ShelteR Investment Management
Statement on the integration of sustainability risks in investment decision‐making process and adverse impacts of investment decisions on sustainability factors (SFDR)
The European Sustainable Finance Disclosure Regulation “SFDR” requires Shelter Investment Management (SIM) to disclose via its website (1) its policy on integration of sustainability risks in investment decision‐making process and (2) where they consider principal adverse impacts of investment decisions on sustainability factors, a statement on due diligence policies with respect to those impacts, taking due account of their size, the nature and scale of their activities and the types of financial products.
Until end of 2023, as SIM is a company with less than 500 employees, SIM has made use of the “de minimis rule,” and therefore decided and disclosed that it is not considering the “adverse impacts of its investment decisions on sustainability factors” although it has been gradually adopting a framework with the purpose to become aligned.
As of the period starting January 2024, SIM will no longer make use of this opting-out possibility, but will instead comply with the requirements of SFDR. This means the following :
- SIM has a ”policy for the integration of sustainability risks” in the investment making process. Such policy has been approved by the Board of Directors on March 2, 2023 and will be published on the website of SIM, starting January 2024.
- SIM will consider “adverse impacts of investment decisions on sustainability factors” in its overall business, starting January 2024 and will make a statement on these impacts for the first time before June 30th, 2025.
- The adverse impacts will be provided for each adverse sustainability indicator that the SFDR prescribes to report on, in accordance with the criteria and formulas provided in the Regulatory Technical Standards (RTS). This includes areas of adverse impact related to greenhouse gas emissions, biodiversity, water, waste, and social and employee matters for investments in companies, and greenhouse gas emissions and social violations in relation to investments in sovereigns and supra-nationals.
- Across all areas the investments of SIM will show adverse impacts, but given the limited data availability for some of the adverse sustainability impact indicators and the lack of historical data, it might not always be possible to put the obtained figures in perspective. In its statement, SIM will provide additional information on how principal adverse impacts are considered at SIM, which will structured in the way described by RTS :
- Description of the principal adverse impacts on sustainability factors
- Description of policies to identify and prioritize principal adverse impacts on sustainability factors
- Engagement policies
- References to international standards
- Historical comparison (as of 2026).
Moreover the Board of Director of SIM wishes to confirm that :
- It is a signatory to PRI and is considering to become a signatory of the Towards Sustainability Quality standard in Belgium;
- It has an entity-level Sustainability Policy and employs an entity-level exclusion policy for certain type of activities;
- It aims to contribute to supporting the goal of net zero GHG emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5°C, by prioritizing within its Fund of Fund investment activities (representing 80% of its activities as per January 2024) – where possible – investments in underlying funds that have an investment strategy that includes support to this same goal.
- It is SIM’s intention to report on the percentage of underlying funds that comply with these goals in relation to the overall investments in underlying funds and to define milestones to increase over time the proportion of compliant underlying funds.
- It is the intention of SIM to report on PAI’s amongst others via look-through of these underlying funds and monitor in particular the PAI’s 1-3 that relate to GHG emissions and take into consideration these PAI’s into investment decisions.
- It has published an updated Engagement & Voting rights policy where SIM targets “indirect” engagement and use of voting rights via prioritizing investments in underlying funds that demonstrate proper corporate engagement and shareholder action, with clear engagement objectives, priorities and escalation processes on the one hand and a properly voting policy formalized and published on the other hand.
- SIM targets annual discussions with these underlying fund managers regarding their engagement and voting policies and the results and actions of the implementation thereof.
- SIM analyses the consistency of these policies with its own policies on engagement and voting rights and related ESG priorities, such as net zero GHG emissions by 2050.
SIM strongly supports “sustainable” portfolio management and believes that careful consideration of environmental social and governance factors is important when making portfolio investment decisions but continues to stress that :
- This incorporation of ESG elements is in the view of SIM however ultimately the choice and decision of our investors;
- SIM will continue to offer different types of solutions that take into account different ESG considerations next to solutions that do not.
SIM continues to be of the opinion that the EU SFD and RTS regulations are, at this stage, not always fully “compatible” with efficient discretionary portfolio management in the interest of the investors for different reasons:
- Regulatory uncertainty : The EU regulations are, at this stage, in the opinion of SIM, unclear and highly complex.
- Ideologic direction: The EU regulation appears to reflect certain ideological views regarding what is to be considered environmentally friendly or sustainable. SIM does not always support such ideological views. Examples include certain views on nuclear power, pellets, private electric transportation means, forced gender equality with board level thresholds.
- Data quality: The data required to analyze sustainability risks and factors in accordance with the new EU regulations is at this stage – in the opinion of SIM – still incomplete and highly divergent with models that have not yet proven their consistency SIM has reviewed official reports that confirm this. Applying “sustainability screenings” within portfolio management and applying PAI’s leads to different portfolio compositions and thus results, depending on the data provider.
- Cost Impact: The actual cost of the sustainability data offered by data providers and the proper analysis of this data is highly expensive. SIM is of the opinion that these costs have important negative effects on the return of “sustainable” investment portfolio solutions.
- Return Impact: As evidenced by the 2022 results of equity markets, the impact of investors’ sustainability preferences can lead to particularly negative deviations in portfolio returns in comparison to standard non-sustainable benchmarks. The EU does not require the notification of this highly important risk factor instead requires informing investors only about the risks of not applying sustainability factors. We believe it is a necessary element of communication to investors when making disclosures to inform “both ways” and we do this in all discretionary portfolio management contracts and our UCITS prospectus.
The Board of Directors
Shelter Investment Management
February 2024 (Fifth statement)