The Sustainable Finance Disclosure Regulation (Regulation (EU) 2019/2088, “SFDR” or “the Regulation”) entered into force on 10 March 2021. The Regulation requires fund managers like Gilde Equity Management (GEM) Benelux Partners B.V.(“GEM” or Gilde) with an AIFMD license from the Dutch Authority for the financial markets (Autoriteit financiele markten, AFM) to provide information with regards to (inter alia) the integration of sustainability risks, the consideration of adverse sustainability impacts, and where applicable, the promotion of environmental or social characteristics, and sustainable investment as an investment objective.
This document contains three sections:
This section specifically addresses Article 3 of the Regulation:
“Financial market participants shall publish on their websites information about their policies on the integration of sustainability risks in their investment decision‐making process.”
Gilde uses the definition of sustainability risk as described in Article 2 (22) of the Regulation: “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”. Gilde believes that integration of sustainability risk considerations in the investment decision-making process is an important part of risk management.
Gilde aims to integrate sustainability risk assessment in the investment decision-making and portfolio management process as further described below.
Gilde conducts a pre-due diligence screening with the aim to identify and consequently avoid any investment which is currently, or likely to in the future, generate a significant share of its revenue from excluded industries or products involved in the following:
Through this negative screening exercise, Gilde aims to filter out investments that have a higher sustainability risk exposure.
Gilde conducts ESG (Environmental, Social, Governance factors) due diligence for each potential investment. Within the ESG due diligence, Gilde assesses whether there are red flags (e.g., unmanageable ESG risks) that should prevent Gilde from proceeding with the potential transaction. Through this process Gilde aims to identify key sustainability risks (and opportunities) and defines appropriate mitigating activities.
Examples of sustainability risks assessed include, where relevant, inter alia negative industry risks such as controversial business activities, carbon and climate impacts, ecosystems / circularity impacts, health & safety impacts, product impacts and supply chain impacts; and company exposure risks such as reputation and brand exposure. Within the proprietary ESG due diligence framework, Gilde aims to assess the likely impacts of sustainability risks on the financial returns in a qualitative manner by allocating a grading on low, medium, high scale.
Gilde intends to provide portfolio companies with the appropriate tools and guidance required to assess and manage sustainability risks. Throughout the ownership phase, Gilde challenges and supports portfolio companies to enhance and further develop their ESG related achievements and disclosure. Where required, action plans are created, performance and progress are monitored, and the plans are continuously revised by the Board of Directors in the portfolio companies.
This section specifically addresses Article 4 sub 1 of the Regulation:
Financial market participants shall publish and maintain on their websites:
Pursuant to article 4 sub 1 (b) of the SFDR, Gilde Equity Management (GEM) Benelux Partners B.V. hereby states that at present it does not consider adverse impacts reporting of its investment decisions on sustainability factors because it has less than 500 employees and does not deem it proportionate to do so.
This section specifically addresses Article 5 of the Regulation:
“Financial market participants and financial advisers shall include in their remuneration policies information on how those policies are consistent with the integration of sustainability risks and shall publish that information on their websites.”
Gilde’s Remuneration Policy aims to align the interests of identified staff of GEM with the interests of the investors in the GEM Funds and to avoid incentives that could result in excessive risk-tasking.
All employees receive a fixed salary. In addition to the fixed remuneration, several employees can receive a variable remuneration.
The Remuneration Policy has been adopted by the Board of GEM in accordance with binding rules implementing EU directive 2011/61/EU on Alternative Investment Fund Managers and relevant implementing regulations (together, the AIFMD).
When assessing eligibility of identified staff to variable remuneration, adherence to the ESG Policy of GEM, which includes the integration of sustainability risks in the investment decision making process, may be part of the non-financial performance criteria which are taken into account in such assessment.