As of 27 December 2022
In March 2021, the Sustainable Finance Disclosure Regulation (“SFDR”) came into effect. SFDR seeks to establish a pan-European framework to facilitate sustainable investment, by providing for a harmonised approach in respect of sustainability-related disclosures to investors within the European Union’s financial services sector.
The scope of SFDR is extremely broad, covering a wide range of financial products and financial market participants. It seeks to achieve more transparency regarding how financial market participants integrate Sustainability Risks into their investment decisions and the consideration of adverse sustainability impacts into the investment process.
The objectives of SFDR are to
- strengthen protection for investors of financial products,
- improve the disclosures made available to investors from financial market participants and
- improve the disclosures made available to investors regarding the financial products, to amongst other things, enable investors make informed investment decisions.
Under Article 3 and 4 of the SFDR, information must be published on the integration of sustainability risks into the investment decisions and on the considerations of the principal adverse impacts of the investment decisions on sustainability factors.
Integration of Sustainability Risks & ESG Factors (SFDR Article 3)
At Incentive, we consider sustainability as an essential part to our investment and portfolio management processes and have integrated Sustainability Risks and ESG factors into our research process.
We believe that companies with a greater focus on sustainability will create greater value than their peers and that companies with high sustainability standards are better positioned to capitalise on business opportunities arising from an increasing sustainability focus among all stakeholders.
We also think that sustainability issues are having a greater influence on a company’s risk landscape and that a strong corporate governance must identify, evaluate, and manage sustainability risks. It is our view that long-term profitability is intrinsically linked to the responsible management of a company’s impact on the environment and society. As such, we work actively with our portfolio companies to promote good corporate governance on sustainability issues.
Incentive sees a “sustainable company” as one whose products or services meet a real and substantive demand over the long term. In addition, a “sustainable company” identifies and manages (i) its sustainability risks and (ii) impact on the environment, society, and people, in line with the expectations of society.
In assessing potential investments, we will consider ESG factors as part of the due diligence process. When investing in companies with real but manageable sustainability risks, we actively engage with the company to mitigate the risks and improves its sustainability performance.
During the investment process, we consider how companies reflect upon and manage ESG risks and opportunities as well as their sustainability performance measurement and reporting, governing documents, and strategies.
For the full disclosures, please refer to the relevant Fund’s prospectus and supplement.
Sustainability Framework (SFDR Article 3)
At Incentive, we believe that sustainable companies will perform better in the long-term and we are committed to integrating sustainability into the investment process through our sustainability framework. Our main commitment, and purpose of our sustainability framework, is to identify and promote good corporate governance on sustainability issues.
The sustainability framework is designed to integrate sustainability analysis throughout the investment process. By making the sustainability analysis an integral part of the investment process, we are in a better position to make informed investment decisions and push portfolio companies to mitigate risks and capture opportunities.
Our sustainability policy can be found here: https://www.incentive.com/sustainability-policy/
Consideration of Adverse Sustainability Impacts of Investment Decisions on Sustainability Factors (SFDR Article 4)
Even though Incentive has integrated the consideration of Sustainability Risks into the investment decision-making process, we do not currently consider the principal adverse impacts of our investment decisions on Sustainability Factors. The reason for opting against doing so is primarily that Incentive has a commercial preference to focus resources elsewhere.
We reserve the right to reconsider this position in the future when more information and guidance is available.
Remuneration Policy (SFDR Article 5)
Incentive’s remuneration policy shall serve to promote sound management and control of Incentive and its clients’ risks, including sustainability risks, and shall not encourage excessive risk taking on the part of employees (in all aspects of its activities that relate to the services which are subject to public authorisation).
An excerpt of Incentive’s Remuneration Policy is set out below:
The Company’s employees currently only receive fixed remuneration (the Company has no guaranteed or non-guaranteed bonuses). The Company has no plans of paying variable remuneration during the applicable period for this remuneration policy. If the Company decides to implement variable remuneration in the future, the Company will establish a framework for calculation and payment of variable remuneration in line with AIFMD Annex II and applicable legislation.
The Company’s remuneration committee has, based on the above, prepared and approved the Company’s remuneration policy. The Company’s remuneration committee shall at least once a year perform a review of the remuneration policy and the application of the policy.
In addition, the board of directors of the Company (the Board) has reviewed and approved the Company’s remuneration policy and shall ensure that the Company complies with this remuneration policy. The Board shall at least once a year perform a review of the application of the policy.
In addition, the remuneration policy is reviewed by the Company’s auditor annually in relation to the internal control audit, as well as the Company’s internal auditor as part such process.
For the purposes of SFDR, all Funds managed by Incentive AS qualify as financial products, however these Funds do not classify as Article 8 Funds or Article 9 Funds.
This information is provided solely for the purposes of Incentive’s compliance with the provisions of the SFDR. The information contained herein is subject to change at any time without notice. Subject to the legal structure of the relevant fund, any issue and allotment of shares in funds managed by Incentive is subject to the provisions of the respective fund’s prospectus and the supplement thereto and any application for shares in such funds shall be based solely on the information contained in such documentation and the most recent annual and/or semi-annual report of the fund and shall be made pursuant to the terms of the respective application form.