Privacy Policy
Sustainability-Related Disclosure
1. Introduction
Pursuant to Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial service sector (“SFDR”) we make the following disclosures. It outlines our approach to sustainability risks in the context of our investment strategies. or potential material negative impact on the value of the investments.
2. Scope
This disclosure applies to all portfolios managed by Farringdon Capital Management. As of today, none of the portfolios we manage promote environmental or social characteristics (ESG) or have sustainable investment as an objective.
3. Investment Philosophy and risk approach
Farringdon Capital Management’s investment philosophy is valuation based. This means that FCM determines what the valuation of a company is, and compares this to the share price. Mispriced companies are an investment opportunity. Our risk management approach looks at all relevant factors that could impact valuation of the company. When enough data is available, assumptions for value drivers are adjusted for risk, including sustainability risk. If this is not possible the discount rate used to arrive at a valuation is increased to adjust for additional risk.
4. Integration of Sustainability Risks in Investment Decision-Making Process
A sustainability risk means 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 investments.
While our portfolios are not explicitly ESG-focused, we assess the possible impact of sustainability risks in the same way as other risks such as business and market risks. We consider sustainability risks as part of our overall investment analysis process. This includes:
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Understanding the potential impact of sustainability factors (environmental, social, and governance) on a company's financial performance and long-term value.
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Monitoring relevant sustainability news and regulations that could affect our investments.
The Farringdon Capital Management investment universe is global and not focused on any specific sector. Which sustainability factors to look at will depend on the specific company that is analysed to determine if the investment case is interesting enough for the company to be included in the investment portfolio. Examples of sustainability factors we could be looking at are:
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Environmental: climate change, biodiversity, natural resource, pollution etc.
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Social and employee: pollical climate, social unrest, human rights, etc.
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Governance: business ethics, remuneration, applicable laws and regulations, etc.
Investments made are continuously assessed for risk, including, sustainability risks. This may lead to a decision to divest if major negative impact on the value of investments is expected.
5. No Consideration of Adverse Impact of Investment Decisions on Sustainability Factors
The SFDR requires us to disclose if we consider principal adverse impacts (PAIs) on sustainability factors. Since our portfolios are not explicitly ESG-focused, we do not currently integrate a formal PAI assessment into our investment strategy. We believe that it is currently not meaningful to measure the possible negative effects of investments on sustainability factors. The cost and the time needed to gather appropriate data are currently disproportionate to the size and available resources within Farringdon Capital Management. However, we are committed to staying informed on the development of PAI considerations and may adapt our approach in the future. Every year will we review our approach regarding the consideration of PAIs.
6. Sustainability risks and remuneration policy
Our remuneration policy aims at aligning the personal objectives of staff members with the long-term interests of Farringdon Capital Management and our clients. In addition, the remuneration policy is consistent with and promotes sound and effective risk management and does not encourage risk-taking that exceeds the level of tolerated risk, including sustainability risk, of Farringdon Capital Management and our clients.
Our employees receive a fixed and variable remuneration. With respect to the variable remuneration, we have a performance measurement process where a set of performance objectives are agreed upon between a director and employee at the start of each year and an end of year performance evaluation review. The performance objectives exist of 50% qualitative criteria and 50% financial criteria. In general, financial criteria will not be part of decisive importance and qualitative factors will be at least important. Negative non-financial performance, in particular, unethical and non-compliance behaviour, overrides any good financial performance and diminishes the staff member’s variable remuneration. In addition, important factors for risk takers are not exceeding risk limits, risk awareness, focus on risk-adjusted returns and any operational and investment incidents. This also include sustainability risks.
7. Further Information
We are committed to transparency and responsible investing practices. While our current focus is not on explicit ESG integration, we will continue to monitor developments in sustainable finance and may adapt our disclosures and approach in the future.
For further information on our investment strategies and approach, please refer to our website or contact us directly.