ESG process

Capital Bay Fund Management S. à r. l. (“CBFM”) has implemented an ESG process to facilitate the incorporation of an effective ESG strategy into its business and operational activities:

ESG-Principles

We have a dedicated ESG Task Force to implement the following principles to address Environmental, Social and Governance issues related to our operations:

Sustainability risks as part of our investment process

Taking into consideration the devastating effects of climate change has led us to include the assessment and monitoring of our exposures to the following set of sustainability risks as part of our regular risk management process:

  • Acute Physical Risk: Risk of extreme weather events, e.g., droughts, floods and storms as a result of climate change, which could severely damage or destroy our property assets and/or Company premises.
     
  • Chronic Physical Risk: Risk of long-term negative effects on assets / properties because of climate change. The increase in temperature might increase electricity costs, due to the necessity of air-cooling. Rising sea-levels endanger structures which are built on shorelines and might reduce the potential land available for construction projects - hence decreasing supply and driving prices up. 
  • Transition risk – Business impacts: Risk of enduring financial losses from the process of adjustment towards sustainable practices, e.g., costly refurbishments of property portfolios to be more energy efficient, resource-recycling and with reduced carbon emissions. The more abruptly the changes are enforced, the higher the losses. A long-term transition would incur less costs compared to a short-term one.
     
  • Transition Risk - Regulatory/Reputational: Risk of incurring financial losses by being fined for non-compliance with environmental, sanitary, health, safety and/or labour laws during the process of moving towards sustainable practices. In case of a sanction, CBFM's name would be published on the CSSF website, which could cause severe reputational damage.
  • Operational Risk – Workplace Safety RiskRisk of decreased productivity and subsequent delays in construction phase caused by a high rate of workplace accidents and employee sick days.

These risks have been integrated in our governance framework and our remuneration policy has been updated to consider the abovementioned sustainability risks and their impact on the investment decision-taking processes.

They have further been made a foundational steppingstone of our Investment process, which is described in the Portfolio Management Policy.

Moreover, their assessment has been made part of the Due Diligence process within the internal Portfolio Management Procedure for new acquisitions.

Principal Adverse Impacts (PAIs) and countermeasures

CBFM manages primarily Real Estate Funds. The principle adverse impacts of real estate assets are:

  • Overconsumption of energy;
  • Fossil fuel use for heating;
  • Wasting of water resources through leaks or too high pressure; and
  • Harming of the biodiversity by invading ecosystems with construction projects.

Our ESG policy sets out a framework for a set of rules, whose purpose it is to guide the Company’s staff on how to be more responsible towards environmental, social and governance concerns in their daily work in order to promote sustainability, fight against climate change and reduce any risks that may arise.

CBFM is accountable for its impact on the environment, the relationship with its community and the way of governance. Environmental, social and governance principles are embedded across our operations and help ensure the sustainability of our business well into the future. CBFM firmly believes that adhering to ESG principles is key to creating long-term value.

To address these impacts, we are planning to implement the following action points:

Engagement with stakeholders

As stewards of the environment, we inform and educate our counterparties how they can reduce resource usage and improve environmental quality. We encourage our funds and investors to be greener and choose a more sustainable approach towards their operations.

We monitor our funds and actively engage with them to improve sustainability performance and corporate behaviour. We may also engage with counterparties where our ESG-integrated research process has highlighted that there are material financial risks arising from sustainability issues or based on the Company’s strategic priorities (e.g. clean energy and sustainable real estate). Similar initiatives will be implemented in the future for the Company to meet its sustainability goals.

We spread awareness to our fund initiators, promoters, and investors to be more involved in greener investment decisions and comply with an ESG framework such as the UN Principles for Responsible Investment. In respect of real estate investments, we encourage our fund stakeholders to apply for a voluntary green certification, such as Energy Star, LEED, NGBS, DGNB, BREEAM, HQE, CASBEE, GRESB, Greenmark and other platforms.

 

UN Global Compact signatory

The United Nations Global Compact is a non-binding United Nations pact to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation. It is a principle-based framework for businesses, stating ten principles in the areas of human rights, labour, the environment, and anti-corruption. Member companies are expected to engage in specific business practices that benefit the people and the planet while pursuing profitability with integrity. The 10 principles for businesses, as stated on the UN Global Compact’s website, are the following:

Principle 1: Support and respect the protection of internationally proclaimed human rights.

Principle 2: Ensure that business practices are not complicit in human rights abuses.

Principle 3: Uphold the freedom of association and the effective recognition of the right to collective bargaining.

Principle 4: Eliminate all forms of forced and compulsory labour.

Principle 5: Abolish child labour.

Principle 6: Eliminate discrimination in employment and occupation.

Principle 7: Adopt a precautionary approach to environmental challenges.

Principle 8: Conduct environmentally responsible activities.

Principle 9: Encourage the development and diffusion of environmentally friendly technologies.

Principle 10: Fight corruption in all its forms including extortion and bribery.

Companies that join the compact should integrate these principles into their corporate strategies, culture, and day-to-day operations. Companies are also expected to advocate the principles publicly and communicate with stakeholders on progress toward meeting the principles.

See also: https://www.unglobalcompact.org/what-is-gc/mission/principles