Sustainability Policy
SOUTHCAP - SGOIC, S.A. ("SOUTHCAP") recognizes that the activity of managing real estate investment undertakings entails sustainability risks.
According to Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 (SFDR), sustainability risk is an event or condition of an environmental, social or governance nature (Environmental, Social and Governance - "ESG"), the occurrence of which is likely to cause an actual or potential significant negative impact on the value of the investment.
SOUTHCAP, as a diligent and judicious manager, in compliance with the mandates assigned to it under the management regulations, shall weigh the various risks that may be relevant to the investments of the real estate investment undertakings, including sustainability risks that may exist.
Our investment decision-making process is guided by the following general principles:
- Proportionality: in carrying out its business, SOUTHCAP considers and weighs sustainability risks, taking into account in particular the nature, scale and complexity of its activities, including the activities of the CIUs under its management. It should be noted that, for the purposes of Article 4(3) and (4) of the SFDR Regulation, SOUTHCAP does not meet the requirements of larger institutions, namely because it does not exceed the criterion of the average number of 500 employees during the financial year.
- Transparency: the Sustainability Policy adopted by SOUTHCAP ("Sustainability Policy") respects the principle of transparency and, to this end, publishes information on its policy on the integration of sustainability risks on its website.
- Adaptability: SOUTHCAP pays attention to ESG issues in terms adapted to the collective investment undertakings under its management, recognizing, however, that the regulatory framework on ESG matters is not fully stabilized, which determines some fragmentation and asymmetry in the information available by the issuing companies.
- Integrity of information: SOUTHCAP recognizes that information to be disclosed in ESG terms must be true, clear, objective and realistic.
- Timeliness: the Policy must be kept up to date, being amended whenever the information contained therein undergoes any change, due to legal modification or the assumptions of SOUTHCAP's performance.
- Consistency: SOUTHCAP's commercial and advertising communications may not contradict the information disclosed under this Policy.
SOUTHCAP ensures that the investment policies of the CIUs under its management are not contrary to its Sustainability Policy, as well as that the corporate purpose and/or investment policy and objectives and activity of the entities in which SOUTHCAP invests on behalf of the managed CIUs do not contradict the Sustainability Policy. These principles are applied throughout the various stages of the decision-making process:
- Screening: In the process of screening for possible investment opportunities, based on publicly available information and/or third parties, including specialized service providers, exposure to sustainability risks will also be considered. As an auxiliary element, lists of business sectors most and least exposed to such risks may be developed and updated from time to time.
- Investment analysis: The information collected in the previous phase will be complemented, where appropriate, with additional information, namely from the target company itself, which allows for a more detailed assessment of the existence of such risks.
- Due Diligence: Where appropriate, due diligence processes, when conducted in collaboration with external advisors, should take into account such risks in the analysis carried out and suggest mitigation measures.
- Investment decision: The information collected and analyzed in the previous steps regarding sustainability risks should be taken into account in the decisions to be made, including the implementation of appropriate mitigation measures if such risks are detected, such as through shareholder engagement with the target company.
- Portfolio monitoring: Among the matters subject to regular monitoring throughout the duration of the investments, sustainability risks will be considered whenever relevant, and the respective mitigation measures will also be reviewed when appropriate.
Accordingly, the impact of this type of risk on the value and return of investments should be assessed on a case-by-case basis and, to that extent, integrated into SOUTHCAP's investment decision-making process as a management entity.
SOUTHCAP does not consider the negative impacts of investment decisions on sustainability factors and does not meet the requirements for large financial market participants set out in Article 4(3) and (4) of the SFDR.
Without prejudice to its diligent and judicious action under the mandates given to it under the management regulations, SOUTHCAP does not take into account the negative impacts of investment decisions on sustainability factors for the following reasons:
- We do not manage real estate investment vehicles that fall under Article 8 or Article 9 of the SFDR.
- The investments underlying the real estate investment vehicles under our management do not take into account the European Union criteria for environmentally sustainable economic activities.
- Considering the type of investments made by our real estate investment vehicles, the level of ESG information available, in particular on the indicators listed in Annex I to Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022, as amended, is not sufficient, which prevents a reasonable and appropriate consideration of the negative impacts of investment decisions on sustainability factors based on that information.
- As there are no sufficient public sources of information on this matter, the consideration of the negative impacts of investment decisions on sustainability factors would imply obtaining this information externally, either through service providers or by the investee companies, but even in this way it is anticipated that in many cases the available information would be insufficient, considering the companies where investments are typically made. Thus, not only would this process entail excessive and disproportionate costs for SOUTHCAP and its real estate investment trusts, but the necessary result for the effective consideration of these negative impacts would not be ensured.
Should the circumstances listed above change in the future, SOUTHCAP may reconsider this matter and, in that case, will inform its investors and other stakeholders of any change in a timely and appropriate manner, and it is not possible at this time to anticipate a specific date for this purpose.
SOUTHCAP recognizes that the remuneration policy plays a central and important role in aligning the relevant interests, namely of investors and other stakeholders, and must also be able to ensure adequate conditions for the implementation of a fair remuneration and suitable for the attraction, loyalty and motivation of our managers and employees.
With a view to integrating sustainability risks into remuneration, SOUTHCAP adopts remuneration practices consistent with prudent, sound and effective risk management, which does not encourage excessive risk-taking in its activity, nor risk-taking that is inconsistent with the risk profile of the CIUs under its management, that promotes situations that generate conflicts of interest with Clients or that disregards the importance of sustainable investment and management behavior.
The determining criterion for assessing the performance of senior employees for the purpose of attributing the variable component of annual remuneration is compliance with the Sustainability Policy.
In this way, SOUTHCAP ensures that, when managing and making investment decisions, its senior employees take into account ESG sustainability factors enshrined in the Sustainability Policy.
We'll talk about it in more detail later, but I'd like to make a final note that these changes must be completed before the 24th in order to respond to the supervisor.