ESG AT RANTUM CAPITAL.

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:

Environment:

• 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

Social:

• 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

Governance:

• 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 retains the option to assess various ESG aspects of the investment, with support from independent external ESG consultants. 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.

While Rantum Capital has been generally considering ESG in all its previous investments, the approach described below currently only applies to Rantum’s Private Debt Fund IV.

Article 10: Transparency of the promotion of environmental or social characteristics and of sustainable investments on websites

Summary

The fund considers and promotes environmental and social characteristics but does not intend to make sustainable investments with an environmental or social objective in accordance with Article 2(17) of Regulation (EU) 2019/2088 (the Sustainable Finance Disclosure Regulation – ‘SFDR’).

Rantum Capital’s financial product will invest in line with its investment strategy and investment restrictions, i.e., 100% of its investments are aligned with the environmental or social characteristics promoted.

As an institutional investor Rantum Capital commits to its responsibility to align its activities with the long-term interest of its stakeholders and society’s central goals and standards. Focusing on this objective, a central element of operations is placed on the incorporation of environmental, social and governance (ESG) criteria into the investment processes and investment decisions.

To this end, the fund follows a mandatory multi-stage approach to consider ESG throughout all phases of the loan decision and loan processing, namely through a) a screening for any conflicts with the fund’s exclusion criteria and the list of careful considerations, b) an ESG Due Diligence, c) consideration of ESG in the investment decision, and d) ESG monitoring, valuation and reporting. Each aspect is outlined in more detail below.

Rantum Capital engages with its PD companies on ESG topics throughout the entire loan processing phase. The investment team, which also instructs external advisors as needed, is responsible for applying the defined ESG procedures and tools in the investment process and lead the engagement with its PD investments to ensure compliance with Rantum Capital’s ESG principles throughout the investment horizon. Where relevant, Rantum Capital will actively engage with PD companies to improve the availability of relevant ESG-related data. Besides of regular ESG inquiries, PD companies are obliged to disclose any breaches of the defined exclusion criteria or otherwise critical ESG incidents on an ad hoc basis. If any such breaches or incidents are flagged, Rantum Capital will engage with the PD company to discuss appropriate mitigation measures and monitor their implementation.

Rantum Capital will also encourage its PD companies to collect and report a set of ESG KPIs derived from both the ESG Data Convergence Initiative and the Principle Adverse Impact (‘PAIs’) indicators as defined by the SFDR. However, 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. However, depending on data availability and quality, Rantum Capital will report ESG KPIs as they are reported. ESG reporting on PD will be included in mandatory regulatory reporting as well as in fund-specific reports.

The following paragraphs discuss the environmental and social characteristics promoted by the financial product as well as the overall ESG framework and methodologies applied.

No sustainable investment objective

The financial product (also referred to as ‘the fund’) considers and promotes environmental and social characteristics but does not intend to make sustainable investments with an environmental or social objective in accordance with Article 2(17) of Regulation (EU) 2019/2088 (the Sustainable Finance Disclosure Regulation – ‘SFDR’).

Environmental or social characteristics of the financial products

The financial product focuses on investments in private debt (PD) assets. Thereby the targeted investment universe is not industry specific. Rantum is a signatory to the United Nations Principles for Responsible Investment (‘UN PRI’), which is an international initiative to focus on the investment implications of ESG factors and to support its signatories in incorporating these factors into their investment and portfolio management decisions. Based on the UN PRI, Rantum has defined a broad set of relevant ESG aspects that are considered within the investment process and allow to obtain a comprehensive ESG picture of potential investments. The following non-exhaustive list presents ESG aspects that are considered and promoted by the financial product:

Environmental:

• 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

Social:

• 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

Governance:

• 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.

Moreover, the fund excludes investments in companies which activities are related to the following aspects:

• 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.

Should any conflicts with applied exclusion criteria and/ or with the list of careful considerations be determined, an investment opportunity might be rejected at this stage.

Investment strategy

Rantum commits to its responsibility to align its activities with the long-term interest of its stakeholders and society’s central goals and standards. Focusing on this objective, a central element of operations is placed on the incorporation of environmental, social and governance (ESG) criteria into the investment processes and investment decisions, as outlined in Rantum’s ESG Policy.

Due to diverting pre-conditions for Private Equity (PE) and Private Debt (PD) investments, such as a different level of access to the target company, data availability, deal timeframe, or simply the numbers of potential deals, the integration of ESG for these two asset classes follows an individually adapted approach. Since this website disclosure relates to a PD fund, the following refers to the procedure for this asset class.

Under its investment strategy, Rantum follows a mandatory multi-stage approach to consider ESG throughout all phases of the loan decision and loan processing, namely through a) a screening for any conflicts with the fund’s exclusion criteria and the list of careful considerations, b) an ESG Due Diligence, c) consideration of ESG in the investment decision, and d) ESG monitoring, valuation and reporting. Each aspect is outlined in more detail below.

a) Potential investments are screened against the background of applied exclusion criteria and conflicts with the list of careful considerations (please refer to ‘What environmental and/or social characteristics are promoted by this financial product?’).

b) Prior to any PD investments, an ESG Due Diligence will be conducted, following a standardized assessment methodology. Within the ESG Due Diligence for PD, the following aspects are looked at and evaluated: ESG materiality, ESG maturity, ESG risks and opportunities, climate risks, diversity and inclusion, as well as an inquiry on the Sustainable Development Goals (SDGs). The ESG Due Diligence is conducted inhouse by trained staff from the investment team, applying a proprietary ESG assessment tool catered to the fund’s PD scope and needs. The tool entails the ESG exclusion check, a questionnaire on all relevant ESG topics, a materiality, maturity and ESG scoring module, as well as a questionnaire for annual ESG monitoring.

c) Findings of the PD ESG DD will be considered in the decision making process. The investment team is required to apply the above described methodology and report on findings as part of the investment committee paper, which will be submitted to the Investment Committee. In case an investment should cleary conflict with applied exclusion criteria and ESG guidelines, and indicate a high financial risk of the investment, an investment opportunity will be rejected at this stage.

d) In case of a positive investment decision, a binding ESG agreement will be entered with the company setting the following obligations (“Binding Elements”):

• Compliance with Rantum’s exclusion criteria;
• Use reasonable efforts to respond to Rantum’s ESG inquiries; and
• Inform Rantum immediately in the event of breaches of the defined exclusion criteria or otherwise critical ESG incidents.

These binding agreements are formalized as part of the loan agreement. Also, the information collected during the pre-selection and the ESG Due Diligence build the foundation for the regular tracking of ESG risks and developments through annual ESG update inquiries during the loan processing phase (for details please refer to “Monitoring of environmental or social characteristics” below).

Governance criteria are assessed in terms of good governance practices during the screening for potential conflicts with exclusion criteria, as well as during the Due Diligence phase. The assessment will be conducted appropriate to the size and scope of the corporate structure of the underlying investment opportunity. As outlined under ‘Environmental or social characteristics of the financial products’, governance criteria to be assessed include (but are not limited to) the assessment of company values and sound business ethics, compliance with prevailing ethical principles, risk management, board diversity, board independence, executive pay as well as measures against bribery, corruption and money laundering as well as violations of UN Guiding Principles on Business and Human Rights and OECD Guidelines for multinational enterprises (MNE).

Proportion of investments

Rantum’s financial product will adhere to its investment strategy and investment limitations, meaning that 100 % its investments will be in line with the environmental or social characteristics it promotes. For the avoidance of doubt, this does not include cash reserves and/ or short-term investments, e.g. for hedging or cash management purposes that only account for insignificant amounts during the life of the fund.

Monitoring of environmental or social characteristics

The information collected during the pre-selection and the ESG Due Diligence build the foundation for the regular tracking of ESG risks and developments through annual ESG update inquiries during the loan processing phase.

In the event of breaches of the defined exclusion criteria by the company, or otherwise critical ESG incidents, the issue will be raised through the Rantum manager overseeing the investment, and Rantum will immediately seek dialogue and swiftly engage with the company’s management to assess and remedy the situation. Rantum will inform investors as soon as feasible after becoming aware of any event that, in Rantum’s opinion, has had or is likely to have a material adverse impact on any sustainability aspects of a company.

Rantum Capital will also encourage its PD companies to collect and report a set of ESG KPIs derived from both the ESG Data Convergence Initiative and the Principle Adverse Impact (‘PAIs’) indicators as defined by the SFDR. However, 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. However, depending on data availability and quality, Rantum Capital will report ESG KPIs as they are reported. ESG reporting on PD will be included in mandatory regulatory reporting as well as in fund-specific reports.

ESG reporting on PD companies will be included in mandatory regulatory reporting as well as in fund-specific reports.

Methodologies

The methodologies used to measure the attainment of the environmental and social characteristics promoted are outlined in the section “Investment Strategy” and section “Monitoring of environmental and social characteristics” above.

Data sources and processing

Data used to attain the environmental and social characteristics promoted is sourced at asset level throughout all stages of the investment process, particularly during the Due Diligence phase, as well as during the monitoring. Relevant data sources include for instance:

• Documents and statements provided by the asset (usually in an electronic data room),
• Information obtained through own research (e.g. the review of publicly available information);
• Information obtained during interviews with PD companies’ representatives.

As mentioned above, Rantum Capital will encourage its portfolio companies to collect and report a set of ESG KPIs derived from both the ESG Data Convergence Initiative and the Principle Adverse Impact (“PAIs”) indicators as defined by the EU Sustainable Finance Disclosure Regulation (SFDR; 2022/1288). To ensure data quality, Rantum Capital has commissioned a dedicated ESG KPI solution provider, Impact Nexus, which provides a digital platform through which ESG KPIs can be collected, reviewed, monitored, and reported in an efficient, standardized, and user-friendly manner.

Limitations to methodologies and data

Although Rantum Capital encourages its PD companies to ensure data availability and data quality, some companies may still be limited in their possibilities to collect relevant ESG data. Therefore, Rantum Capital cannot guarantee the availability and quality of all data points and consequently cannot make an all-embracing KPI reporting commitment. However, the approach to attain the environmental and social characteristics promoted covers the use of various data sources to cover different aspects of such characteristics. Depending on data availability and quality, Rantum Capital will report ESG KPIs as they are reported. Data is stored electronically. In case of unsatisfactory data availability, a portion of the required data may be estimated.

Due Diligence

The Due Diligence of PD companies and underlying data sources is conducted in accordance with internal guidelines, following standardized operational procedures. The Due Diligence is dependent on the availability of ESG-related data (as described under “Data sources and processing” above), that is obtained from the PD companies both, during the Due Diligence processes and through monitoring in the loan processing phase.

Engagement Policies

Rantum Capital engages with PD companies on ESG topics throughout the entire loan processing phase. The investment team, which also instructs external advisors as needed, is responsible for applying the defined ESG procedures and tools in the investment process and lead the engagement with its PD investments to ensure compliance with Rantum Capital’s ESG principles throughout the investment horizon. Where relevant, Rantum Capital will actively engage with PD companies to improve the availability of relevant ESG-related data. Besides of regular ESG inquiries, PD companies are obliged to disclose any breaches of the defined exclusion criteria or otherwise critical ESG incidents on an ad hoc basis. If any such breaches or incidents are flagged, Rantum Capital will engage with the PD company to discuss appropriate mitigation measures and monitor their implementation.

ESG reporting on PD companies will be included in mandatory regulatory reporting as well as in fund-specific reports.

Designated reference benchmark

No specific index has been set as a benchmark for the purpose of attaining the environmental or social characteristics promoted by the financial product.