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Regulation (EU) 2019/2088 of the European Parliament and of the Council on sustainability-related disclosures in the financial services sector (the “SDR”) entered into force on 10 March 2021. SDR is part of the European Commission’s action plan for the financing of sustainable growth and the objectives include ensuring transparency and openness on sustainability-related issues.
Among other things SDR states that financial market participants and financial advisers must act in the best interests of end-investors, including, but not limited to, the requirement to perform an appropriate due diligence prior to investments being made. Recital 12 to the Disclosure Regulation states that in order to fulfil its regulatory obligations, financial market participants and financial advisers should integrate into their processes, including due diligence, not only all relevant financial risks, but also all relevant sustainability risks that could have a significant adverse impact on the financial return of an investment or on the advice provided, and that such risks are to be continuously evaluated. A ‘sustainability risk’ means 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 the investment.
Proxy P Management AB (“Proxy” or the “Fund Manager”) has adopted an environmental, social and governance (“ESG”) policy (the “Policy”), outlining the general principles on how ESG and Sustainability Factors are integrated in the investment strategies of the respective sub-funds of the Fund and which specifies how the Fund Manager follows principles for responsible investment and how sustainability risks are incorporated in the investment decisions. The policy applies to all funds managed by the Fund Manager.
The Policy also outlines the general principles on how ESG and Sustainability Factors are integrated in the investment strategies of the respective sub-funds of the Fund.
The Fund Manager is a signatory of the United Nations-supported Principles for Responsible Investments (“UNPRI”). The UNPRI is recognised as leading global network for investors committed to integrating ESG considerations into investment practices.
The Policy is reviewed and updated at least on an annual basis or regularly whenever required due to changes of general principles set out in the Policy or in case of regulatory changes. Additional details on the Fund Manager’s Policy will be published on the Fund Manager’s website, on the following link: www.proxypm.se
Transparency of adverse sustainability impacts at entity level (Article 4/7)
Currently the level-2 rules detailing how to evaluate adverse sustainability impact indicators are not yet fully defined. Therefore, the Fund Manager chooses initially not to consider negative consequences for sustainability factors under SDR. However, as outlined in the Policy, adverse sustainability impact is considered already today through for example partial scope analysis. The Fund Manager expects to comply as rules becomes clearer and be compliant at the latest by January 2022.
The Fund Manager’s investment process is based on its ESG framework, taking relevant aspects into account.
The primary objective is to generate stable risk adjusted financial returns and ESG objectives are part of the toolbox used to generate alpha and outperformance.
The Fund Manager’s investment strategy aims at being ESG compliant strategy as the energy transition universe inherently includes companies which are critical for global reduction in Green House Gas Emissions (GHE) and consequently a more sustainable business environment.
ESG objectives support the fund’s risk framework and enhances risk mitigation. A high ESG score is considered increased quality assurance and indication of company longevity.
How sustainability risks are integrated
Proxy operates through an active investment strategy where the capital manager continuously makes assessments about the investment objects business models, market positions, future prospects and sustainability risks. The scope of the analyzed risks is environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters. Based on the results from the analysis we form an opinion if we will invest or not.
How sustainability risks are identified
Sustainability risks are identified through internal analysis. Proxy considers sustainability risks in conjunction with all investments which means attempting to identify and document what sustainability risks are relevant for each investment and how they are expected to affect the returns.
How the due diligence of potential sustainability risks is integrated
Proxy operates through an active investment strategy where the capital manager continuously makes assessments about the investment objects business models, market positions, future prospects and sustainability risks. The sustainability risk analysis and assessments are carried out by the fund manager before new investments are executed.
How the identified sustainability risks are evaluated and prioritized
When it comes to sustainability risks there is no such thing as a multipurpose tool or an all-round general solution for everything. What is a severe problem in one industry can be off lesser importance in other industries. The identified sustainability risks are evaluated by the Fund Manager before new investments occur.
Proxy’s investment universe focuses on the Energy Transition Theme and as such, directly exclude companies with unwanted business models and industry sector exposure, for example:
Fossil Fuel (Oil and Gas)
General negative environmental impact factors
Proxy is proactively and intentionally seeking out companies who are supporting the transition to a carbon free economy.
Proxy is focusing on three areas of energy transition:
1. Energy Efficiency – systems and technologies that provide a more efficient energy consumption which in turn result in declining GHE/CO2.
2. Electrification – energy storage technologies, like batteries, replace the usage of oil leading to a decline in GHE/CO2.
3. Renewables – replaces coal and natural gas based energy production, supporting a decline in GHE/CO2.
Proxy aims to analyse and understand the overall impact of the individual portfolio companies and the GHE/CO2 impact of the investment universe.
We analyse the data from two perspectives: absolute and rate of change. We also analyse it from a sub-sector and geographical point of view. Our analysis and calculations results in a Proxy proprietary ESG score for each individual company.
As an owner Proxy will in short address issues such as:
Proxy’s remuneration policy shall be consistent with the sustainability risk integration policies at any given time.
The purpose of Proxy’s remuneration policy is to counteract a risk-taking that is not compatible with the Fund’s (and its sub-funds) risk profile, fund regulations and the common interest of unitholders. The company’s remuneration structure does not encourage excessive risk-taking, nor in terms of sustainability risks. Employees should not be able to take excessive risk or disregard identified sustainability risks in the performance of their duties.
For further information see our remuneration policy which can be received by request.
Proxy P Management policy on long-term shareholder engagement
Swedish government on Directive 2017/828 of EU stipulates that an AIFM has to report on below points:
Proxy P reporting on above for 2018: