Regulation (EU) 2019/2088 (SFDR), SFDR RTS (Commission Delegated Regulation (EU) 2022/1288), and Regulation (EU) 2020/852 (Taxonomy Regulation) establish unified guidelines for financial market participants, including Alternative Investment Fund Managers, concerning transparency in integrating sustainability risks and addressing adverse sustainability impacts. These regulations mandate the disclosure of sustainability-related information regarding financial products. The Taxonomy Regulation further introduces an EU-wide framework aimed at standardizing the classification of economic activities based on their environmental sustainability. In alignment with these regulatory requirements, this document delineates AUDENTIA CAPITAL MANAGEMENT LTD’s (the “Company”) approach to responsible investment. This Sustainability Risk Policy embodies the Company’s dedication to integrating environmental, social, and governance (ESG) factors into its investment decisions.
AUDENTIA CAPITAL MANAGEMENT LTD, licensed as an Alternative Investment Fund Manager by the Malta Financial Services Authority, qualifies as a financial market participant under the aforementioned regulations. Consequently, this Policy governs the integration of ESG considerations into investment management processes across all managed funds.
In this Sustainability Risk Policy, the following terms, when used, shall have the meanings set out hereunder:
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An investment fund (financial product) that meets the requirements of Article 6 of SFDR, and therefore do not integrate any kind of sustainability into the investment process and which deem sustainability risks not to be relevant for their investment strategy. |
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An investment fund (financial product) that meets the requirements of Article 8 of SFDR, and therefore promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices. |
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An investment fund (financial product) that meets the requirements of Article 9 of SFDR, and therefore has sustainable investment as their objective. |
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The six environmental objectives as set out in the Taxonomy Regulation, namely: (i) climate change mitigation; (ii) climate change adaptation; (iii) sustainable use and protection of water and marine resources; (iv) transition to a circular economy; (v) pollution prevention and control; and (vi) the protection and restoration of biodiversity and ecosystems. | |
| ESG |
Environmental, social, and governance. |
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A financial market participant within the meaning of Article 1(12) of SFDR | |
| Principal adverse impacts |
Those impacts of investment decisions that result in negative effects on sustainability factors. |
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| Sustainability factors |
Environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters. |
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| Sustainability risk |
An environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment. |
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| SFDR or the Sustainable Finance Disclosure Regulation |
Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector. |
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| SFDR RTS |
Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022 supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details of the content and presentation of the information in relation to the principle of ‘do no significant harm’, specifying the content, methodologies and presentation of information in relation to sustainability indicators and adverse sustainability impacts, and the content and presentation of the information in relation to the promotion of environmental or social characteristics and sustainable investment objectives in pre-contractual documents, on websites and in periodic reports |
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| Taxonomy Regulation |
Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088. |
Board of Directors:
– Oversee the implementation of the sustainability policy.
– Ensure compliance with regulatory requirements.
– Review and approve sustainability reports.
Investment Committee / Risk Manager:
– Monitor and evaluate the sustainability performance of funds.
– Develop and update sustainability-related policies and procedures.
– Provide guidance on ESG integration and sustainability risks.
Portfolio Managers:
– Integrate ESG factors into investment analysis and decision-making processes.
– Monitor and report on sustainability risks and opportunities.
Compliance Officer:
– Ensure that all disclosures and reporting meet regulatory standards.
– Conduct regular reviews to ensure adherence to the sustainability policy.
In the event that the Company outsources or delegates to other third party managers and/or investment advisors (the “Delegates”) the performance of any of its functions, the Company shall ensure that the Delegates have in place an ESG policy or as a minimum adopt the Company’s ESG Policy.
The Company should ensure the following in order to ensure compliance with the applicable regulation:
SFDR
Taxonomy Regulation (if applicable)
RTS
In terms of remuneration the Company should:
In line with the Remuneration Policy and the remuneration criteria for the Directors, the members of Investment Committee, and the Portfolio managers of the Company, there is no guaranteed variable remuneration, and no variable remuneration is paid unless it is determined by the Directors following a performance based and risk-adjusted assessment, and such variable remuneration should be reasonable, structured in such a way as to achieve a fair balance between fixed and variable elements, and in-line with the business strategy, market condition and the specific environment in which the Company operates.
Considering the very limited impact of the variable remuneration of the Identified Staff on the risk profile of the CISs and the nature of the business of the Company, the Company deems that there is no risk of misalignment with the integration of the sustainability risks in the investment decision making process of the Company in respect of the CISs.
For further information about remuneration, please refer to the Company´s Remuneration Policy
In terms of remuneration the Company should:
For further information about conflicts of interest, please refer to the Company´s remuneration policy.
Most of the Funds managed by the Company align with the requirements of Article 6 of SFDR, therefore, they do not promote any ESG characteristics as the portfolio selection process follows a strategy based on economic conditions and market forecasts which do not take ESG factors into account and therefore it does not invest in any securities with embedded ESG criteria. Moreover, such Funds do not have a sustainable investment objective pursuant to SFDR. Therefore, those Funds are not subject either to article 8 or to article 9 of SFDR.
Those Funds neither promote nor designate sustainability-related characteristics to their investors or benchmarks. Furthermore, the Company does not assess the Principle Adverse Impacts (PAIs) of its decisions on ESG Factors for these Funds, as these impacts do not influence the Company´s investment process, and due to the lack of available and reliable data.
As a ‘financial market participant’, the Company has to perform a sustainability risk assessment to firstly determine the relevance of sustainability risks in respect of each Fund. In this regard, such assessment should confirm that sustainability risks are not directly relevant to the Company´s operations in relation to those specific funds, a position which should be reflected in the Funds’ Offering Documentation.
In general, the Funds managed by the Company do not take into account the adverse impacts of investment decisions on sustainability factors, as required by Article 4 (1) (b) of the SFDR.
In general, the Funds managed by the Company do not take into account the adverse impacts of investment decisions on sustainability factors, as required by Article 4 (1) (b) of the SFDR. Notwithstanding the above when the Company manages funds classified under Article 9 as per SFDR, the following shall be considered:
The Company undertakes an assessment of the principal adverse impacts (“PAIs”) of its investment decisions on Sustainability Factors. PAIs are those impacts arising from investment decisions that have a negative effect on Sustainability Factors.
Where the PAI cannot possibly be determined due to insufficient disclosure or lack of tangible data, the Company will actively engage with the target company in question and should no commitment be made by the latter to mitigate the PAI, this matter will be factored into the decision-making process.
The Company has disclosed on its website a statement on the due diligence process in respect of identified PAI arising from the Company’s investment decisions.
The Board is charged with the promotion of awareness and understanding of ESG considerations within the investment team and to integrate due consideration of Sustainability Factors and Sustainability Risks into their investment decision making process, engagement efforts and to share such knowledge with other employees of the Company.
Information on Sustainability Factors and related Sustainability Risks are incorporated into the Company’s investment decision-making processes at the asset selection stage when undertaking due diligence on such asset class and, where possible, assessed in terms of the potential financial impact in the long term. When undertaking the ESG analysis, the Company will seek to obtain information from a variety of sources, including, but not limited to:
The Company will ordinarily also rely on due diligence measures adopted by target companies to identify, mitigate, and report on Sustainability Risk.
Sustainability Risks and/or opportunities vary by country, industry, markets, as well as by characteristics specific to a target company such as size and geographical footprint. These matters are taken into consideration when undertaking the assessment of the Sustainability Factors and Sustainability Risks associated with a target investment.
Inadequate management of Sustainability Risk can lead to inefficiencies, operational disruption, litigation, and reputational damage. These outcomes may impact the performance of the investment and ultimately the financial returns of the Company’s clients.
The integration of information on Sustainability Factors and Sustainability Risks into investment decision making processes enhances the Company’s understanding of sectors, assets and companies and their ability to deliver sustainable, long term shareholder value.
The Company integrates information on Sustainability Factors in its investment strategy, whereby Sustainability Risks are considered in the broader investment process and analyses across the asset classes and ultimately in the investment decisions undertaken by the Company.
When assessing a target company, the Company takes into account the extent to which the target company:
In this respect, the Company assesses the extent to which the target companies follow the principles set out in the OECD Due Diligence Guidance for Responsible Business Conduct. The objective of the OECD Due Diligence Guidance for Responsible Business Conduct is to “…provide practical support to enterprises on the implementation of the OECD Guidelines for Multinational Enterprises by providing plain language explanations of its due diligence recommendations and associated provisions. Implementing these recommendations helps enterprises avoid and address adverse impacts related to workers, human rights, the environment, bribery, consumers and corporate governance that may be associated with their operations, supply chains and other business relationships….” .
The Company adopts a pragmatic approach whereby information on Sustainability factors is integrated into established investment assessment processes. The Company does not have a separate ESG focused process. With investments spanning over various asset classes, jurisdictions, sectors, and markets, the Company takes into account legal and cultural differences in different markets. Thus, the ESG analysis is sensitive to the individual situation pertaining to each target company in terms of the local norms, laws, regulations, and expectations of the market in which it operates.
The Company does not automatically exclude investments in products/ target companies purely on ESG grounds if the Company, feels that such Sustainability Risks do not necessarily pose a financial risk in the long term. The purpose of integrating information on Sustainability Factors and related Sustainability Risks in the investment decision making process does not automatically exclude certain products/ target companies as the investment decision making process takes into consideration other factors and risks.
The Company could apply a set of filters for the purpose of determining which companies, sectors or activities are eligible or ineligible to be invested in based on its preferences, values and/or ethics.
Certain clients may have concerns about specific activities or industries and may instruct the Company to exclude such activities or industries. In such circumstances, the Company will actively engage with its clients to better understand and define these criteria such that it is able to maintain such exclusions on an ongoing basis.
The Company also screens target companies/ products that promote and provide solutions that are consistent with Sustainability Factors and aims at including such products in the portfolios managed by the Company. The Company will also positively recommend such products on an ongoing basis.
Once invested in, the ongoing eligibility of said companies, sectors or activities is likely to be revisited on a periodic basis or if there are significant changes.
The Company also considers the principle of ‘do no significant harm’. This principle considers an investment to be ‘sustainable’ if it contributes to an environmental or social objective and does not significantly harm any other environmental or social objective as set out in the Regulation.
Concerning the strategies discussed in this ESG Policy, the Company promotes one product which is specifically labelled as an ESG product, namely the Ecoener Inversiones Fund, designated under Article 9 of SFDR. Whilst an ESG integration strategy continues to be applied, it may not necessarily be the only emphasis of all products managed by the Company, particularly in the case of the other sub-funds managed by the Company designated under Article 6 of SFDR.
The Board will periodically review this document to ensure that it remains up-to-date and consistent with the Company’s regulatory obligations under applicable law and risk appetite. The Board shall be responsible for initiating and facilitating an annual review of this document and its implementation, which review shall be carried out in light of legal and business developments as well as the Company’s experiences in its implementation.
All changes or material exceptions to this document are to be approved by the Board, whether in relation to the annual review or otherwise.
Audentia Capital Management (“ACL” or the “AIFM”) is authorised by the Malta Financial Services Authority to provide AIFM services to a range of AIFs.
As per Regulation (EU) 2019/2088 (“SFDR”), the company is defined as a “financial market participant”.
In accordance with Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (SFDR), ACML identifies and analyses sustainability risks as part of its risk management process and classifies the AIFs assets according to specific ESG criteria.
Further, per Article 3 of SFDR, a financial market participant is required to “publish on their websites information about their policies on the integration of sustainability risks in their investment decision‐making process.”
ACML has adopted this statement to describe the approach taken to demonstrate compliance with Article 3 of SFDR. For the purpose of this statement: “Sustainability risk” means an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of an investment.
To the extent possible, ACML adopts a sustainable approach in the operations and investment strategies depending on the different categorization of the Funds managed, integrating sustainability risks where required by the Offering Documents.
A sustainability risk is defined as environmental, social or governance event or condition that, which if they occur have or may have significant negative impacts on the assets, financial and earnings situation, or reputation of a supervised entity.
For ACML, taking into consideration sustainability risks means integrating ESG factors (as defined below) in its daily operations and business for the benefit of its clients and overall, the financial system.
Sustainability risks can be subdivided into 3 categories:
There are different level of consideration given to sustainability risks depending on the strategy pursued which are further described in the offering documents of the funds in accordance with SFDR. Further information is included in the Sustainability Risks Policy of the AIFM.
The integration of ESG issues into investment practice and decision-making is an increasingly standard part of the regulatory and legal requirements for Alternative Investment Funds, along with requirements to consider the sustainability-related preferences of the clients and beneficiaries, and to report on how these obligations are implemented.
The European regulation defines sustainability risk as an environmental, social or governance event or condition that, if it occurs, could have an actual or a potential material negative impact on the value of the investment. For all funds and mandates with an ESG approach (articles 8 or 9), ACML defines the ESG indicators to follow. These can be indicators developed by ACML or provided by diverse sources. Principal Adverse Impacts (PAI) are indicators defined by the SFDR regulation. These indicators are specific to each process and can be associated with a hard or a soft limit.
ESG indicators and PAIs are monitored by Compliance and Risk Management Functions and integrated into risk reports. Limits on the indicators can be either hard or soft. Breaches are handled according to current Compliance Monitoring Program and Risk Management policy, and reported to the Board of Directors of the Company.
Internal Portfolio Management model for article 8 or article 9 Funds:
For those Funds where the Investment Management/ Portfolio Management is carried out directly by the AIFM, during the ex-ante risk assessment process, ACML
performs the related analysis in order to identify and to measure the likely impact of the risk on the investment fund, also ensuring the Investments falls within the category of an “ESG Investment” according to the classification of the particular Fund. ACML will collect the related information and if those risks are relevant, the risk management team of the AIFM will perform an exposure assessment (ex-post) review of those risks as part of the discharge of its duties.
The sustainability risk identification and assessment will be performed according to the NAV frequency of the different Funds, and at least on an annual periodic basis, by requesting information to the investment committee during the due diligence process and by performing the reviews during the ex-post analysis. Through this, ACML aims to identify a change in the relevance of the risk affecting the Fund’s return.
Delegation model for article 8 or article 9 Funds:
For the investment funds for which the portfolio management function is delegated to a third-party Portfolio Manager, ACML will require the Portfolio Manager to define a dedicated sustainability investment approach. ACML will control on a periodic basis, during its due diligence process as defined in its monitoring framework, the correct application of the sustainability investment approach and will perform the pre investment checks and ex-post analysis, classifying the investment products by typology of sustainability risk and performing the related checks.