SFDR product disclosure Private Equity Ambienta IV Fund
The sustainable investment objective of Ambienta’s Private Equity Fund IV, classified as Art. 9, is achieved through investments in companies whose current and/or prospective activities focus on products, services and/or operations that contribute to Resource Efficiency and Pollution Control.
The Fund’s investment strategy involves selecting companies based on their positive environmental impact, as assessed through the 11 Resource Efficiency and Pollution Control metrics of Ambienta’s proprietary Environmental Impact Analysis (EIA) methodology. Assessment and ongoing monitoring is conducted by the Sustainability and Strategy team. Data is sourced directly from target companies or from third-party sources, with limited estimations, when necessary and with an emphasis on transparency and accuracy.
The Fund aims to achieve a ratio of sustainable investments equal to 100% of invested assets.
The proprietary ESG in Action programme is integral to the investment process. This programme, that embraces the entire investment lifecycle, includes due diligence to assess environmental, social and governance impacts and significant engagement, post-investment, to ensure alignment with best business practices and compliance with do no significant harm, minimum safeguards, and good governance principles.
Sustainable investment objective of the financial product
Ambienta IV Fund, Ambienta’s latest Private Equity fund whose fundraise closed in July 2022, invests in companies for which environmental sustainability is a driver of success and competitiveness and whose current and/or prospective activities focus on products and/or services and/or operations that contribute to greater efficiency in the use of natural resources (Resource Efficiency) and/or better control of environmental pollution (Pollution Control), regardless of the sector of reference, provided that they do not significantly harm any other objectives set out in the SFDR Regulation, that they respect minimum safeguards and that they follow good governance practices.
The Fund invests in companies with a positive environmental impact assessed through their contribution to at least one of Ambienta’s 11 metrics related to Resource Efficiency or Pollution Control, as measured through our Environmental Impact Analysis (“EIA”) proprietary methodology. Since the impact determined by such metrics is directly related to the company’s business turnover, as the business grows, the impact will gradually increase. The methodology adopted to implement the investment strategy is explained in detail below. To assess investee good governance practices, the ESG in Action programme is employed i) in due diligence where management structures, employee relations, remuneration policies and tax compliance are analysed and ii) after investment, through ESG integration and definition of Action Plans for continuous improvement.
Proportion of investments
Ambienta’s investments in Fund IV shall be coherent with the above-mentioned sustainable investment objective, with the purpose of achieving a ratio of sustainable investments equal to 100% of invested assets.
Monitoring of sustainable investment objective
Ambienta assesses and monitors annually the environmental impact of investments both in the selection and management phases, through the activity of the dedicated Sustainability and Strategy (S&S) team. The S&S team analyses how environmental trends shape industries and identifies sustainability hot topics that lead to the proposal of investment ideas. Potential investment opportunities are analysed together with the investment teams to understand how these companies contribute to improve Resource Efficiency and/or Pollution Control in their respective sector and this is assessed prior to investment using Ambienta’s EIA methodology. The EIA is then reassessed at least annually.
To measure the achievement of sustainable objectives, the Fund will make use of EIA and its 11 indicators. The purpose of the EIA methodology is to determine a quantification of the contribution to the two objectives of Resource Efficiency and/or Pollution Control of target companies. Each company in the portfolio will have a positive environmental impact on at least one of these metrics assessing the impact with respect to the market reference standard for the specific product or service of the business. There are 5 metrics to evaluate the contribution in terms of Resource Efficiency (Energy Saved, Water Saved, Food Saved, Materials Saved, Land (fill) Saved) and 6 to evaluate the contribution in terms of Pollution Control (CO2 Emissions Reduced, Air Cleaned, Water Cleaned, Pollutants Avoided, Materials Recycled, Biodiversity Preserved).
Data sources and processing
The Environmental Impact Analysis is the basis for the selection of investments. Necessary data to calculate impact are collected directly from the target companies during due diligence and periodically over the duration of the financing period, from accredited third party sources, or, when necessary, but rarely, estimated by the Sustainability & Strategy team. The calculated environmental impact results from the assessment of the contribution of the company business with respect with current market standards. Within the limitation of available data, the Sustainability & Strategy team always strives to estimate the net environmental impact, after considering feedback loops and negative effects from technology evolution. The process is formalized in an internal policy to ensure transparency, homogeneity and accuracy in the application of the methodology.
Limitations to methodologies and data
Our approach is based on an internal proprietary analysis that is fed by research, company analysis, including due diligence, and discussion with experts. The process is standardized, formalized in an internal policy and as transparent and detailed as possible. Some limitations are intrinsic in the nature of the analysis as it relies on third party information and target company’s disclosures that may in some cases be restricted and may affect the depth of the analysis. Nonetheless, such limitations do not affect the attainment of the sustainable investment objective, as data is verified during the due diligence phase and against multiple sources or, where this is not viable, considered not sufficient and the investment process discontinued.
No significant harm to the sustainable investment objective
As written above, the EIA analysis allows to assess whether the prevailing contribution is positive or negative across multiple environmental issues and therefore represents a first test on do not significant harm to environmental objectives.
Furthermore, the integration of ESG assessment is an integral part of the investment process and contributes to the identification and control of the potential negative effects associated with investments, including social and governance ones. This takes place through Ambienta’s ESG in Action programme (a proprietary approach to the integration of non-financial factors into portfolio management) structured in two main phases: due diligence and engagement.
The analysis takes into account, across the different phases of the ESG in Action programme and through an internally defined process:
- the principal adverse impact indicators (i.e. mandatory and relevant additional indicators);
- the guiding principles of the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles of Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights.
Prior to investment, during the due diligence phase, the main impacts on environmental and social objectives are analysed to ensure the absence of negative impacts, in accordance with the do no significant harm principle (DNSH), and compliance with minimum safeguard and good governance principles. Based on results, an exclusionary approach or an engagement approach may be adopted.
During the holding period, through continuous interactions with the companies in its portfolio, operated with the support of its investment teams, the Sustainability & Strategy team aims to mitigate the adverse impacts of the investee company through specific actions, thus improving the corresponding environmental, social and/or governance parameters. The programme also ensures that investee companies operate in compliance with the best practices of business conduct and integrity, with particular reference to sound management structures, relations with staff, staff remuneration and compliance with tax obligations.
This is achieved through formalized and managed steps at the level of the Board of Directors that lead to the definition of an ESG Action Plan, which includes subsequent monitoring and reporting. The results of the assessment of the likely impact of sustainability risks on the future returns are also taken into account both in the pre-investment phase and in subsequent phases. The most significant risk areas are subject to qualitative and, if necessary, economic assessment for the purpose of defining intervention actions to be integrated into the business plan of the investee companies.
Attainment of the sustainable investment objective
Given the Fund’s strategy of investing in private companies, no benchmarks or reference indices are used. The sustainable investment objective is pursued through monitoring environmental performance measured through the EIA.