100% of ThomasLloyd funds aligned to Article 9 of EU Sustainable Finance Disclosure Regulation
Article 9 financial products require the most stringent pre-contractual disclosures and ongoing transparency
Evaluating sustainability risks is an integral part of risk management framework and investment strategy
Applying the Principal Adverse Impacts (PAI) Framework both as part of the pre-investment due diligence and as part of the continuous oversight
Zurich, 11 March 2021. ThomasLloyd, one of the world’s leading specialist impact investors and providers of climate financing, has announced the 100% alignment of its current and future product portfolio with Article 9 of the EU Sustainable Finance Disclosure Regulation (SFDR).
SFDR came into force across the EU on 10th March and requires disclosures from investment managers at both a general entity-level and product-level in-scope of the regulation.
SFDR aims to provide investors with greater transparency on the level of sustainability of financial products, and to direct private investment towards sustainable investments. The SFDR and other regulations such as the EU Taxonomy are also aligned with the ‘European Green Deal’, which aims to see the EU become carbon neutral by 2050.
Founder and Chief Executive Officer, T.U. Michael Sieg noted: “We are a vocal advocate of the new SFDR regulations. Any initiative or criteria that help market participants define, measure and report on the sustainability attributes of their economic activities, is to be truly welcomed. We believe this will make it easier and more transparent for end-investors to understand how ESG and Sustainability are aligned with their investments.
At ThomasLloyd, we believe that there doesn’t need to be a trade-off between financial performance and positive impact. The growing focus on governance and regulatory compliance in the social and environmental domains, together with the requirement to evidence the impact of an investment, are powerful tools to align the interests of all stakeholders. For us, there are no changes to what we have been doing over the past 10 years which, put simply, is to invest in sustainable real assets that have a positive impact on the environment and the communities we invest in.
We also support the idea of a European Single Access Point (ESAP) as one of the actions identified by the European Commission in its Capital Markets Union Action Plan. We recognise the need for an EU-wide platform that provides investors with seamless access to financial and sustainability-related company information.”
Nick Parsons, Head of Research and ESG Policy at ThomasLloyd commented: “A key feature of the new EU ESG framework, within SFDR and the Taxonomy Regulation, is that it provides a definition of sustainable investment. The investment must promote an environmental or social characteristic and meet minimum standards of governance and must ‘do no significant harm’ to any other area of environmental or social concern. It is important to note that the term sustainable objective relates to Article 9 financial products which are the most stringent in terms of pre-contractual disclosures and ongoing transparency. Given our successful 10-year track record in impact investments, our alignment to Article 9 is a natural and seamless next step in our progression – and is validation of our approach to investing.”
As a promoter of SFDR Article 9 funds, ThomasLloyd’s approach is to apply the Principal Adverse Impacts (PAI) Framework both as part of the pre-investment due diligence, and as part of the continuous oversight. Sustainability Indicators are also selected prior to an investment being made, and are monitored over the life of the investment.
Together with the ThomasLloyd investee companies, ThomasLloyd will be reporting on a mandatory basis on 18 PAIs including greenhouse gas emissions, biodiversity, water and waste. The SFDR requires firms to report on these PAI’s together with at least one other indicator on climate or environment, and at least one additional indicator related to principal adverse impacts on a social, employee, human rights, anti-corruption or anti-bribery sustainability factor. This reporting will be published annually.
“ThomasLloyd’s investment strategy involves taking majority and significant minority stakes directly in companies and projects and maintaining an active ownership position throughout our investment period. Evaluating sustainability risks forms an integral part of our risk management framework and our investment strategy. These risks are evaluated before our investment is made and continuously thereafter,” said Mr Parsons.
In the context of the United Nations’ 17 Sustainable Development Goals (UN SDGs), the focus of ThomasLloyd is on SDG 7 Affordable and Clean Energy, SDG 8 Decent Work and Economic Growth, SDG 10 Reduced Inequalities, and SDG 11 Sustainable Cities and Communities. The Impact Reports ThomasLloyd published each year for both India and the Philippines provide clear evidence of the significant progress made by Thomas Lloyd in these areas over the past decade.
ThomasLloyd is signatory to the UN-supported Principles for Responsible Investments (UN PRI) and supports various initiatives for sustainable investment such as the United Nations Environment Programme (UNEP), United Nations Global Compact, the Global Impact Investment Network (GIIN) and the Climate-Related Financial Disclosures Task Force (TCFD). ThomasLloyd is an accredited partner of the IFC, a member of the World Bank Group, and an authorised partner of the European Investment Bank.
Further details on ThomasLloyd’s approach to SFDR, Stewardship and Engagement can be found here.