AFFM SA duly recognizes how global and compelling the challenge is to shape a more sustainable future for everyone and thus welcomes the growing commitment of business and finance to Environmental, Social, and Governance (ESG) criteria, in line with the UN Sustainable Development Goals (SDG) and EU legislation, such Sustainable Finance Disclosure Regulation (EU) 2019/2088 (SFDR).
Sustainability risk refers to an environmental, social, or governance event or condition, that, if it occurs, could cause a material negative impact on the value of an investment and/or returns from that asset. As a financial market participant, AFFM is aware that sustainability risk represents a risk on its own, which could potentially and materially undermine the return of its investment strategies, similarly to other standard financial risks such as market, liquidity, counterparty and operational risks. With reference to environmental aspects, sustainability risk may include pollution prevention, waste management or climate change risk, while social and governance issues could refer to fundamental labour rights or corruption and bribery prevention.
On the other side, investment decisions undertaken by AFFM on behalf of its strategies under management may result in Principal Adverse Impacts (PAI) on sustainability factors. An economic activity may have the potential to impact various sustainability indicators, both positively and adversely, such as promotion of energy- or carbon emission intensive companies that fail to disclose or do not engage enough towards Paris Climate Agreement goals as well as via lotion of social and employee maters and human rights.
AFFM has appointed Alken Asset Management Ltd. (Alken AM) as the delegated portfolio manager of all the strategies managed by AFFM. Under this delegation, Alken AM executes the investment decision process and – subject to data availability - integrates sustainability risk assessments. Via ongoing oversight and due diligence of Alken AM, AFFM ensures that assessment and monitoring of sustainability risks as well as PAI are integrated within the risk management framework and the general investment process for all the strategies under AFFM’s management. AFFM closely partners with the external portfolio manager to effectively incorporate ESG factors alongside financial factors in the investment decision process and to promote active engagement, collaboration, transparent disclosure and reporting.
Depending on the specific investment strategy, an increase in the sustainability risk exposure based on an increase of the sustainability risk level of a specific investment or of the portfolio of a given fund may lead to disinvestment of certain assets.
The integration of sustainability risks may differ among the investment strategies as the materiality of the sustainability risk may vary depending on the asset class, the investment objectives and market trends. Please refer to the delegated asset manager’s ESG disclosures for more details on ESG integration in the investment process: www.alken-am.com/esg
For the specific disclosure at funds’ level, please refer to the overview below.