September 2024
The management of sustainability risk forms a part of the due diligence process implemented
by the Inverewe Capital London Limited (the Investment Manager) on behalf of Inverewe
Credit Opportunities Master Fund ICAV and Inverewe Credit Opportunities Fund ICAV (the
Funds). When assessing the sustainability risk associated with underlying investments, the
Investment Manager is assessing the risk that the value of such underlying investments could
be materially negatively impacted by an environmental, social or governance event or condition
(“ESG Event”).
Using both quantitative and qualitative processes, sustainability risk is identified, monitored and
managed by the Investment Manager in the following manner:
1) Prior to acquiring investments on behalf of the Funds, the Investment Manager uses
ESG metrics of third party data providers (“Data Providers”) such as Bloomberg in
order to screen the relevant investment against sustainability risk and to identify
whether it is vulnerable to such risk. This process incorporates applying both an
exclusion policy (whereby potential investments are removed from the investment
universe on the basis that they pose too great a sustainability risk to the Funds) and
positive screening whereby those investments which have a low sustainability risk
rating as well as strong financial performance are included in the investment universe.
Not all ESG metrics/ratings received from Data Providers are as equally
comprehensive. In addition, current events and new factors may also be of relevance
to an investment decision. Accordingly, the Investment Manager may also conduct an
analysis on each potential investment in order to allow it to assess the adequacy of
ESG practices of an issuer to manage the sustainability risk it faces. The information
gathered from the analysis conducted will be taken into account by the Investment
Manager in deciding whether to acquire a holding in an issuer and may, in certain
circumstances, result in the Investment Manager investing in an issuer which has a
lower ESG rating/metrics where it believes that the relevant existing ESG rating/metrics
do not fully capture recent positive sustainability-related changes which have been
implemented by the relevant issuer.
2) During the life of the investment, sustainability risk is monitored through review of ESG
data published by the issuer (where relevant) or selected Data Providers to determine
whether the level of sustainability risk has changed since the initial assessment has
been conducted. This review is conducted on a six monthly basis. Where the
sustainability risk associated with a particular investment has increased beyond the
ESG risk appetite for the Funds, the Investment Manager will consider selling or
reducing the Funds’ exposure to the relevant investment, taking into account the best
interests of the Shareholders of the Funds.
The Investment Manager has determined that the sustainability risk (being the risk that the
value of the Funds could be materially negatively impacted by an ESG Event) faced by the
Funds is low.
The Investment Manager does not currently consider the principal adverse impacts of
investment decisions on sustainability factors, as the relevant information required to assess
the impact of investment decisions that may result in negative effects on sustainability factors is
not yet available. Sustainability factors are defined in Article 2 of the Sustainable Finance
Disclosure Regulation (the “SFDR”) as “environmental, social and employee matters, respect
for human rights, anti-corruption and anti-bribery matters”. When the finalised Regulatory
Technical Standards supplementing the SFDR are published and the rules are sufficiently
clear, the Investment Manager intends to comply with the relevant requirements by developing
processes to gather information on the sustainability impact of underlying investments and by
making assessments of principal adverse impacts based on this reporting.