Sustainability risk
integration policy
- INTRODUCTION
- OBJECTIVE OF THE POLICY
- SCOPE AND APPLICATION
- GENERAL RESPONSIBILITIES
- ADVERSE EVENTS
5.1. TRANSPARENCY OF ADVERSE SUSTAINABILITY EVENTS AT CORPORATE LEVEL
5.2. TRANSPARENCY OF ADVERSE SUSTAINABILITY EVENTS WITH RESPECT TO THE VEHICLES MANAGED.
- IDENTIFICATION AND ASSESSMENT OF SUSTAINABILITY RISKS
6.1. DEFINITION OF SUSTAINABILITY RISK
6.2. RISK ASSESSMENT
6.3. MONITORING AND UPDATING
- INTEGRATION OF SUSTAINABILITY RISK INTO THE INVESTMENT DECISION-MAKING PROCESS
7.1. RELEVANT INFORMATION
7.2. ANALYSIS AND EVALUATION
7.3. INVESTMENT DECISIONS
7.4. SUSTAINABILITY FACTORS ANALYZED IN THE DECISION MAKING PROCESS
- DISCLOSURE OF INFORMATION
- EVALUATION AND CONTINUOUS IMPROVEMENT
- COMPLIANCE AND ACCOUNTABILITY
- VALIDITY AND UPDATING
- APPLICABLE REGULATIONS
1. INTRODUCTION
Zubicapital S.A (hereinafter “the Company”) has developed this policy which aims to establish a sound framework for the integration of sustainability risks into our investment decision-making process, complying with the requirements set out in Regulation (EU) 2019/2088 of the European Parliament and of the Council, as well as other applicable regulations related to sustainability disclosure in the financial services sector. With this policy we seek to comply with legal and regulatory requirements regarding sustainability disclosures, while promoting responsible risk management and a positive contribution to sustainable development.
We recognize the importance of sustainability in the financial services sector and are committed to integrating sustainability risks into our investment decision-making process as we understand that long-term financial performance is intrinsically linked to sustainability.
This policy will apply to all aspects of the Company’s investment and financial asset management. All members of our investment team will be involved in the implementation of this policy and are expected to comply with its principles and procedures.
We are committed to transparency and accountability in relation to our sustainability risk integration practices.
2. OBJECTIVE OF THE POLICY
The objective of this policy for integrating sustainability risk into the Company’s investment decision-making process is as follows:
Comply with regulatory requirements: we are committed to complying with regulations and legal requirements related to sustainability disclosures in the financial services industry. We will ensure that our policy is aligned with these requirements and that our practices comply with disclosure and transparency obligations.
Improve decision making: We seek to improve our investment decision-making process by integrating sustainability risks, considering both financial and sustainability risks in all our investment opportunities, so that we take a stronger position to make informed decisions.
Build trust and transparency: We want to strengthen the confidence of our investors and other stakeholders by demonstrating our commitment to sustainability and responsible risk management. We will provide information on demand about our sustainability risk integration approaches, the results of our assessments and the measures taken to mitigate identified risks.
Driving positive change: By integrating sustainability risks into our investment decisions, we aim to have a positive impact on sustainable development. We seek to invest in companies and projects that adopt sustainable practices, promote innovation in key areas and contribute to the transition to a low-carbon, inclusive and socially responsible economy.
3. SCOPE AND APPLICATION
This policy applies to all investment decision-making processes carried out by the Company, including the management of the vehicles’ portfolios and the evaluation of investment projects.
This policy applies to all aspects of the Company’s investment and financial asset management. This includes, but is not limited to:
Selection of investee companies: When selecting investee companies, we actively consider sustainability risks and their alignment with our investment objectives. We analyze the quality and consistency of information on ESG aspects of companies and will assess their potential impact on our portfolios.
Vehicle management: In managing our portfolios, we integrate sustainability risks into our investment strategies. We regularly monitor the performance of our investments in financial and non-financial terms, taking into account relevant ESG factors. This allows us to make informed decisions about holding or reallocating assets based on their performance.
Investment Project Evaluation: When evaluating specific investment projects, we consider the associated sustainability risks and opportunities. We conduct an ESG analysis to understand how the project may affect the environment, local communities, human rights and governance, and use this information to make ethical and responsible investment decisions.
4. GENERAL RESPONSIBILITIES
Within the framework of this policy of integrating sustainability risks into the investment decision-making process, the following general responsibilities are established:
Board of Directors
Approve this policy and ratify any amendments to it.
To ensure the effective implementation of this policy.
To provide the necessary resources for the execution and compliance with the policy.
Regulatory Compliance
Review prior to approval by the Board of Directors of this policy following its development and/or updating.
Periodic review of internal procedures and controls.
Ensure that the Company’s employees involved in the provision of the investment services indicated in the previous section are aware of this policy and, if applicable, of the exclusion criteria.
Investment Department
Responsible for implementing and following the principles and procedures of this policy.
Integrate sustainability risks into the investment decision-making process.
Use available relevant information to properly evaluate investments.
Monitor environmental, social and corporate governance risks of portfolio companies.
Evaluate the effectiveness of the integration of sustainability risks in the investment decision-making process.
Propose appropriate measures to correct any identified non-compliance.
Investment Committee
Promote, assess and approve proposals for ESG objectives and their implementation in the Company.
Integrate ESG assessments into investment decision-making processes.
Analyze expectations from investors to capture their ESG preferences.
Ensure appropriate analysis and assessment of sustainability risks.
Review reports and results, and provide recommendations to continuously improve the integration of sustainability risks into the investment decision-making process.
All parties involved in the implementation of this policy have a responsibility to communicate any identified concerns or non-compliances and to collaborate in the continuous improvement of practices related to sustainability risk integration.
In assigning these responsibilities, we seek to ensure that all aspects of the Company comply with the requirements of Regulation (EU) 2019/2088 and other applicable regulations, and that a culture of sustainability is promoted in our SGIIC.
5. ADVERSE EVENTS
TRANSPARENCY OF ADVERSE SUSTAINABILITY EVENTS AT THE CORPORATE LEVEL
Given the size, less than 500 employees, nature and scale of the Company’s activities, as well as the robustness of the procedures for integrating sustainability risks into investment decisions, the Company declares that it does not take into account adverse impacts of investment decisions on sustainability factors.
However, the consideration of the adverse effects of investment decisions on sustainability factors may be subject to development as the level of maturity of ESG risk management allows the establishment of sound methodologies for this purpose.
TRANSPARENCY OF ADVERSE SUSTAINABILITY IMPACTS WITH RESPECT TO MANAGED VEHICLES
In relation to the transparency of adverse sustainability impacts with respect to managed vehicles, in accordance with the provisions of Art. 7 of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on the disclosure of information concerning sustainability in the financial services sector, where adverse impacts are taken into account, individually for each vehicle, a clear and reasoned explanation of how the financial product takes into account the main adverse impacts on sustainability factors shall be included in the vehicle’s legal documentation.
6. IDENTIFICATION AND ASSESSMENT OF SUSTAINABILITY RISKS
DEFINITION OF SUSTAINABILITY RISK
In the context of this policy, we understand sustainability risk as the potential for environmental, social or governance (ESG) factors to adversely affect the Company’s financial profitability, reputation and business continuity, as well as the ability to meet long-term investment objectives.
Environmental Risk:
Includes negative impacts associated with climate change, pollution, inadequate natural resource management, environmental degradation, water scarcity and other relevant environmental factors.
It may also encompass risks arising from the transition to a low-carbon economy, such as the imposition of carbon taxes, stricter environmental regulation or changes in consumer preferences towards more sustainable products.
Governance Risk:
Includes negative impacts arising from poor corporate governance practices, such as lack of transparency, corruption, conflicts of interest, poor risk management, lack of board diversity, and inadequate executive compensation.
It can also encompass risks associated with the lack of a sound governance structure and non-compliance with applicable regulations and standards.
Proper management of sustainability risks involves identifying, assessing and mitigating these risks throughout the investment process. This may include integrating ESG criteria into investment analysis, continuous monitoring of portfolios, engagement with investee companies, adoption of responsible investment approaches, and transparent disclosure of information related to sustainability risks.
By recognizing and addressing sustainability risks proactively, we seek to protect the interests of our investors, contribute to the long-term sustainability of financial markets and promote economically, socially and environmentally responsible development.
RISK ASSESSMENT
Once identified, sustainability risks will be assessed in terms of their likelihood of occurrence and potential impact. Risk assessment may involve the use of specific sustainability-related indicators and metrics, such as carbon emissions, environmental impact indicators, corporate sustainability ratings or human rights indices. In addition, we will consider the geographical, sectoral and temporal context to better understand the relevance of the identified risks.
During the assessment, we also consider the potential interaction between the different sustainability risks and how they may jointly affect our investments. This will enable us to obtain a holistic view of sustainability-related risks and opportunities.
MONITORING AND UPDATING
Identifying and assessing sustainability risks is not a static process. We recognize the need to keep abreast of changes in the sustainability landscape and new risks that may emerge. We will therefore establish mechanisms to continuously monitor and update our risk assessment, regularly reviewing relevant information and adapting our investment strategies accordingly.
In addition, we will encourage the active participation of investment team members in the identification and assessment of sustainability risks, promoting awareness of ESG aspects in the decision-making process.
By integrating the identification and assessment of sustainability risks into our investment decision-making process, we will be in a better position to manage sustainability-related financial and non-financial impacts, and to generate long-term sustainable returns for our investors.
7. INTEGRATION OF SUSTAINABILITY RISKS INTO THE INVESTMENT DECISION-MAKING PROCESS
At the Company, we consider the effective integration of sustainability risks into our investment decision-making process to be of vital importance. To achieve this, we will implement the following practices:
RELEVANT INFORMATION
To ensure adequate identification of sustainability risks, we implement a systematic process of gathering relevant information. This may include reviewing public reports and data, consulting specialized sources, monitoring sustainability-related trends and events, as well as collaborating with subject matter experts.
During the identification process, environmental, social and governance (ESG) issues that may have a material impact on our investments will be considered. Examples of sustainability risks include climate change, natural resource scarcity, human rights issues, corruption and poor corporate governance.
ANALYSIS AND EVALUATION
The information collected is integrated into our investment analysis and evaluation process. We use appropriate tools and models to assess sustainability risks and their potential impact on our investments.
In addition to traditional financial aspects, we consider sustainability risks as a key factor in assessing the viability and performance of our investments. This allows us to holistically assess risks and opportunities and to make informed decisions supported by sound data.
INVESTMENT DECISIONS
Identified and assessed sustainability risks are effectively considered in our investment decision-making process. This means that investments that present unacceptable risks may be excluded from our portfolio. Our integration of sustainability risks also allows us to identify investment opportunities that are aligned with our investment policy and offer solid long-term financial performance.
In summary, integrating sustainability risks into our investment decision-making process helps us make informed, conscious and responsible decisions, considering both financial aspects and sustainability risks. This enables us to generate sustainable value for our investors and contribute to a more sustainable and equitable future.
SUSTAINABILITY FACTORS CONSIDERED IN DECISION MAKING
We consider a wide range of sustainability factors when making investment decisions. These factors help us to assess the risks and opportunities associated with environmental, social and governance (ESG) issues. Sustainability factors that may be subject to analysis are listed below.
Environmental impact:
Measurement of greenhouse gas emissions and their contribution to climate change.
Evaluation of the consumption of natural resources, such as water, energy and raw materials.
Analysis of waste management and impacts on biodiversity and ecosystems.
Life cycle analysis: Assessing the environmental impact of a product or service at all stages of its life cycle, from the extraction of raw materials to its final disposal.
Carbon footprint: Measure the greenhouse gas emissions generated by a company or investment and set reduction targets.
Energy efficiency assessment: Analyze energy consumption and evaluate measures taken to improve energy efficiency.
Social impact:
Assessment of labor practices, including working conditions, wages, benefits and safety.
Analysis of diversity and inclusion policies, gender equality and respect for human rights.
Consideration of relations with local communities and commitment to sustainable development.
Supply chain assessment: Analyze supplier practices in terms of labor rights, working conditions, health and safety, and risk management.
Impact on local communities: Assessing how a company’s operations affect local communities in terms of employment, economic development, access to basic services and respect for human rights.
Governance impact:
Consideration of financial and non-financial disclosure, as well as regulatory compliance.
Corporate governance structure analysis: Evaluate the composition of the board of directors, independence of members, existence of specialized committees and transparency in decision making.
Stakeholder engagement: Evaluate the participation of relevant stakeholders, such as employees, customers, suppliers and communities, in the company’s decision-making and management.
Risk management and compliance: Evaluate the company’s ability to identify, assess and manage risks, as well as to comply with relevant regulations and standards.
Business ethics and anti-corruption: Assess the company’s policies and practices regarding business ethics, anti-corruption and responsible business behavior.
8. DISCLOSURE OF INFORMATION
We comply with the disclosure requirements set out in Regulation (EU) 2019/2088 and other applicable regulations by preparing and disclosing sustainability reports containing relevant information on ESG risks and our policies for integrating sustainability into the investment decision-making process.
We maintain clear and effective communication with our investors about sustainability risks and how we address them in our investment decisions. We provide regular and updated information to enable them to understand and assess the impact of sustainability on their investments.
9. EVALUATION AND CONTINUOUS IMPROVEMENT
We regularly review and evaluate the effectiveness of our policy for integrating sustainability risk into the investment decision-making process. We take into account best practices, regulatory changes and advances in the understanding of sustainability risks to continuously improve our policy and practices.
10. COMPLIANCE AND ACCOUNTABILITY
All members of the Company are responsible for complying with this policy and for contributing to the effective integration of sustainability risks into the investment decision-making process. The Board of Directors is responsible for monitoring and ensuring compliance with this policy.
In the event that non-compliances or deviations from this policy are identified, appropriate measures will be taken to correct the situation and prevent future violations.
11. VALIDITY AND UPDATING
This policy for integrating sustainability risks into the investment decision-making process is effective from the date of its approval and will be subject to periodic reviews to ensure it is updated and adapted to changes in the regulatory and sustainability environment.
12. APPLICABLE REGULATIONS
The development of this policy is based, among others, on the following implementing regulations:
DIRECTIVE (EU) 2017/828 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 17 May 2017 amending Directive 2007/36/EC as regards the promotion of long-term shareholder engagement.
DIRECTIVE 2014/95/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 22 October 2014 amending Directive 2013/34/EU as regards the disclosure of non-financial information and diversity information by certain large companies and certain groups
Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability disclosures in the financial services sector.
Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022 supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details in terms of content and presentation to be met by information relating to the “no significant harm” principle, and specifying the content, methods and presentation for information relating to sustainability indicators and adverse sustainability impacts, as well as the content and presentation of information relating to the promotion of environmental or social characteristics and sustainable investment objectives in pre-contractual documents, on websites and in periodic reports.
In addition to these specific regulations, other applicable financial and investment rules and regulations, as well as international best practices and standards related to sustainability and risk management should be taken into account. These may include, among others:
Global Reporting Initiative (GRI) Standards: These standards provide guidance for sustainability-related disclosures.
United Nations Principles for Responsible Investment (PRI): These principles provide a global framework for the integration of ESG aspects into investment practices.
The policy is developed taking into account these regulatory frameworks and recognized best practices to ensure compliance with legal obligations, transparency and responsible management of sustainability risks in our investment decisions.