Sustainable Finance Disclosure Regulation (2019/2088) (the "Disclosure Regulation")
EQT Fund Management S.à r.l ("EFMS"), EQT's Luxembourg alternative investment fund manager, makes the following disclosures in accordance with Articles 3(1), 4(1)(a) and 5(1) of the Disclosure Regulation.
Sustainability risk policies
A sustainability risk means "an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investment". For EFMS, sustainability risks are risks which, if they were to crystallise, would cause a material negative impact on the value of the portfolios of its funds.
Before any investment decisions are made on behalf of any funds that EFMS manages, the relevant investment advisory team will, subject to EFMS’ approval, complete a process that identifies the material risks associated with each proposed investment; these will include relevant and material sustainability risks.
EFMS considers these risks as part of its risk management process for the funds it manages, starting with an overall assessment of the likely risks associated with investments pursuant to the relevant fund's investment policy and objectives and leading to specific investment proposals submitted to the investment committee.
The investment committee assesses all the identified risks, including sustainability risks alongside other relevant factors set out in the proposal. Following its assessment, the investment committee makes investment decisions having regard to the relevant fund's investment policy and objectives. Throughout the entire process, relevant sustainability risks are identified and assessed using the same process as is applied to other relevant risks affecting the funds and investments made on their behalf.
EFMS pays staff a combination of fixed remuneration (salary and benefits) and variable remuneration
(including bonus). In this regard, EFMS has identified a list of staff relative to the exposure on sustainability risks and defined risk indicators to assess such sustainability risks in terms of variable remuneration. These risk indicators can be quantitative or qualitative, and reflect the relevant environmental, social and governance aspects. These risk indicators are set so that the structure of remuneration does not encourage excessive risk taking with respect to direct or indirect sustainability risks.
Adverse Sustainability Impacts Statement
Due diligence policies with respect to the principal adverse impacts of investment decisions
As part of its portfolio management practices applicable to each one of EFMS’ business lines, EFMS considers the principal adverse impacts of investment decisions on sustainability factors in the manner prescribed by Article 4 of the Disclosure Regulation. EFMS does this principally through the review of pre-acquisition due diligence material provided by its relevant investment advisory team and ongoing monitoring in respect of such identified impacts, which are described in the Portfolio Management Policy.
This statement takes due account of EFMS' size, the nature and scale of its activities and the types of financial products it makes available.
Policies on the identification and prioritisation of principal adverse sustainability impacts and indicators
During the screening and due diligence phases of each proposed investment, the consideration of sustainability impacts forms an integral part of the investment decision making process and will be continuously evaluated throughout on an on-going basis in order to understand whether an investment contemplated by EFMS will proceed further in the on-going due diligence and ultimately to the relevant EFMS Investment Committee review.
Principal adverse sustainability impacts
Given the nature of the investments made by the funds managed by EFMS, the principal adverse sustainability impacts of its investment decisions will typically vary depending on the sector and industry of the contemplated target company. However, EFMS will typically consider the following factors in its investment process: greenhouse gas emissions, share of non-renewable energy consumption and production, and board gender diversity.
EFMS strives to take a number of actions to seek to address these adverse impacts, for example
● Considering adverse impacts and red flags for potential investments at origination stage.
● Identifying and, where relevant, quantifying material adverse impacts during the due diligence process.
● Where material adverse impacts have been identified with a proposed investment, relevant information and commentary is provided to the relevant EFMS investment committee.
● Actively engaging with portfolio companies on sustainability matters through the lifecycle of the investment (for example, supporting investee companies with the implementation of ESG policies and action plans, engaging with senior leadership on specific sustainability issues etc.).
● Monitoring adverse impacts during the investment lifecycle and reporting progress to the relevant EFMS Investment Committee, as relevant.
● Regular reporting to investors in the fund on material sustainability impacts.
Adherence to business conduct codes and internationally recognised standards
The parent company of EFMS, EQT AB, has a long-standing commitment to responsible investment and ownership principles and was the first among Nordic peers to become a signatory to the UN supported Principles for Responsible Investment initiative in December 2010. EQT continuously maintains and aligns its responsible investment and ownership approach with various international conventions, standards and guidelines such as, but not limited to, the Ten Principles of the UN Global Compact, the UN Guiding Principles on Business and Human Rights, the UNDP powered SDG Impact and TCFD (Task Force on Climate related Financial Disclosures). Additionally, EQT AB has committed to the Science Based Targets initiative and aims to align its operations with the Paris Agreement where applicable.