Astorg makes the following disclosures in accordance with the Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (the “SFDR”).
The disclosures apply to the following Astorg entities:
- Astorg Asset Management S.à r.l. (AAM)
- Astorg Partners SAS
Article 3 Transparency of sustainability risk policies
Pursuant to Article 3 of the SFDR, Astorg is required to disclose the manner in which sustainability risks (as defined hereafter) are integrated into the investment decision-making process.
A sustainability risk means an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investments made by Astorg. In the context of the firm, sustainability risks are risks which, if they were to crystallize, would cause a material negative impact on the value of the portfolios of the firm's funds.
Such risks are principally linked to climate-related events resulting from climate change (i.e. physical risks) or to the society’s response to climate change (i.e. transition risks), which may result in unanticipated losses that could affect an investment. Sustainability risks can also affect companies by introducing social risks (e.g. gender gaps, social inequality) and governance risks (e.g. bribery issues, selling practices).
As of today, Astorg and its funds under management remain exposed to sustainability risks. Such sustainability risks are integrated into the investment decision making and risk monitoring to the extent that they represent a potential or actual material risks and/or opportunities to maximizing the long-term risk-adjusted returns.
The integration of sustainability risks in the investment decision-making is based on the following approach.
At the outset, ESG issues are considered from the very first stage of the investment process at the screening phase. During screening, the relevant investment team will review the list of investment restrictions to identify whether a business or investment does not constitute a material breach against Astorg’s prohibited or restricted investments, as defined in Astorg’s ESG and Climate policies and in the funds’ Limited Partnership Agreements. These include businesses in which Astorg is not likely to invest (such as activities relating to thermal coal, weapons production and tobacco), or situations that merit enhanced early due diligence (such as companies operating under sanctions regimes).
Once the opportunity of a new investment is validated, the investment team carries out an analysis of the targeted company and completes an ESG assessment based on company-specific material topics to assess potential ESG-related risks and identify possible opportunities. This is done by engaging external and internal subject matter experts and is based on both private information gathered from the company management and from publicly available information.
During this process, Astorg identifies ESG aspects that are material and relevant to the investment, in accordance with the Global Reporting Initiative definition of materiality and the Sustainability Accounting Standard Board’s Materiality Map and using Astorg’s sector-specific ESG due diligence questionnaire (customized by sector). Astorg’s ESG assessment also includes cross-portfolio questions related to climate change risk irrespective of the sector of the investment. To assess good governance of the investee companies, Astorg will ensure that each investment has sound management structures in place and has a risk framework to prevent illicit business practices or misconduct.
At the investment committee stage, Astorg includes key ESG risks and opportunities for the investment in Investment Committee (“IC”) discussions and memos, including the results of ESG, regulatory, reputational and geopolitical due diligence conducted, based on the team’s knowledge of the business, the Target’s operations, and cross-portfolio topics assessed for all investments. The IC memo includes findings from the due diligence of the company’s existing practices and notes about how the identified topics will be incorporated and addressed during ownership.
During ownership, Astorg seeks to work with its portfolio companies to appropriately integrate and monitor progress on material ESG issues, including the industry specific topics and cross-portfolio topics into business procedures. Astorg also makes sure that investment agreements include clauses related to sustainability-related controversies in investee companies.
Compliance with Article 4 - Principal Adverse Impacts
Astorg considers the principal adverse impacts (PAI) of its investment decisions on environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters by means of
- Assessing PAI during due diligence before investment decisions are made. This is done through ESG due diligence assessment of the companies’ ESG policies and management of environmental and health and safety topics, including air, waste, water and GHG emissions, contaminated land, amongst others and governance policies in place.
- Assessing and monitoring on a yearly basis the sustainability performance of portfolio companies: this is done by carrying out the Ecovadis assessment and the carbon assessment for scope 1, 2 and 3 of Astorg’s portfolio companies to assess and monitor their environmental, labour, human rights, supply chain and ethical management systems.
Information on such principal adverse impacts will be reported in the annual ESG report made available to investors and on Astorg’s website.
Astorg has an ESG programme which aims at monitoring potential PAI of portfolio companies, with planned actions to avoid or reduce PAI. Astorg’s ESG programme includes:
- Having a sustainability representative for every portfolio company who drives internal action to identify and reduce PAI.
- Having sustainability action plans reviewed yearly in all portfolio companies. These action plans address the PAI, which are considered the most material for the companies and the actions to reduce them.
- PAI are monitored on a yearly basis through a yearly data collection on sustainability KPIs, which involves all portfolio companies. Astorg’s assessment is designed according to size, countries of operations and industry/sector of the assessed company. The indicators requested are divided into three categories: policies, actions and results.
- All energy and climate-related PAI are measured through a specific carbon assessment of all portfolio companies, which covers scope 1, 2 and 3 and which is repeated on a yearly basis.
- Whenever data from portfolio companies are not available, Astorg involves third-party consultancies specialised in certain topics (e.g. environmental impacts) in order to assess the occurrence and severity of adverse impacts.
AAM in Luxembourg relies on Astorg’s group ESG team which consists of the ESG Director, the CEO, the Board of Managers and the IC of the respective fund, collectively, the (“ESG Team”). This team was formed in 2018 to serve as a resource to Astorg, its professionals, and its portfolio companies. Astorg’s CEO holds overall accountability for the integration of ESG protocols into the investment process as well as Astorg’s internal organizational management. Astorg’s Board of Managers is responsible for the review and approval of Astorg’s ESG Policy, strategy and action plans. Astorg’s IC is responsible for the assessment of ESG factors during the investment decision-making process.
All Astorg investment professionals are responsible for ensuring ESG aspects are considered at all stages of the investment cycle together with portfolio companies’ management and are supported by the ESG Director in this effort. Astorg’s ESG Director is responsible for providing the framework for Astorg’s approach to ESG and for implementing the ESG and Climate Policies both at Astorg and at the portfolio level. The ESG Director also coordinates ESG due diligence together with the investment teams, provides input on ESG risks and opportunities during the investment decision-making process and oversees the ongoing monitoring of ESG policies. Additionally, the ESG Director is responsible for reporting the ESG performance of Astorg and its portfolio to investors with the support of Astorg’s investor relations team.
Furthermore, ESG training is provided to the Astorg Team several times throughout the year. These training programs ensure that the team is kept updated on macro sustainability trends as well as Astorg’s internal ESG protocols.
As mentioned in our Climate Policy, Astorg’s consideration of principal adverse impacts of its investment decisions is aligned with the objectives of the Paris Agreement, which aims to keep global temperature rise “well below” 2 degrees above pre-industrial levels this century, and to pursue efforts to keep the temperature rise to 1.5 degrees, by its consideration of climate-change risk (measured on a yearly basis as part of Astorg’s climate risk assessment of the portfolio).
In some investments, Astorg has worked to apply established ESG-related standards, such as the International Finance Corporation (IFC) 2012 Performance Standards on Environmental and Social Sustainability (Performance Standards), and EBRD environmental and social policy standards. Astorg is a signatory to the United Nations-backed Principles for Responsible Investment (PRI) since 2011 and has a score of A+ for its Strategy and Governance and Private Equity modules since 2019.
Disclosure related to Article 5 of the Sustainable Finance Disclosure Regulation – Remuneration Policy
AAM has set up a remuneration policy which is designed to promote sound and effective risk management and not to encourage risk-taking that is inconsistent with its risk appetite or the risk profiles of the portfolios which it manages. Astorg’s Responsible Investment Policy / ESG Policy sets out how its investment process incorporates a consideration of ESG risks. Such risks form part of Astorg’s assessment of risk for the purposes of its remuneration policy. According to Astorg’s remuneration policy, variable remuneration for relevant staff takes into account compliance with all of the firm's policies and procedures as well as with the firm’s internal risk management framework and risk limits, including those relating to the integration of sustainability risks. In this regard, Astorg remuneration policy does not encourage risk-taking which is inconsistent with its internal risk limits or with the risk profile of the funds that Astorg manages, including regarding sustainability risks stemming in particular from climate-related events or from the society’s response to climate change.
Article 8 Product disclosures - Mid-Cap Fund
EU Sustainable Finance Disclosure Regulation (2019/2088) (the "Disclosure Regulation")
In accordance with the Article 10 of the Disclosure Regulation, AAM [Astorg Asset Management S.à r.l. (“Astorg”)] makes the following disclosures with respect of Astorg Mid-Cap Fund (the “Mid-Cap Fund”) which, by means of its integration of ESG related criteria in its investment decisions and portfolio management, promotes environmental and social characteristics (as per the Article 8 of the Disclosure Regulation).
The strategy of the Mid-Cap Fund is to generate significant long term capital appreciation primarily by investing in control or co-control leveraged buyout transactions primarily in European businesses with an enterprise value of less than €400 million while promoting environmental or social characteristics. The Mid-Cap Fund is therefore required to publish information on the methodologies used to assess, measure and monitor such environmental or social characteristics of the funds, including data sources, screening criteria for the underlying assets and the relevant sustainability indicators used to measure the environmental or social characteristics of the funds.
Environmental and Social Characteristics promoted by the Fund
Astorg requires all its companies to achieve the ‘Advanced’ level (score 65-84) according to the EcoVadis CSR performance range during the ownership period.
How the Environmental and Social Characteristics Are Met
The Mid-Cap Fund promotes these characteristics by pursuing its investment policy (investing in management buyouts and build-ups, partnership deals and growth equity investments) whilst applying (i) a strong initial “Screening” process to consider if a business or investment involves any critical ESG or reputational concerns (see below), (ii) a detailed evaluation of the risks and opportunities of company specific ESG issues and (iii) the implementation of strong ESG and Climate strategies during the investments’ holding period and the exit phase. In particular Astorg requires all its companies to achieve the ‘Advanced’ level (score 65-84) according to the EcoVadis CSR performance range during the ownership period.
All the elements described above are binding elements for Astorg’s investment selection and portfolio management. A description of how the strategy is implemented on a continuous basis is set out below (see “Astorg’s policy for the integration of sustainability risks” below). The promotion of environmental and social characteristics of an investment does not prevent Astorg to pursue its investment strategy, with the exception of the prohibited sectors listed in Astorg’s ESG and climate policies and in the funds’ Limited Partnership Agreements.
At the outset, ESG issues are considered from the very first stage of the investment process at the screening phase. During screening, the relevant investment team will review the list of investment restrictions to identify whether a business or investment does not constitute a material breach against Astorg’s prohibited or restricted investments, as defined in Astorg’s ESG and Climate policies and the funds’ Limited Partnership Agreements. These include businesses in which Astorg is not likely to invest (such as activities relating to thermal coal, weapons production and tobacco), or situations that merit enhanced early due diligence (such as companies operating under sanctions regimes).
Data sources and Methodologies Used to Assess, Measure and Monitor the Environmental and Social Characteristics
The methodologies used to measure the attainment of the social or environmental characteristics are, among others:
- The EcoVadis CSR assessment which Astorg uses to measure and monitor investments’ performance on environmental, social and governance aspects;
- The carbon assessment for scope 1, 2 and 3
Astorg’s data sources for the indicators used are primarily the portfolio companies in which it invests. Should there be a data gap due to the lack of data from the sources, Astorg will use third party sources to provide estimations (for example in case of scope 3 emissions data for certain categories).