Sustainable Finance Disclosure Regulation (“SFDR”)
Sustainability Risks
“Sustainability Risks” as defined 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”.
Sustainability Risks include (but are not limited to) the following:
- environmental risks such as the impact of environmental events such as increased flooding risks on operations of portfolio companies;
- social risks such as impact of non-compliance with anti-slavery or working conditions laws and regulations by portfolio companies; and
- governance risks such as inadequate management oversight of portfolio companies.
Integration of sustainability risks in investments decisions (Article 3 SFDR)
AQA Capital Ltd (“AQA”) aims to investigate sustainability risks during investment due diligence and consider material sustainability risks when making investment decisions. Sustainability risks are also investigated during ongoing review of the portfolios.
AQA’s approach to investigating and addressing sustainability risks is tailored to each investment strategy, taking into consideration factors such as asset class, geography, and industry.
While AQA adopts strategy-specific approaches to investigating and addressing sustainability risks, sustainability risks are generally identified upfront during new investment screening and due diligence. AQA may undertake desktop information reviews, utilise third-party or proprietary tools, and/or engage with counterparties and advisers (where feasible and permitted by the investment strategy) to investigate sustainability risks as part of investment decision-making. Any material sustainability risks identified during screening and due diligence are considered as part of the investment decision. Where feasible and permitted by the investment strategy, AQA may seek to manage material sustainability risks when structuring an investment. AQA may, for example, aim to incorporate sustainability risks into financial analyses or incorporate specific clauses in transaction documentation.
It shall be noted that the degree to which sustainability factors are integrated into the investment decision-making process may also vary according to the fund’s ESG targets as described in the relevant fund’s investment strategy.
Principal Adverse Sustainability Impacts Statements (Article 4 SFDR)
No consideration of adverse impacts of investment decisions on sustainability factors
AQA does not consider the Principal Adverse Impacts (PAI) of investment decisions on sustainability factors to the extent that is required by Article 4(1) of the Regulation. By taking into consideration the Company’s size, the nature and scale of its activities and the types of clients it has onboarded and their investment strategy, the Company considers that it would be disproportionate to consider principal adverse impacts as set out in the PAI regime in the SFDR. The Company may possibly consider such adverse impacts in respect of future mandates.
Remuneration and sustainability risks (Article 5 SFDR)
In line with our Remuneration Policy, no variable remuneration is paid to our staff unless it is determined to be justified following a performance assessment based on quantitative (financial) as well as qualitative (non-financial) criteria.
Due to this very limited impact on the risk-profile of our clients, as well as the nature of our business, we deem that there is no risk of misalignment with the integration of the sustainability risks in our investment decision making process with respect to our clients.
As such, we believe that our existing structures are sufficient to prevent excessive risk taking in respect of sustainability risks.
The Remuneration Policy can be found on the Company’s website.
Kindly contact info@aqa-capital.com for a full copy of our ESG Policy.
July 2024