The Regulation on Sustainability Disclosure in the Financial Services Sector (Regulation (EU) 2019/2088, "Sustainable Finance Disclosure Regulation", "SFDR" or "the Regulation") entered into force on March 10, 2021. The Regulation requires fund managers such as Apicem Investments B.V. with an AIFMD license from the Authority for the Financial Markets (AFM) to disclose information regarding (among other things) the integration of sustainability risks, the consideration of negative sustainability impacts and, where applicable, the promotion of environmental or social characteristics, and sustainable investment in the investment policy.
This document contains three sections:
-Integration of sustainability risks ('sustainability risks') into investment decisions
-Principal adverse impact statement ('principal adverse impact statement')
-Remuneration policy ('remuneration policy') in relation to the integration of sustainability risks
Integrating sustainability into investment decisions
This section specifically addresses Article 3 of the Regulation:
"Financial market participants shall publish on their websites information about their policies on integrating sustainability risks into their investment decisions."
Sustainability risks
Apicem Investments uses the definition of sustainability risk as described in Article 2 (22) of the Regulation: "an environmental, social or governance event or circumstance that, if it occurs, could cause an actual or potential material adverse effect on the value of the investment." Apicem Investments believes that considering sustainability risks in the investment decision-making process is an important part of risk management.
Integrating sustainability into investment decision-making process
Apicem Investments seeks to integrate sustainability risk assessment into the investment decision-making and portfolio management process, as described in more detail below.
First screening
Apicem conducts pre-due diligence screening with the goal of identifying and then avoiding investments that currently, or in the future are likely to, generate a significant portion of their revenues from excluded industries or products involved in the following, among others:
-production, trade and/or distribution of tobacco;
-production of, trade in and/or distribution of weapons;
-production, distribution or sale of adult entertainment, including gambling and the "adult industry";
-acts, activities or events that do not comply with the laws and regulations of the country where the activities take place.
With this negative screening, Apicem Investments avoids investments with higher sustainability risk.
Due diligence
Apicem conducts ESG (Environmental, Social, Governance) due diligence for each potential investment. Within the ESG due diligence, Apicem assesses whether there are any "red flags" (e.g., uncontrollable ESG risks) that should deter Apicem from proceeding with the potential transaction. Through this process, Apicem aims to identify key sustainability risks (and opportunities) and define appropriate mitigation activities. Examples of sustainability risks assessed include, where relevant, negative sector risks such as controversial business activities, carbon and climate impacts, ecosystem / circularity impacts, health and safety impacts, product impacts and supplier chain impacts; and business risks such as reputation and brand exposure. Within its proprietary ESG due diligence framework, Apicem seeks to qualitatively assess the likely impact of sustainability risks on financial returns by assigning a rating on of low, medium and high.
Business
Apicem aims to provide portfolio companies with the right tools and guidance needed to assess and manage sustainability risks. Throughout the ownership phase, Apicem challenges and supports portfolio companies in improving and further developing their ESG-related performance and disclosure. Where necessary, action plans are established, performance and progress monitored, and plans are continually updated by the boards of the portfolio companies.
Main adverse effects statement
This section specifically addresses Article 4(1) of the Regulation:
Financial market participants shall publish on their websites:
-if they consider the main adverse effects of investment decisions on sustainability factors, a statement of due diligence policies with respect to those effects, taking due account of the size, nature and scale of their business and the types of financial products they make available; or
-if they do not consider adverse effects of investment decisions on sustainability factors, clear reasons for doing so, including, if relevant, information on whether and when they intend to consider those adverse effects.
Main adverse effects reporting
Pursuant to Article 4(1)(b) of the SFDR, Apicem Investments (Apicem) B.V. hereby declares that it does not currently consider reporting on negative impacts of its investment decisions on sustainability factors because it has fewer than 500 employees and does not consider it proportionate to do so.
Apicem Investments remuneration policy in relation to sustainability risk integration
This section specifically addresses Article 5 of the Regulation:
"Financial market participants and financial advisors shall include in their remuneration policies information on how those policies are consistent with the integration of sustainability risks, and publish that information on their websites."
General information about Apicem's remuneration policy
Apicem's remuneration policy is designed to ensure that the interests of Apicem employees are aligned with the interests of investors in the Apicem Funds and to avoid incentives that could result in excessive risk-taking behavior. All employees receive a fixed salary. In addition to the fixed remuneration, some employees may receive variable remuneration.
The remuneration policy has been adopted by the Apicem board in accordance with binding rules implementing EU Directive 2011/61/EU on Alternative Investment Fund Managers and its implementing regulations (collectively, the AIFMD).
Remuneration policy considerations related to the integration of sustainability risks
When assessing variable compensation for employees, compliance with Apicem's ESG policy, which includes the integration of sustainability risks into the investment decision-making process, may be among the non-financial performance criteria considered in such assessment.
