+44 203 747 2625

info@volpicapital.com

207 Sloane St, Belgravia, London SW1X 9QX, UK

Principal Adverse Impact Statement

EU Sustainable Finance Disclosure Regulation

The Sustainable Finance Disclosure Regulation (”SFDR” or “the Regulation”) entered into force on 10 March 2021. The Regulation requires fund managers like Volpi Capital (Volpi) as an authorised AIFM to provide information to investors with regards to the integration of sustainability risks, the consideration of adverse sustainability impacts, the promotion of environmental or social characteristics, and sustainable investment.

This document specially addresses Article 4 of the Regulation:

Financial market participants shall publish and maintain on their websites a statement on due diligence policies with respect to principal adverse impacts of investment decisions on sustainability factors, taking due account of their size, the nature and scale of their activities and the types of financial products they make available”.

More information related to the SFDR, and Volpi’s approach to ESG (Environmental, Social, Governance factors) and Responsible Investment in general, can be found on Volpi’s website, including:

  • Sustainability risk policy
  • Remuneration policy in relation to the integration of sustainability risks
  • Responsible Investment Policy

Summary

Volpi considers principal adverse impacts of its investment decisions on sustainability factors. The present statement is the consolidated principal adverse impacts statement of Volpi. This principal adverse impacts statement covers the reference period from 10 March 2021 to 31 December 2021.

Volpi uses the definition of principal adverse sustainability impacts as described in Article 20 of the Regulation: “Those impacts of investment decisions that result in negative effects on sustainability factors, with sustainability factors referring to environmental, social and employee matters, respect for human rights, anticorruption and antibribery matters.”
Volpi believes that investment decisions that negatively impact climate or other environment-related resources, or have negative implications for society, are detrimental to value creation. To this end, Volpi, considers the principal adverse impacts of its investment decisions on sustainability factors throughout all major steps of the investment and portfolio management process.

Description of Principal Adverse Impacts

Volpi will take necessary preparations to gather, monitor and report the principal adverse sustainability impact indicators listed below. Volpi will provide an updated version of this statement by no later than 30 June 2023, with the indicators reported over reporting year 2022. From 2024 onwards, Volpi will provide historical comparisons with previous reference periods. Volpi will also seek to detail actions taken and actions planned for the future, as well as targets set for each PAI indicator to avoid or reduce the PAI identified where possible.

  1. GHG emissions
  2. Carbon footprint
  3. GHG intensity of investee companies
  4. Exposure to companies active in the fossil fuel sector
  5. Share of non-renewable energy consumption and production
  6. Energy consumption intensity per high impact climate sector
  7. Activities negatively affecting biodiversity-sensitive areas
  8. Emissions to water
  9. Hazardous waste ratio
  10. Violations of UN Global Compact principles and OECD Guidelines for Multinational Enterprises
  11. Lack of processes and compliance mechanisms to monitor compliance with UN Global Compact principles and OECD Guidelines for Multinational Enterprises
  12. Unadjusted gender pay gap
  13. Board gender diversity
  14. Exposure to controversial weapons

Description of policies to identify and prioritise principal adverse impacts

Volpi will report on all indicators related to principal adverse impact on sustainability factors as set out in Table 1 of Annex I of the Regulatory Technical Standards of the Regulation.

Furthermore, Volpi will select at least one additional indicator related to principal adverse impacts on a climate or other environment related sustainability factor that qualifies as principal as set out in Table 2 of Annex I, as well as at least one additional indicator related to principal adverse impacts on a social, employee, human rights, anti-corruption or anti-bribery sustainability factor that qualifies as principal as set out in Table 3 of Annex I. Volpi will select these additional indicators based on the probability of occurrence and severity of adverse impacts (including their potentially irremediable character).

Measurement of principal adverse impacts will, to some extent, be subjective and based on judgement. Volpi will seek to ensure accuracy by implementing internal and/or external reviews where doing so would reduce the margin of error and/or increase confidence in the indicators.

Volpi have formally approved these policies by 10 March 2021. Volpi partners will be primarily responsible for the implementation of these policies. However, all investment team members will be educated with regards to principal adverse impacts on sustainability factors in order to integrate these considerations in the investment process, as detailed below.

Initial Screening

Volpi 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 harmful activities/products.

Volpi will not invest in companies that:

  1. deny human rights;
  2. engage child or forced labour directly or within their supply chain;
  3. manufacture weapons that are designed primarily for destructive purposes e.g. anti-personnel mines, cluster weapons;
  4. produce products that are illegal under UK or local law;
  5. cause serious environmental damage;
  6. has, as its primary business activity, the production, promotion or distribution of the following: i) adult entertainment, ii) tobacco, iii) distilled alcoholic beverages, iv) gambling products, services or platforms;
  7. provide research, development or technical applications relating to electronic data programs or solutions which support the above exclusions list.

Through this negative screening exercise, Volpi aims to filter out potential investments that are likely to have significant adverse impacts on sustainability factors.

Furthermore, Volpi looks for evidence that companies are responsible employers who look after their employees, promoting diversity and taking an interest in their local communities.

Due diligence

Volpi conducts a comprehensive ESG due diligence for each potential investment. Within the ESG due diligence, Volpi focusses on assessing whether there are any red flags (e.g. unmanageable ESG risks) that should prevent Volpi from proceeding with the potential transaction. In conducting its due diligence, Volpi pays particular attention to potential adverse impacts on sustainability factors arising from the company’s operations.

Examples of principal adverse impacts that are considered include, where relevant, climate and other environment-related indicators such as greenhouse gas emissions, energy performance, biodiversity, water and waste; and social and governance indicators such as social and employee matters, respect for human rights, anti-corruption and anti-bribery matters.

Business Operations

Through the annual ESG review cycle, Volpi, together with an external ESG & Responsible Investment consulting firm, engages with the portfolio companies to gather data and perform analyses to identify and measure principal adverse impacts on sustainability factors. Actions taken will be commensurate with the estimated likelihood and severity of the impact on a sustainability factor.

Reporting

Investors in Volpi funds are provided an annual Environmental, Social and Governance Report (ESG Report). The report highlights the key material ESG themes and the underlying portfolio companies’ performance on those themes, and provides an action plan that aims both at reducing or mitigating risks and identifying value creation opportunities. The reports are updated annually, to monitor progress and keep the portfolio company focussed on achieving its goal to become a more sustainable and future proof company over time.

Engagement policies

Volpi proactively engages with its portfolio companies regarding principal adverse impacts on sustainability factors. Through these engagements, portfolio companies measure and report relevant information on the context of the principal adverse impacts affecting their businesses.

Volpi will exercise its fiduciary duty as responsible stewards and will aim to improve upon the identified principal adverse impacts for each portfolio company. As Volpi funds are majority owners in portfolio companies, Volpi has access to senior management and has the potential to wield significant influence with regards to the management of principal adverse impacts.

Engagements will be carried out over time in a structured format. Where applicable, Volpi will, in cooperation with portfolio companies, set targets and milestones to measure the success of the engagement as it relates to the measurable improvement in one or several of the identified principal adverse impacts on sustainability factors.

Adherence to international standards

The Volpi Responsible Investment Policy is looking to incorporate or align with several recognised global standards for responsible business operations and investment practices which include, but are not limited to, the Principles for Responsible Investment and United Nations Global Compact