ESG and SFDR Disclosures
Sector AM strongly believe that an economically efficient and sustainable global financial system is a necessity for long-term value creation. More than before both customers and employees make their choices based on values and purpose, framing questions on carbon footprint and how companies contribute to a more circular economy. ESG issues into the investment process help Investment Managers to sharpen their minds on these extra-financial risks that may be less obvious but can have a material impact over time. Hence the principles go to the core of prudent risk management.
Sector AM is a signatory to the United Nations Principles for Responsible Investment (UNPRI), which is the World's leading proponent of responsible investment. The UNPRI works to understand the investment implications of ESG factors and to support its international network of investor signatories in enforcing and incorporating these factors into our investment and ownership decisions. At Sector AM, We encourage the Investment managers on our platform to acknowledge the risks and opportunities related to applying a broad perspective in assessing various businesses and believe living the UN PRI principles helps in delivering higher return with better controlled risk to the investors.
Sector AM's ESG Policy can be found here. Sector Capital AS, Sector AM's distribution and investor relations arm, has a separate Sustainability Policy that you can access here.
As of January 2023
In March 2021, the Sustainable Finance Disclosure Regulation (“SFDR”) came into effect. SFDR seeks to establish a pan-European framework to facilitate sustainable investment, by providing for a harmonised approach in respect of sustainability-related disclosures to investors within the European Union's financial services sector.
The scope of SFDR is extremely broad, covering a wide range of financial products and financial market participants. It seeks to achieve more transparency regarding how financial market participants integrate Sustainability Risks into their investment decisions and the consideration of adverse sustainability impacts into the investment process.
The objectives of SFDR are to
(i) strengthen protection for investors of financial products,
(ii) improve the disclosures made available to investors from financial market participants and
(iii) improve the disclosures made available to investors regarding the financial products, to amongst other things, enable investors make informed investment decisions.
Under Article 3 and 4 of the SFDR, information must be published on the integration of sustainability risks into the investment decisions and on the considerations of the principal adverse impacts of the investment decisions on sustainability factors.
These SFDR-related disclosures apply for each of Sector Fund Services AS (“SFS”), and Sector Theta AS (“Sector Theta”) and Capricorn Fund Managers Limited (“Capricorn”, and together with SFS and Sector Theta, the “Companies”), in their capacities as AIFM and UCITS ManCo and Investment Managers, respectively, related to the AIFs Sector Global Emerging Markets Fund (“SGEM") and Sector Zen Fund ("Sector Zen", and collectively, the “Funds”), sub-funds of Sector Investment Funds Plc (“SIF PLC”). SFS acts as AIFM for SIF PLC. Capricorn is appointed as investment manager for SGEM and Sector Theta is appointed as investment manager for Sector Zen. Additional disclosures with respect to funds managed solely by SFS is set out in the section “Fund Classification” below.
SFDR disclosures applicable for our Investment Partners Sector Gamma AS and Incentive AS can be accessed through their websites here: Sector Gamma website and Incentive website. SFDR disclosures applicable for Sector Capital AS are available under the Investor Services page of this website.
Integration of Sustainability Risks & ESG Factors (SFDR Article 3)
SFS, in conjunction with the respective investment manager (as applicable), believe that the sustainability of company performance may impact the ability to create long-term value for investors. SFS, in conjunction with the respective investment manager (as applicable), consider ESG integration to be an important instrument to improve the risk-return profile of the investments made by the Funds.
SFS, in conjunction with the respective investment manager (as applicable), integrate the consideration of ESG risks and value creation opportunities into its investment process and structurally integrates Sustainability Risks and ESG factors into the investment decision-making process across all asset classes. SFS, in conjunction with the respective investment manager (as applicable), focus on ESG factors that have the potential to substantially impact an organisation's ability to create and preserve economic, environmental and social value for it and its stakeholders.
SFS, in conjunction with the respective investment manager (as applicable), believe that it is up to the investment managers, analysts and others involved in the investment research and decision-making process to determine what weight these factors should be given in each individual case. SFS, in conjunction with the respective investment manager (as applicable), also consider ESG issues during the investment process and in the monitoring of portfolio investments.
Further, SFS, in conjunction with the respective investment manager (as applicable), engage with investee companies to make sure they are accountable and fulfil their obligations, including compliance with ESG principles, to shareholders and stakeholders.
Individually and in cooperation with others, SFS, in conjunction with the respective investment manager (as applicable), promote the acceptance and implementation of ESG principles within the investment industry and contribute to enhancing the effectiveness of these implemented ESG principles.
SFS, in conjunction with the respective investment manager (as applicable), believe that their ESG related research will reduce their exposure to countries, industries, and securities with material negative ESG risks. In managing the Funds, SFS, in conjunction with the respective investment manager (as applicable), may focus on investments in issuers that demonstrate adherence to environmental, social and good governance practices.
SFS, in conjunction with the respective investment manager (as applicable), have carried out an assessment of the likely impacts of Sustainability Risks on the returns of the relevant Fund and do not expect that it will materially impact the expected risk or return characteristics of the relevant Fund.
Consideration of Adverse Sustainability Impacts of Investment Decisions on Sustainability Factors (SFDR Article 4)
Even though SFS, in conjunction with the respective investment manager (as applicable), have integrated the consideration of Sustainability Risks into the investment decision-making process, they do not currently consider the principal adverse impacts of their investment decisions on Sustainability Factors. SFS, in conjunction with the respective investment manager (where applicable), has opted against doing so, primarily as they have a commercial preference to focus resources elsewhere.
Remuneration Policy (SFDR Article 5)
Each of the Companies’ remuneration policies shall serve to promote sound management and control of the Companies and their clients’ risks, including sustainability risks (in all aspects of their activities that relate to the services which are subject to public authorisation).
A summary of SFS’ and Sector Theta’s respective remuneration policies is set out below:
The purpose of the Company’s remuneration policy is to establish arrangements for compensation that may help the Company to attract highly skilled and qualified employees, develop and retain key persons and encourage perpetuity and continuous progress to reach the Company’s goals, while at the same time ensuring the integrity of the Company’s risk management.
The remuneration policy determines the following:
(i) To which of the Company’s employees and representatives this remuneration policy shall be applicable, in accordance with the abovementioned regulations concerning the calculation and payment of remuneration (Identified Employees). Such employees are divided into (a) executive management, (b) employees with control functions, (c) representatives and (d) employees whose responsibilities are of significant importance to the Company's risk exposure. Regarding the last category in (d) above, employees with similar remuneration as executive managers and other employees with tasks of considerable importance to the Company's risk exposure will be considered separately;
(ii) Whether the Company has more than 50 employees and/or total of assets under management that exceeds certain thresholds (and thus required to establish a remuneration committee); and
(iii) Which frameworks and guidelines that will apply to the calculation and payment of both the fixed and variable remuneration to those defined as “Identified Employees”.
The remuneration from the Company to Identified Employees may consist of a fixed and a variable element. The fixed element shall be determined on an individual basis and be sufficiently high (so that the Identified Employees of the Company are not dependent on any relevant variable remuneration, enabling the Company to not disburse the variable part of the remuneration).
Neither of the Companies have guaranteed bonuses or sign-on fees.
For SFS, the Identified Employees are the CEO, the CFO, the CLO/CCO and the Head of Risk Management.
For Sector Theta, the sole Identified Employee is the CEO.
For the purposes of SFDR, the Funds qualify as financial products. None of the Funds are classified as an Article 8 Fund or an Article 9 Fund.
Specific disclosures for funds managed solely by SFS (the Park Avenue Equity Fund 2018 and the Park Avenue Equity Fund 2020, each a sub-fund of Trient Global Investment Funds plc, (each a “Park Avenue Fund” and collectively the “Park Avenue Funds”)):
The Park Avenue Funds’ investment objectives and policies require that each Park Avenue Fund invest substantially all of its assets in the Master Fund (as defined in the Park Avenue Funds’ supplement) and, as such, SFS in its capacity as the Park Avenue Funds’ Investment Manager, does not exercise a meaningful degree of discretion as regards the investment of the Park Avenue Funds’ assets. As the extent to which SFS in its capacity as the Investment Manager exercises discretionary investment management power is limited in this way, (i) SFS in its capacity as the Investment Manager does not specifically consider Sustainability Risks in its investment decision making, (ii) SFS in its capacity as the Investment Manager does not consider the potential adverse impacts of its investment decisions on Sustainability Factors and (iii) the investments underlying the Park Avenue Funds do not take into account the EU criteria for environmentally sustainable economic activities.
This information is provided solely for the purposes of SFS’ and Sector Theta’s compliance with the provisions of the SFDR. The information contained herein is subject to change at any time without notice. Subject to the legal structure of the relevant fund, any issue and allotment of shares in funds managed by SFS and Sector Theta (as applicable) is subject to the provisions of the respective fund’s prospectus and the supplement thereto and any application for shares in such funds shall be based solely on the information contained in such documentation and the most recent annual and/or semi-annual report of the fund and shall be made pursuant to the terms of the respective application form.