MISSION & STRATEGY
Charme Capital Partners SGR (hereinafter “Charme”) is an Asset Management Company investing across Europe, with a particular focus on Italy, the UK and Spain. It is primarily engaged in majority investments identified based on their growth potential, their market positioning and the excellence of their products or services, with the aim of enhancing their value in an ethical and responsible way.
This Responsible Investment Policy (hereinafter “the Policy”) is thus intended to provide a broad framework for Charme’s approach to environmental, social and governance (ESG) integration throughout the investment analyses, in its internal processes and in promoting ESG management in Portfolio Companies, consistently with the mission, vision and values outlined below.
The Policy outlines Charme’s responsible investment approach throughout the investment lifecycle, from the evaluation phase to the disinvestment phase of each investment, taking in consideration ESG factors throughout the process. The specific approach to ESG integration at Portfolio Companies level is determined in accordance with Investment Managers and involves consideration of multiple factors, including the investment strategy, sector and investment time horizon.
Mission, vision and responsible investments
In its investment processes, Charme is committed to implement ESG practices inspired by ethical, responsible and sustainable principles, in line with the international best practices and aiming at creating value in the medium to long term. Charme’s commitment in this sense has been formalised by signing the Principles for Responsible Investment (PRI) in 2019, the six principles promoted by the United Nations with the aim of contributing to the development of a more sustainable financial system through ESG incorporation in investment practices.
The mission and vision of Charme is fundamentally based on the following values:
- Global investor platform: its strategic long-term investor base represents the distinctive factor of Charme’s investment activity and guarantees the best support for the development of companies in which it invests. This is balanced between international entrepreneurs, leading global industrial groups and key institutional investors;
- Long-term relationships: in fifteen years of activity, Charme has built an unparalleled network of entrepreneurs, managers and international investors through its reputation for consistency, pragmatism and integrity;
- Proprietary deal sourcing: Charme is deeply embedded in its core geographies, allowing for the development of proprietary projects in the initial acquisition phase as well as in each of the following development phases;
- Growth: Charme’s objective is investing in companies with high growth and international development potential. The outcomes achieved so far prove Charme’s ability to accelerate growth alongside management teams by providing long-term strategic vision, operational support and growth capital;
- Responsibility: Consistent respect for the heritage of Charme’s investee companies and their management teams before, during and after ownership;
- Entrepreneurial culture: Charme’s strong entrepreneurial culture is at the core of its approach and has helped numerous portfolio companies to expand internationally throughout economic cycles;
- Consistent returns: Charme’s investment approach and use of appropriate leverage has enabled its Portfolio Companies to grow in all economic conditions and has delivered strong returns for investors.
This Policy applies to all investment analyses, allowing the opening of new dialogue streams between Charme and the Portfolio Companies. In particular, the integration of ESG considerations is carried out in the following phases of the investment process:
The evaluation of ESG elements in the pre-investment phase takes three approaches:
- Negative screening: excluding from investment those companies that engage in activities or sectors that are deemed controversial by Charme or that were involved in violations of human rights, corruption or cause damage to the environment;
- ESG due diligence: analyzing risks and opportunities related to material ESG topics for the target company, alongside a careful assessment of the management’s ethics and reputation;
- Scenario analysis: analyzing the financial impact of ESG macro-trends that are most relevant to the target company, with a particular focus on climate change impacts.
The outcomes of implementing the three above-mentioned approaches could result in the exclusion of some investments or in the asset devaluation/revaluation through an analysis of quantifiable risks.
If Charme deems potential ESG risks arisen in the pre-investment phase, acceptable and/or manageable, or the opportunities related to the potential investment as strategic levers for value creation, it will proceed in the investment process, as long as it is in line with predefined investment standards. Charme will then implement a monitoring process for ESG fields at risk in the target company, alongside the activation of specific initiatives aiming at mitigating and reducing identified ESG risks.
All outcomes arisen in the pre-investment phase are reported in the Preliminary Investment Memorandum and in the Final Investment Memorandum drafted by the investment team; these documents are submitted to the Board of Directors for evaluation and, if such evaluation is positive, the investment is approved.
Subsequently, relevant ESG topics related to the target company are translated into common Key Performance Indicators for all Portfolio Companies (“cross portfolio KPIs”) and in customized Key Performance Indicators for each Portfolio Company (“company-specific KPIs”); the KPIs are subsequently formalized in an ESG Action Plan.
After the acquisition, Charme applies the ESG Action Plan defined in the pre-investment phase by setting accountability measures both internally and at Portfolio Company level.
At this stage, the Portfolio Company, with the support of Charme, is tasked with establishing an internal annual reporting system in order to measure and monitor the performance and status of the ESG Action Plan. This includes cross portfolio KPIs and company-specific KPIs and, if appropriate, ESG targets with a corresponding time frame for their achievement.
The information collected is included annually in the report that Charme produces for its investors; this report also includes any relevant incidents at Company level and the related corrective measures adopted.
Charme adopts every possible measure to ensure that its Portfolio Companies receive the adequate training and tools to correctly understand, report and monitor the KPIs included in the ESG Action Plans.
Charme strongly believes in the value generated through the implementation of a responsible investment process and, for this reason, it is committed to share ESG outcomes achieved by Portfolio Companies with potential buyers, in order to outline the path of continuous growth of its Portfolio Companies after their exit from the Fund.
MONITORING AND REPORTING
Charme is committed to annually collect internal reports drafted from Portfolio Companies and to monitor cross-portfolio KPIs to assess the overall performance of the Fund. The resulting ESG information about its portfolio will be periodically communicated to investors.
In order to ensure the timely monitoring and reporting of relevant ESG data and information at Portfolio Company level, Charme implements:
- constant monitoring of ESG issues by the appointed investment managers;
- investment manager’s commitment to organize, at least twice a year, ad hoc meetings / calls between Charme and the Portfolio Companies in order to discuss the progress of the ESG Action Plan.
During such meetings, potential criticisms will be analyzed and intervention measures will be agreed upon.
As stated above, the Charme annual report will disclose outcomes achieved by Portfolio Companies.
Furthermore, on an annual basis, Charme will complete the PRI’s Transparency Report, made publicly available on the PRI website. Charme is committed to defining and developing internal ESG objectives, in order to undertake a path of responsible and sustainable growth and improve its own ESG performance.
REVIEW AND ACCOUNTABILITY
Charme is committed to reviewing and updating the Policy when it is deemed necessary in order to reflect ongoing developments in the ESG field and evolving best practices, and in any case at least every two years.
This Policy was first approved on 29 November 2019 by the Board of Directors of Charme Capital Partners SGR.
CHARME CAPITAL PARTNERS SGR S.P.A. - SFDR DISCLOSURES
Charme views environmental, social, and governance (“ESG”) factors as important for making sound investment decisions. Long considered as part of its activities, Charme has formalised its commitment to high standards in its own ESG Policy. The policy sets out the significance of ESG factors in relation to its investors, portfolio companies, employees and other stakeholders.
As an investor, Charme aims to grow and improve performance as well as minimise risk in areas relevant to the long-term sustainability of each business in its investment portfolio.
Since 2019, Charme has been a signatory of the United Nations supported Principles for Responsible Investment. The Principles for Responsible Investment provide a voluntary framework to managers for incorporating environmental, social, and governance (ESG) issues into their mainstream investment decision-making and ownership practices.
Charme takes an active role in improving ESG awareness, performance and compliance in each portfolio company. At Charme a mandatory ESG assessment is undertaken during due diligence by the deal team members for each prospective investment: such due diligence activity’s aim is to identify any sustainability risk and to understand how such risks can be assessed and mitigated. In addition, a risks and opportunity assessment is conducted and the relevant next steps are agreed with the respective management teams, resulting into an ESG Action Plan summarizing the KPI applicable to each investee company. Following the initial ESG assessment, each portfolio company is then required to carry out the activities provided in the ESG Action Plan and on an annual basis to provide Charme a report highlighting the implementation of the ESG Action Plan, focused on performance and progress relative to company specific KPIs.
Sustainable Risk Finance Disclosure Regulation (2019/2088) (the “Disclosure Regulation”)
Charme makes the following disclosures in accordance with Articles 3(1), 4(1)(b) and 5(1) of the Disclosure Regulation.
Approach to sustainability risk
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 the investment”. Sustainability risks are risks which, if they were to crystallise, would cause a material negative impact on the value of the portfolios of the funds managed by Charme. Before any investment decision is made on behalf of any managed funds, Charme identifies the material risks associated with each proposed investment, including sustainability risks (supplemental due diligence may also be conducted by an external professional firm when deemed necessary). Charme considers such risks as part of its fund risk management process having regard to the fund’s investment policy and objective.
Consideration of sustainability adverse impacts
Article 4 of the Disclosure Regulation requires fund managers to make a clear statement as to whether or not they consider “principal adverse impacts”. Although ESG and sustainability risk is important to Charme and Charme takes it seriously, Charme does not consider the adverse impacts of investment decisions on sustainability factors in the manner prescribed by Article 4 of the Disclosure Regulation. This is the current position, which Charme will keep under review. The reason for this decision also stems from the fact that the detailed requirements on the scope of “principal adverse impacts” were not settled by 10 March 2021, when Charme was required to decide and publish its initial approach. Charme is continuing to assess the mandatory data collection and disclosure requirements, which are applicable to firms which opt in to consider the principal adverse impacts of their investment decisions.
Charme integrates its commitment to environmental, social and governance matters within its remuneration policy. In particular, specific ESG parameters integrate the objectives of the identified personnel involved in investment decisions. Furthermore, Charme, as a manager dedicated to long-term investments, considers it essential to integrate ESG principles in pursuing the performance of the investment funds managed, on the basis of which the long-term component of remuneration is also defined.