MISSION & STRATEGY

Introduction

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.

To view our Responsible Investment Policy, please use the following link: CHARME RESPONSIBLE INVESTMENT POLICY

---

CHARME CAPITAL PARTNERS SGR S.P.A. - SFDR DISCLOSURES

Responsibility

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.

Integration of sustainability risks

Charme believes that Environmental, Social and Governance (hereinafter, also, “ESG”) criteria are important when making informed, responsible investment decisions. Long considered an integral part of its activities, Charme has formally integrated its commitment to sustainability into its responsible investment policy. This policy sets out the importance of the integration of ESG considerations in relation to investors, portfolio companies and the investment process as a whole.

As an investor, Charme focuses on growth and improved performance, as well as on minimising risk in areas relevant to the long-term sustainability of the companies in its investment portfolio.

Since 2019, Charme has been a signatory to the United Nations-supported Principles for Responsible Investment. The Principles for Responsible Investment offer managers – on a voluntary basis – a framework for the incorporation of environmental, social and governance (ESG) issues into their investment decision-making process and in relation to the exercise of rights with regard to portfolio companies.

Charme incorporates sustainability considerations into its investment decision-making processes as it has adopted specific ESG and responsible investment policies, as well as a dedicated risk management policy. In this context, Charme also adopts targeted methodologies to examine and control sustainability risks, both during the preliminary investment assessment phase and during phases after the investment has been made. These sustainability-related risks are identified taking account of the particular characteristics of the company in which the investment is planned, together with the business segment in which the target company operates.

In more detail, in the period prior to the investment, the Company follows a highly selective approach, using a negative filtering procedure to exclude a priori investments in areas considered controversial, in line with the rules of the funds managed. With this in mind, investments in companies operating in the following areas are ruled out:

• weapons;
• tobacco;
• illegal drugs;
• pornography or prostitution; 
• alcoholic beverages.

Investments in companies that are, or have been, involved in serious and systematic human rights violations or serious environmental damage or that have been implicated in cases of serious corruption are also excluded.

This approach emphasises Charme’s commitment to adopting investment practices that consider not only the potential economic return but also the social and environmental impact of investments, demonstrating a sense of responsibility towards a broader range of stakeholders and towards the planet.

Once the negative screening stage has been completed, Charme carries out specific ESG due diligence. This involves analysis of the risks and opportunities regarding ESG issues relevant to the individual target company, as well as performance of a scenario analysis involving a review of the financial impact of macro-trends related to ESG issues relevant to the target companies, with particular attention to climate change effects.

The conclusions reached as a result of the analyses describe above are incorporated into the reports prepared by the investment team. These documents are then presented to the Board of Directors so that an informed discussion can take place. These analyses, along with other valuation factors, form the basis for the decisions of the Board of Directors as to whether or not to proceed with the investment process. This process ensures that every investment decision is based on a detailed understanding of both risk and sustainability issues and value-added opportunities. Subsequently, relevant ESG issues relating to the target company are considered in cross portfolio Key Performance Indicators (KPIs) and in company specific KPIs. Finally, the KPIs are included in the investment agreement in the form of an ESG Action Plan.

During the post-investment phase, Charme implements the ESG Action Plan drawn up at the pre-investment stage, establishing accountability measures both internally and at the level of the portfolio companies. In this phase, with the support of Charme, the individual portfolio company is charged with setting up an internal annual reporting process to measure and monitor performance and the state of progress with the ESG Action Plan. Where appropriate, it shall also define a plan of ESG objectives and the timeframe over which they should be achieved.

When selling its investments, Charme performs a review of the ESG measures implemented during the management period. This review is aimed at assessing progress made in improving the ESG profile of the investment and assessing the residual level of ESG risk.

Failure to take account of the adverse impacts of investment decisions on sustainability factors

Article 4 of the SFDR requires investment fund managers to state explicitly whether or not they consider the “principle adverse impacts (PAIs) of investment decisions on sustainability factors. For the purposes of the regulation, “principal adverse impacts” should be construed as the effects of investment decisions that have adverse impacts on sustainability factors related to the environment, social and personnel issues, respect for human rights and issues regarding the war on bribery and corruption.

Although ESG issues and sustainability risk are of central importance and are taken seriously by Charme, Charme does not currently take account of the adverse impacts of investment decisions on sustainability factors. This is also due to the fact that there is still limited availability of comprehensive and reliable data on environmental, social and governance (ESG) factors and, in many cases, it is not sufficiently standardised to permit and effective, uniform assessment of the adverse impacts of all investments.

Charme performs a detailed review of the impacts of its investment decisions on sustainability criteria. It does so by following an approach that differs from analysis of the principal adverse impacts (PAIs) and which is based on the following principles:

• adoption of an exclusion policy with non-participation in certain investment areas considered significantly controversial;

• design and implementation of an ESG action plan aimed at improving specific ESG performance for each portfolio company;

The Company reserves the right to review and, if necessary, update its approach to principal adverse impacts (PAIs) and related disclosures, accordingly.

Remuneration policy and integration of sustainability risks

Charme integrates its commitment to sustainability into its remuneration policy, providing for the management of sustainability risks also through a remuneration system that does not encourage the taking of such risks. In particular, the short-term incentive-based variable remuneration of certain senior members of the Charme management team may be linked to compliance with sustainability risk management measures when implementing investment policies.