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.