2. No Sustainable Investment Objective
The Company promotes environmental or social characteristics, but does not have as its objective sustainable investment.
3. Environmental or Social Characteristics of the financial product
The Company promotes environmental and/or social characteristics by virtue of investing substantially all of its assets in the Lux Feeder, which the AIFM has determined shall be treated as a financial product that promotes environmental or social characteristics within the meaning of Article 8 of the SFDR.
The Lux Feeder disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Company.
The AIFM will invest in the Master Fund. The AIFM also acts as the Advisor of the Master Fund and will implement the Lux Feeder’s promoted characteristics at the level of the Master Fund.
The Lux Feeder promotes the following environmental and/or social characteristics:
a) Excluded Investments:
The AIFM aims to exclude certain investments from its portfolio that the AIFM views as inherently prone to having the most significant adverse environmental and/or social impacts on the environment and society.
In order to achieve this aim, the AIFM applies an exclusion screen at the level of the Master Fund. The AIFM will not, at the level of the Master Fund, knowingly make direct investments in any of the following businesses. We refer to these as the “Excluded Investments”:
- which directly manufacture, distribute or sell (i) anti-personnel landmines, (ii) nuclear, chemical or biological weapons or (iii) cluster bombs or munitions;
- where 20% or more of total revenue arises from the direct manufacturing of arms, ammunition (excluding (i) businesses which directly produce, sell or distribute components that are intended for use within such weapons, firearms or ammunitions or (ii) businesses which market or maintain arms or ammunition) or tobacco;
- where 20% or more of the total revenue of such Portfolio Company arises from coal and oil exploration, extraction or production;
- which systematically use harmful or exploitative forms of forced or child labour; or
- which generates 50% or more of its revenue in aggregate from:
- coal exploration, extraction, production, transportation, power generation, distribution and/or storage;
- oil exploration, extraction, production, transportation, power generation, distribution and/or storage; and/or
- gas exploration, extraction and/or production
b) ESG Assessment Process:
The AIFM has created a proprietary ESG Screening Checklist to evaluate the environmental and/or social impacts of investments. The AIFM aims, at the level of the Master Fund, to exclude certain investments from its portfolio that the AIFM views as inherently prone to having the most significant adverse environmental and/or social impacts on the environment and society. The ESG Screening Checklist is used to identify whether prospective investments which pass the exclusion screen should nevertheless be excluded from the Master Fund in order to achieve this aim. The ESG Screening Checklist currently consists of 27 mandatory questions across the following themes: high risk sectors, bribery and corruption risk, country risk, reputational risk, climate risk, ESG maturity, and the extent to which the primary products and services of the proposed target company contribute to any United Nations’ Sustainable Development Goals. The AIFM may update the ESG Screening Checklist from time to time but will always apply it, at the level of the Master Fund, in a standardised, consistent manner. The AIFM will make reasonable efforts to obtain all the information required under the ESG Screening Checklist (noting that it is possible that not all relevant information will be available for all proposed investments). The AIFM will consider such information for each proposed investment prior to making an investment decision at the level of the Master Fund (the “ESG Assessment Process”).
4. Investment strategy
The Company invests substantially all of its assets in the Lux Feeder.
As part of its review prospective underlying fund investments, the Investment Advisor’s operational due diligence teams assess good governance at both the level of the underlying fund manager and the underlying fund. At the manager level, the operational due diligence teams review the manager’s decision-making function, including the composition of any management committees (such as the board of directors) and the coverage and responsibility of such committees along with their voting structures. At the fund level, the operational due diligence teams assess the responsibilities of the fund’s governing body (such as the investor advisory committee), any conflict of interests, oversight of portfolio management, and other compliance related issues including sound management structures, employee relations, remuneration of staff and tax compliance.
The Lux Feeder disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Company.
Investment strategy used to meet the environmental or social characteristics promoted by the Lux Feeder
The Lux Feeder is a closed-ended feeder fund that will invest in ICG Strategic Equity Fund V (USD) LP (the “Onshore Fund”). The AIFM also acts as the Advisor of the Master Fund. The Master Fund invests primarily in sponsor-led bespoke liquidity transactions involving established PE funds and their underlying assets.
To identify investments in line with the Lux Feeder’s promoted environmental or social characteristics, the AIFM on a continuous basis: (i) applies the Exclusion List; and (ii) considers the information attained through the ESG Assessment Process prior to making an investment decision. See section (c) above for further detail on the Lux Feeder’s promoted characteristics.
The policy to assess good governance practices of the investee companies, including with respect to sound management structures, employee relations, remuneration of staff and tax compliance
The AIFM adheres to the same Good Governance Policy (the “Policy”) which is used in relation to all potential investments made at the level of the Master Fund to ensure that good governance is being followed within the potential investee company.
Under the Policy, the following four core pillars are highlighted as being central to the AIFM’s assessments of good governance (and are the focus of pre-investment and ongoing due diligence): sound management structures, employee relations, remuneration of staff and tax compliance. In respect of each of the core pillars, the AIFM, as relevant, will seek information on a selection of key good governance metrics most relevant to the underlying investment as part of pre-investment due diligence at the level of the Master Fund. Examples of such metrics that may be considered, where deemed relevant by the AIFM in relation to investments at the Master Fund level, include:
- sound management structures: board composition, independence and oversight, board gender ratio, risk and crisis management, anti-bribery and corruption (“ABC”) and financial crime policies and procedures;
- employee relations: policies and procedures regarding human rights, occupational health and safety, employee grievance mechanisms, and whistle-blowing; and
- remuneration of staff: compliance with minimum wage requirements, board / senior management remuneration policies, gender or other diversity pay gap practices and/or information; and
- tax compliance: applicable tax compliance or tax risk management policies and procedures, operations in non-cooperative tax jurisdictions, governance and audit processes for tax returns.
Other alternative and/or additional and/or fewer metrics or enquiries may be used where deemed appropriate.
The AIFM will consider, where deemed appropriate, any evidence of incidents, violations or allegations in respect of the above good governance core pillars that are considered to be so serious or persistent that they suggest an ongoing failure of good governance.
During the investment lifecycle, the AIFM carries out ongoing monitoring, as detailed in the Policy. The monitoring practices are tailored to the investment nature and type.
The selection of and subsequent assessment of the relevance and weighting of the above metrics will vary according to the size, sector and geographic location of the company or asset. It will also vary based on the evidence and information available to investment teams both in respect of the above listed key metrics as well as any wider governance and/ or ESG factors uncovered separately as part of investment due diligence. As such, no one metric will be determinative on its own and some judgement will be required to consider these both in the round and in the wider context of the transaction when reaching a good governance assessment finding both pre-investment and as part of ongoing monitoring.
For the avoidance of doubt, the Policy will not apply to certain investment classes, such as investments in sovereign and supranational entities (including government bonds and securities) or derivative financial instruments that the AIFM causes the Lux Feeder and/or the Master Fund to enter into for risk management (e.g. interest rate or foreign currency) purposes.
The Lux Feeder, at the Master Fund level, will only make investments where it is concluded by the AIFM, as relevant, in good faith, that:
- immediately prior to the investment, the investment demonstrates good governance practices; or
- if the investment demonstrates partial alignment with good governance practices immediately prior to the investment, the AIFM reasonably assesses that it will be possible to remedy any deficiencies in good governance practices with the support of the AIFM.
Where the AIFM determines, in good faith, that the pre-investment due diligence or ongoing monitoring under the Policy demonstrates evidence of material and ongoing good governance failures and the AIFM would be or is unable to influence remedial action, the AIFM will decide not to invest or (in a post-investment scenario) take steps to divest the investment, insofar as feasible, and all other routes to remedial action are exhausted. The manner and rate of divestment may, in some cases, be subject to how liquid the investment is.
5. Proportion of investments
The Company invests substantially all of its assets in the Lux Feeder.
The Lux Feeder disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Company.
The Lux Feeder has not set a minimum proportion of its investments which will be used to meet the promoted environmental and social characteristics of the Lux Feeder. An investment will be treated as “#1 Aligned with E/S characteristics” where:
- the investment is not an Excluded Investment; and
- the AIFM has considered information gathered as a part of the ESG Screening Checklist prior to making an investment decision.
Owing to the mandatory nature of the list of Excluded Investments and the ESG Assessment Process, except for certain derivative financial instruments which the AIFM uses to manage the Master Fund’s and the Lux Feeder’s currency and interest rate risks for which it is not possible to apply the list of Excluded Investments or the ESG Assessment Process, the AIFM anticipates 100% of the investments, at the Master Fund level, to meet the promoted environmental and/or social characteristics promoted by the Lux Feeder.
The Lux Feeder will generally have indirect exposures to investments as the Lux Feeder will invest in the Master Fund. For these purposes no distinction is made in the asset allocation between direct exposure in investee entities and any other types of exposures to those entities, as the AIFM does not anticipate the Lux Feeder’s asset allocation to include direct exposures to investee entities.
6. Monitoring of environmental or social characteristics
The Company relies on the Lux Feeder’s monitoring of the environmental or social characteristics for the Lux Feeder.
The Lux Feeder disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Company.
The sustainability indicators for the Lux Feeder are:
Table of sustainability indicators for the ICG V GP-Led Secondary Onshore Feeder Fund, L.P.
| Promoted characteristic |
Sustainability indicator |
| 1. Excluded Investments |
The percentage of value of investments held by the Master Fund at the end of the reporting period which have passed the negative screen for Excluded Investments. |
| 2. ESG Assessment Process |
The percentage by value of investments held by the Master Fund at the end of the reporting period where the AIFM considered the information gathered as a part of the ESG Screening Checklist before making its investment decision. |
Prior to investment, at the level of the Master Fund, the AIFM: (i) assesses whether an investment should be excluded as an Excluded Investment; and (ii) considers the information gathered to assess whether a proposed investment under the ESG Assessment Process should, even if not an Excluded Investment, nevertheless still be excluded due to having significant adverse environmental and/or social impacts on the environment and society. The Excluded Investment and ESG Assessment Process promoted characteristics are measured by the sustainability indicators listed for those characteristics above.
The AIFM carries out the relevant pre-investment assessments for the Lux Feeder’s promoted characteristics as per the methodologies detailed in section (g) below. Section (h) also details the related internal and external control mechanisms.
7. Methodologies
The Company invests substantially all of its assets in the Lux Feeder.
The Lux Feeder disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Company.
Pre-investment process: The AIFM will use the data sources detailed in section (h) below to assess whether a proposed investment is an Excluded Investment or not. The AIFM will use those data sources to assess proposed investments in accordance with the ESG Screening Checklist (which currently consists of 27 mandatory questions across the following themes: high risk sectors, bribery and corruption risk, country risk, reputational risk, climate risk, ESG maturity, and the extent to which the primary products and services of the proposed target company contribute to any United Nations Sustainable Development Goals). Exclusion screens are conducted on the basis of information available about the underlying company and its activities (typically financial reports and/or management presentations provided by the company or its placement agents), to determine that the specified thresholds in the Exclusion List are not met. Once the ESG Screening Checklist is completed, the data is compiled in a standard investment committee report and analysed by the AIFM’s investment team. Should the AIFM require further information, additional due diligence is conducted. Depending on the results the investment may or may not be submitted for the ultimate investment decision by the AIFM’s investment committee. The percentage of value of investments held at the end of the reporting period which have passed the negative screen for Excluded Investments and where the AIFM considered the information gathered as a part of the ESG Screening Checklist before making its investment decision is reported in the Lux Feeder’s periodic reporting.
8. Data sources and processing
The Company relies on the Lux Feeder’s approach to data sources and processing for the Lux Feeder.
The Lux Feeder disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Company.
Data sources used to attain each of the environmental or social characteristics promoted by the Lux Feeder
The AIFM obtains pre-investment data through a combination of sending questionnaires to the managers of the investee companies, data rooms compiled by the managers of the investee companies, arranger banks and their advisers and obtaining information from third party specialist providers. In some cases where data is not available or accurate, reasonable assumptions may be made, or estimated or proxy data used.
Measures taken to ensure data quality
The AIFM will, where relevant and appropriate, consider taking steps to follow-up and query data with the managers or general partners of the investee companies and compare data obtained from third parties and self-reported data against historic data and comparable industry and sector data. The questionnaires sent to the managers of the investee companies utilise established reporting methodologies to ensure consistency of how data is reported. Once data is received from the managers or general partners of the investee companies, spot checks are preformed to ensure accuracy.
Where data is not reported by the managers or general partners of the investee companies, this is clearly indicated; or in the case of GHG emissions, and climate metrics, a proxy is modelled by a third party provider utilising a range of investee company specific inputs such as revenue, key countries of operations and sector; and regression analysis based on a number of years of historic data of peer companies that publicly report their emissions. Proxy data is only utilised for scope 1 and 2 GHG emissions, and is used as an interim measure in the absence of actual data. For other gaps in reported data – the AIFM will engage with investee company to request measured data. Trend analysis is also performed to spot anomalies.
How data is processed
The data is used in the assessment of proposed investments put forward to the investment committee and, where appropriate, used in relevant calculations pertaining to the promoted characteristics and metrics of the Lux Feeder. Records are kept of all investment decisions of the AIFM in line with regulatory requirements.
Proportion of data that is estimated
In some instances, the Lux Feeder may need to use estimates or proxy data. Where estimated data is used it will be based upon reasonable assumptions and appropriate comparators. The AIFM will act reasonably in using estimated or proxy data. As the use of such data will vary on a case-by-case basis, it is not possible to provide an exact proportion of estimated data.
9. Limitations to methodologies and data
The Company relies on the Lux Feeder’s approach to methodologies and data for the Lux Feeder.
The Lux Feeder disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Company.
As detailed in section (g) above, the AIFM’s investment team is responsible for proposing investments to the investment committee. The investment team makes its own assessment of whether the proposed investment meets the environmental and social characteristics promoted by the Lux Feeder. Where the investment team are not satisfied that an investment does not meet these requirements, the investment team may decide not to put forward the proposed investment to the investment committee.
Multiple data sources may be used in relation to the Lux Feeder’s promoted characteristics and sustainability indicators. The primary limitations relate to data gaps where the nature/location of investments means that there are no or limited obligations to collect, publish or provide ESG data; the reliance on self-reported data; and, the use of assumptions or estimates / proxy data in some instances. Even where published/provided, such data may not be of a sufficiently high-quality or may be incomplete or otherwise inaccurate. The AIFM may also be required to rely on data provided by third-party providers which cannot be verified. These limitations are not considered to materially limit the monitoring or attainment of the promoted characteristics as the data is generally subject to internal and external checks (such as comparison against previous data periods or other comparable investee companies), self-reported data is usually provided in a timely fashion and the AIFM will engage with portfolio investments and third party data providers where appropriate (e.g. if data is inaccurate, incomplete or needs other validation). Where estimated data is used it will typically represent the minority of data used and will be based upon reasonable assumptions and appropriate comparators.
10. Due diligence
The Company relies on the Lux Feeder’s approach to due diligence for the Lux Feeder.
The Lux Feeder disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Company.
Potential investee companies are diligenced to assess whether they would be Excluded Investments. Further, the due diligence includes the reasonable efforts by the AIFM to complete the ESG Screening Checklist to assess whether an investment is inherently prone to having the most significant adverse environmental and/or social impacts on the environment and society. These are in line with the promoted characteristics detailed in sections (c) and (e) above. As set out in section
(h) the due diligence carried out on the underlying assets of the Lux Feeder includes reviewing information provided by the managers of potential investee companies, as well as review of data rooms compiled by the managers of potential investee companies. The AIFM may also obtain and review information from third parties as part of the due diligence process.
The ESG Screening Checklist currently consists of 27 mandatory questions across the following themes: high risk sectors, bribery and corruption risk, country risk, reputational risk, climate risk, ESG maturity, and the extent to which the primary products and services of the proposed target company contribute to any United Nations Sustainable Development Goals.
The AIFM also seeks information on a selection of key good governance metrics most relevant to the underlying investment as part of pre-investment and ongoing due diligence in accordance with its Good Governance Policy. See the full detail in section (d).
The AIFM’s investment team uses this information to carry out an assessment of proposed investments and decide whether or not to recommend an investment to the investment committee. The AIFM’s investment team is required to consult with the Sustainability & ESG team if significant ESG risks are identified. Prior to making investment decisions, the investment committee considers the investment team’s analysis of the proposed investment’s data in relation to the Lux Feeder’s promoted characteristics and the Good Governance.
11. Engagement policies
The Company relies on the Lux Feeder’s approach to engagement policies for the Lux Feeder.
The Lux Feeder disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Company.
The Lux Feeder does not seek to engage with the managers or general partners of the investee companies as, considering the investment-types envisaged by the Lux Feeder’s investment strategy, it is unlikely to have the relevant influence in the investee company’s capital structure. However, the Portfolio Manager will engage with the managers or general partners of the investee companies annually to gather information for the ESG Screening Checklist and as required under the Good Governance Policy (see full detail in section (d)). See the further details in the “Fund’s approach to ESG” sub- section 2 (“Fund’s approach to ESG”) in section VIII Environmental, Social and Governance of the memorandum for the Lux Feeder.
12. Designated reference benchmark
No index has been designated as a reference benchmark to meet the environmental or social characteristics for the Feeder Fund or the Master Fund.
