(pursuant to articles 3 and 4, paragraph 1, letter (b) and 5 SFDR)
SUSTAINABILITY RISK INTEGRATION IN THE INVESTMENT DECISION-MAKING PROCESS
In order to comply with the principles of responsible investment, Gradiente has adopted a code for a structured approach to the management of environmental, social and corporate governance issues (ESG) for itself as well as for the selection and management of portfolio companies.
One reason is because we believe that by adopting an ESG approach it is possible to achieve better growth, cost savings and better profitability as to long-term returns compared to a traditional approach. At the same time we increase our reputation and strengthen relationships with stakeholders. Therefore, Gradiente SGR aims to associate the adoption of responsible finance principles with the maximization of returns through the management of investment funds and target companies. All of this is possible thanks to the integration of traditional financial analysis tools with environmental, social and good governance tools both during the investment evaluation process and during the holding period of the investee companies, in order to consider the risks of sustainability in investment decisions.
In particular, sustainability risks are meant as an environmental, social or governance event or condition which, if it occurs, could cause a significant negative or potential impact on the value of the investment, as defined by art. 2, point 22 of EU Regulation 2019/2088. Particularly:
- sustainability risk related to environmental issues includes climate risk, both physical and transitional. Physical risk derives from the physical effects of climate change, acute or chronic: for example, frequent and severe climatic events can have an impact on products, services and supply chains. Transition risk, on the other hand, is linked to companies’ ability to mitigate and adapt to climate change and their adaptation to a low-carbon economy;
- sustainability risk related to social issues may include labor rights and community relations, issues such as inequality and inclusiveness, investment in human capital and accident prevention;
- sustainability risk related to governance issues may include, among others, the composition and effectiveness of the Board of Directors, management incentives, shareholder engagement, corruption. This type of sustainability risk includes risks that may impact an issuer’s operational effectiveness and resilience, as well as its public perception and reputation, impacting its profitability and, in turn, its capital growth.
The investment process adopted by the SGR is integrated by the screening, assessment and due diligence procedure to be conducted on the companies/entities subject to investment (also) in the ESG area.
Below is a summary of the main phases when the aforementioned ESG procedure will be articulated:
- preventive exclusion of investments in expressly prohibited sectors;
- due diligence, also with regard to ESG factors, according to the following three main guidelines:
- preparation and use of specific information questionnaires referring to ESG factors, aimed at a preliminary assessment of good governance, environmental and social factors;
- the assistance of (and cooperation with) a consultant (specially designated) with specific skills in assessing ESG factors with respect to individual investment transactions, in order to identify both the risk profiles and the opportunities connected to the reference investment;
- the implementation of specific environmental due diligence, where the environmental risk factor is potentially significant with reference to the sector of activity in which the company/entity subject to investment operates.
On the basis of the results of the due diligence, also carried out through the consideration of specific ESG indicators, the asset management company evaluates the investment (for example if it is such as to allow the promotion of environmental and social characteristics as well as compliance with good governance practices in line with the investment policy) and the related risks, including those of sustainability.
STATEMENT ON THE NOT CONSIDERATION OF THE NEGATIVE EFFECTS OF INVESTMENT DECISIONS ON SUSTAINABILITY FACTORS
The SGR, also considering that the assessment of the negative effects of investment decisions taken on behalf of the AIFs managed on sustainability factors (“Principal Adverse Impacts” – PAI) is not a mandatory requirement for it – in consideration of the regulatory obligations applicable to the itself (e.g. exceeding the criterion of the average number of 500 employees during the financial year) and the type of financial products offered – it has not currently implemented a procedure for the relative consideration and evaluation of PAIs in the light of the provisions of art . 4 of EU Regulation 2019/2088. In fact, the SGR believes that, considering the peculiarities of its business, the integration of sustainability risks in its processes/policies/procedures guarantees a responsible investment process aimed at supporting the pursuit of social and governance objectives.
INTEGRATION OF SUSTAINABILITY RISKS WITHIN THE INVESTMENT PROCESS
The specific qualitative assessment indicators relating to portfolio management activities include the implementation of policies, at investee company level, for the management of sustainability risks, as defined by art. 2, point 22 of EU Regulation 2019/2088.