These disclosures include information required under the European Sustainable Finance Disclosure Regulation (SFDR)
Integration of Sustainability Risks into our Investment Decisions
Sustainability Risks are defined under SFDR 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 the investment”. Investors should be aware that we are committed to responsibly managing every stage of the investment cycle, including Sustainability Risks. Our policies and procedures are designed to help support positive outcomes for the timberfunds or separate account clients (investor or client) while also identifying and mitigating Sustainability Risks (as identified below).
Among the responsible strategies employed by us is the employment of an investment strategy that focuses on plantation forestry (rather than native forests), which strategy offers positive environmental and social benefits. At its core, sustainable delivery of wood fiber to global markets helps alleviate pressure on native forests and acts as an effective carbon sink.
In evaluating investment opportunities, we employ a bottom-up investment process that draws on our local expertise and direct operational experience to inform valuation modeling and bid strategy in close coordination with the asset management team that will operate the investment post-acquisition. As part of this investment process, a robust due diligence process is undertaken to identify and mitigate risk (including identifying and evaluating Sustainability Risks), and encompasses forestry, market, operational, legal, political, and tax considerations.
Once acquired and through the point of disposition, each investment is managed in a responsible manner guided by our Responsible Investment Policy which is available here. We seek to implement forestry management systems which emphasize safety performance, sustainable forestry practices, community engagement, and long term stewardship. In addition, investments may support local community programs by providing support for education, health and basic infrastructure projects. Wherever possible, investments will be certified under the Forest Stewardship Council (FSC ®) or similar certification standards. Each of these practices are designed to assist in the management of Sustainability Risks applicable to the investments.
Listed below are Sustainable Risks which we consider in our investment management processes. If we did not manage any of the below events or conditions then this could cause an actual or a potential material negative impact on the value of our clients’ forestry investments.
(a) Environmental considerations
- Fire, Wind and other Weather and Pest Damage to Properties. Timber is subject to a number of natural hazards, including damage by fire, wind, insects and diseases or soil infertility. Severe weather conditions and other natural and man-made disasters may reduce productivity of forest lands and interfere with the harvesting, processing and delivery of forest products. Disease and pest control methods are not always successful.
- Climate Change. During the life of an investment, climate change may result in acute or long-term weather events or patterns that may impact the forestry investment, or lead to changes in regulatory regimes. Such risk factors may have a negative impact on the investment and in turn, the investors’ return. They may also have a positive impact on the investment as forestry is recognized as an efficient carbon sink and carbon markets develop further. We cannot predict what impact these factors may have on an investment’s returns.
- Forest Asset and Biological Risks. An investment in a timberfund may include large areas of forested land dispersed over broad geographic regions. The forests growing on such properties may exhibit a wide range of characteristics with significant variability in available log inventory, quality, and productivity. While an investment will seek to identify and minimize all sources of biological variability in the projection of forest assets, there can be no assurance that all such risks will be eliminated.
(b) Social Considerations
We expect that forestry investments made by our clients will be actively engaged in their communities through the sponsorship and support of vital community programs. The following are examples of initiatives that may be implemented with our clients’ investments:
- improving living conditions for workers in the field through the construction and maintenance of worker housing,
- implementation of worker safety programs and programs that promote personal hygiene,
- providing support for education and health programs in local communities,
- providing support for basic infrastructure programs in local communities (for example, programs to improve access to clean water),
- supporting protection of archeological and historical sites, and
- providing reasonable access to land for recreational and cultural purposes.
(c) Governance considerations
- Access to Water and Regulation of Water Rights. There has been an increased regulatory focus on plantation water usage in recent years. The priority placed on regulating plantation development varies from country to country and in some cases involves water licenses, and usage of water taxes. This developing regulatory regime may impact an investment’s ability to grow subsequent rotations of trees following harvest. Countries may introduce additional regulations that could affect investments in the future. We cannot predict the form that any such regulations may take or the impact any such regulations would have on our clients’ investments.
- Environmental Regulation. The forest products industry is subject to extensive environmental regulation. Increased regulation could result in increased costs, and operating restrictions that could adversely affect financial results. Environmental incidents on plantations or at related manufacturing facilities could subject an investment to significant liabilities.
- Timber Export/Import Regulation. There is a possibility that in some countries in which the export of raw logs could be taxed, subject to volume limitations, or otherwise discouraged or prohibited by governmental authorities. A prohibition, limitation, or change in trade policy regarding the export of logs could have an adverse effect on the returns of a particular investment.
- Tax, Diplomatic and Regulatory Developments. We work with local finance, tax and legal teams, as well as the audit and tax providers and outside counsel for each of the properties to oversee financial, tax and legal matters that arise at the local levels, including keeping up to date with respect to changes in local tax laws and practices and other diplomatic and regulatory developments. Moreover, in many parts of the world (in both developed and developing countries alike), timber properties are the subject of claims by indigenous peoples that might hamper the acquisition, management or disposition of certain properties. More recently, in certain countries, the laws governing the sale of rural properties to companies controlled by foreign investors have become more restrictive. Such laws may either require additional governmental approvals to make the investment, structural changes in the investment vehicles, or partnering with an in-country investor in order to achieve compliance. We cannot predict what changes in such laws or practices may occur over the life of a forestry investment or how such changes, if enacted, would impact such investment or the return to investors.
- Regulatory Compliance Manual. As a United States SEC registered investment adviser, we have adopted a code of ethics and policies and procedures pertaining to conflicts of interest, insider trading, anti-corruption compliance, political and charitable contributions and public positions, and gifts and entertainment. This code of ethics and these policies and procedures are designed to help support positive outcomes while also identifying and mitigating key environmental, social and governance risks and apply to all employees, global asset management consultants and other persons who provide advice on behalf of us and are subject to our supervision and control.
No Consideration of Sustainability Adverse Impacts
We do not currently consider the adverse impacts of investment decisions on sustainability factors (PAIs) taken on behalf of our clients’ forestry investments. This is due to the fact that the detailed rules and requirements in relation to the content, methodology and presentation of the information on sustainability indicators, are still pending approval by the European Commission. In the short term, we will continue to keep the consideration of the PAIs under review.
Integration of Sustainability Risks in the Remuneration Policy
We are an independently owned SEC registered investment adviser. We are controlled by members of our investment team which are the full-time providers of investment advisory services to our investors. This alignment of interests contributes to the integration of sustainability in all aspects of our organization, including our remuneration policy. We have established a remuneration policy which does not encourage excessive risk taking, including Sustainability Risks, as risk mitigation is one of the underlying drivers of our firm’s investment philosophy. For further information about our remuneration policy, please contact firstname.lastname@example.org.
Product Specific Sustainability Related Disclosures
For additional sustainability related disclosures related to specific financial products please click here .
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