INFORMATION PURSUANT TO ART. 3, 4 and 5 of REGULATION (EU) 2088/2019
Art. 3 – Policies on the integration of sustainability risks
By adopting the United Nations Principles for Responsible Investment (UN PRI) and establishing a sustainability strategy, Consilium has embedded ESG aspects in its business, aiming to contribute to the United Nations Sustained Development Goals. After joining the UN PRI in March 2020, Consilium implemented an ESG Policy, changing its investment procedures and formalising its ESG governance.
With reference to the investment activity of its funds under management, Consilium believes that the integration of ESG factors throughout the investment process, taking into account the peculiarities of each investment, is paramount for the development of a sustainable growth strategy for its portfolio companies.
Such commitment is substantiated as it follows:
- during the pre-investment phase, an ESG due diligence is carried out to identify ESG risks and possible mitigation measures. In this phase, Consilium investigates (i) the operating context in which the target company operates, (ii) the potential sustainability risks and related mitigants and (iii) the best practices of the industry;
- once the investment has been completed the portfolio company, with the support of Consilium, prepares an “ESG Action Plan”. The document defines the objectives to be pursued in the short to medium term to improve the ESG profile of the company and the mitigation actions to address the sustainability risks highlighted during the ESG due diligence;
- during the holding period, Consilium carries out an yearly monitoring and reporting activity, also by means of direct interactions with ESG representatives of the portfolio companies;
- before the divestment, Consilium performs an ESG assessment aiming to evaluate the improvement in the ESG profile of the portfolio company and the degree of residual ESG risks. The selection of the exit option, compatibly with its financial targets, is made with the objective to best guarantee, in the medium to long term, the contextual creation of both financial and social value.
Art.4 – Monitoring of negative effects of investment decisions on sustainability factors
Article 4 of the SFDR Regulation (EU Regulation 2088/2019) requires investment fund managers to expressly state whether or not they consider the “main adverse effects” (IAPs) of investment decisions on sustainability factors. Under current legislation, ‘main adverse effects’ should be understood as the effects of investment decisions that have a negative impact on sustainability factors related to the environment, social and personnel issues, respect for human rights and issues related to the fight against both active and passive bribery.
Although ESG and sustainability risks are pivotal in its vision, for the time being Consilium does not consider the negative effects of investment decisions on sustainability factors. Consilium assesses the environmental, social and governance impacts of portfolio companies differently than envisaged by the legislation, using a negative screening method to exclude companies that do not meet certain ethical criteria from the universe of its potential targets, then carrying out a due diligence to identify relevant ESG issues. The performance of the portfolio companies is then monitored and evaluated periodically while the top management is encouraged to adopt improvement plans.
Furthermore, given the obligations of the relevant legislation (including the technical methodologies and data collection requirements that this would reasonably entail), there is no guarantee that Consilium would have access to clear, comparable data, suitable for identifying and evaluating the main negative impacts of investment decisions on sustainability factors.
This is the current position, which Consilium will monitor.
Art. 5 – Remuneration policies and integration of sustainability risks
Consilium requires its employees and directors to adhere to its remuneration policy and implement all the processes related to the integration of environmental, social and governance obligations. Specific ESG targets may be set for each employee and director based on that individual’s priorities and operative goals. Furthermore, Consilium considers its commitment to ESG integration in its activities essential for long-term investment performance, thus coherent with its remuneration structure which is specifically based on long-term funds’ performance.