Sustainable Finance Disclosure Regulation on entity level in alignment with Article 3, 4, and 5 of Regulation (EU) 2019/2088
Article 3: Transparency of sustainability risk policies
Rantum Capital has established a well-defined organizational and structural framework for incorporating environmental, social, and governance factors into its investment decisions (ESG policies). Furthermore, Rantum Capital has crafted a comprehensive compliance manual that delineates the company’s compliance policies, including the structure for monitoring compliance. This manual also furnishes explicit directives for assigning roles and executing compliance and ESG policies.
How do RANTUM Capitals sustainability risk management and ESG policies work?
Rantum Capital’s ESG guidelines outline the integration of sustainability risks into its investment decision-making processes, encompassing all companies associated with Rantum Capital. Rantum Capital has adopted a focused ESG methodology and collaborates with independent external ESG consultants to facilitate the ongoing implementation of its ESG policies, conduct ESG due diligence, and monitor the ESG performance of portfolio companies. As part of the investment process, Rantum Capital comprehensively assesses various ESG aspects to develop a holistic understanding of potential investments. The following aspects are taken into account:
- Mitigation and adaption to climate change
- Combat resource depletion and support the concepts of a circular economy
- Responsible handling of hazardous substances or their avoidance
- Avoidance and reduction of environmental pollution
- Stop deforestation
- Avoid loss of biodiversity
- Compliance with human rights and labor standards
- Equal opportunities, diversity, training, and development opportunities
- Adequate remuneration and fair working conditions
- Occupational safety and health protection
- Company values and sound business ethics
- Compliance with prevailing ethical principles and Risk Management
- Board Diversity and Independence
- Measures against bribery, corruption, and money laundering
- Executive Pay
As relevant ESG aspects differ for individual business sectors and activities, Rantum applies an ESG materiality analysis for each investment, identifying ESG aspects that are of particular importance for the investment and taking these into account when determining relevant ESG risks and opportunities.
Integration of sustainability risks into investment decision-making processes
Rantum Capital incorporates sustainability risks throughout the investment process for each product and individual investment opportunity. During the screening phase, Rantum Capital applies the following exclusion criteria:
- Manufacturing, selling or distribution of controversial weapons including anti-personnel mines, cluster munitions, chemical and biological weapons.
- Carrying out of illegal logging and commercial logging in near-natural tropical rain forests.
- Production, trade and/or distribution of products or activities that are deemed to be illegal under applicable law in the country where such company is incorporated.
- Companies with sites/operations located in or near to biodiversity-sensitive areas where activities of those companies negatively affect those areas.
- Fur trade and the operation of fur farms or the trade/manufacture of fur products.
- Production, marketing or offering of illegal pornographic material or services.
- Import or export of products, goods, or services to or from countries that are subject to any economic/financial sanctions or trade embargoes administered or enforced by the United Nations Security Council or the European Union.
- Companies engaged in violations of UN Guiding Principles on Business and Human Rights and OECD Guidelines for MNEs including:
- All forms of violations against human rights;
- All forms of forced and compulsory labour, including child labour;
- Illegal destruction of the environment;
- Tolerance of corruption in all its forms, including extortion and bribery.
Furthermore, careful consideration is given to businesses engaged in:
- Nuclear power generation through nuclear fission or the mining, production, handling or reprocessing of nuclear fuels;
- Genetic modifications of animal, human and plant organisms;
- Legal adult entertainment related products and services;
- Controversial forms of gambling meaning operating casinos, betting offices and internet gambling; and
- Earning in jurisdictions that appear on the revised EU list of non-cooperative jurisdictions for tax purposes.
During the due diligence phase, Rantum Capital, with support from independent external ESG consultants, assesses various ESG aspects of the investment. This includes identifying material opportunities and risks that could have a significant financial impact on the investment. The ESG consultants conduct thorough secondary research, review relevant documents, and conduct interviews with management and relevant employees of the target investment to gain a comprehensive understanding of the target companies. The results of the ESG due diligence inform Rantum Capital’s decision-making process when recommending an investment decision. The investment team follows this methodology and reports the results in the memo submitted to the Investment Committee for review. Rantum Capital retains the right to reject an investment if it clearly violates Rantum Capital’s ESG guidelines and poses a significant financial risk to the investment.
Throughout the holding period, sustainability risks are regularly reviewed to ensure compliance with Rantum Capital’s ESG policy and business principles. ESG issues are specifically addressed in reports prepared by the fund or its portfolio companies and are discussed during fund investor meetings.
Article 4: Tranparency of adverse sustainability impacts at entity level
No consideration of adverse impacts
The SFDR obliges Rantum Capital to make a “comply or explain” determination regarding the consideration of adverse sustainability impacts (PAIs) in investment decisions pertaining to sustainability factors, as outlined in the SFDR’s specific rules. Rantum Capital has chosen not to adhere to this rule, both in general and concerning the Funds. However, Rantum Capital will periodically reassess its decision regarding the PAI regime. Rantum Capital has thoroughly examined the requirements of the PAI Regime stated in Article 4 of the SFDR and the current Regulatory Technical Standards issued in December 2022 (the “PAI Regime”). While supporting the PAI Regime’s aim of enhancing transparency regarding the negative impact of investment decisions on sustainability factors for clients, investors, and the market, Rantum Capital expresses concerns about the unavailability of necessary data to fulfill many of the PAI regime’s reporting requirements. Therefore, Rantum Capital cannot guarantee the availability and quality of all data points and consequently cannot make an all-embracing KPI reporting commitment, including PAIs, in this regard. Despite this decision, the company has implemented proactive ESG-related initiatives and policies as part of its overall commitment to ESG matters, as summarized in this section. It is important to note that none of the following information should be interpreted as Rantum Capital’s adherence to the PAI regime.
Article 5: Transparency of remuneration policies in relation to the integration of sustainability risks
Rantum Capital, including its subsidiaries and controlled affiliates (collectively referred to as “Rantum Capital”), has established a compensation policy (referred to as the “Policy”) that is applicable to all employees across all entities within the Rantum Capital structure, with only limited exceptions. The Policy is developed, approved, implemented, and monitored by various committees within the organization. The primary objective of the Policy is to support Rantum’s business strategy, corporate values, and long-term interests. It achieves this by facilitating the identification, assessment, and management of sustainability risks during the determination of individual compensation packages. The Policy is guided by key principles, including the promotion of an appropriate risk culture, including the management of actual and potential conflicts of interest, and compliance with relevant laws and regulations.
The performance management and compensation system outlined in the Policy is designed to enhance effective risk management, with specific focus on the following aspects:
- Ensuring that performance evaluations comprehensively consider compliance with risk management requirements, covering all relevant types of current and future risks, including sustainability risks.
- Implementing deferral arrangements that utilize co-investment and carried interest agreements for senior executives. These arrangements foster alignment between employee and third-party investor interests. In the event of a decline in the value of the underlying investment portfolio, whether due to sustainability risks or other factors, the value of the employee’s holdings will be proportionately reduced.
- Senior executives may experience a reduction in deferred variable compensation under certain circumstances. These circumstances include instances where the company, in which the employee works, encounters a significant risk management failure or a substantial decline in financial performance (as determined at Rantum’s discretion). This reduction may be applicable in connection with sustainability risks associated with an investment.
Overall, Rantum Capital’s compensation policy emphasizes the integration of risk management considerations, including sustainability risks, to align employee compensation with the long-term interests of the company.