Fondaco considers fundamental the integration of Environmental, Social and Governance (ESG) factors into its investment process. Besides promoting sustainable economic and social development, we believe that these elements can contribute positively to the financial results of the funds while reducing their risks. It is considered that financial market participants committed to integrating ESG criteria into their strategy can generate sustainable profits over time and, therefore, create a solid prospect of value creation for all investors and the whole community.
The approach adopted by Fondaco in pursuing and monitoring he pre-set goals and identifying and mitigating risks includes creating an appropriate governance structure to oversee all aspects related to the ESG approach and adopting an ESG risk management policy. For a better description of the approach, please refer to the “Responsible Investment Policy” at the following link: https://fondacogroup.it/lux/about/policies-and-documentation/
The governance structure is based on the following institutions:
Board of Directors, which executes strategic policy-making activities.
Investment Committee, responsible for selecting investment operations and applying the ESG guidelines defined in the “Responsible Investment Policy” to the process of selecting each investment.
Risk Management, responsible for monitoring and evaluating the impact of ESG factors on fund risk and related financial returns.
Definition of the general principles applied on the basis of the provisions of the regulations in force
Description of the different types of portfolios managed according to the ESG risk
Monitoring activities carried out by the Management Company
Reporting activities carried out.
Considering alternative investments, ESG risk management occurs in due diligence’s context, selection and monitoring the investment and ESG risks associated with the investments, verify that the risk-revenue profile is consistent with the risk profile of each fund, and in terms of ESG objectives analysing areas for improvement.
For traditional investments, the risk management team supports the management team analysing and monitoring funds’ ESG risks, using ESG rating assigned to individual instruments by one or more specialist providers, reinforced by internal ratings, if necessary. The ESG rating summarises an issuer’s exposure to ESG risk, adjusted for the issuer’s expertise to manage those risks. The procedure followed is adapted according to the ESG classification applied to each portfolio, as required by current legislation.
Fondaco considers in some instances the significant adverse effects on sustainability aligned with the environmental, social and governance goals, establishing minimum limits to the ESG rating of the issuers invested in, as described above.
Regarding the obligations under Article 4 (paragraph 1) of the SFDR relating to the consideration of the principal adverse effects of investment decisions on sustainability factors (referred to as “PAI” – Principal Adverse Impacts), Fondaco has initially chosen to select and check the principal adverse effects of investment decisions on sustainability factors of funds that promote environmental and/or social sustainability features pursuant to Article 8 of the SFDR.
The Company will continuously re-evaluate the evolution of the regulatory framework and the availability of indicators to determine the main adverse effects, aiming to expand and improve the consideration of the main negative effects.
Fondaco is aligned with EU Regulation 2019/2088 and best practices regarding objectives’ integration linked to ESG issues in its staff remuneration and incentive policy. The remuneration policy has a direct link between specific sustainable evolution’s indicators of the asset under management and the determination of the overall variable remuneration and the assignment of individual goals linked at least to each member of the portfolio management team.