Disclosure Regulation
PRELIMINARY REMARK
Regulation (EU) 2019/2088 ("Disclosure Regulation" or "SFDR") requires financial market participants, including investment firms providing portfolio management services, UCITS management companies and alternative investment fund managers, to disclose information for increased transparency, including in relation to sustainability risk management strategies and potential or identified adverse sustainability impacts.
ARTICLE 3 OF THE SFDR: TRANSPARENCY IN THE STRATEGIES FOR DEALING WITH SUSTAINABILITY RISKS
Through the fundamental approach of ESG integration, the group-wide defined exclusions and the consideration of sustainability risks, Flossbach von Storch AG fulfils the fiduciary duties in the best possible way to appropriately classify potential risks (and opportunities) of investment decisions.
ESG factors are considered in depth in the proprietary evaluation and assessed for opportunities and risks. Each of the three factors (E, S and G) is considered from the perspective of a long-term investor to ensure that none of the aspects lead to a potential conflict of interest of long-term value creation. Sustainability risks are environmental, social or governance events or conditions that, if they occurred, could have an actual or potential material adverse effect on the value of an investment. Sustainability risks can have a significant impact on other risk types, including, for example, general price risk, operational risk, liquidity risk, currency risk, and contribute as a factor to the materiality of these risk types.
The analysis process also includes the examination of reputational risks as well as climate-related physical risks and transition risks, which can have a direct and indirect impact on the value of a company. The following points, amongst others, can be named as exemplary standards with regard to the ongoing analysis of target investments:
- Are climate-related physical and transition risks that may affect the business model sufficiently monitored and taken into account in the company's long-term direction?
- Are sufficient measures taken to address sustainability risks that have a significant impact on the company's reputation and can have a lasting effect on the value of the investment if there is a loss of confidence?
Within the framework of the multi-level analysis, special attention is paid to good corporate governance with integrity, which is important for the sustainable development of the company. This increases a company's long-term prospects for success and can only be achieved by taking ecological as well as social factors into account. The following points, amongst others, can be named as exemplary standards:
- Does the company's management properly and sufficiently take into account ecological, social and economic framework conditions?
- Do the employed managers of the target company act like responsible and sustainable owners?
ARTICLE 4 OF THE SFDR: TRANSPARENCY OF ADVERSE SUSTAINABILITY IMPACTS AT THE COMPANY LEVEL
The Flossbach von Storch Group takes into account the main adverse impacts of investment decisions on sustainability factors in accordance with Article 4 (1a) of the Sustainable Finance Disclosure Regulation (SFDR). The main adverse impacts are identified, prioritised and assessed as part of the in-house analysis process using specific ESG analyses, which are prepared individually for invested issuers/guarantors and accounted for in the risk/reward profile of the company analyses.
The principal adverse impact indicators (PAIs) are prioritised according to relevance, severity of negative impacts and data availability. The assessment is not based on rigid bandwidths or threshold values that companies must comply with or achieve; instead, attention is paid to a positive development in dealing with the PAI indicators.
As part of the participation policy, efforts are made to reduce particularly negative impacts, including in the indicators of greenhouse gas emissions Scope 1 & 2, energy consumption from non-renewable energy sources, and serious violations of the UN Global Compact Principles and OECD Guidelines for Multinational Enterprises. This means that if one of the companies does not deal adequately with the indicators identified as particularly negative, this is addressed with the company and attempts are made to work towards a positive development.
If the management does not take the necessary steps for improvement to a sufficient extent, the voting right is exercised in this respect or the investment is sold.
In addition, exclusions, such as the manufacture and/or distribution of controversial weapons and the mining and/or distribution of coal, can contribute to a reduction or avoidance of individual adverse sustainability impacts.
Flossbach von Storch AG also supports the growing importance of sustainability in the financial sector. In order to emphasise the importance of the topic, the Flossbach von Storch Group observes the following recognised standards: Principles for Responsible Investment (PRI); BVI Bundesverband Investment und Asset Management e. V. (BVI); CDP. V. (BVI); and CDP. The standards are selected after individual consideration and the determination that they are in line with the in-house investment strategy.
As part of the in-house ESG analysis, care is taken to ensure that companies take a responsible approach to their environmental and social footprint. In the view of the Flossbach von Storch Group, this includes setting climate targets and complying with recognised international value standards. A particular focus is placed on the following standards, which are directly related to the focussed PAIs: UN Global Compact Principles & OECD Guidelines (PAIs 10 & 11) and Paris Climate Agreement (Table 1 PAIs 1-6, Table 2 PAI 4).
Detailed information on this can be found under Downloads.
In its activities as a financial advisor and portfolio manager with regard to the Flossbach von Storch private equity funds, Flossbach von Storch AG does not take any adverse effects on sustainability factors into account. This also applies to Flossbach von Storch's activities as a financial advisor to external private equity funds.
The data relevant to the target investments of the Flossbach von Storch private equity funds and external private equity funds, which must be used to determine and weight the adverse sustainability impacts, are currently not available on the market, or not available to a sufficient extent. As soon as the availability of data for the aforementioned target investments has improved, Flossbach von Storch intends to take the most important adverse impacts into account as part of its investment and investment advisory activities.
ARTICLE 5 OF THE SFDR: TRANSPARENCY OF REMUNERATION POLICY IN RELATION TO THE CONSIDERATION OF SUSTAINABILITY RISKS
The Flossbach von Storch Group's strategies for incorporating sustainability risks are also incorporated into the company's internal organisational guidelines. The adherence to these guidelines is decisive for the evaluation of employee performance and thus has a significant influence on future salary development. In this respect, the remuneration policy is in line with the strategies for the inclusion of sustainability risks.
ARTICLEs 8, 10, 11 OF THE SFDR: TRANSPARENCY IN THE PROMOTION OF ENVIRONMENTAL OR SOCIAL FEATURES
If a financial product is classified as an Article 8 product pursuant to the SFDR, relevant information about the environmental and social characteristics will be available from Downloads.
Status: 25/06/2024