We believe that environmental, social and corporate governance (ESG) issues and stewardship activities are material to delivering strong positive risk-adjusted investment returns over the long-term. Therefore, we have integrated ESG analysis that encompasses sustainability risk assessment into the investment process of our Emerging Europe listed equity strategy. Sustainability risk means 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. Since 2011 Avaron has been the signatory of UN Principles for Responsible Investment (PRI) that are designed to encourage the integration and analysis of ESG characteristics into investment practice.
We have incorporated ESG and sustainability considerations into the investment process using exclusion, norms-based screening and ESG integration. Our responsible investment approach is outlined in the Responsible Investment Policy. To avoid financing companies that are engaged in activities with clear negative impact on people and environment we apply exclusion principles to filter out such issuers. Norms-based screening is used to identify companies that are allegedly involved in breaches of international law and norms on environmental protection, human rights, labour standards and anti-corruption. ESG and sustainability integration entails in-depth analysis of ESG criteria using an internally developed ESG Scorethat is an integral part of our company fundamental analysis and enables to assess the ESG performance of issuers in our investment universe.
First Emerging Europe fund granted LuxFLAG ESG Label
In April 2023 LuxFLAG granted Avaron Emerging Europe Fund LuxFLAG ESG label, recognizing our commitment to sustainable investing and responsible corporate practices. The label is valid for one year. Read more.
Granted to the fund until 31.03.2024. LuxFLAG is not liable for fund performance.
Climate change, the biggest threat to our society
Climate change as the biggest threat facing society today was recognized in 2015, when 195 countries signed the Paris Climate Agreement, committing countries to transition to a lower carbon economy and limit the global average temperature rise to well below 2 degrees Celsius (°C) above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C. At Avaron, we are supporters of the Paris Agreement and the disclosure recommendations of the Financial Stability Board’s Task Force on TCFD. Our approach to climate change is outlined in the Climate Change Policy Statement. We have set a long-term commitment for our Emerging Europe equity strategy to have net-zero emission investments by 2050 and to achieve 50% portfolio carbon footprint reduction by 2030.
Active ownership – we vote and engage
We commit to actively exercise our rights as a shareholder via voting at shareholder meetings and engaging – having an active dialogue – with investee companies. We maintain direct contact with companies we invest in on ESG issues and push for constant improvement. Exercise of voting rights is central to our practice of responsible investment as it enables to maintain shareholder oversight of the issuers’ policies and management. Voting activities are carried out in accordance to our Voting Policy. Since 2019 we publish detailed voting records of all our funds.
Transparency, reporting and documents
We disclose on responsible investment practices on annual basis via our Responsible Investment Report and the UNPRI Reporting Framework. Transparency Reports, publicly available also on the PRI website, show signatory responses to all of the mandatory indicators as well as responses to voluntary indicators that the signatory has agreed to make public. Assessment Reports demonstrate how a signatory has progressed in its implementation of the principles year-on-year and enable to benchmark against its peers. We have made our Assessment Reports public to offer better transparency on our responsible investment efforts.
Considering the size of Avaron, the Sustainable Finance Disclosure Regulation (SFDR) makes the entity level PAI voluntary for us. Our decision on not to perform the entity level PAI is driven by Avaron’s scale of activities and the types of funds we manage and investors to whom our products are targeted. We shall determine and disclose whether, and the extent to which, Avaron considers the principal adverse impacts of the investment decisions depending on the characteristics of the product, and in particular the product’s designation as promoting “environmental or social characteristics” or having “sustainable investment” as its objective.
In relation to products that do not expressly claim to promote environmental or social characteristics or have a sustainable investment objective, Avaron does not consider the principal adverse impacts of its investment decisions. In relation to products that promote environmental or social characteristics, or have sustainable investment as their objective, Avaron considers principal adverse impacts to the extent described in that product’s prospectus. In all cases, please refer to a product’s prospectus for the specific policies applicable to that product available here.
Avaron has implemented remuneration principles which follow the objective, values and long-term interests of the company, including commitment to sustainability and responsible investing.
The structure of remuneration promotes sound and effective risk management. It aims to discourage risk‐taking that exceeds the level of tolerated risk as set forth in legislation, Avaron’s policies and fund documents.
Sustainability risk management is considered as part of each relevant individual’s performance review, including his or her adherence to Avaron’s Responsible Investment Policy which incorporates the process of how portfolio companies are analyzed and monitored to mitigate sustainability risks in Avaron’s investments.
The assessment of the performance is set in a three-year framework, to ensure, that the assessment process is based on longer-term performance considering the business cycle.
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