005

hurricane seasons and has since grown into a significant player in the Florida market.

Olympus employed nearly 90 full-time employees at the end of 2016. Pegasus is

working with the company to review its benefits package and human resources

policies and procedures. Any identified gaps in 2017 are expected to be included as

goals to address in 2018.

About

ESG Highlights

Olympus E&S Risk Categorization: As an insurance company operating in an OECD market with limited supply chain activity, Pegasus categorizes Olympus as a “Category C” investment using the IFC’s and Equator Principles’ E&S assessment approaches.

“At Olympus, sustainability is embedded in the very nature

of our day-to-day business model. Our purpose is protection

and restoration of our clients’ homes when they need it

most, often times when catastrophic weather hits. To the

hard-working men and women of Olympus, a home is not

just an asset that is monetary in nature, it is the nucleus

from which our clients live, work and raise their families.”

- Jeffrey B. Scott, CEO


Financial Stability

Olympus prioritizes maintaining a solid balance sheet

and disciplined business strategies in order to ensure

the company can service its clients in times of

need. The company’s Catastrophe Excess of Loss

Reinsurance Program is consistently placed with

some of the world’s finest reinsurance partners, further

protecting the solvency of Olympus through the most

extreme catastrophic events. The time and care Olympus

invests in evaluating risk factors is critical to maintaining

competitive rates. The company’s responsible practices and

careful underwriting policies are reflected in a consistent Financial

Stability Rating® of A, Exceptional from Demotech, Inc.

“Our damage was small in comparison to what you usually see, but it was massive to us. The Trade representatives that came into our home were absolutely the best....The project is complete now and we think it is much better than it was before. Thank you very much for the wonderful service.”

Testimonials

- Arlene and Bill W.

performed a complete inspection of the damage and proceeded to make a complete report of his assessment. I find the need to congratulate Olympus Insurance for selecting someone so honest and professional. He has turned an unpleasant situation around and has made it a truly pleasant experience!!!

To round thing up, it’s a pleasure to do business with Olympus Insurance!

“On behalf of the Flagler County Board of County Commissioners, I would like to take this opportunity to thank you for donating 30 cases of bottled water to Flagler County Emergency Management as they support the many firefighters and ancillary personnel in their ongoing activities in defense of the county against wildfires. We are truly grateful for the support you and others in the community have provided through donations.”

- Godfrey P.

- Alan Peterson, Chairman

Flagler County Board of County Commissioners


Pegasus and Olympus are working together to support the company in meeting

Pegasus’ 2017 ESG and impact goals for all portfolio companies.

Company Profile | Olympus

I would like to thank you for the prompt handling of my claim! Only a few hours after I reported my claim I got a call to set up an appointment for an inspection, which we set for 1:30 pm on the following day.

The inspector was knocking at my door at 1:25 pm; he


Pegasus invested in Fiberon, LLC (“Fiberon”) in 2007 in Fund IV. Based in North Carolina,

with facilities in New London and Meridian, ID, Fiberon is a leading manufacturer of

composite decking, railing and fencing used in homes and

light commercial construction. Its Fiberon brand product

line, which includes Sensibuilt brand decking, is designed

specifically for professional contractors.3

Since 1997, Fiberon has been manufacturing and selling high-quality composite decking

and railing products designed to make outdoor living easy. The company’s products

are made from recycled materials, meaning it can divert more than 60,000 tons of

wood and plastics from landfills and incinerators each year. Fiberon sources local pre-

and post-consumer recycled content, and uses a closed-loop water cooling system

Pegasus invested in bMuse Group, LLC (“bMuse”) in its Fund V. bMuse was founded

in 2008 and has over 50 employees globally. The company utilizes a studio model to

incubate products and companies aimed at recasting video, publishing, healthcare,

gaming, education, and entertainment for the digital age.

Companies under the bMuse umbrella benefit from sharing

engineering and marketing resources, as well as from high-level

partnerships that bMuse holds with industry-leading companies

(some of which include Hasbro, BBC, and Harper Collins). bMuse also receives

consulting and product-licensing revenue from engagements with third-party clients.

bMuse was part of Pegasus’ wellness portfolio. The company has incubated a number

of health-related products, such as Kinsa, a company that makes smart thermometers

that could track the spread of certain conditions in any specific area, having potentially

significant positive benefits for the healthcare industry (e.g. inventory planning) and

health authorities (e.g. the United States Centers for Disease Control).

bMuse Group, LLC1

Fiberon, LLC2

Companies that Pegasus exited in 2016 may have more limited profiles due to less ability to engage the company for informa-tion post-exit. Moving forward, since Pegasus is instituting a more formalized ESG and impact data collection and engage-ment process year-round, the Firm expects to have more detail on exited companies. 1bMuse E&S Risk Categorization: As a small-scale incubator operating mainly in OECD markets, with limited supply chain activity, Pegasus categorizes bMuse as a “Category C” investment using the IFC’s and Equator Principles’ E&S assessment approaches.2Fiberon E&S Risk Categorization: Fiberon’s manufacturing process involves managing EHS risks. Such risks and potential negative impacts are limited, largely reversible and manageable through mitigation measures. As such, Pegasus categorizes Fiberon as a “Category B” using the IFC’s and Equator Principles’ E&S assessment approaches.3Fund IV initially invested in Sensibuilt Building Solutions, LLC (Sensibuilt) and merged into Fiberon in Dec. 2008.

Investments Exited in 2016


for zero water discharge. Approximately 98.5% of the waste materials generated are

recovered.4 Fiberon’s products are also free of harmful chemicals, produced using

sustainable processes, and contribute toward points in LEED and other green building

rating systems. These practices were recognized by Green Builder magazine, who

named Fiberon a “2015 Eco-leader.”

Today, Fiberon products are sold throughout North America, and to more than 30

countries in Europe, Asia, Australia, and Central and South America. U.S. goods are

transported via rail cars from two manufacturing plants: one on the east coast; the

other, on the west. This practice enhances efficiency while reducing GHG emissions.

Fiberon’s polymer chemists and extrusion professionals employ the latest technology to

constantly innovate, using the finest raw materials coupled with leading manufacturing

processes to ensure best-in-class quality. Fiberon products have consistently held a

top-three market share in their respective categories, and the company offers industry-

leading warranties on products and labor.

Pegasus invested in Molycorp in 2008 in Fund IV. Based in Colorado, USA, Molycorp

was formed to purchase the assets of the Mountain Pass mine, the largest non-

Chinese rare earth deposit in the world according to the April 2010 U.S. Government

Accountability Office briefing. The rare earth oxides

were mined as ore from an open pit mine, refined and

processed through an extensive chemical beneficiation

system and sold as concentrates for use in a variety of

industrial applications. The investment thesis behind

Molycorp largely focused on the company supplying critical inputs to wind turbines,

hybrid and electric vehicles and water filters, corresponding with Pegasus mandate

to invest in resource efficiency, energy, and wellness. Please see the first half of this

report for a case study on ESG initiatives at Molycorp.

Molycorp5

4Source: Company management.5Molycorp E&S Risk Categorization: As an open pit mine with a number of high risks related to EHS aspects, Pegasus categorized Molycorp as a “Category A” investment using the IFC’s and Equator Principles’ E&S assessment approaches.


PegasusPartner Investments

184 185Pegasus Capital Advisors | Annual Sustainability & ESG Impact Report 2016 | Pegasus Partner Investments

Impala EnergyPegasus 2016 Sustainability Report

Company Profile

About

Impala E&S Risk Categorization: Impala has been involved with the development of Category A and B projects. As such, it is classified as a Category A investment by Pegasus using the IFC’s and Equator Principles’ E&S assessment frameworks.Impala Energy Holdings, LLC is not a portfolio company for any of the funds managed by Pegasus Capital Advisors or its affiliates, but rather is an investment made by certain principals of Pegasus Capital Advisors.

Founded in 2015, Impala Energy Holdings, LLC (“Impala”)

is a clean (renewable and gas) power holding company

focused on addressing the power capacity and

investment shortfall in sub-Saharan Africa (“SSA”). The

company is pursuing this significant opportunity through

development, investment and owning a diverse portfolio

of medium-sized power assets across both government-

backed independent power projects and smaller-

scale power plants for commercial and industrial (“C&I”)

companies (including fuel supply, such as Compressed

and Liquified Natural Gas (“CNG” and “LNG”). Impala features

unique characteristics, including:

Impala invests directly into project-specific companies alongside development

or investment partners, with a preference for majority and control positions when

feasible. Impala will also accept minority stakes alongside experienced partners.

Flexibility to pursue projects opportunistically depending on the localized need

(e.g. utility scale, off-grid, mini-grid or transmission line) and technology, fuel, and

resources available (e.g. solar, wind, hydro, geothermal, gas, or other)

Availability of development capital (most scarce capital throughout the project

development and implementation cycle) for early-stage development

Ability to invest at financial close if risk / projected returns are attractive, along with

the flexibility to construct, operate and hold assets depending on market conditions


Captive C&I product offers a flexible cleaner base-load solution for corporate clients who are:

distant from the grid (and relying on diesel generation)

relying on an unreliable grid

those distant from sources of significant renewable energy

Modular renewable, battery, CNG, and/or LNG solutions and power purchase agreements with shorter-than-usual terms enable clients to:

Use renewable and/or gas solutions (frequently as hybrids to ensure clean and affordable base-load power) to reduce or completely avoid dependency on expensive and dirty diesel

As feasible, adjust the load profile as operations change in size Switch to pure renewable plus storage solutions as this technology matures and becomes more affordable

Meet financial and climate change targets

Currently, as much gas is flared as is consumed in SSA, resulting in significant wastage and GHG emissions

Impala has identified an opportunity to work with local partners in SSA to capture such gas and compress or liquify it into a form that can be delivered to corporate clients without a pipeline Gas pipeline development is expensive and can result in significant environmental and social issues relating to land-use change

This solution eliminates corporate reliance on dirty diesel generators Working with local partners results in two-way learning and capacity building of talent

Focus on grid-connected / utility-scale IPPs, Captive and C&I markets, as well as supporting infrastructure

Sources: IEA Africa Energy Outlook, 2014. McKinsey, “Brighter Africa”, 2015. Additionally, as per the World Bank (http://www.worldbank.org/en/news/press-release/2016/12/12/new-data-reveals-uptick-in-global-gas-flaring): “Gas flaring – the burning of natural gas associated with oil extraction – takes place because of technical, regulatory, or economic constraints. As a result, there are more than 16,000 gas flares at oil production sites worldwide, causing about 350 million tons of CO2 to be emitted to the atmosphere every year... Flaring also wastes a natural resource that could be put to productive use or conserved (by reinjecting it into the ground). For example, if the 147 bcm of gas flared globally were used for power generation, it could provide about 750 billion kWh of electricity, or more than the African continent’s current annual electricity consumption.”

Company Profile | Impala Energy

Based in London, UK, the Impala team has substantial experience in global power

and infrastructure across the development continuum (greenfield, late-stage

development, construction and operations), including projects in SSA and other

emerging markets, and a strong history of working together.

Impala seeks to address the power infrastructure gap in SSA, where two-thirds

of people (approximately 600 million people) lack access to power, and where

consumption is expected to double over the next 15 years due to population

and economic growth. Current installed capacity does not meet demand, forcing

businesses and residential consumers to rely on expensive and dirty (high carbon)

forms of generation (e.g. diesel prices are three to six times what grid consumers

pay globally). McKinsey estimates that SSA will require investment of about US$835

billion by 2040 to supply the continent’s growing electricity demand, including

US$490 billion for generation capacity, plus US$345 billion for transmission and

distribution.1 As such, there are an estimated 3,155 generators in SSA, with an

average size of 6.5 MW, for total oil-fired capacity of approximately 20,600 MW.2


In 2016, Impala employed approximately six people full time and two people

part-time on market based compensation packages including ownership carry,

healthcare, employee pension and other benefits.

The company is committed to ESG best practices at both the holding company level

and for its projects and investments. For instance, at the holding company level,

the firm has an ESG Policy that it is further developing into an ESG Management

System, as well as a FCPA and UK Bribery Act policy, strict policies on financial

controls and reporting, among others. In terms of projects, the company is

committed to the IFC Performance Standards and EHS Guidelines. Participatory

stakeholder engagement with communities in which the company invests is a key

priority, as well as local job creation and capacity building. Impala is developing its

approach to ESG and impact reporting as its project portfolio evolves.

ESG Highlights

1Sources: https://www.usaid.gov/powerafrica; IEA Africa Energy Outlook, 2014; McKinsey, “Brighter Africa” 2015; Africa Progress Panel,

“Africa Progress Report 2015”; Overseas Development Institute, “Job Creation Impact Study: Bugoye Hydropower Plant – July 2013”;

Economist Intelligence Unit, “Enabling a More Productive Nigeria: Powering SMEs”; African Development Bank.2Sources: IRENA, “Solar PV in Africa: Costs and Markets”, 2016; Platts, 2015 and 2016.


Sources: McKinsey, “Brighter Africa” 2015; Africa Progress Panel, “Africa Progress Report 2015”; Overseas Development Institute, “Job Creation Impact Study: Bugoye Hydropower Plant – JULY 2013”; Economist Intelligence Unit, “Enabling a More Productive Nigeria: Powering SMEs”; African Development Bank; http://www.pcworld.com/article/2926892/power-problems-disrupt-africas-telecom-sector.html; http://www.fao.org/docrep/011/i0670e/i0670e03.htm; http://www.theguardian.com/environment/cif-green/2010/apr/01/south-africa-medupi-climate-pollution.

Economic

Development

Approximately five to six new jobs are created per MW added, excluding

indirect and induced jobs (a 50 MW power plant could create 250 to 300

direct jobs)

Africa’s infrastructure deficit is said to hinder economic growth by at least

2% and reduce business productivity by 40%

Frequent power cuts result in losses estimated at 6% of turnover for large

firms and as much as 16% for enterprises in the informal sector

Health &

Wellbeing

Approximately 60% of refrigerators used to store vaccines in Africa lack

access to a reliable source of energy

Almost 4/5 people in SSA rely on solid biomass for cooking (mainly

fuelwood and charcoal), resulting in approximately 600,000 annual deaths

from household air pollution – nearly half are children under five

Education

Girls frequently must collect firewood instead of being in school

A majority of primary schools in SSA lack access to electricity

A student’s potential to do homework is often dependent upon

lighting availability

Information

Technology growth is dependent on power supply

Mobile phones give civic groups and voters information and

capability to demand accountability in government elections;

they enable rural farmers to access market, weather and critical

data; they provide access to financial services through mobile

payment programs

Environmental

Conservation

Solid biomass accounts for over 2/3 of Africa’s total energy consumption,

higher than for any other region; reducing its use by 50% would save 60-

190 million tonnes of CO2-equivalent emissions

If SSA aggressively promotes renewables, it could obtain a 27% reduction

in CO2 emissions

The Intergovernmental Panel on Climate Change identified SSA as one of

the most vulnerable regions to climate change

Examples of Impact Potential from Clean Power Development in SSA

Company Profile | Impala Energy

The company has a focus on creating lasting shareholder value through a

combination of holding projects medium-term and opportunistic asset sales.

Impala has identified the following as the top three SDGs with which it is aligned.

The company expects to expand upon how it addresses specific underlying

indicators for each of these SDGs in its 2017 annual reporting:

In 2018, Impala aims to operationalize its ESG Management System, announce its

first projects, and report on ESG and impact outputs and outcomes.



ZeroBase EnergyPegasus 2016 Sustainability Report

Company Profile

ZeroBase Energy, LLC is not a portfolio company for any of the funds managed by Pegasus Capital Advisors or its affiliates, but rather is an investment made by certain principals of Pegasus Capital Advisors. ZeroBase Energy, LLC is owned and managed by Pegasus Strategic Partners, LLC, a special situations group that invests on behalf of the partners of Pegasus Capital Advisors, L.P.

Founded in 2009, ZeroBase Energy (“ZeroBase”) is an innovator in solar hybrid

off-grid and micro-grid power systems for rural, remote and austere environments,

reducing reliance on expensive fuels (e.g. diesel) and GHG emissions. The

company’s vision is to make cleaner sources of energy more accessible to those

most in need. ZeroBase’s goal is to make choosing, buying, owning, and operating

renewable energy systems easier and more cost effective for programs looking

to make a sweeping impact. The ZeroBase team is dedicated to solving the

difficult challenges associated with bringing energy to those beyond the grid. The

company’s solutions reduce their customers’ energy costs and lessens risks that

stem from reliance on fossil fuels and unstable grids. The company sees power

as a platform for stabilizing communities, and reliable energy access as a key to

public safety, education, health care, and industry growth.

Hundreds of ZeroBase microgrid and power systems are now in use around the

world, in some of the most austere and remote environments. ZeroBase customers

include defense and security forces, rural electrification authorities, commercial

agricultural and manufacturing companies, and sustainable resorts.

Differentiation and focus:

About

Focus on standardized portable hybrid power aimed at optimizing diesel generator efficiency and reduction in fuel consumption

Introduced a portfolio of Forward Operating Renewal Generator (FORGE™) standard products from 300 W to 18 kW

Operational efficiency priorities include power surety, manpower utilization, fuel savings and silent watch

ZeroBase E&S Risk Categorization: ZeroBase historically has not developed projects, other than one ~1MW project in Hawaii, and it contract manufactures its equipment. Project ESG risks and potential negative impacts are generally limited, reversible and easily mitigated through management plans. As such, Pegasus categorizes ZeroBase as a “Category B” using the IFC’s and Equator Principles’ E&S assessment approaches.


“We believe that economies are created when people have access to consistent and affordable power. Remote and portable energy solutions are a key to improved security, education, agriculture, and tourism.

Our purpose is it to provide energy access and efficiency to far reaching areas around the globe. As an official Mobile Power Partner of the R20 Regions of Climate Action, we are pleased to support their Sustainable Energy for All initiative with the United Nations. We take pride in playing a small part in providing global solutions for stronger economies and healthier environments.

We are committed to continually innovate solutions that enable our clients to create a more sustainable future for all.”

-Steven D. Hogge, President & CEO

Company Profile | ZeroBase Energy

In 2016, ZeroBase had one office in Ferndale, Michigan and a new design and test

center in Fremont, California.

ZeroBase established a Research and Development facility in Fremont, CA, which opened

access to a broader pool of talent experienced in designing and deploying renewable energy

solutions. The facility is being designed with state of the art equipment aimed at optimizing

ZeroBase’s renewable energy solutions. Staffing of the new facility began in 2016 and has

continued into 2017.

ZeroBase developed its first commercial microgrid exceeding 1 MW on the Hawaiian Islands.

The commercial facility will operate independently off-grid on solar PV and energy storage,

with generators as backup power.

ZeroBase supplied a microgrid system to power a rural village in Tanzania that previously did

not have access to reliable sources of energy.

New York’s Nassau County’s Emergency Management Office purchased ZeroBase trailers and

portable hybrid power systems to ensure operation of critical assets during natural disasters

and other emergencies.

In 2014, ZeroBase built a microgrid in partnership with EarthSpark International that supplies

electricity to 2,000 people in the southwestern village of Les Anglais, Haiti. In late 2016,

Hurricane Matthew directly struck the town, and about 20% of the solar array was damaged

by the storm. ZeroBase is working with EarthSpark to rehabilitate the damaged solar arrays to

bring the area’s power generation capacity back up to 93 kW.

2016 ESG Highlights

In terms of future activities, targeted platforms include a transportable microgrid

for the U.S. Marines, and optimization of solar and energy storage solutions for

customers in Haiti and Hawaii.

ZeroBase is the Official Mobile Power Partner of the R20 Regions of Climate Action.



ZeroBase had under 20 employees in 2016. The company offers a benefits

package that includes medical, dental, vision, life insurance, short-term disability

insurance, long-term disability insurance, a flexible spending account, 401k, and

wealth management assistance. As a goal for 2017, the company plans to review

its HR policies and procedures to identify opportunities to enhance its governance

and social practices.

ZeroBase products are built in a third-party factory committed to consistent

standards, and there were no significant incidents to report in 2016. As a goal for

2017, the company plans to review its supply chain for opportunities to enhance

best ESG practices.


ZeroBase has identified the following as the top three SDGs with which it is aligned.

The company expects to expand upon how it addresses specific underlying

indicators for each of these SDGs in its 2017 annual reporting to Pegasus:

Company Profile | ZeroBase Energy

Opportunities to expand the company’s client base to service more businesses,

organizations and individuals that contribute to sustainable economic development

Opportunities to enhance efficiency and design of ZeroBase systems for the benefit

of end-users and the environment

A more comprehensive approach to pursuing and measuring the company’s positive

impacts, particularly through the use of system testing and optimization at the new

R&D facility

While ZeroBase is not a portfolio company of Pegasus’s funds, it intends to

adopt the goals Pegasus has set for its portfolio companies in 2017. In addition,

ZeroBase has identified a number of company-specific goals to enhance current

ESG practices in 2017, including:



Future Goals



Pegasus’ ESG Specialists continue to work with the Firm’s portfolio companies

to seek to enhance their best practices and reporting with respect to ESG risks

and opportunities. As Pegasus moves forward, the Firm will strive to adhere to

the below targets and timeframes:

Map the selected GRI disclosures to the SDGs, SASB metrics, and IRIS

metrics and adopt a systematic, methodological approach for portfolio

companies and Pegasus to report on them, including both:

Metrics customized for each company based on materiality

Metrics standardized across companies to allow for analysis of aggregate data

2017 Report

Supplement the selected GRI disclosures with additional metrics as needed

in order to evaluate and report on positive impacts (outputs and outcomes)

2017 Report

Set impact benchmarks and goals for portfolio investments (as 2016 is the

first year of sustainability, ESG, and impact reporting, this report serves

as a baseline)

2017 Report

Where results from reporting are determined to fall short of ESG best

practices, develop time-bound action plans for Pegasus and portfolio

companies to close gaps

2017 Report

There can be no guaranty that Pegasus will successfully implement any of these targets, or that, if implemented, such targets will enhance the performance of the portfolio companies.

2017 Report Internally at Pegasus, fine-tune our approach to intentionality and

communication of our theory of change; set benchmarks and goals based

on best practices

Work with portfolio companies and internally at Pegasus to develop or enhance

grievance mechanisms (open to all key stakeholders, including communities,

customers, employees, workers, etc.), as appropriate and commensurate

with the identified level of potential environmental and social risk

2017 Report

Where they do not already exist, develop codes of conduct, policies, and

procedures for core operations and the supply chain, including human

rights, non-discrimination, FCPA, compliance, and ethics, among others

(at Pegasus and across the portfolio)

2017 Report

Conduct a review of portfolio companies for cybersecurity risks and develop

action plans with the companies to address material vulnerabilities identified

2017 Report

Conduct a review of incident reporting and enhance policies and

procedures where appropriate (at Pegasus and across the portfolio)

2017 Report

Identify opportunities for improvement in the Firm's ESG-MS

(e.g. ESG policies and procedures for company add-on acquisitions)

2017 Report

Develop a ratings or rankings system to quantify and benchmark ESG

performance of portfolio companies

2018 Report

Further integrate ESG best practices and knowledge throughout the highest

governing body, management team, and employees / staff, and consider

setting ESG performance targets tied to compensation (at Pegasus and

across the portfolio)

2017-2018 Reports


Evaluate opportunities to measure how ESG and impact initiatives are

reflected in financial performance

2018 Report

Evaluate compensation practices across Pegasus and portfolio companies

in an effort to ensure fairness and appropriate levels of transparency

2018 Report

2018 Report Enhance workforce development and training programs at Pegasus and

across the portfolio

2018 Report Increase diversity and inclusion efforts (including in leadership and at the

Board level) at Pegasus and across the portfolio

2018 Report Identify opportunities and set goals to further positive social impacts at

Pegasus and across the portfolio, such as hiring from disadvantaged

populations and implicit bias trainings; identify approaches to not just

pursue job creation, but creation of “quality jobs”

2018 Report Identify opportunities and set goals to further positive environmental

impacts at Pegasus and across the portfolio, such as efficiencies in

materials, waste, water, energy, and emissions

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