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”), Mediterrania Capital Partners Limited (“Mediterrania” 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.
Mediterrania is a private equity AIF Manager authorised by the Malta Financial Services Authority. To date, Mediterrania manages two funds subject to SFDR, one of them licensed in Malta and another one licenced in Spain. Both funds are private-equity funds. The sustainability risks considered apply to the funds’ investment in an investee company.
Mediterrania 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, Mediterrania 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 Mediterrania 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, Mediterrania 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, Mediterrania 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 Mediterrania 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 Sustainabulity report.
The Company continuously reviews and assesses its investment processes and regularly evaluates the feasibility of integrating sustainability adverse impacts into the Mediterrania 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.
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 Mediterrania Capital Partners Limited (“Mediterrania” or the “Company”). SFDR principles are enshrined in the Mediterrania Remuneration Policy.
The Mediterrania remuneration policy provides for a fixed remuneration. No variable remuneration shall be paid to Identified Staff, as defined in the Mediterrania 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.
Date of publication: 20 September 2023