Sustainability-Related Disclosures

 

No Consideration of Adverse Impacts of Investment Decisions on Sustainability Factors

BKN Capital S.A. (“BKN Capital“) is an alternative investment fund manager (“AIFM”) and, as such, a financial market participant (“FMP”) within the meaning of Art. 2(1)(e) of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial sector (the “SFDR”). BKN Capital manages alternative investment funds (the “Funds”), either performing portfolio management itself or delegating it to third-party portfolio managers (each a “PM”). 

BKN Capital does not consider principal adverse impacts of its investment decisions on sustainability factors (“PAI”) at entity level, in accordance with SFDR Art. 4(1), point (b). This applies to all investment decisions taken by or on behalf of BKN Capital for all Funds, whether BKN Capital performs portfolio management itself or has delegated it to a PM. 

The reasons for not considering PAI at entity level are the varying approaches to ESG and sustainability factors across the Funds, which pursue different investment strategies and asset classes and are managed either by BKN Capital itself or by different PMs, and the multiple sources of data used, which currently do not allow a consistent and systematic measurement, aggregation and reporting of PAI at entity level. BKN Capital does not currently intend to consider PAI at entity level. It reviews this position at least annually, taking into account relevant market practices and regulatory developments, and may, on this basis, reconsider whether to take PAI into account in the future.

While BKN Capital does not consider PAI at entity level, for certain Funds, it may collect, calculate and report information relating to PAI, including on an ex-post basis and for investor reporting purposes. Such reporting does not mean that PAI are considered as part of the investment decision-making process of the relevant Funds.

Notwithstanding the above, certain Funds may consider PAI at product level, typically where BKN Capital has delegated portfolio management to a PM that considers PAI in its investment decisions. This is a feature of the relevant Fund, agreed by BKN Capital and set out in that Fund’s documentation, and such Funds are not reflected in BKN Capital’s entity-level position described above. For those Funds, BKN Capital, as AIFM, remains responsible for the related disclosures made in accordance with SFDR Art. 7 and 11 and, through its initial due diligence and ongoing oversight of the PM, ensures that:

  1. The PM has the appropriate processes, data and infrastructure in place to identify, measure, monitor and report on the PAI considered on an ongoing basis;
  2. The Fund’s pre-contractual disclosures contain a clear and reasoned explanation of how the Fund considers PAI; 
  3. Information on how the Fund considered PAI is included in the Fund’s periodic (annual) report;
    and
  4. The PM provides BKN Capital, on a timely basis, with the data and information BKN Capital needs to make these disclosures.

The processes, systems and procedures applicable to the consideration and reporting of PAI by such Funds remain subject to BKN Capital’s periodic due diligence and are reviewed at least annually. The pre-contractual disclosures of all other Funds state that BKN Capital does not consider PAI, together with the reasons therefor, in accordance with SFDR Art. 7(2).

Where a PM is located outside the European Union and is therefore not itself subject to the SFDR, BKN Capital obtains from that PM, by contractual means, the information needed for the disclosures of the relevant Fund. 

For recent developments or any further queries relating to BKN Capital’s sustainability-related disclosures, please contact: reporting@bkncapital.lu.

Entity-Level Sustainability-Related Disclosures

The following information aims at giving further guidance on how BKN Capital S.A. (“BKN Capital“) handles the implementation of the requirements set by the Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial sector (the “SFDR”), which applies since  10 March 2021. As an alternative investment fund manager (“AIFM”), BKN Capital is a financial market participant within the meaning of Art. 2(1)(e) SFDR (“FMP”).

The following information is based on the current understanding of the legal and regulatory framework in place and may therefore vary based on additional texts published by the competent authorities.

SFDR Art. 3, 4 and 5 require FMPs to publish on their websites information about, among other things, their policies on the integration of sustainability risks in their investment decision-making process, about how their remuneration policies are consistent with the integration of sustainability risks and about the principal adverse impacts of investment decisions on sustainability factors at an entity level. BKN Capital’s statement on principal adverse impacts is published in the separate section “No Consideration of Adverse Impacts of Investment Decisions on Sustainability Factors” of this website. 

Integration of Sustainability Risks in the Investment Decision-Making Process

BKN Capital integrates sustainability risks, i.e. environmental, social or governance events or conditions that, if they occur, could cause an actual or a potential material negative impact on the value of an investment (SFDR Art. 2(22)), in its investment decision-making process for all funds it manages (the “Funds”), in accordance with Commission Delegated Regulation (EU) No 231/2013, as amended by Commission Delegated Regulation (EU) 2021/1255. Sustainability risks are identified and assessed as part of the due diligence on each proposed investment (including, where relevant, through ESG due diligence questionnaires and the application of any exclusions set out in the relevant Fund’s documentation), are monitored by BKN Capital’s risk management function on an ongoing basis through relevant risk indicators and, where appropriate, stress tests or scenario analyses, and are reviewed by the investment committee before each investment decision.

Sustainability risks are integrated for all Funds, including Funds which do not promote environmental or social characteristics or have sustainable investment as their objective, in a manner proportionate to each Fund’s investment strategy and to the characteristics of each proposed investment. The outcome of this assessment may or may not affect individual investment decisions or portfolio construction. The likely impact of sustainability risks on the returns of the Funds may change over time.

The sustainability risks considered in BKN Capital’s investment decision process depend on each Fund’s investment strategy as well as the economic sector and geographical exposure of the targeted investment, and may notably include:

  • Environmental: Environmental events or conditions that could negatively affect the value of an investment, such as physical climate risks (e.g. extreme weather events, flooding or heat stress), transition risks (e.g. carbon pricing, regulatory changes or stranded assets), resource scarcity and pollution-related liabilities; 
  • Social: Social events or conditions such as poor labour practices, health and safety incidents, human rights controversies, community opposition or product liability;
    and
  • Governance: Governance events or conditions such as weak board oversight, bribery and corruption, breaches of anti-money laundering rules, inadequately managed conflicts of interest or tax controversies. 

Where BKN Capital delegates the portfolio management of a Fund to an external portfolio manager (“PM”), the PM integrates sustainability risks in its investment decisions in accordance with BKN Capital’s requirements, the Fund’s documentation and, where relevant, the PM’s own sustainability risk policy, which may also be available on the PM’s website. As part of its initial due diligence and ongoing oversight, BKN Capital ensures that:

  1. The PM has adequate knowledge and understanding of sustainability risks;
  2. Sustainability risks are an integral part of the Funds’ written investment process;
  3. Sustainability risks are considered as part of a broader analysis of individual investments by the PM;
  4. In assessing the sustainability risks prior to the execution of the investment, the PM draws upon a wide variety of internal and external research to assess qualitative, quantitative, reliable and up-to-date ESG related data over the time horizon of the relevant Fund;
    and
  5. The PM adequately records its sustainability risk assessments and provides BKN Capital with the information necessary for BKN Capital’s oversight and disclosures.

Where BKN Capital retains portfolio management of a Fund, it integrates sustainability risks in its own investment decisions in accordance with this policy. Where no investment advisor is appointed, the assessment of sustainability risks is performed by BKN Capital as part of its investment analysis and reviewed by the investment committee. Where an investment advisor is appointed, the investment committee considers and reviews each investment or divestment proposal received from the investment advisor, including the advisor’s assessment of the related sustainability risks, and takes decisions on behalf of BKN Capital for the relevant Fund. As part of its due diligence on the investment advisor, BKN Capital assesses the advisor’s knowledge and understanding of sustainability risks and the quality of the related information it provides. In certain instances, investment advisors may also publish information on their own websites in respect of the integration of sustainability risks. 

 Sustainability risks are embedded in BKN Capital’s risk management policy and process, including through relevant risk indicators and limits and, where appropriate, stress tests or scenario analyses. BKN Capital oversees, on an ongoing basis, the integration of sustainability risks by PMs, including through ex-post controls.

Remuneration Policy

Pursuant to SFDR Art. 5 FMPs are required to include in their remuneration policies information on how those policies are consistent with the integration of sustainability risks, and shall publish that information on their websites. BKN Capital’s remuneration policy is consistent with the integration of sustainability risks. In particular: (i) variable remuneration is not linked to the performance of individual investments in a way that would encourage excessive risk-taking, including with respect to sustainability risks; (ii) the assessment of individual performance includes qualitative criteria such as adherence to BKN Capital’s sustainability risk policy and procedures; (iii) staff in control functions are remunerated independently of the business areas they oversee; and (iv) where portfolio management is delegated, BKN Capital takes the remuneration practices of the PM into account as part of its due diligence. 

Pre-Contractual Information

In accordance with SFDR Art. 6 to 9, the information required at the level of the individual Funds, including sub-funds or compartments, is disclosed in each Fund’s pre-contractual disclosures made pursuant to Art. 23(1) of Directive 2011/61/EU (AIFMD), such as the offering memorandum or private placement memorandum. The information on this page is subject to review at least annually.

For recent developments or any further queries relating to BKN Capital’s sustainability-related disclosures, please contact: reporting@bkncapital.lu.

Sustainability-Related Disclosures of Financial Products

BKN Capital S.A. (“BKN Capital“) provides sustainability-related disclosures which are product-specific, as referred to in Art. 10 of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial sector (the “SFDR”), for funds that it manages (“Funds”), which (i) promote, among other characteristics, environmental or social characteristics, or a combination of those characteristics, in accordance with SFDR Art. 8, or (ii) have sustainable investment as their objective, in accordance with SFDR Art. 9. For each such Fund, these disclosures are published in a dedicated “Sustainability-related disclosures” section, structured in accordance with Commission Delegated Regulation (EU) 2022/1288, in the same part of the website as the other information on that Fund.

The product-specific sustainability-related disclosures of the Funds falling within the scope of SFDR Art. 8 or 9 are available below, or via the links below to the relevant Fund’s or PM’s website: [Fund name – link to the Fund’s “Sustainability-related disclosures” section] [●]. This information is kept up to date and any amendment is explained on this page in accordance with SFDR Art. 12.

For any queries, please contact reporting@bkncapital.lu .