ESG Disclosures in accordance with SFDR
At Novalis, we are aware of our
responsibilities towards society, including those relating to environmental,
social and governance (“ESG”) matters. The transition to a low-carbon, more
sustainable, resource-efficient and circular economy will affect all operators of
the economy including the portfolio entities that we invest in.
Even though no environmental or social characteristics are promoted by Novalis in accordance with article 8 of Regulation (EU) no. 2019/2088 of the
European Parliament and of the Council of 27 November 2019 on
sustainability-related disclosures in the financial services sector (“SFDR”)
and Novalis does not have sustainable
investments as its purpose in accordance with article 9 of the SFDR, we do
believe that, in order to make good investments, sustainability factors should
not be overlooked.
1. Sustainability risk policies
We
acknowledge that ESG-related events or conditions could potentially have a
(negative) impact on the value of our investments. As Novalis neither promotes environmental or social characteristics, nor has
sustainable investments as its purpose, we do not formally integrate an
assessment of sustainability risks in our decision making process in accordance
with article 3 of the SFDR and we do not plan to do so in the future.
That being said, we do carefully select potential portfolio entities for
investments, as well as the sectors that they are active in. In addition,
through the long-term investments that the Novalis funds take in portfolio entities, we may influence such portfolio
entities’ activities and policies and thereby diminishing (sustainability)
risks for our investments. As set out in the documentation
governing our funds, no investments will be made in entities active in certain ‘restricted
sectors’ (which, among others, are sectors that may entail sustainability
risks).
Prior to making any investment, we conduct a thorough due diligence research on
target entities. Such due diligence research, among others, focuses on the
target’s compliance with applicable legislation, among which also ESG-related
legislation. The outcome of the due diligence findings and assessment of the
target’s compliance with (ESG) legislation is taken into consideration when an
investment decision is taken by us.
As
an active investor, we seek representation on the governance bodies of our
portfolio entities. Throughout the lifespan of our investments, we monitor
portfolio entities’ compliance with (ESG) legislation and human rights. In
addition, with their investments, our funds aim to create additional employment
opportunities.
2. No
consideration of sustainability adverse impacts
We are
aware that our investment decisions, as well as our portfolio entities’
activities may have an impact on sustainability factors. However, for the
purpose of article 4 of the SFDR, Novalis does not
consider the adverse impacts of our investment decisions on sustainability
factors.
Novalis does not consider those adverse
impacts because we are a small organisation with limited resources and
personnel and we are not capable of determining precisely what the adverse
impacts of our investment decisions would be based on the different criteria
set forth in the SFDR and the legislation implementing the SFDR. In addition,
we invest in start-ups that, due to their size and limited resources, are not
capable of providing the information required for that purpose.
Novalis does not intend to consider adverse
impacts of investment decisions on sustainability factors in the future in
accordance with article 4 of the SFDR for the aforementioned reasons.
3. Integration of sustainability risks into remuneration policy
As a sub-threshold
manager of alternative investment funds, we not have an obligation to have a formal remuneration policy in
accordance with article 40 and following of the Belgian law of 19 April 2014 on
alternative entities for collective investments and their managers.
Consequently, sustainability risks are not integrated in our remuneration policy.