ESG AT RANTUM CAPITAL.

Rantum Capital has developed a clear organizational and structural approach to the consideration of environmental, social and governance aspects within its investments (ESG policies). In addition, Rantum Capital has developed a compliance manual that outlines the company’s compliance policies, including the compliance monitoring structure. This manual also provides clear guidelines for assigning responsibilities and implementing compliance and ESG policies.

Rantum Capitals ESG guidelines define how sustainability risks are incorporated into Rantum Capitals investment decision-making processes. These guidelines apply to all companies involved by Rantum Capital. Since 2021, Rantum Capital has applied a targeted ESG methodology and engages independent, external ESG consultants to support the ongoing implementation of Rantum Capitals ESG policies, conduct ESG due diligence, and assist in monitoring the ESG performance of portfolio companies. As part of the investment process, Rantum Capital evaluates various ESG aspects to obtain a comprehensive ESG picture of potential investments. The following aspects are considered:

• Environment:
  Climate change, pollution, waste management, resource management, environmental footprint in the supply chain.
• Social:
  Employee well-being, health and safety, supply chain and human rights, product integrity, safety and quality, community impact
• Governance:
  Business ethics, code of conduct, board and management structure, internal controls, supply chain governance, stakeholder engagement and reporting.

Through a materiality analysis, ESG aspects of particular relevance to the investment are identified and considered in determining ESG risks and opportunities.

Sustainability risks are considered at all stages of the investment process for each product, for each individual investment opportunity. In the screening phase, Rantum Capital excludes investments in companies that:

• Deliberately violate national laws and International Labor Organization (ILO) conventions.
• Engage in the manufacture, sale or distribution of firearms
• Are based in countries subject to trade embargoes imposed by the UN or the European Union (EU)

During the due diligence phase of the investment, Rantum Capital, supported by independent external ESG consultants, assesses various ESG aspects of the investment and identifies material opportunities and risks with high potential financial impact on the investment. To gain a comprehensive understanding of the target companies, the ESG consultants conduct extensive secondary research, review relevant documents, and interview management and relevant employees of the target investment. The results of the ESG due diligence are considered as part of Rantum Capitals decision-making process when recommending an investment decision. The investment team is required to apply the above methodology and report on the results as part of the memo submitted to the Investment Committee for review. Rantum Capital reserves the right to reject an investment should it clearly violate Rantum Capitals ESG guidelines and pose a high financial risk to the investment.

Sustainability risks will be reviewed regularly during the holding period to ensure compliance with Rantum Capitals ESG policy and business principles. ESG issues are specifically addressed in reports prepared by the fund or its portfolio companies and discussed at fund investor meetings.

No consideration of adverse impacts

The SFDR requires Rantum Capital to make a “comply or explain” determination as to whether to consider adverse sustainability impacts (“PAIs”) of investment decisions related to sustainability factors, in accordance with a specific set of rules described in the SFDR. Rantum Capital has elected not to consider this rule, both generally and with respect to the Funds. Rantum Capital will periodically review its decision not to consider the PAI regime. Rantum Capital has carefully considered the requirements of the PAI Regime in Article 4 of the SFDR and in the Final Report on Draft Regulatory Technical Standards issued on February 2, 2021 (the “PAI Regime”). Rantum Capital supports the PAI Regime’s goals of improving transparency for clients, investors and the market on how financial market participants integrate consideration of the negative impact of investment decisions on sustainability factors. However, Rantum Capital is concerned about the lack of available data necessary to meet many of the PAI regime’s reporting requirements. Rantum Capital believes that companies and market data providers are not yet ready to provide all the necessary data for the PAI regime.

Notwithstanding Rantum Capitals decision not to consider the PAI Regime, Rantum Capital has implemented positive ESG-related initiatives and policies as part of its overall commitment to ESG matters, as summarized in this section. For the avoidance of doubt, none of the following information is intended to suggest that Rantum Capital is considering the PAI Regime.

Rantum Capital (together with its subsidiaries and controlled affiliates, “Rantum Capital”) has established a compensation policy (the “Policy”) that applies to all Rantum Capital entities. The Policy is developed, approved, implemented and monitored by a number of committees within the Rantum structure. The Policy applies to all Rantum employees, with limited exceptions. The policy was developed with the goal of supporting Rantum’s business strategy, corporate values and long-term interests, including by facilitating the identification, assessment and management of sustainability risks when determining individual compensation packages. Key principles of the Policy include fostering an appropriate risk culture (including with respect to managing actual and potential conflicts of interest) and complying with applicable laws and regulations. The performance management and compensation system provided for in the Policy is designed to promote effective risk management, in particular by:

• Ensuring that performance appraisals take full account of compliance with risk management requirements and that all relevant types of current and future risks, including sustainability risks, are covered;
• Implementing deferral arrangements using co-investment and carried interest agreements for senior executives that facilitate alignment of employee and third-party investor interests. If the value of the relevant underlying investment portfolio declines (whether due to sustainability risk or other reasons), the value of the employee’s holdings will be reduced accordingly; and
• Reduction in deferred variable compensation for senior executives in certain circumstances, such as in the event that the company in which the applicable employee works experiences a material risk management failure or a material decline in its financial performance (as determined in Rantum’s sole discretion), including in connection with a sustainability risk related to an investment.