Transparency of remuneration
policies in relation to the integration of sustainability risks
The remuneration of staff (to the exclusion of the members of the Board) will be determined by the Chenavari executive management on the basis of both quantitative criteria (for example, financial performance of the individual, their business unit and the Chenavari Group) and qualitative criteria (for example, individual performance, assessment of adherence to certain policies and procedures). The qualitative criteria used include, among others, an assessment of whether the relevant individual employee has complied with Chenavari’s sustainability policies, including the Firm’s Policy of Responsible Investment, where applicable.
In general terms, a positive or neutral assessment of overall compliance by individual Staff with the Responsible Investment Policy would not in itself be expected to contribute to any additional variable remuneration being awarded to individual Staff. However, in extreme cases as assessed by the Group, a negative assessment of overall compliance by an individual Staff member regarding the Responsible Investment Policy may result in a reduction in the variable remuneration amount which would otherwise have been awarded to that individual Staff member. The amount of any such reduction must be authorised by the Group’s Executive Management and is determined at the sole discretion of the Executive Management.
Principal adverse impacts
- statement of non-compliance
The Sustainable Finance Disclosure Regulation (“SFDR”) requires Chenavari to make a “comply or explain” decision whether to consider the principal adverse impacts (“PAIs”) of its investment decisions on sustainability factors, in accordance with a specific regime outlined in SFDR. Chenavari (the “Firm”) has opted not to comply with that regime. Accordingly, the Firm does not consider the principal adverse impacts of its investment decisions on sustainability factors.
The Firm has carefully evaluated the requirements of the PAI regime in Article 4 SFDR, and in the draft Regulatory Technical Standards which were published in April 2020 (the “PAI regime”). The Firm is supportive of the policy aims of the PAI regime, to improve transparency to clients, investors and the market, as to how financial market participants integrate consideration of the adverse impacts of investment decisions on sustainability factors. However, taking account of the nature and scale of the Firm’s activities and the types of products the Firm makes available, the Firm considers that it would be disproportionate to comply with the specific PAI regime of the SFDR.
Chenavari manages certain strategies with significant holdings in cash, cash equivalents, credit derivatives, structured finance instruments or illiquid debt instruments for which we do not consider it to be practical to consider PAI factors because is it not possible to source relevant PAI data and/or because we do not perceive there to be a direct or representative link between the investment and the negative impacts of the underlying entity or entities linked to the security (e.g., a hedging instrument linked to a broad index of underlying securities).
Furthermore, ESG characteristics, ambition level and approaches (including the consideration or not of adverse impacts of investment decisions) are defined the level of each Chenavari product and can vary from one product to the other. Hence, some of the products may consider principal adverse impacts of their investment decisions. In this case, the approach for considering such impacts is detailed in the pre-contractual documentation of the concerned products, as required under article 7(1) of the SFDR Regulation. However, the vast majority of existing Chenavari products does not consider adverse impacts of their investment decisions. Consolidating indicators on a perimeter of products that is heterogeneous in terms of methodology and data sources could lead to inconsistencies in the consolidated data that is reported at entity level, which is a situation that Chenavari would like to avoid.
The Firm is also concerned about the lack of reasonably priced / readily available data to comply with many of the reporting requirements of the PAI regime, as the Firm believes that issuers and market data providers are not yet ready to make available all necessary data for the PAI regime.
The Firm will keep its decision not to comply with the PAI regime under regular review.
Notwithstanding the Firm’s decision not to comply with the PAI regime, the Firm has implemented positive ESG-related initiatives and policies, as part of its overall commitment to ESG matters.
This statement is equally applicable to Chenavari Investment Managers Luxembourg S.à r.l.