The European Commission adopted a package of measures on sustainable finance in May 2018. One component of this package is the Sustainable Finance Disclosure Regulation (“SFDR”) which aims to standardise disclosure requirements on how financial market participants integrate environmental, social and governance (“ESG”) factors in their investment decision-making and risk processes. In this context of SFDR, DFI is in the process of conducting a comprehensive review and update of its ESG policies and procedures. We intend to complete our review and introduce our updated ESG policies and procedures during the course of 2021.
DFI is a signatory to the United Nations-supported Principles for Responsible Investments, and we routinely consider how ESG factors contribute to investment risk and opportunity. We adopt a general ‘do no significant harm’ approach and seek to avoid investments that may have negative environmental, social or reputational impacts. Accordingly, we do consider the adverse impacts of investment decisions on sustainability factors, but not strictly in the manner prescribed by Article 4 of the SFDR. As a result, we intend to update this position following completion of our review of DFI’s ESG policies and procedures, in order to align our approach with the requirements of the SFDR.
In terms of sustainability risks, and prior to making an acquisition, we consider relevant financial and non-financial risks during the initial stages of the investment decision making process. We identify ESG risks or opportunities and add these to the proposed outline business plan, with technical and environmental reports completed as part of DFI’s due diligence steps.
In relation to Article 5 of the SFDR, DFI staff are remunerated by way of fixed components (salary and benefits) and variable components (bonus and, in some cases, carried interest). We apply an integrated team approach for ESG implementation and encourage all staff to actively engage on and incorporate ESG matters. The allocation of variable remuneration to staff is based on a variety of factors including compliance with policies and procedures in relation to ESG as well as a sustainable and responsible approach to risk.