The general partners of CVC Capital Partners' funds are non-EU Alternative Investment Fund Managers ("Non-EU AIFMs") and therefore, it is our understanding that they are not subject to the entity level regulatory requirements of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector ("SFDR").
However, we prioritise and embed ESG into how we do business and recognise that transparency is a core part of this. We have therefore chosen to make entity-level disclosures on a voluntary basis.
These disclosures apply to the following entities: CVC Capital Partners VII Limited, CVC Capital Partners VIII Limited, CVC Capital Partners Asia V Limited, CVC Capital Partners Strategic Opportunities II Limited and CVC Growth Partners II GP Limited (the "CVC Entities").
Article 3: Entity-level sustainability risk disclosures
CVC's Responsible Investment Policy sets out CVC's approach to the management of environmental, social and governance (ESG) issues, including 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. The Responsible Investment Policy covers all CVC private equity funds, the CVC Entities, existing portfolio companies as well as new acquisitions, all investment activities across the deal cycle, and CVC's own operations. All CVC staff are required to adhere to the ESG Policy.
Sustainability risk management is embedded in the way CVC seeks to make investment decisions and in its ongoing portfolio and asset management activities. CVC defines sustainability risk as ESG risk, which, if present, could lead to a material negative impact on the long-term value of one or more investments made by CVC, and ultimately negatively impact the value returned to its investors.
CVC's Responsible Investment Policy sets out how CVC embeds ESG issue management during the investment decision process. CVC assesses ESG risks and management standards of targeted companies when evaluating investment opportunities. CVC analyses inherent ESG risks and relevant management activities (to the extent that information is available) throughout the investment review stages, and any material findings are documented in the investment papers. To assist Deal teams with this analysis, CVC has developed a comprehensive ESG due diligence guidance and information tool based on internationally recognised SASB standards and an early stage ESG red flag checklist. CVC 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 instructs external experts to perform ESG due diligence on target companies focusing on material risks and opportunities. If CVC concludes that the ESG risks of a target company are too great and cannot be appropriately mitigated, no investment is made.
The ESG Committee (which includes six Managing Partner representatives) is the main sponsor of the CVC ESG Policy and is accountable to the Boards of CVC Capital Partners SICAV-FIS S.A. and CVC Capital Partners (Luxembourg) S.à r.l. for its implementation.
Article 4: PAI Disclosures
On the basis that the relevant regulatory technical standards that will supplement the SFDR and, in particular, will set out the consequences of compliance with Article 4 of the SFDR (the "RTS") are not yet finalised CVC will continue to monitor the progress of the RTS and will consider whether it would be appropriate for the CVC Entities to opt-in to Article 4 of the SFDR once the RTS are finalised. CVC confirms that ESG considerations are of great importance to CVC, including in the context of its investment decisions. Please see our Responsible Investment Policy and our Responsible Investing webpages for more detail on how we consider ESG factors in our investment decision making and during ownership.
Article 5: Entity-level remuneration policies disclosures
In practice, 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.