EU Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (the “SFDR”) defines sustainability risk 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”. Sustainability Risks are principally linked to climate-related events resulting from climate change (i.e. physical risks) or to the society’s response to climate change (i.e. transition risks), which may result in unanticipated losses that could affect the Investments and financial condition. Sustainability risks can also affect companies by introducing social risks (e.g. gender gaps, social inequality) and governance risks (e.g. bribery issues, selling practices).
Cube IM strives to integrate Sustainability Risks into its investment decision making and risk management and discloses to the Funds’ investors the results of the assessment of the likely impacts of Sustainability Risks on the returns of the Funds it manages.
Sector selection is only a first step. Indeed, Cube IM believes it is paramount to consider and analyze ESG issues and Sustainability Risks for each investment and, during the holding period, not only monitor risks but also implement pragmatic ESG action plans in all portfolio companies to mitigate those risks, covering ESG Governance, Business Ethics, Human Resources, Health & Safety, Supply Chain, Environment, Community Involvement and climate-related risks.
It is worth noting that the impacts following the occurrence of a Sustainability Risk may be numerous and vary depending on the specific risk, region and asset class of the relevant Fund. In general, where a Sustainability Risk occurs in respect of an investment, there may be a material negative impact on the value of that investment.
Further details on Cube IM’s sustainability risk policies can be found in the section “Responsible investments guidelines” which can be accessed through the following link:
ESG Report Summary