ESG

Our Environmental, Social, Governance Policy

Responsible and Sustainable Investing

Our investment team always strives to promote, where applicable and appropriate, the promotion of awareness and understanding of ESG considerations and integrate the same into our investment decision making process and engagement efforts. As a result, and where appropriate, information on ESG factors and the related ESG risks are incorporated into our processes at an asset selection stage when undertaking due diligence on such asset class. Furthermore, and whenever possible, an assessment is also carried out in terms of the potential financial impact in the long-term.

When undertaking the ESG analysis, we will seek to obtain information from a variety of sources, including, but not limited to:
I. the target company itself;
II. third party specialist data providers;
III. brokers; and
IV. academics.

EU Sustainable Finance Disclosure Regulation (the “SFDR”)

Statement in compliance with article 4 of the Sustainable Finance Disclosure Regulation (“SFDR”)

Pursuant to EU 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 (the “SFDR”), Framont & Partners Management Ltd (“Framont” or the “Company “) is required to disclose the manner how Sustainability Factors (as defined hereafter) are integrated into the investment decisions and the assessment of the likely impacts of sustainability risks.

Article 4(1)(b) of the SFDR states that Financial Market Participants, such as the Company, shall publish and maintain on the websites, the reasons why they do not consider adverse impacts of investment decisions on sustainability factors, clear reasons for why they do not do so, including, where relevant, information as to whether and when they intend to consider such adverse impacts.

Framont is a UCITS and AIF Manager authorised by the Malta Financial Services Authority.

Framont does not make an assessment on the likely impact of sustainability risks on a return on investment in an investee company. Given that the funds are private-equity funds, the nature of the assessment will result in either an investment being made, an investment proceeding “with caution” or no investment being made. During the holding of an investment, the Company will seek to ensure that the standards applied are upheld and help in addressing the sustainability risks identified. Upon divestment of an asset, Framont will seek to include the added value of the investment due to the implementation of funds’ ESG standards in the exit valuation of the investment. The results of such assessments are made available to investors in the manner set out in the applicable offering documents.

The sustainability risks considered by Framont are environmental, social and governance (ESG”) and are set out in the standards which the Company uses to screen potential and holding investments for the funds. In applying such sustainability risks, Framont also considers, inter alia, the EIB Business Management Standards and the DFI Social & Environmental Procedures. The Company’s ESG policy provides guidance as part of the risk appraisal process, to make reasonable investment decisions by identifying and managing the level of environmental and social risk to which the funds are exposed through its investee companies. The ESG Policy applies to all investments considered by the investment committees of the funds under the Company’s management. Save that where the ability to conduct due diligence or to influence and control the integration of ESG considerations in the investment is limited, or where other circumstances affect the ability to assess, set or monitor ESG related performance goals, or it is not feasible to implement ESG-related principles, Framont and the funds believe it is appropriate, that where reasonable, efforts are made to encourage investee companies to consider relevant ESG-related principles.

While the Company is strongly committed with the promotion of ESG factors, it has decided not to consider the adverse impacts of its investment decisions on sustainability factors. This is because Framont currently considers the information provided by the investee companies of the relevant funds insufficient to describe the principal adverse impacts as required by SFDR and Commission Delegated Regulation (EU) 2022/1288 (“RTS”).

While the Company does not currently consider sustainability adverse impacts, the Company is committed to transparency and provide other relevant sustainability disclosures in its annual Sustainability report.

The Company continuously reviews and assesses its investment processes and regularly evaluates the feasibility of integrating sustainability adverse impacts into the Framont decision-making. The Company remains committed to staying abreast of developments in the market and regulatory landscape and will reassess its approach should the circumstances change. Any future changes or updates to our consideration of sustainability adverse impacts will be promptly communicated via the Company’s website.

Statement in compliance with article 5 of the Sustainable Finance Disclosure Regulation (“SFDR”).

Article 5 of SFDR states that financial market participants and financial advisers shall include in their remuneration policies, information on how such policies are consistent with the integration of sustainability risks and shall publish that information on their websites.

A Sustainability risk is defined as an environmental, social or governance event, which if it occurs, causes a material negative impact on the value of the investments held by the Collective Investments Schemes (“CISs”) managed by Framont & Partners Management Ltd (“Framont” or the “Company”). SFDR principles are enshrined in the Framont Remuneration Policy.

The Framont remuneration policy provides for a fixed remuneration. No variable remuneration shall be paid to Identified Staff, as defined in the Framont Remuneration Policy unless it is determined to be justified by its board of directors following a performance assessment based on quantitative (financial) as well as qualitative (non-financial) criteria. Considering the very limited impact of the variable remuneration of the Identified Staff on the risk profile of the CISs and the nature of the business of the Company, including, where applicable, the delegation of the investment management function of some CISs to other third-party entities, the Company deems that there is no risk of misalignment with the integration of the sustainability risks to the investment decision making process of the Company in respect of the CISs.

If the Company delegates portfolio management activity to a third-party investment manager (the “delegate”), such delegate shall ensure that it adopts remuneration policies and procedures which are consistent with the integration of sustainability risks, provided sustainability risks are integrated into the investment decision-making process. The Company shall seek periodic confirmations from each delegate that these policies are being complied with and the remuneration structures are not encouraging excessive risk-taking with respect to sustainability risks and remuneration is limited to risk adjusted performance.

The Company believes that, where portfolio management is retained, its existing structures are sufficient to prevent excessive risk taking in respect of sustainability risks.

We have adopted various approaches to integrate the consideration of environmental, social, and governance (ESG) factors into our investment decision-making process:

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Integration

We conduct proprietary, detailed research to understand the long-term sustainability of earnings and the risk profile of an asset class. We also adopt a pragmatic approach whereby information on ESG factors is integrated into established investment assessment processes. We do not have separate ESG focused processes and do not automatically exclude investments in a particular asset class purely on ESG grounds if we feel that such ESG risks do not necessarily pose a financial risk in the long term.

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Negative and positive screening

We will actively engage with our clients to understand whether they have concerns about specific activities and / or industries in order to maintain such exclusions on an on-going basis.

We also screen target companies/ products that promote and provide solutions that are consistent with ESG Factors and aims at including such products in the portfolios that we manage and positively recommend such products on an on-going basis.

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Exclusions

We will not knowingly invest in companies involved in the following activities:

arms manufacturing;
manufacture of tobacco;
hard spirits;
gambling; and
genetically modified organisms.

We will assess these types of investments on a case-by-case basis and any potential for indirect exposure is carefully considered and factored into investment selection.

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Principle Adverse Impacts

We undertake an assessment of the Principal Adverse Impacts (“PAIs”) of our decisions on ESG Factors. PAIs are those impacts arising from a particular decision taken which we take that will eventually have a negative effect on ESG Factors.

Where the PAI cannot possibly be determined due to insufficient disclosure or lack of tangible data, we will actively engage with the target company in question if possible and should no commitment be made by the latter to mitigate the PAI, this matter will be factored into the decision-making process.

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Alignment of Remuneration Policy with sustainability investments

In line with our Remuneration Policy, no variable remuneration is paid to our staff unless it is determined to be justified following a performance assessment based on quantitative (financial) as well as qualitative (non-financial) criteria.

Due to this very limited impact on the risk-profile of our clients, as well as the nature of our business, we deem that there is no risk of misalignment with the integration of the sustainability risks in our investment decision making process with respect to our clients.

As such, we believe that our existing structures are sufficient to prevent excessive risk taking in respect of sustainability risks.

Kindly contact compliance-framont@framontmanagement.com for a full copy of our ESG Policy.