Kinnerton Credit Management A/S (“AIFM or Company”) believes that it is important to consider environmental, social and governance (“ESG”) matters as well as broader ethical issues when determining potential investments of the Company. The AIFM believes they have a duty to carefully consider ESG matters as well as assessing the implications of any potential investment of the Company to ensure the Company’s investments contribute to a positive net ESG aggregate outcome.
For avoidance of doubt, unless otherwise stated within the relevant fund documentation, each of the funds under management do not have sustainable investment as part of their investment objectives for the purposes of Article 9 of the European Union Sustainable Finance Disclosure Regulation (“SFDR”). Each fund is also not intended to promote specific environmental or social characteristics in accordance with Article 8 of the SFDR.
Integration of Sustainability Risks
As set out in the SFDR, “sustainability risk” means an ESG event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of an investment. As part of the AIFM’s ESG assessment process, the AIFM seeks to identify the sustainability risks (the “Sustainability Risks”) which might cause a material negative impact on the value of the Company’s investments and assess the Sustainability Risks identified as part of the AIFM’s ESG assessment. The AIFM may (if necessary) use specialist external consultants (“External Consultants”) to help assess potential Sustainability Risks, which could affect the Company’s investments.
The AIFM aims to identify environmental characteristics such as noise pollution, air pollution, carbon footprint (including Deutsche Gesellschaft für Nachhaltiges Bauen (“DGNB”) certification opportunities), soil pollution and water pollution when assessing the Sustainability Risks associated with prospective investments of the Company. This environmental assessment process is an integral part of the AIFM’s due diligence and overall ESG assessment process with respect to prospective investments of the Company.
If material Sustainability Risks are identified by the AIFM or External Consultants during the ESG assessment process, the AIFM will prioritise the identified material Sustainability Risks as part of its decision making process with respect to the prospective investment . All of the Sustainability Risks, which are identified, by the AIFM or the External Consultants are included in the AIFM’s investment reports, which are subsequently presented to and considered by the AIFM’s investment committee (the “Investment Committee”). The Investment Committee must give its approval before any investment by the Company is approved by the AIFM.
Impacts of Sustainability risk on Returns
The AIFM acknowledges that certain of the investments that may be made by the Company may be negatively impacted by Sustainability Risks and that Sustainability Risks may impair the value of the investments made by the Company. It is also acknowledged Sustainability Risks may arise and impact a specific investment made by the Company or may have a broader impact on an economic sector, geographical regions or countries, which, in turn, may impact the Company’s investments.
Status of the Funds under the SFDR and the Taxonomy Regulation (Regulation EU 2020/852) (“Taxonomy Regulation”)
In addition, the AIFM does not anticipate that the strategy of the Funds will take account of the criteria for environmentally sustainable economic activities under the EU Taxonomy Regulation.
Principal Adverse Impact Reporting
The AIFM does not currently consider an assessment of the principal adverse impacts of its investment decisions on ‘sustainability factors’ within the meaning of Article 4(1) (a) of SFDR as part of its investment process because it is not a financial market participant that is required to do so given that the AIFM does not have on its balance sheet an average number of employees exceeding 500 during the financial year. The AIFM may choose at a later date to publish and maintain on its website the consideration of principal adverse impacts of investment decisions on sustainability factors.
It is the Company’s policy to maintain remuneration arrangements that, among other things, do not encourage risk-taking (including in respect of exposure to Sustainability Risk as defined in the SFDR) that is inconsistent with the risk profile of the Company.