Towards greater transparency
To reorient capital flows toward a more sustainable economy, the EU has adopted a series of new regulations. One of them, the Sustainable Finance Disclosure Regulation (“SFDR”), aims to provide greater transparency regarding the sustainability of financial products.
As an Investment Manager focusing on backing companies with a product-driven net positive contribution to the UN Sustainable Development Goals (“SDGs”), we welcome efforts to increase transparency in sustainable investing. We believe that regulation can help reduce greenwashing, and hence, some of the uncertainty and confusion regarding what “sustainable investing” is. We also believe it will contribute to lifting the overall standards for sustainability-related assessments, documentation, and transparency in the financial sector, and incentivize capital allocation to products that demonstrate their contribution to a more sustainable future.
Independent of regulatory developments, Norselab aims for a top-of-the-range approach to impact. This entails integrating impact into the product design, building solid frameworks for assessing, measuring, and tracking impact, and for publicly disclosing our data.
Sustainability risk policies in the investment decision-making process
Our overarching approach
Norselab’s Meaningfulness Policy describes our overarching impact philosophy and provides guidance on how Norselab identifies and measures impacts.
We define impact as a significant contribution to achieving the SDGs. The SDGs constitute a globally recognized roadmap for designing a future where economic growth does not compromise the safekeeping of our planet and the well-being of people and societies. They provide a comprehensive map of risk and opportunity - and thus a solid strategic prism through which we can meaningfully and successfully invest in new, growing, and established companies through Norselab’s various funds.
To ensure a solid foundation for investment decisions, our approach aims to build the most complete picture of a company’s impacts, as well as risks. This means using multiple lenses in our assessments of companies. To date, our approach consists of the following lenses, including the SDGs:
- SDGs: The contributions of companies’ products and services are mapped to the underlying targets and indicators of the SDGs. We consider both positive and negative contributions.
- Net impact quantification: We quantify both positive and negative impacts of companies’ products and services to provide a net impact score.
- EU regulatory assessments: We screen and assess companies based on the Principal Adverse Impact indicators defined by the SFDR, and perform assessments for potential eligibility and alignment with the EU Taxonomy.
- Operational risk assessments: We seek to uncover operational risks and strengths, to ensure that companies operate responsibly and sustainably. This includes mapping potential gaps to fill.
As of today, these lenses provide satisfactory insights into a company’s impacts and risks. We are, however, constantly considering adding new data layers that could enhance our approach and hence our understanding of companies’ impacts from various perspectives.
Impact due diligence in the investment process
Based on our overarching approach, each of our investment products follow an impact due diligence process tailored to the product when investing. Assessment of impacts and sustainability risks through the four lenses are integrated into these processes. The due diligence processes are described in each of our products’ Sustainability-related disclosures:
Exposure to sustainability risks
Norselab’s products may be exposed to sustainability risks from time to time. A sustainability risk is defined in SFDR as an environmental, social, or governance event or condition that could cause an actual or potential material negative impact on the value of investments.
The universe of sustainability events or conditions is very broad, and their relevance, materiality, and impact on investments will depend on a number of factors. If they materialize, sustainability risks can reduce the value of investments held within Norselab’s portfolios and could have a material impact on the performance and returns of Norselab’s products.
Sustainability risks integration in our Remuneration Policy
Norselab’s compensation structure for its employees consists of fixed, and, for some selected employees, carried interest components. Sustainability risks are embedded in Norselab’s compensation model through our impact investing mandate. Impact is imperative and a baseline across all of the underlying funds and investments where Norselab has been appointed Investment Manager. Sustainability risks is integrated in our impact philosophy and investment process, as stated in our Meaningfulness policy to which all employees must adhere to. On this basis, Norselab does not establish additional compensation incentives to manage sustainability risks.
Statement on consideration of Principal Adverse Impacts on sustainability factors in investment decisions
Norselab considers the mandatory indicators under investments in investee companies set out by the SFDR. We publish an annual statement for the previous reporting year by June 30th.
- Meaningful Equity I: Statement on consideration of Principal Adverse Impacts on Sustainability Factors 2022
- Meaningful Equity II: Statement on consideration of Principal Adverse Impacts on Sustainability Factors 2022
- Meaningful Impact High Yield: Statement on consideration of Principal Adverse Impacts on Sustainability Factors 2022
- Meaningful Equity I: Statement on consideration of Principal Adverse Impacts on Sustainability Factors 2021
We use a combination of data disclosed by the relevant companies and data provided by third parties to assess Principal Adverse Impact indicators. The third-party data providers have been chosen based on Norselab’s impact data strategy. We carry out reviews on our third-party data providers regularly.