This disclosure is made pursuant to Regulation (EU) 2019/2088, known as the EU Sustainable Finance Disclosure Regulation, or “SFDR”.
Marsham IM is required to adhere to SFDR as a result of its funds promoting environmental or social characteristics and being made available to investors in the European Union.
In particular, the following 4 funds are categorised as Article 8 funds under SFDR:
- Marsham USD Transitional Issuers Fixed Income Fund
- Marsham EURO Transitional Issuers Fixed Income Fund
- Marsham GBP Total Return Fund
- Marsham Singularity Supertrends Fund
The hyperlinks above lead to the page for each fund where further information can be found, including the relevant Fund Documents, and in particular the Sustainability-Related Disclosures for each fund as required under Article 10 of SFDR.
The remaining disclosures required under SFDR apply at firm level, and are found below. These disclosures apply to the Firm as a whole, including in relation to its management of the four funds mentioned above.
Sustainability Risk Management
Article 3 of SFDR requires disclosure of the Firm’s policy on the integration of sustainability risks into its investment decision-making process. Under SFDR, sustainability risk is defined as an environmental, social or governance event or condition that, if it occurs, could cause a negative material impact on the net asset value of an investment within the portfolio, or the portfolio itself.
Marsham IM portfolio manages a number of funds whose strategies involve investing in debt or equity securities, including in those of companies that have already adopted and implemented best-in-class sustainability practices (“Best-In-Class companies”), and those on the path of transitioning towards and adopting such sustainability practices (“Transitional Issuers”). The objectives of these funds are to generate attractive returns for investors while being mindful of and minimising all relevant risks, including sustainability risks.
Marsham IM assesses the sustainability risks of potential investments, including those related to climate change, resource depletion, environmental degradation and societal issues. Examples of sustainability risks include the potential for any adverse social or environmental practices of investee companies to cause governments or regulators to impose fines or revoke licenses, lead to class action suits, or to attract negative attention on social media or in the legacy media leading to boycotts and reputational damage. A further sustainability risk is whether the business model of investee companies itself is not sustainable, either due to the ongoing depletion of necessary resources, or due to operating in locations that are vulnerable to rising sea levels, global warming or pollution.
Mitigating Sustainability Risks
Where sustainability risks are identified, this may occur at different stages in the investment process. Where sustainability risks are identified prior to investment, then this may in many cases preclude investment. In some cases, however, company management will undertake to address the sustainability risks identified, in which case an investment may still occur and progress in addressing the sustainability risks will be monitored.
In cases where sustainability risks are identified in relation to an existing investee company, or where sustainability risks worsen after an investment is made, then the Firm will seek to understand how the management of the investee company intends to address the identified sustainability risk. Where a satisfactory plan is not being proposed by company management then Marsham IM will consider divestment.
Marsham IM is subject to rules on remuneration in SYSC 19G of the FCA Handbook (the “Remuneration Code”) and has developed its Remuneration Policy to comply with these Rules, as well as associated FCA Guidance. In addition, Marsham IM is subject to supplementary requirements under Article 5 of SFDR to ensure its Remuneration Policy is consistent with the integration of sustainability risk.
Marsham IM believes that its people play a key part in the overall success of the Firm. As a result, the Firm is committed to providing total remuneration packages that enables it to attract, reward and retain high performers. The Firm aims to provide total remuneration packages which reward superior performance and contribution in a way that is consistent with the long-term interests of the Firm and its investors, which requirements the promotion and recognition of effective risk management, including sustainability risk management, and the taking into account both financial and non-financial performance metrics.
In particular, Marsham IM appraises and compensates employees in a manner that does not reward or encourage risk taking, including with respect to sustainability risk, as that term is defined in SFDR and in the preceding section.
Principal Adverse Impacts
SFDR requires firms to make a ‘comply or explain’ decision and disclosure regarding whether they consider the Principal Adverse Impact (“PAI”) of their investment decisions on the environment or society, or matters relating to employee rights, human rights, bribery or corruption. The PAI regime, as set out in Article 4 of the SFDR and elaborated on in detail in the Regulatory Technical Standards (“RTS”), includes a detailed, prescriptive and quantitative methodology for monitoring, assessing and disclosing the Principal Adverse Impacts of investment decisions.
Marsham IM has carefully considered the requirements of the PAI regime and supports the aims of the regime on improving transparency to clients, investors and the market on how financial market participants integrate the consideration of adverse impacts of their investment decisions on sustainability factors. However, taking into account the nature, size and scale of our activities and services provided, we consider it would not be proportionate or practicable to comply with the prescriptive and quantitative aspects of the PAI regime.
The Firm will keep its decision not to comply with the PAI regime under regular review and will re-evaluate its decision on at least an annual basis. This decision will be considered in particular in light of whether the quality, accessibility and coverage of the required data sets has improved sufficiently to allow practical compliance with the regime, or whether any aspects of the rules in the RTS have been relaxed, or guidance issued by regulators, to facilitate practical compliance.