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 decision 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 decision 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. The identification of potential ESG risks and/or opportunities may impact the investment decision discussions and selections, especially if identified as material and/or high impact. During investment decision 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.
No consideration of sustainability adverse impacts
Verdane is not required to and does not consider principal adverse impacts of investment decisions on sustainability factors on entity level. We consider our existing ESG policies and procedures to be appropriate, proportional and tailored to the investment strategies of our funds. Further, we are currently not in a position to obtain all such information from portfolio companies that is required to consider principal adverse impacts if investment decisions as per Article 4 of the SFDR. We intend to continuously evaluate our position and update accordingly to the extent relevant.
Integration of sustainability risks into remuneration policies
Verdane has adopted a remuneration policy which is consistent with Verdane’s integration of sustainability risks in its investment processes. Remuneration to employees is determined on the basis of an annual performance review in which both financial and non-financial criteria are taken into account. The criteria include a number of targets / KPIs which are set ahead of each year, including sustainability-related targets. The criteria also include employees’ compliance with Verdane’s Sustainability and ESG Policy, which outlines how Verdane manages sustainability and ESG-related risks and opportunities throughout its screening, sourcing, investment process and ownership phase.
