Integration of sustainability risk in our investment decision-making process
Verdane is committed to adhering to the EU’s Sustainable Finance Disclosure Regulation (SFDR) ((EU) 2019/2088) and making available sustainability-related information with respect to our funds and investment process.
It is increasingly clear that megatrends related to sustainability will drive a reallocation of economic value over the coming decades, with certain sectors and business models better positioned than others for consistent growth. We believe a careful consideration of these developments is a cornerstone of a successful investment selection process. This includes not only a negative screening in which businesses which are clearly unsustainable are excluded from investment consideration, but also a positive screening element whereby Verdane is more likely to consider an investment in a company whose business model is clearly aligned with sustainability megatrends, and where this alignment supports a robust financial case.
Sustainability considerations are an integrated part of our investment selection process, and training and elevation of ESG and sustainable growth principles within the team are achieved through internal workshops as well as external training, conferences and seminars. In 2019, we revised our Investment Committee Materials to further integrate sustainability-related value creation and risk frameworks as part of the core underwriting and evaluation criteria for investments. When evaluating a potential investment during the sourcing stage, we take into consideration any risks and opportunities relating to sustainability factors. In the due diligence phase, ESG is integrated into Verdane’s information request list and Investment Committee Materials. The latter has templates for assessing the potential ESG risks in each portfolio company (and mitigation strategies) as well as the opportunities for building on current aspects of ESG that the company is doing well. Our investment professionals are expected to detail how sustainability-related trends may impact a potential investment over the course of Verdane’s ownership period and beyond, and to discuss these with the Investment Committee. The identification of potential ESG risks and/or opportunities may impact the Investment Committee discussions and selections, especially if identified as material and/or high impact. During Investment Committee discussions, ESG is a standard item on the question/agenda list.
More information on Verdane’s ESG strategy can be found in our Sustainability and ESG Policy.