Princeville Climate Partners II Ltd: Sustainability‐related disclosures at entity level
In accordance with Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (“SFDR”), Princeville Climate Partners II Ltd (“Princeville”), in its capacity as a non-EU alternative investment fund manager (“AIFM”) to certain fund(s) registered for marketing under Directive (EU) 2011/61 on alternative investment fund managers (“AIFMD”) in the EU, is required to disclose information about the integration (or not) of sustainability risk in its investment processes, as well as details regarding the consideration (or not) of adverse impacts on sustainability factors.
(i) Integration of sustainability risks in the investment process
Under SFDR, Princeville is defined as a “financial market participant”. Article 3(1) of SFDR requires financial market participants to publish information about their policies on the integration of sustainability risk in their investment decision-making processes.
Sustainability risk is defined under SFDR as an environmental, social or governance event or condition that, if it occurs, Princeville considers could cause an actual or potential material negative impact on the value of one or more investments.
Princeville closely considers sustainability risk in its investment process. Princeville conducts thorough sustainability-related due diligence assessing companies’ positive and negative environmental, social and governance outcomes in its evaluation of the supply chain, which forms part of the climate-positive assessment. Such factors directly affect Princeville’s investment decisions as well as targeted interaction with potential portfolio companies.
(ii) Consideration of Adverse Impacts on Sustainability Factors
Article 4(1)(a) of SFDR requires financial market participants to publish and maintain on their websites information on the manner in which principal adverse impacts (“PAIs”) on sustainability factors have been considered in their investment decisions. PAIs are potential adverse effects of investment decisions on sustainability factors. Sustainability factors are environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters.
Princeville does not formally consider PAIs of investment decisions on sustainability factors within the meaning of Article 4(1)(a) of SFDR.
Meaningful consideration of PAIs is not currently possible due to the difficulty in obtaining the requisite data on which Princeville would be obligated to report on in accordance with SFDR, given the early stage investments and the lack or quality of ESG reporting in specific jurisdictions. This is predominantly due to the fact that the investee companies, which are at the early stages of their growth, do not sufficiently report data to accurately assess adverse impacts. Should any adverse impacts be identified during the investment process, those impacts will be evaluated and if deemed material, Princeville will conduct an enhanced assessment of the specific impact before making any investment decision.
Notwithstanding the aforementioned barrier to the identification and prioritisation of PAIs, Princeville will re-evaluate this position on a periodic basis, giving due consideration to market developments.