Disclosures pursuant to Articles 3, 4 and 5 of the EU Sustainable Finance Disclosure Regulation (2019/2088) (SFDR)
As Proterra Investment Advisors (Singapore) Pte. Ltd. (“Proterra”) manages certain alternative investment funds (the “Funds”) that have been registered for marketing under the Alternative Investment Fund Managers Directive (2011/61/EU) (the “AIFMD”) in one or more member states of the European Economic Area (“EEA”), Proterra is required by the Sustainable Finance Disclosure Regulation (Regulation 2019/2088) (the “SFDR”) to make certain disclosures on its website, including information about Proterra’s policies on the integration of sustainability risks into its investment decision-making processes; its approach to adverse sustainability impacts; and the consistency of its remuneration policies with the integration of sustainability risks. For these purposes, sustainability risk means an environmental, social or governance (“ESG”) event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment.
No exclusive consideration of sustainability adverse impacts
Proterra acknowledges that the pursuit of the Funds’ objectives may, in some circumstances, have an impact on certain sustainability factors and, as part of the investment process described below, Proterra integrates a consideration of sustainability risks arising from ESG related criteria into its investment analysis. However, having considered the size, nature and scale of its activities, and as the primary objective of the Funds is to achieve attractive, sustainable, long-term, risk-adjusted returns for investors in the Funds, Proterra considers that it would not currently be proportionate for it to comply with the detailed technical standards under the SFDR relating to the principal adverse impacts of its investment decisions on sustainability factors. Therefore, Proterra does not currently consider the principal adverse impacts of investment decisions on sustainability factors, except to the extent that Proterra has determined that sustainability factors also materially impact financial returns.
Policies on the integration of sustainability risks into the investment decision-making process
Proterra recognizes that sustainability risks can be relevant to a variety of sectors and may directly impact on the value of an investment. Proterra believes effective ESG standards are important elements of investee corporations and, ultimately can support stronger, longer-term returns on the Funds’ investments. Accordingly, Proterra has established processes for reviewing ESG practices at target companies prior to making an investment, as well as for monitoring existing and newly established practices post-investment. Proterra has an ESG Policy in place to guide this review.
In line with Proterra’s ESG Policy, when considering prospective investments, the relevant investment team of Proterra will seek to identify and understand the ESG responsibilities and sustainability risks associated with each investment through pre-investment due diligence combined with third-party ESG and investigative due diligence.
Proterra recognizes that proper management of sustainability risks is essential to the sustained success of the Funds’ investments. As such, and in order to achieve the objectives of the Funds, Proterra considers potential investments’ compliance with the ESG Policy throughout the investment process.
While Proterra aims to abide by certain ESG principles set out in its ESG policy, the consideration of such principles is secondary to Proterra’s objective of achieving attractive, sustainable, long-term, risk-adjusted returns for the Funds’ investors. Accordingly, Proterra is not obliged to abide by such ESG principles and, for the avoidance of doubt, Proterra does not incorporate ESG considerations into its broader investment process in a manner that would reduce the expected risk-adjusted returns of the Funds.
Irrespective of whether a fund managed by Proterra makes a minority or control investment in an investee corporation, Proterra generally seeks to have substantial influence over such corporation, as Proterra considers that value creation and enhancement stem from active involvement with investee corporations, including company support, board leadership and governance (including management of key ESG factors), focus on execution and cross-company collaboration. Proterra monitors the strategy, financial and non-financial performance and risk and capital structure of the Funds’ investments in accordance with the management of the applicable investment strategy, as well as monitoring the investee corporations’ activities for alignment with the Funds’ ESG principles.
Where Proterra has voting rights or other rights attached to investments in investee corporations, Proterra exercises these in accordance with the applicable investment objectives and in alignment with Proterra’s ESG Policy. Where appropriate, Proterra may liaise with other shareholders and/or stakeholders of the relevant investee corporations.
In general, sustainability risks consist of one category of risk among others taken into account by Proterra when making investment decisions.
Consistency of remuneration policies
Proterra’s remuneration policies are consistent with their approach to the integration of sustainability risks into the investment decision making process. As sustainability risks are a type of financial risk, Proterra acknowledges that failure to consider such risks could have an adverse impact on the performance of investments and the performance of funds managed by Proterra. Pursuant to Proterra’s remuneration policies, all investment professionals receive a base salary and are eligible for a discretionary bonus. They are also eligible to participate in Proterra’s health and welfare plans (such as health, life insurance and retirement plans). Certain investment professionals may also be entitled to participate in the carried interest of Proterra’s sponsored funds. Accordingly, to the extent that sustainability risks have an impact on performance of the Funds, this is likely to be reflected in the overall level of variable remuneration awarded to staff.