Our Sustainable Improvement Strategy
The success of our “Buy, Improve, Sell” model relies on building better businesses that are positioned to prosper over the longer term. The sustainability improvements that we promote and encourage among our businesses benefit from our long-term view and are underpinned by our focus on conducting business with the highest standards of integrity, honesty, and transparency.
In line with the “Sell” aspect of our strategy, our absolute metrics across all areas will fluctuate year-on-year. By implementing a stronger culture of operational and financial improvement, we rebuild our businesses’ resources and capabilities, and enable them to pursue commercially attuned sustainability improvement initiatives that can continue beyond our ownership.
Inputs
Industry expertise
Core management group has operated in the UK and the international manufacturing arena for over two decades.
Highly experienced management team
The current team founded Melrose in 2003 with a view to buying and improving underperforming businesses. Since then it has overseen transactions with a total market value of over £10 billion.
Strong track record
Melrose has generated significant financial returns for its shareholders, achieving an average return on equity of 2.5x across the businesses sold to date and returned over £5.5 billion of cash to shareholders
Operational efficiency
Our businesses benefit from substantial investment and changed management focus in order to drive growth. Melrose increased the operating margins of businesses sold by between five and nine percentage points.
Effective governance
The Board maintains high standards of corporate governance to ensure that Melrose achieves success for the benefit of the businesses we manage and our shareholders over the long-term.
Value creation
Sustainable value creation model
Governance
Effective governance, risk management and compliance
We require our businesses to implement strong governance frameworks and promote a robust governance culture, supported by the Melrose Code of Ethics and underlying Group policies, to underpin the operational and financial improvement measures we implement, and to rebuild our businesses’ resources and capabilities to enable them to pursue commercially attuned sustainability improvement initiatives.
Environmental
Environmental leadership – respect and protect the environment
We have set firm Group targets to source global electricity from renewable sources(1), divert waste from landfill(2), and reduce Scope 1 and Scope 2 emissions intensity(3).
Decarbonising our industry
We invest in and support our businesses in developing new products and services that contribute to the decarbonisation of our businesses’ sectors, aligned with a net zero future.
Social
Promote employee and community diversity, inclusion, health, safety, wellbeing and skills development
The Board comprises a diverse membership, having achieved the Hampton-Alexander Review and Parker Review recommendations. Our businesses are required to ensure that permanent employees receive regular (annual) formal performance reviews(4), and to protect employees from injury and lost time accidents. Melrose invests in furthering and promoting these values within our businesses, for the benefit of their employees and the communities in which they operate, through the Melrose Skills Fund.
(1) Where renewable electricity is commercially and reasonably available in the relevant jurisdiction.
(2) Excluding hazardous waste, which is already disposed of correctly outside landfill.
(3) Target baselined on 2021 performance. Baseline was set in conjunction with the timeframe of the Group’s target setting process.
(4) Where permitted by local laws and employee representative bodies.
Outputs
Strategic improvements
- Introduction of Group level sustainability targets and commitments
- Improved ESG disclosure through engagement and action
- Continuous bolstering of our Group sustainability governance framework
- Alignment with non-financial reporting frameworks including the TCFD and SASB
- Setting business-level sustainability strategies
A
MSCI – ESG score: ↑ “A” (2020: “BB”)
C
CDP Climate change score: “C” (inaugural)
53.6 "strong"
Sustainalytics – ESG Risk Management score: ↑ 53.6 “strong” (2020: 28.4 “average")
Shareholder investment and gain
2.5x
Average return on equity across all businesses sold
£5.5bn
Cash return to shareholders since establishment
Reinvestment
c£1.2bn
Spent on research and development for Nortek, Elster and GKN acquisitions
£300m
Spent on climaterelated research and development in the last two years
