Articles 3(1), 4(1) and 5(1) of the European Union Sustainable Finance Disclosure Regulation ("SFDR") impose obligations to make website disclosures at an entity level.
CVC Europe Fund Management S.à.r.l ("CVC Europe"), as an EU AIFM, is in scope for SFDR entity-level disclosures. CVC Europe acts as the AIFM for various Luxembourg based fund vehicles of the CVC Network, which includes CVC Capital Partners, CVC Credit Partners and Glendower fund vehicles.
The below disclosures apply to CVC Europe as well as certain other CVC Capital, CVC Credit, and Glendower entities that act, from time to time, as the general partner and/or non-EU AIFM of non-EU AIFs that have been marketed to investors in the EU under the national private placement regimes made available under Article 42 of AIFMD (collectively, the “CVC Non-EU AIFMs”).
CVC Europe and the CVC Non-EU AIFMs are referred to together in the below disclosure as "CVC". CVC, in making these disclosures, makes reference to the wider CVC group ESG policies and practices.
Article 3: Entity-level sustainability risk disclosures
Management of sustainability risks is embedded in the way CVC makes investment decisions and in its ongoing portfolio and asset management activities. For the purposes of SFDR, a “sustainability risk” is defined as an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of an investment. The occurrence of a sustainability risk could therefore ultimately negatively impact the value returned to investors in a CVC managed fund. CVC’s tailors its approach to the management of sustainability risks (referred to herein as “ESG or sustainability risks”) to the various investment strategies. Those approaches are further detailed here under.
- Private Equity strategies
CVC Capital Partners' Responsible Investment Policy sets out CVC's approach to responsible investment, including the management of environmental, social and governance (ESG) issues and the principles which we as an investment manager and advisor aspire to and the procedures we have implemented in order to integrate these principles into our activities for private equity strategies. The CVC Capital Partners' Responsible Investment Policy covers all CVC private equity funds and investment activities across the deal cycle.
CVC Capital Partners’ Responsible Investment Policy sets out how CVC Capital Partners embeds the consideration of ESG issues during the investment decision process. CVC Capital Partners assesses ESG risks and management approaches of targeted companies when evaluating investment opportunities. CVC Capital Partners analyses inherent ESG risks and relevant management activities (to the extent that information is available) throughout the investment review stages, and material findings are documented in the investment papers. Typically, CVC will conduct an outside-in materiality assessment in order to identify key topics to assess in the due diligence phase. The sector-based Materiality Map produced by the Sustainability Accounting Standards Board (SASB) is available to deal teams, and external advisors may be consulted at the early stage of a deal, to ensure relevant topics are incorporated into broader scoping of due diligence. . CVC Capital Partners also has access to global business intelligence tools on compliance, ESG and business conduct risks which are used as part of the initial screening of potential investments. Where deemed necessary by the Deal team, CVC Capital Partners instructs external experts to perform ESG due diligence on target companies focusing on material risks and opportunities.
- Credit strategies
CVC Credit Partners’ ESG Policy outlines the approach to integrating the evaluation of material ESG Considerations into the investment process. The CVC Credit Partners’ ESG Policy covers all CVC Credit Partners’ clients, as well as all strategies, and CVC Credit Partners’ own operations.
CVC Credit Partners seeks to integrate the evaluation and thoughtful management of ESG risks and opportunities (“ESG Considerations”) throughout the investment processes, as memorialized in the CVC Credit Partners’ ESG policy. The investment teams use information gathered from third-party data providers, publicly available resources, and issuer-provided materials and other sources, to seek to identify and review ESG Considerations when carrying out due diligence on each new investment and when monitoring existing investments. When identified, the respective investment team escalates material ESG Considerations to the relevant Investment Committee for review and consideration.
In the event CVC Credit Partners concludes that there is a material ESG Consideration associated with an investment that could cause a potential or actual material negative impact on the value of such investment, CVC Credit Partners will assess the likelihood of that risk occurring or enlarging against the potential pecuniary advantage of making or maintaining its position with respect to such investment. In those instances when an investment is made following the identification of a material ESG Consideration, the respective risk and/or opportunity will be monitored on an on-going basis.
CVC Credit Partners’ evaluation of ESG Considerations is expected to vary, including, among others, related to the level of control and influence, investment approach and engagement activities that it is able to undertake with respect to each investment. CVC Credit Partners expects to continue to make investments in situations where they have limited or no ability to evaluate or manage ESG Considerations, and in such circumstances CVC Credit Partners will employ reasonable efforts to engage on ESG risks and opportunities as may be appropriate throughout the lifecycle of such investment. Further, CVC Credit Partners is mindful of material ESG considerations that arise after an investment is made, and such considerations will be reviewed as part of CVC Credit Partners’ on-going portfolio monitoring process.
- Secondaries strategies
On the basis that positive ESG outcomes can contribute to positive financial performance, and that the management of ESG risks can help to mitigate negative financial outcomes, Glendower seeks to incorporate the consideration of ESG factors into its investment decision-making process and during the ongoing ownership of funds and portfolio companies. As part of its due diligence process, Glendower looks to understand whether a general partner or, in the case of a direct investment, the company’s management, seeks to identify, monitor, and manage ESG risks and opportunities within their portfolio, or company, respectively.
Glendower's investment team, supported by Glendower’s internal ESG Committee, is responsible for conducting the ESG due diligence as part of the investment process and documenting any ESG findings in each investment memorandum. Ultimate ESG scrutiny and decision-making are the responsibility of the relevant Glendower fund’s investment committee. Accordingly, Glendower's ESG philosophy brings the entire platform together, with the deal team and the investment committee taking ultimate responsibility for the ESG analysis and ongoing monitoring.
Glendower, where possible, seeks opportunities to partner with the underlying managers to help drive improvements in its portfolio investments. Therefore, as a part of its regular investment monitoring process (which addresses both ESG matters and other performance metrics), the investment team will review track the underlying portfolio investments’ ESG progress annually.
Article 4: No consideration of adverse impacts of investment decisions on sustainability factors
CVC does not consider the adverse impacts of investment decisions on sustainability factors in the manner prescribed by Article 4 of SFDR.
- Private Equity strategies
With respect to CVC’s Private Equity strategies, while CVC endeavours to obtain ESG data from portfolio companies, including in relation to potentially adverse sustainability impacts, reporting of ESG data by private companies and coverage of private companies by ESG data providers continues to be limited in extent (particularly compared to public markets). In addition, a number of the global business intelligence tools on compliance, ESG and business conduct risks available to CVC which are used as part of the initial screening of potential investments, focus on such risks from the perspective of their financial materiality only. In the absence of meaningful and reliable insights relating to the adverse sustainability impacts of prospective portfolio companies it is not possible for CVC to systematically consider the adverse impacts of its investment decisions on sustainability factors. Even for companies where data relating to adverse sustainability impacts is available, in circumstances where such information is not deemed to be financially material, CVC’s private equity funds will not be precluded from considering a prospective portfolio company for inclusion within their portfolio. As such, the current adverse sustainability impact profile of a given investment opportunity is not considered as part of the investment decision making process.
More generally, CVC invests in both majority and minority positions with respect to private equity portfolio companies. In the context of minority portfolio companies in particular, CVC may be limited in the extent to which it is able to engage with portfolio companies to mitigate potential sustainability adverse impacts. While CVC may have more influence with respect to majority positions in private equity portfolio companies, CVC’s Private Equity funds do not currently explicitly incorporate commitments with respect to reductions of specific negative externalities in their investment strategies.
As the quality and reliability of information relating to adverse sustainability impacts for private markets investments improves, including as impact reporting is adopted by a greater number of private companies, CVC will keep under review the decision not to consider the adverse impacts of sustainability risks on its investment decisions, including whether it is appropriate to consider adverse impacts in isolation from their financial materiality.
- Credit strategies
With respect to CVC Credit Partners’ credit strategies, while CVC Credit endeavours to obtain ESG data from portfolio companies, including in relation to potentially adverse sustainability impacts, reporting of ESG data by private companies and coverage of private companies by ESG data providers continues to be limited in extent (particularly compared to public markets). In its capacity as a credit investor (both as an originator, as well as a secondary purchaser) CVC Credit is further limited in its ability to obtain sufficient information to systematically consider the adverse impacts of its investment decisions on sustainability factors. As a credit investor, CVC Credit is also limited in the extent to which it is able to require portfolio companies to mitigate potential sustainability adverse impacts. As such, the current adverse sustainability impact profile of a given investment opportunity is not considered as part of the investment decision making process.
Although the quality and reliability of information relating to adverse sustainability impacts for private markets investments is expected to improve, including as impact reporting is adopted by a greater number of private companies, the nature of CVC Credit’s relationship to borrowers within its funds’ portfolios make it challenging to require mitigation with respect to adverse sustainability impacts. As such, in the medium term, it is not expected that CVC Credit will consider the adverse impacts of its investment decisions for the purposes of Article 4 of SFDR; however, this situation will be kept under review.
- Secondaries strategies
As an investor in secondary private market funds, Glendower is limited in the extent to which it is able to obtain relevant information with respect to the adverse impacts of its investment decisions. Glendower is generally reliant on information received from a general partners, or, in the case of direct investments, on company management. However, in both cases, noting that reporting of ESG data in relation to private markets investments and coverage of private companies by ESG data providers continues to be limited in extent (particularly compared to public markets), in the absence of meaningful and reliable insights relating to the adverse sustainability impacts of prospective portfolio companies it is not possible for Glendower to systematically consider the adverse impacts of its investment decisions on sustainability factors. In addition, as an secondary investor in private market funds, and as, typically, a minority investor in direct investments, Glendower is limited in the extent to which it is able to require general partners or direct investments to mitigate potential sustainability adverse impacts. As such, the current adverse sustainability impact profile of a given investment opportunity is not considered as part of the investment decision making process.
Although the quality and reliability of information relating to adverse sustainability impacts for private markets investments is expected to improve, including as impact reporting is adopted by a greater number of private companies and private funds, the nature of Glendower’s relationship with general partners and direct investments makes it challenging to require mitigation with respect to adverse sustainability impacts. As such, in the medium term, it is not expected that Glendower will consider the adverse impacts of its investment decisions for the purposes of Article 4 of SFDR; however, this situation will be kept under review.
Article 5: Entity-level remuneration policies disclosures
When assessing individual performance which will be taken into consideration to determine the variable part of CVC staff’ remuneration, CVC may take account of non‑financial as well as financial criteria, including the evaluation of material ESG considerations and sustainability risks as part of its investment process as described in CVC’s ESG related policies and summarized here above.
Furthermore, in practice for private equity funds, in accordance with general private equity remuneration and award processes, a significant portion of an investment professional's compensation is typically in deferred instruments aligned to the performance of investments, meaning that the value of an investment professional's compensation will be negatively impacted by a sustainability risk that impacts the value of the underlying investment.
Last updated: June 2024