Introduction

EU Regulation 2019/2088 on sustainability-related disclosures in the financial services sector (the ‘SFDR’ or ‘Sustainable Finance Disclosure Regulation’) imposes new disclosure obligations on asset managers in respect of sustainability of environmental, social and governance. The SFDR came into force on 19 December 2019 and key elements generally referred to as Level 1 requirements came into effect from 10 March 2021.

The SFDR requires asset managers to provide investors with certain environmental, social and governance (‘ESG’) related information in relation to certain financial products to enable end investors to make informed investment choices.

Responsible and Sustainable Investing

In managing the investments of the respective funds under management (the “Funds”), Altarius Asset Management Limited (“Altarius” or “the AIFM”) shall aim to take into account, to the extent applicable, sustainability risks and the potential impact of such risks on the returns of the respective Fund investments. A sustainability risk is an environmental, social or governance (“ESG”) event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of an investment (sustainability risks are referred to as “ESG risks”).

In particular, as part of the investment due diligence process certain governance risks (including management structure and compensation, and board composition) and social risks (including product safety and public health and safety) may be considered alongside other material risks in respect of the target companies and investment products. The due diligence process shall take into account publicly available information and, when and where applicable, discussions with the management of the target companies and other key stakeholders. Any ESG risks will be reflected in the investment memoranda considered by the investment committee of the AIFM as part of its investment management process.

In light of the investment policies of the respective Funds, Altarius generally considers that the potential impact of ESG risks on the returns of Funds under management to be low. However, no assurance can be given that ESG risks will be avoided or, in the event that they arise, effectively mitigated and losses may be incurred.

Integration

Our investment team, together with the ESG Committee, always strives to promote, where applicable and appropriate, the promotion of awareness and understanding of ESG considerations and integrate the same into our investment decision making process and engagement efforts. As a result, and where appropriate, information on ESG factors and the related ESG risks are incorporated into our processes at an asset selection stage when undertaking due diligence on such asset class. Furthermore, and whenever possible, an assessment is also carried out in terms of the potential financial impact in the long-term.

The team at Altarius has adopted various approaches to integrate the consideration of environmental, social, and governance (ESG) factors into our investment decision-making process:

Negative and Positive Screening

We will actively engage with our clients to understand whether they have concerns about specific activities and/ or industries in order to maintain such exclusions on an on-going basis. In such cases, we will undertake – to the extent possible – to screen target entities and/ or products that promote and provide solutions that are consistent with ESG Factors and shall aim to invest in such products on an on-going basis, as applicable.

Exclusions

Altarius will not knowingly invest in companies or hold securities that are engaged in:

– Arms manufacturing

– Manufacture of tobacco

– Hard spirits

– Gambling, and

– Genetically modified organisms

We will assess these types of investments on a case-by-case basis, and any potential for indirect exposure is carefully considered and factored into investment selection.

In this respect, the AIFM may seek the prior advice of the respective investment advisors and/or investment analysts involved within the respective Fund in all cases in which it is willing to carry out an investment in a business whose exclusion from the restricted sectors below is uncertain or when the incidence of the restricted activities on the overall business of the target company is low or minimisable.

Exposure to companies or securities engaged in the above industries may lead to the stopping of the acquisition process.

Principle Adverse Impacts

When applicable, Altarius is committed to using its best efforts to take into account the potential adverse impact of its investment decisions. However, it shall be noted that non-financial data of SMEs are not always available in satisfactory quality and quantity to allow the AIFM to fully assess the potential adverse impact of the AIFM’s investment decisions on the global sustainability factors.

In considering the above, and due to the size of the AIFM’s operations and the significant resources required to implement a formal monitoring programme, Altarius does not currently assess the adverse impacts that its investment decisions may have on sustainability factors.

Kindly contact Toni Krastev for a full copy of our ESG Policy.

Alignment of Remuneration Policy with Sustainability Investments

The Remuneration Policy of Altarius does not encourage risk-taking which is inconsistent with its risk profile as well as the risk profiles of the Funds under management. Moreover, and in line with the AIFM’s Remuneration Policy, no variable remuneration is paid to staff unless it is determined to be justified following a performance assessment based on quantitative (financial) as well as qualitative (non-financial) criteria.

Considering the limited impact of variable remuneration of identified employees on the risk profile of the Company’s clients and the nature of the business of the Company (including, where applicable, the delegation of the investment management function to other third-party entities), the Company deems that there is no risk of misalignment with the integration of any sustainability risks in the investment decision making process of the Company in respect of its clients. Furthermore, the AIFM is of the view that its existing structures are sufficient to prevent excessive risk-taking in respect of any sustainability risks.

Kindly contact Toni Krastev for a full copy of our Remuneration Policy.