Policy of Responsible Investment
In keeping with the Firm’s investment philosophy of navigating alpha-generating investment opportunities while dynamically managing risks, Chenavari recognises the importance of sustainability, namely Environmental, Social and Governance (“ESG”) considerations for its investment decisions and active ownership practices.
ESG matters can both drive financial out-performance and help identify risks which could negatively impact investments. As such, Chenavari is committed to integrating sustainability factors into its investment decision-making process.
Chenavari’s Policy of Responsible Investment is intended to set out basic principles and guidelines as well as to promote and enhance the Firm’s culture of responsible investing.
Chenavari's Policy of Responsible Investment is available at this link.
Negative Screening and Exclusions
Chenavari excludes certain sectors, issuers or securities for poor ESG performance based on specific ESG criteria, e.g. avoiding particular products/services or business practices.
Chenavari excludes companies whose principal business is directly derived from the production of or trade in controversial weapons (including anti-personnel landmines, cluster weapons, nuclear weapons, and chemical and biological weapons), or the manufacturing of tobacco products.
The Firm maintains absolute avoidance of companies which are known to be involved in the trade of products, services or activities involving pornography or prostitution, human trafficking, sexual violence against women, forced labour or child labour as defined by the International Labour Organisation (ILO) conventions, severe environmental damage, gross corruption, including extortion and bribery.
Chenavari also uses a materiality threshold (30%) based on revenues directly derived from thermal coal mining or the generation of electricity using coal. When applying the revenue threshold, attention will be paid to forward-looking plans from the entities in question to reduce their dependency on thermal coal operations over time.
For complex situations, the investment teams may refer to the ESG Committee, which deliberates on a case-by-case basis.
In recent years, the industry has become more aware of methodologies for incorporating sustainability risks into investment research and decision-making. Chenavari acknowledges these developments and seeks to refine its process in this area.
As an example, the Lyxor / Chenavari Credit Fund portfolio managers are now able to apply their investment discretion in analysing issuers on both financial as well as non-financial characteristics, including ESG factors or criteria, to identify material risks or opportunities which may impair or enhance an issuer’s ability to service its debt obligations. We have contracted the services of a world leading ESG data provider to empower our portfolio managers with objective independent ESG research.
For private credit investments, we are developing policies and procedures to assist the pre-investment analysis as well as monitoring of relevant sustainability risks during the life of the investments.
EU Sustainable Finance Disclosure Regulation
The Sustainable Finance Disclosure Regulation (“SFDR”) aims to reduce information asymmetries in principal‐agent relationships with regard to the integration of sustainability risks, the consideration of adverse sustainability impacts, the promotion of environmental or social characteristics, and sustainable investment, by requiring financial market participants and financial advisers to make pre‐contractual and ongoing disclosures to end investors when they act as agents of those end investors (principals).
Chenavari's Policy for Reponsible Investment discloses specific information regarding our approaches to the integration of sustainability risks. Please follow this link for more information about the Firm's consideration of adverse sustainability impacts as well as transparency about remuneration policies in relation to the integration of sustainability risks.