BKN Capital as AIFM is regulated by the Luxembourg financial supervisory authority Commission de Surveillance du Secteur Financier (CSSF). As a member of the Association of the Luxembourg Fund Industry (ALFI) we also subscribe to the ALFI Guidelines and Recommendations such as the Code of Conduct for Luxembourg Investment Funds. Our governance rules cover the following areas:
Within the meaning and in accordance with the provisions set out in Regulation (EU) N°2019/2088 of the European Parliament and of the Council of 27 November 2019 (as amended) on sustainability-related disclosures in the financial sector (SFDR), BKN Capital S.A. (“BKN”) is defined as a Financial Market Participant (“FMP”). SFDR Art. 3 requires from an FMP to publish information about policies established on the integration of sustainability risks in their investment decision-making process and potential adverse sustainability impacts on an entity level.
Sustainability risk means an environmental, social or governance (“ESG”) event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of an investment. The individual sustainability risk factors considered for each specific investment depend on each of the managed Fund’s investment strategy as well the economic sector and geographical exposure of the targeted investment, and may notably include:
Environmental: Material negative impacts from investment decisions relating to the quality and functioning of the natural environment and natural systems, including greenhouse gas emissions, use of non-renewable energy, biodiversity, water and waste;
Social: Material negative adverse impacts from investment decisions relating to the rights, well-being and interests of people and communities; and
Governance: Material negative adverse impacts from issues relating to the governance of companies, including inappropriate management of conflicts of interest, violation of anti-money laundering rules, etc.
BKN takes potential sustainability risks into consideration in its analysis of potential investments and the implemented investment decision-making process in accordance with the provisions of SFDR.
Portfolios are managed by integrating ESG risks and factors on a case-by-case case basis and depending on the characteristics of each proposed individual portfolio investment, including for products which do not promote ESG characteristics or have specific sustainable investment objectives. This means that whilst ESG factors are considered, they may or may not impact portfolio construction. The impact of ESG integration on investment performance may change over time.
In case BKN delegates the portfolio management function to an external Portfolio Manager (“PM”), being located in one of the member states of the European Union, and the PM decided to integrate sustainability risks in his investment decision process, additional information on the integration of sustainability risks into the decision making (pre-trade assessment) can be found on the website of the specific portfolio manager.
Principle adverse impact statement
If principal adverse impacts (“PAI”) of investment decisions are considered, as per Art. 4 of SFDR, BKN as FMP is required to publish regularly on its website a “statement on due diligence policies with respect to those impacts, taking due account of their size, the nature and scale of their activities and the types of financial products they make available”.
BKN may act itself as PM. For the time being, BKN does not consider adverse impacts of investment decisions on sustainability factors as per Art. 7(2) of SFDR. In accordance with point (b) of Art. 4(1) of SFDR, the main reason for not considering adverse impacts of investment decisions on sustainability factors at the company level is the lack of further information and relevant data of the required quality to identify, adequately assess and weight sustainability-related PAI.
BKN will continue reviewing the situation on a regular basis and, if necessary, decide on this basis on the possibility of taking into account PAI of investment decisions on sustainability factors. Once BKN will decide to consider and disclose adverse sustainability impacts in accordance with point (a) of Art. 4(1) of SFDR, this website will be updated in due course to reflect how, to what extent and where the information on such PAI on sustainability factors may be found pursuant to SFDR in accordance with regulatory requirements and data availability. Such statement will then also consider Art. 7 of SFDR on the transparency of PAI at product level.
BKN may also delegate portfolio management to a duly authorised external PM, who may already consider PAI on its investment decision for the AIF they manage. Should such external PM wish to consider PAI in line with Article 7 of SFDR in respect of the AIF it manages, BKN shall ensure that:
The external PM has the appropriate infrastructure in place to report on PAI on an ongoing basis;
Where PAI are to be considered in respect of the AIF, the appropriate disclosures are made in the pre-contractual documents in line with SFDR latest by 31 December 2022;
The list of AIF for which PAI are considered is available on request;
The processes, systems and procedures in place to consider and report on PAI in respect of each AIF shall remain subject to BKN’s periodic due diligence;
Any external PM also provides or published on its website appropriate disclosures in accordance with Art. 4(1) and (2) of SFDR, while also considering the associated Regulatory Technical Standards (“RTS”) once adopted by the European Commission, in respect of AIFs;
Once being a regulatory requirement, if and when applicable, the periodic reporting of the AIFs will contain sufficient and appropriate information as to the assessment of PAI.
BKN will review the data situation on a regular basis and, if necessary, decide again on this basis on the possibility of taking into account PAI of investment decisions on sustainability factors as part of internal strategies, provided that the steps described in 1 to 6 of the above are carried out in an equivalent manner with appropriate disclosures made on BKN’s website.
SFDR requires FMPs to integrate information on the consistency of their remuneration policy with the integration of sustainability risks, in accordance with Art. 5(1) of SFDR. BKN has amended its remuneration policy accordingly.
All information required at the level of the AIF can be found in the specific pre-contractual information of the product, such as sales prospectus or private placement memorandum. Also, where PAI are not considered in respect of the AIF managed, BKN will ensure appropriate disclosures are contained within the relevant pre-contractual documents, as to why PAI are not considered in respect of the specific AIF.
These statements are subject at least to an annual review.