Glennmont and the EU SFDR

Introduction

As of 10th March 2021, Regulation (EU) 2019/2088 – the EU’s Sustainable Finance Disclosure Regulation (“SFDR”) – entered into force. In broad terms, EU financial market participants are obliged under the regulation to disclose information around the sustainability of their products through different forums, including on their websites. Glennmont Partners has opted to comply with this regulation, despite being a fund manager based in the UK. The disclosures below relate to Articles 3(1), 4(1), 5(1) and 10 of the SFDR.

Visit our client portals to access SFDR disclosures for our range of private funds:

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Disclosures

Article 3 (1): Transparency of sustainability risk policies

For Glennmont Partners, sustainability risk is defined as an environmental, social or governance (ESG) event or process that, if it occurs, could cause an actual or a potential material negative impact on the value of an investment.

ESG has always been critical to Glennmont Partners’ ambitions as a group. We consider it throughout our investment, asset management, and divestment processes, and believe it to be crucial for delivering long-term sustainable value. Prior to investment, material ESG risks are highlighted to the Investment Committee by the team working on the project. The project team also comments on the potential avoided emissions and job creation arising from the project over its life, as well as any community fund agreements either in place or to be instituted. During the asset management phase, Glennmont actively manages ESG factors by setting and monitoring health and safety standards and continuously managing the impact of its operations on the environment. Regular measurements, monitoring, and auditing of the organisation’s ESG performance, and the system that is put in place to enhance it, provides management with a basis for evaluating the effectiveness of the ESG management procedures.

Glennmont Asset Management Ltd, Clean Energy Partners LLP and Glennmont Partners I Ltd, when acting for their respective clients, each has in place a policy on the integration of sustainability risks in its investment decision making process, which can be found within Glennmont Partners’ responsible investment ESG Policy, which is available here. The policy is adopted for all clients, tailored to the needs of the appropriate product strategy and applied to the responsibilities required of the respective firm. Where an independent third party AIFM is appointed for a fund product then they shall make their own disclosures on the applicable website.

Article 4 (1): Transparency of adverse sustainability impacts at entity level

Glennmont believes that all investments have an impact on society and the environment. We aim to assess these effects and, where possible, promote the positive and mitigate the negative. Across the clean energy asset class, a growing number of opportunities exist for pursuing specific, measurable, and positive social and environmental results that contribute to long-term financial returns. We are dedicated to identifying such opportunities and assessing the impact of those investments. In addition, Glennmont seeks to engage with our operators to encourage ESG best practice, with the ultimate goal of better outcomes not only for society but also for the environment.

Glennmont has robust responsible investing product standards and takes a principles-based approach to claiming positive impact, whereby our positive impact should not be outweighed by severe negative impacts from the same investment. In addition, as part of our role in being responsible stewards of capital, we implement processes in our investment strategies to regularly identify, mitigate, address, and manage negative impacts where possible.

The regulatory environment in which Glennmont is operating is evolving and the expectations of competent regulatory authorities regarding how ESG factors and their adverse impacts should be defined and evaluated are not yet developed to the full extent. As such, there is no definitive guidance available or developed market approach at this time in relation to the systems, controls, and measures that would need to be put in place in order to provide a Principal Adverse Impacts Statement in line with Article 4(1)(a) of SFDR.

In light of these circumstances, Glennmont will apply 4(1)(b) of SFDR, but will continue to keep this decision under review as matters evolve.

Article 5 (1): Transparency of remuneration policies in relation to the integration of sustainability risks

Glennmont Partners’ remuneration policies take into consideration sound and effective risk management including with respect to sustainability risks. The remuneration policies do not encourage excessive risk-taking including with respect to sustainability risks. Sustainability risk is an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investment. All staff have ESG implementation as an annual objective, which, depending on the role concerned, would also include sustainability risks.

Article 10 (1): Transparency of the promotion of environmental or social characteristics and of sustainable investments on websites

The Glennmont Clean Energy funds are only available to certain professional/qualified investors and this disclosure is solely being made in relation to the obligations on Glennmont Asset Management Limited as (i) the alternative investment fund manager, or (ii) the delegated portfolio manager, to certain fund products, in each case in accordance with the SFDR. As such, this disclosure is not, and must not be treated as, any offer of interests in any Glennmont fund. Any investment in a Glennmont fund may only be made solely on the basis of the memorandum and the other documentation referred to therein. This disclosure required by the SFDR does not constitute an offer to sell, or a solicitation of an offer to purchase, any security.

Certain of the Glennmont Clean Energy funds are intended to be a financial product falling under Article 9 of the SFDR. As part of their investment strategy, they have sustainable investment as their objective. Sustainable investment means an investment in an economic activity that contributes to an environmental or social objective; provided that the investment does not significantly harm any environmental or social objective and that the investee companies follow good governance practices. Further detail regarding their investment strategies is set out in the relevant offering information.

Where applicable Glennmont will track the following performance indicators for the purpose of measuring the attainment of the sustainable objective of the funds:

Clean energy production (MWh)
Avoided emissions (tCO2e)

To assess good governance, Glennmont ensures that each investment is managed with strong governance controls through: the establishment of appropriate project governance structures; providing clear roles and responsibilities throughout the investment lifecycle; robust business ethics; diversity of employees; and transparent and timely reporting.

The methodologies used by Glennmont as AIFM or delegated portfolio manager to assess, measure and monitor the environmental characteristic are as follows:

During due diligence and prior to investment, material ESG risks are highlighted to the Investment Committee by the team working on the project. In addition, Glennmont will obtain and assess relevant ESG risks identified within the third-party Environmental Impact Assessment (EIA) undertaken prior to investment, including impact of the physical asset on the environment, potential avoided emissions and job creation and health and safety management. The project team also comment on the potential avoided emissions and job creation arising from the project over its lifetime, as well as any community fund agreements either in place or to be instituted. Those responsible for managing the portfolio will base their investment decision on a number of factors, including both the ESG opportunities, and the sustainability risks identified through this due diligence process and assessed under a risk management framework applied by the AIFM or delegated portfolio manager.

Based on the data collected, and throughout the ownership of the investment, Glennmont will work with the investment companies to integrate and monitor progress on environmental and social issues and address adverse impacts. In addition to monthly reporting on the two performance metrics outlined above (clean energy production and avoided emissions), Glennmont will require monthly reporting on ESG-related issues (such as Health and Safety issues and incidents) on the assets within the portfolio from the subcontracted technical and commercial service providers; discuss ESG considerations at asset review calls and meetings, on-site visits, quarterly face-to-face meetings; and at the Asset Management Committee. Regular measurements, monitoring and auditing of the organisation’s ESG performance, and the system that is put in place to improve it, provides management with a basis for evaluating the effectiveness of the ESG management procedures.

Initially and over the period of Glennmont’s investment, Glennmont assesses and monitors indicators that are deemed to indicate the presence of a principal adverse impact in relation to the Do No Significant Harm tests of the EU Taxonomy and in accordance with the relevant sustainability indicators in the final report on the draft regulatory technical standards under the Sustainable Finance Disclosure Regulation. This is to ensure that the investments can be considered as sustainable investments, and do not cause significant harm to other sustainability factors.

Glennmont will assess each investment on an at least annual basis relative to the tracked performance indicators to demonstrate that the investment can be considered as a “sustainable investment”, and continue to be considered as such in its definition as an economic activity that contributes to an environmental objective – climate change mitigation (as classified under Article 9, SFDR).