Sustainability disclosures
With respect to the implementation of the EU Sustainable Finance Disclosure Regulation 2019/2088 (hereinafter ‘SFDR’), the integration of sustainability risks into the investment policy, ecological and/or social aspects of DD Alternative Fund, and adverse effects of the investments on sustainability factors are discussed below.
Integration of sustainability risks into investment policy
Sustainability risks are integrated into the DD Alternative Fund investment process. The definition of sustainability risk is an environmental, social or governance event or circumstance which, if it occurs, may have an actual or potentially negative material effect on the value of the investment.
Companies selected for the DD Alternative Fund investment portfolio must meet the ‘big five’ quality criteria, including sustainability.
As part of the ESG1 analysis developed by DoubleDividend Management (hereinafter also ‘the Administrator’), research is carried out into the criteria applied by the Administrator in the field of environmental, social and corporate governance aspects. The ESG analysis of environmental and social aspects is divided into three global challenges that the Administrator believes are the most important to the quality of society.
The analysis assesses whether the companies make a substantial effort with respect to any of the following challenges:
CLIMATE
ECOSYSTEMS
WELL-BEING
1 Stands for environmental, social and governance aspects.
The 17 UN Sustainable Development Goals have been ranked under the three identified global challenges, thus integrating the SDGs into the sustainability policy.
The Administrator applies the following four corporate governance principles in its ESG analysis: fairness, transparency, accountability and responsibility. These four principles are applied to matters including the composition of the board, shareholder rights, the remuneration policy and the provision of information by companies.
Based on the ESG analysis DD Alternative Fund invests in companies that respond to opportunities, offer solutions and have a positive impact on any of the aforementioned challenges through their production process, products and/or services.
Companies that are in gross violation of one or more principles of the United Nations Global Compact are excluded from investment. The ten principles of the Global Compact serve as guidelines for good governance in the areas of human rights, labour, the environment, and anti-corruption. Companies active in excluded activities are also excluded from investment. The Administrator has published its view on exclusions as well as the exclusion list on its website (only available in Dutch). The Administrator is of the opinion that sustainable, high-quality companies are more promising in the long term and make a positive contribution to the risk-return profile of an investment portfolio.
Ecological and/or social aspects
The Administrator strives to promote certain ecological and/or social aspects.
The ESG analysis includes a large number of indicators that outline the ecological and social characteristics of a company. This can be information about carbon emissions, biodiversity, water use and reuse, waste flows, diversity on the Board, the remuneration policy and shareholder rights. In addition companies may not be in gross violation of the principles of the UN Global Compact, nor be on the Administrator’s exclusion list.
As stated above, based on the ESG analysis DD Alternative Fund invests in companies that respond to opportunities, offer solutions and have a positive impact on any of the aforementioned challenges through their production process, products and/or services.
This ESG analysis (based on the three defined challenges) makes use of sector-specific reports from (societal) organisations, company information on sustainability in annual reports and websites, and Bloomberg. Furthermore the companies are consulted if any further information and/or explanation is desired. DD Alternative Fund does not use a financial or reference benchmark to assess the ecological and/or social aspects of DD Alternative Fund.
Adverse effects on sustainability factors
The Administrator takes (possible) adverse effects on sustainability factors into account when making investment decisions. The Administrator has included a number of indicators in its ESG analysis that take the sustainability factors into consideration.
In this context ‘sustainability factors’ are defined as environmental, social and employment matters, respect for human rights, and the fight against corruption and bribery.
The indicators applied by the Administrator include at least the indicators stated in Table 1 of the technical standard pertaining to EU Regulation 2019/2088 (SFDR). The possible adverse effects on sustainability factors are assessed for each indicator based on publicly disclosed information. The Administrator notes that it is dependent on the availability of non-financial (sustainability) information from the companies as well as the quality of this data.
As of the 2021 financial year the Administrator includes information about the main adverse effects on sustainability factors in the annual report.
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