The EU’s Sustainable Finance Disclosure Regulation (2019/2088) (“SFDR”) requires financial market participants and financial advisers to publish on their websites information about their policies on the integration of sustainability risks into their investment decision-making and investment advice.
Sustainability Risk is defined in the SFDR as an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value.
Sustainability risk is integrated throughout the investment process in Kestrel Capital as follows:
Funds: During the investment selection process, consideration is given as to how the fund integrates sustainability risk and ESG risks into their investment process. The Sustainability objectives of funds are also considered by the Investment Committee as part of the due diligences on funds.
Direct securities: Kestrel Capital may consider sustainability risk factors of a company as part of the investment process, but sustainability risk factors are not a deciding factor in the decision to select a security.
At onboarding and as part of periodic suitability and appropriateness assessments, all clients are requested if they have any sustainability preferences for funds. Kestrel will then take the clients sustainability preferences into account when advising on financial products or engaging in discretionary management services. This will form an important part of our analysis for choosing a provider and/or product.
Kestrel Capital has in place a Remuneration Policy which promotes sound and effective risk management and does not encourage excessive risk-taking. The policy seeks to ensure that excessive risk taking is not rewarded. Where remuneration is performance related, the total amount of remuneration is based on a combination of the assessment of the performance of the individual and of the overall results of Kestrel and when assessing individual performance, financial and non-financial criteria (e.g. client satisfaction, plans for the company, whether the individual has breached any of the firm’s Compliance policies or the firm’s Coded of Conduct, sustainability risks) are taken into account.
Kestrel Capital is required to disclose whether it considers the principal adverse impacts (“PAIs”) of its investment decisions. PAIs are described as impacts that result, or might result, in negative effects on sustainability factors, such as social and employee matters, respect for human rights, anti-corruption or anti-bribery matters. These obligations arise under Article 4 of the SFDR. Kestrel has elected not to do so at the present time, both in portfolio management and investment advice services. This is due to the scale of Kestrel’s business and the services its offers.
Finally, Kestrel Capital as a financial market participant and financial advisor recognises that ESG is a relatively new and evolving discipline and as such it will continue to review, embed and expand its approach to managing sustainability risks on behalf of its clients and wider society.