(a) Summary1
These Sustainability-related disclosures relate to Regenerate European Sustainable Agriculture LP (the “Fund” or “financial product”, as applicable) and are made pursuant to Article 10(1) of the Sustainable Finance Disclosure Regulation (EU) 2019/2088 (“SFDR”). For the purposes of the below, the “Manager” means Regenerate Asset Management Limited.
| Section |
Summary |
|
No sustainable investment objective
|
The Fund is categorised as falling under Article 8 of SFDR, meaning that the Fund promotes, amongst other characteristics, environmental or social characteristics, but does not have a sustainable investment objective and will not make sustainable investments for the purposes of the SFDR.2
|
|
Environmental or social characteristics of the financial product
|
This section lists the following environmental and social characteristics which are promoted by the Fund:
- Reduction in carbon emissions;
- Carbon sequestration;
- Improvement in soil health and quality;
- Improvement in food quality and nutrition;
- Promote the protection and restoration of Biodiversity and ecosystem protection;
- Water quality improvement; and
- Local community engagement and employment.
This section also includes a statement as to the Fund’s commitment to making a minimum level of sustainable investments within the meaning of the SFDR.
|
|
Investment strategy
|
This section describes the investment strategy of the Fund, which invests in agricultural businesses across Europe with the objective of delivering attractive financial returns and environmental and social benefits. A core objective of the Fund is the creation of a resilient, climate positive investment portfolio where the investee companies play a key role in enhancing biodiversity, restoring and protecting soil health, as well as improving the quality and sustainability of water. Positive externalities are generated through changes in management practices and investment into agricultural infrastructure to better drive the transition to a more sustainable economy.
This section also includes a description of the Fund’s policy to assess good governance practices of its investee companies.
|
|
Proportion of investments3
|
This section sets out the Fund’s target asset allocation to investments that are aligned with the promoted environmental and social characteristics of the Fund as a percentage figure.
|
|
Monitoring of sustainable objective
|
This section sets out the sustainability indicators used to measure the attainment of each of the environmental and social
characteristics promoted by the Fund. A description of each sustainability indicator and the methodology used to assess each sustainability indicator is provided.
|
|
Methodologies for environmental or social characteristics
|
This section refers back to the “Monitoring of environmental or social characteristics” section, which describes the methodologies used to measure how the environmental and social characteristics promoted by the Fund are met through various sustainability indicators.
|
|
Data sources and processing
|
This section covers: (i) the data sources used to attain each of the environmental and social characteristics promoted by the Fund; (ii) the measures taken to ensure data quality; (iii) how data is processed; and (iv) the proportion of data that is estimated.
|
|
Limitation to methodologies and data
|
This section covers (i) any limitations to the methodologies and the data sources referred to above; and (ii) how such limitations do not affect how the environmental and social characteristics promoted by the Fund are met.
|
|
Due diligence
|
This section covers the “due diligence” process, investment selection and integration of environmental, social and governance (“ESG”) considerations into the due diligence of each prospective investment.
|
|
Engagement policies
|
This section describes the engagement policies implemented where engagement is part of the sustainable investment objective, including any management procedures applicable to sustainability-related controversies in investee companies.
|
|
Designated reference benchmark
|
No reference benchmark has been designated for the purpose of attaining the ESG characteristics promoted by the Fund.
|
(b) No sustainable investment objective
The Fund promotes environmental or social characteristics but does not have sustainable investment as its objective and will not make sustainable investments for the purposes of the SFDR.4 The Fund is categorised as falling under Article 8 of SFDR, meaning that the fund promotes, amongst other characteristics, environmental or social characteristics.
(c) Environmental or social characteristics of the financial product
The Fund promotes, amongst other characteristics, environmental and/or social characteristics, but does not have a sustainable investment objective.
The Fund will have a target allocation of a minimum of 75% of investments into assets that are aligned with the promoted environmental and social characteristics of the Fund. These investments will not necessarily meet the full requirements to be deemed sustainable investments due to the transitional nature of the Fund and the absence of agriculture in the Climate Change Mitigation and Climate Change Adaptation sections of the Regulation (EU) 2020/852 (the “EU Taxonomy Regulation“). Please note, however, that the Manager does not take account of the EU Taxonomy Regulation in its management of the Fund and as such the Fund does not commit to making a minimum proportion of EU Taxonomy Regulation-aligned investments.
In making the investments described above, the environmental and social characteristics promoted by the Fund are:
- Reduction in carbon emissions;
- Carbon sequestration;
- Improvement in soil health and quality;
- Improvement in food quality and nutrition;
- Promote the protection and restoration of Biodiversity and ecosystem protection;
- Water quality improvement; and
- Local community engagement and employment.
(d) Investment strategy
The Fund will focus on the investment into agricultural businesses across Europe with the objective of delivering attractive financial returns and environmental and social benefits. A core objective of the fund is the creation of a resilient, climate positive investment portfolio where the investee companies also enhance biodiversity, restore and protect soil health, as well as improving the quality and sustainability of water. Positive Externalities are generated through changes in management practices and investment in agricultural infrastructure to better drive the transition to a more sustainable economy. In pursuing its strategy, the Fund will promote the environmental and social characteristics listed above in section (c).
The Manager, on behalf of the Fund, will assess good governance of investee companies in the following ways:
- By taking an active participation into the due diligence and establishing governance practices as part of the investment process. The Manager will due diligence the pre-existing management structure, employee standards and policies including diversity, remuneration levels at acquisition as well as implementing changes if required post-acquisition.
- By bringing in new expertise and specialisms where required in accordance with the investment strategy of the Fund, including upskilling, training and monitoring to ensure implementation of the investment strategy and ESG requirements.
- Reporting upon: (i) staffing per hectare (versus historic an industry standards), (ii) productivity per staff member, (iii) pay per staff member, (iv) the number of local staff employed and (v) the number of permanent jobs in relation to the farms invested in on an annual basis to investors in its Annual Impact Report.
- Diversity and inclusion within each farm business will be reported annually in the Annual Impact Report.
- Performance and KPIs within staff teams at investee companies will be managed by the management team of the investee companies. Management teams will be rated upon performance and efficiency as well as diversity and inclusion. Bonuses and/or equity participation will be linked to performance.
(e) Proportion of investments
The Fund has a target allocation of a minimum of 75% of investments into assets that are aligned with the promoted environmental and social characteristics of the Fund. These investments will not necessarily meet the full requirements to be deemed sustainable investments due to the transitional nature of the Fund and the absence of agriculture in the Climate Change Mitigation and Climate Change Adaptation sections of EU Taxonomy Regulation.
(f) Monitoring of environmental or social characteristics
The following sustainability indicators are used to measure the attainment of each of the environmental and social characteristics promoted by the Fund:
- Farm Carbon Dioxide (CO2)/ Greenhouse Gas (GHG) Emissions;
- Usage of External Synthetic Inputs in the Farming Process;
- Soil Carbon Assessment;
- Water Infiltration of the soil;
- Promoting the Protection and Restoration of Biodiversity and related Ecosystems;
- Positive Social Externalities to Local Communities (such as local engagement and employment);
- Total Holistic Net Farm Carbon Emissions on a whole farm (including carbon sequestration) basis;
- Local Pollution generated by the farm – Water and Air; and
- Human Capital such as staffing per hectare (versus historic and industry standards), productivity per staff member, pay per staff member and number of permanent jobs created.
The Manager will report on the above listed sustainability indicators in an annual impact report (“Annual Impact Report”) within 90 days of the end of the preceding year. Baseline measurements will in all cases be reported upon for all investments in the Annual Impact Report following the first year of investment.
(g) Methodologies for environmental or social characteristics
The Manager uses the sustainability indicators set out in section (f) “Monitoring of environmental or social characteristics” to measure how the environmental and social characteristics promoted by the Fund are met through various sustainability indicators. To measure the Fund’s sustainability indicators, the Manager collects data directly from the management teams and operating partners of our investee companies, as well as from independent specialists who support the monitoring and assessment of the data. Its methodology includes the use of various quantitative metrics and qualitative measures that are applied on a standardised basis and reported to investors on an annual basis.
(h) Data sources and processing
In its assessment of the sustainability indicators set out in section (f) “Monitoring of environmental or social characteristics”, the Manager uses both third party and its own sources of data. Data is collected directly from the management teams, operational staff and third party advisers to ensure a seamless and transparent process in reporting the operations and Sustainability Indicators. These include:
- Assessment of soil carbon;
- Third party evaluation of farm emissions; and
- Third party assessments of the ecological profile of the farm.
The majority of data will be measured, except where labelled as modelled data. Modelled data will be based on high quality academic models. At this stage there is no certainty around the proportion of data that will be modelled versus measured, but it will be clearly disclosed as such.
(i) Limitations to methodologies and data
Soil carbon is an emerging area of activity and carbon measurement, modelling and interpretation is nascent but growing. All methodologies have limitations, but the Manager has experience at assessing carbon modelling and creating a protocol and establishing carbon measurements.
The main limitations to soil carbon analysis and farm emissions related to the cost of measurement and testing (for example physical soil testing and analysis) and the standardisation across the industry. The cost of the long-term impact assessment will form part of the economic analysis of each farm investment.
(j) Due diligence
The Manager utilises a due diligence process which evaluates each investment from the ground-up, incorporating an investment’s sectoral focus, key issues and management structure for the implementation of the investment plan. As part of the pre-investment analysis the Manager targets low-risk, stable countries with stable and proven agricultural sectors. The Manager selects high quality assets and businesses within the sector where the management and context are aligned with ecological practices and offer attractive growth prospects.
Each acquisition by the Fund undergoes a rigorous due diligence process which evaluates ownership, title and water as well as the potential for growth and expansion, soil quality, plant and animal issues, climatic issues, farm equipment and assets, human resources and management team. As part of the initial assessment, the Manager will ask each management team or operating partners a set of ESG questions to identify any ESG red flags.
All investment decisions are based on commercial, financial, legal and ESG due diligence, as well as estimated return and key risk components. External controls include the use of third-party experts in the due diligence process to establish a baseline for future monitoring of the sustainability indicators.
(k) Engagement policies
The Manager works actively with investee companies to press for greater diversity on leadership teams and equal pay for staff irrespective of gender or race. Within agriculture, the Manager encourages its investee companies to achieve high standards in the sector on diversity in leadership. Nonetheless, it will always seek to find the most suitable person for the role in the context of the investee company and the Fund.
The Manager promotes, monitors and reports on equal pay for all staff within investee companies as part of its engagement policies and HR process.
Finally, the Manager will also assess whether staff have or have the potential to implement the environmental plan in relation to company based on their personal context, training and appetite for training.
(l) Designated reference benchmark
No index has been designated as a reference benchmark to meet the environmental and social characteristics promoted by the Fund.