Sustainable Finance Disclosure Regulation (SFDR)
Transparency of sustainability risk policies (Art. 3 SFDR)
Sustainability risk management is embedded in the way Rantum seeks to originate investments and make investment decisions, as well as in ongoing portfolio and asset management activities.
Rantum recognises the importance of identifying, assessing and managing material sustainability risks as an integral part of conducting business.
Consequently, Rantum has developed a clear organisational and structural approach for the consideration of environmental, social and governance aspects within its investments (ESG Guidelines). Furthermore, Rantum has developed a Compliance Manual, which outlines the Firm’s compliance policy including its compliance monitoring structure. This manual also provides clear guidelines regarding the allocation of responsibilities for and the implementation of compliance and ESG procedures.
How does Rantum’s sustainability risk management and ESG guidelines work?
Rantum’s ESG Guidelines set out how sustainability risks are integrated into Rantum’s investment decision-making processes. These guidelines apply to all involved Rantum entities.
As of 2021, Rantum applies a targeted ESG methodology and commissions independent, external ESG consultants to support the continuous implementation of Rantum’s ESG Guidelines, conduct ESG due diligences and support with the monitoring of its portfolio companies’ ESG performance.
Within the investment process, Rantum assesses various ESG aspects to obtain a comprehensive ESG picture of potential investments. The following ESG aspects are thereby considered:
- Environmental: climate change, pollution, waste management, resource management, environmental footprint in the supply chain
- Social: staff wellbeing, 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, governance in supply chain, stakeholder engagement and reporting
Through a materiality analysis, ESG aspects that are of particular importance for the investment are identified and taken into consideration when determining ESG risks and opportunities.
Integration of sustainability risks into investment decision-making processes
Sustainability risks are considered at all stages of each product’s investment process, in respect of each individual investment opportunity.
In the screening phase, Rantum excludes investments in companies which:
- Deliberately violate national laws and International Labour Organisation conventions (ILO)
- Manufacture, sell or market fire arms
- Are based in countries subject to trade embargoes imposed by the United Nations (UN) or European Union (EU)
Due Diligence Phase
During the due diligence stage of the investment, Rantum, supported by independent, external ESG consultants, assesses various ESG aspects of the investment and determines material risk and opportunities with high potential financial impact on the investment. In order to obtain a thorough understanding of the target companies, the ESG consultants perform a comprehensive desktop research, review relevant documents and conduct interviews with the management and relevant staff of the target investment.
Findings of the ESG Due Diligence will be considered as part of Rantum’s decision making process when providing advice on an investment decision. The investment team is required to apply the above methodology and report on findings as part of the investment committee paper submitted to the Investment Committee for consideration. Rantum may choose to reject an investment should it clearly go against Rantum’s ESG guideline and indicate a high financial risk of the investment.
During the holding phase, sustainability risks are regularly monitored to ensure consistency with Rantum’s ESG Guideline and business principles. ESG aspects will be specifically addressed in reports prepared by the Fund or its Portfolio Companies, and will be discussed at meetings of the Fund’s Investors.
Transparency of adverse sustainability impacts (Art. 4 SFDR)
No consideration of adverse impacts
The SFDR requires Rantum to make a “comply or explain” decision whether to consider the principal adverse impacts (“PAIs“) of its investment decisions on sustainability factors, in accordance with a specific regime outlined in SFDR. Rantum has opted not to comply with that regime, both generally and in relation to the Funds.
Rantum will keep its decision not to comply with the PAI regime under regular review.
Rantum has carefully evaluated the requirements of the PAI regime in Article 4 of the SFDR, and in the final report on draft Regulatory Technical Standards which were published on February 2nd, 2021 (the “PAI regime“). Rantum is supportive of the policy aims of the PAI regime, to improve transparency to clients, investors and the market, as to how financial market participants integrate consideration of the adverse impacts of investment decisions on sustainability factors. However, Rantum is concerned about the lack of readily available data to comply with many of the reporting requirements of the PAI regime, as Rantum believes that companies and market data providers are not yet ready to make available all necessary data for the PAI regime.
Notwithstanding Rantum’s decision not to comply with the PAI regime, Rantum has implemented positive ESG-related initiatives and policies, as part of its overall commitment to ESG matters, as summarised in this section. For the avoidance of doubt, none of the following information is intended to suggest that Rantum complies with the PAI regime.
Transparency of remuneration policies in relation to the integration of sustainability risks (Art. 5 SFDR)
Rantum (along with its subsidiaries and controlled affiliates, “Rantum“) has established a remuneration policy (the “Policy“) applicable to all Rantum entities. The Policy is developed, approved, implemented and monitored by a series of bodies within the Rantum structure. The Policy applies to all employees of Rantum, save for limited exceptions.
The Policy has been developed with the aim 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 remuneration packages. The key principles of the Policy include fostering appropriate risk culture (including with respect to the management of actual and potential conflicts of interest) and compliance with applicable law and regulation.
The performance management and rewards framework envisioned by the Policy has been designed to promote effective risk management, including in particular by:
- Ensuring that assessment of performance takes full account of adherence to risk management requirements, covering all relevant types of current and future risks, including sustainability risks;
- Implementing deferral arrangements using co‐investment and carried interest arrangements for senior personnel, facilitating alignment of interests between staff‐members and third-party investors. If the value of the relevant underlying investment portfolio should decrease (whether arising as a result of a sustainability risk or otherwise), the value of the employee’s holdings will be reduced accordingly; and
- Providing for reduction of deferred variable remuneration awards to senior personnel in certain circumstances, such as in the event that the entity in which the relevant employee works suffers a significant failure of risk management, or experiences a significant downturn in its financial performance (as determined in the sole discretion of Rantum), including in connection with a sustainability risk concerning an investment.