The Regulation (EU) no. 2019/2088 of the European Parliament and of the Council of November 27, 2019 on sustainability-related disclosures in the financial services sector (SFDR) requires financial market participants such as Hymont Capital BV (the GP) to provide information to investors with regard to the integration of sustainability risks, the consideration of adverse sustainability impacts, the remuneration in relation to sustainability risks and the promotion of environmental or social characteristics, and sustainable investment.

We believe that in order to make good investments environmental and/or social factors should not be overlooked, and we intend to promote certain environmental and/or social characteristics for the fund managed by the GP, i.e., Hymont Capital Fund CommV (Hymont Capital Fund or the Fund)

To avoid any misunderstanding, we clarify that the Fund does not have nor pursues sustainable investments in accordance with article 9 of the SFDR, as its purpose.

You will find under Part I the GP AIFM level disclosures and under Part II the article 8 SFRD disclosures for the financial product Hymont Capital Fund.

  1. GP AIFM LEVEL DISCLOSURES

The information below regarding the policies of the GP on sustainability is made in accordance with articles 3, 4 and 5 of the SFDR.

Integration of sustainability risk in the investment policies

A sustainability risk means “an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investment”. For Hymont Capital Fund, sustainability risks are risks which, if they were to become reality, would cause a material negative impact on the value of its portfolio companies and the underlying real estate projects and assets (sustainability risk).

There will be no formal consideration of sustainability risks in the decision-making process regarding Hymont Capital Fund in accordance with article 3 of the SFDR and we do not plan to do so in the future. The GP will re-evaluate the possibility to consider sustainability risks in the decision-making process on an annual basis. There will, however, be an annual report on ESG performance of our portfolio companies and their underlying real estate projects and assets as included in Hymont Capital Fund’s ESG Policy. In doing so, the GP can assess and evaluate the overall ESG performance of our portfolio companies as well as the underlying real estate projects to the extent the Fund has the possibility to do so and the identified risk is material from both a financial and, or sustainability perspective.

In the pre-investment phase, the regular due diligence process will consist of a screening of possible short and long-term risks that may occur within the relevant real estate project and the underlying assets involved in the investment. To this end, an analysis is made of typical risks related to real estate projects such as location, operational and legal risks relating to the underlying assets but also any environmental, social, governance or other risks. If the GP presumes that a portfolio company is potentially eligible under the EU Taxonomy, the team will notify the portfolio company and may give support and guidance for further analysis and reporting.

The GP includes ESG information, where relevant or available, in the (i) initial screening of an investment opportunity, (ii) due diligence in relation to a potential investment, and (iii) monitoring of the portfolio companies and the underlying real estate projects and assets. This information is used when reviewing and approving an investment opportunity.

Principal adverse impact of investment decisions on sustainability factors

In accordance with article 4.1(b) of the SFDR, the GP states that it does not consider the adverse impacts of investment decisions on the sustainability factors as referred to in article 4.1(a) of the SFDR and does not make the disclosures as described in article 4.1(a) of the SDFR.

Given that the investment scope of the GP is primarily focused on real estate projects bought via special purpose vehicles (i.e. the portfolio companies), most of the portfolio companies are not be able to provide the necessary data on the underlying real estate projects that would allow the GP to report on what the adverse impacts of the investment decisions would be, based on the different criteria set forth in the SFDR and the legislation implementing the SFDR.

Although the GP integrates high-level ESG risk and impact screening and monitoring into the investment process, the GP is not able to communicate data and evolution reporting in accordance with the reporting requirements of the SFDR. At a later stage, the Fund can reevaluate, depending on the size of its own team and the ability of the portfolio companies to provide the necessary data for compliant reporting.

Integration of sustainability risk in the remuneration policy

The GP, as a sub-threshold manager of the Fund, does not have an obligation to have a formal remuneration policy in accordance with article 40 and following the Belgian law of April 19, 2014, on alternative entities for collective investments and their managers.

In practice, in accordance with general remuneration and award processes, a significant portion of an investment professional’s compensation is typically in deferred instruments aligned to the performance of investments, meaning that the value of an investment professional’s compensation will be negatively impacted by a sustainability risk that impacts the value of the underlying investment.

  1. HYMONT CAPITAL FUND – ARTICLE 8 SFDR DISCLOSURES

Summary

Hymont Capital Fund CommV (the Fund) is a financial product that promotes environmental and/or social characteristics but does not have as its objective sustainable investment and does not invest in sustainable investments. No reference benchmark has been designated for the purpose of attaining the environmental and/or social characteristics promoted by the Fund.

The Fund is an early-stage real-estate fund which will be focused on equity and equity-linked investments in privately held companies (which may be set up or incorporated by the Fund or any of its affiliates), which hold real estate assets or are otherwise active i.a. in real estate projects with a medium-term hold strategy, with an emphasis on income-producing logistics and value-add student housing, along with other mixed-use, office and retail assets.

No sustainable investment objective

This financial product promotes environmental or social characteristics but does not have sustainable investments as its objective.

Environmental or social characteristics of the financial product

The Fund will aim at promoting the following, non-limited, list of environmental and social characteristics (i) Energy Efficiency: Amount of renewable energy generation on-site, (ii) Water Conservation: Area of catchment surfaces utilized for rainwater collection / Percentage of total water demand met through rainwater harvesting, (iii) Social Equity: Provision of community spaces and amenities available to all residents, (iv) Biodiversity: Percentage of green preserved or created within the development.

It is, however, neither expected nor required that every portfolio company or its underlying real estate project falls within the scope of any of the ESG priorities listed in the ESG-policy.

Investment strategy

The investment strategy of the Fund will be focused on making equity and equity-linked investments in privately held companies (which may be set up or incorporated by the Fund, the Statutory Director and/or any of their Affiliates), which hold real estate assets or are otherwise active i.a. in real estate projects with a medium-term hold strategy, with an emphasis on income-producing logistics and value-add student housing, along with other mixed-use, office and retail assets.

The Fund will generally hold one hundred percent (100%) of the outstanding equity of portfolio companies, although the Fund is entitled to co-invest with other investors, accept other minority investors or shareholders in a portfolio company or do minority investments or participations in portfolio companies.

An ESG policy will be implemented that needs to be considered for purposes of making investments in portfolio companies and their underlying real estate projects.

The Fund does not directly or indirectly invest in, guarantee, or otherwise provide financial or other support to companies or other entities that engage in certain activities and/or sectors and are explicitly excluded in the product documentation.

Such exclusions, inter alia, relate to companies which:

  • Consultancy firms, agencies, engineering bureaus or third-party software development houses (e., in general project-based businesses or service companies).
  • Companies with product targeting industries such as:
    • Gambling
    • Adult entertainment
    • Illegal substances/narcotics
    • Tobacco
    • Coal
    • Unconventional oil & gas
    • Alcohol

Companies developing products to help prevent or counter any negative effects on health or the environment in these industries, could however be eligible.

  • Companies violating any of the minimum protection standards to comply with social and governance protection mechanisms from the UN guiding principles on business & Human Rights and OECD guidelines.
  • Companies with direct links to one of the “countries mentioned in the FATF list of ‘High-Risk Jurisdictions subject to a Call for Action’”, as per the Belgium FPS Finances website.

Considering the specific nature of the Fund’s investment strategy, which is to acquire assets in order to redevelop them, the Fund will make sure to take into account the abovementioned sustainability characteristics when assessing an investment opportunity.

Pre-investment, the regular due diligence process will consist of a screening of possible short and long-term risks that may occur within the relevant real estate project and the underlying assets involved in the investment. For this purpose, the Fund bases itself on its in-depth sector knowledge. To this end, an analysis is made of typical risks related to real estate projects such as location, operational and legal risks relating to the underlying assets but also any environmental, social, governance or other risks.

The Fund promotes environmental and/or social characteristics, but will not make any sustainable investments, nor will it qualify as environmentally sustainable under the EU taxonomy. However, if the investment team presumes that a portfolio company and/or the underlying real estate project is potentially eligible under the EU Taxonomy, the Fund will ensure support and guidance for further analysis and reporting.

In the definitive transaction documentation, the Fund will define the reporting requirements and add the extra agreed actions to be taken in to account.

Post-investment, the Fund also provides an annual evaluation. To this end, annual monitoring is exercised based on data available related to the portfolio company and the underlying real estate project. Based on this evaluation, improvement or follow-up actions are discussed.

A detailed overview of the Fund’s good governance practices is provided in our ESG-policy. In the definitive transaction documentation, the Fund will define the reporting requirements and add the extra agreed actions to be taken in to account.

Proportion of investments

All investments of the Fund can be categorized as “#1 Aligned with E/S characteristics”. None of the Fund’s investments are included under “#2 Other”.

Our investment strategy leads us to invest in real estate projects via investments through special purpose vehicles. The projects will be managed taking into account the E/S characteristics set out by the Fund for that specific project, however, none of real estate projects in which the Fund invests are required, at the moment of the investment, to be aligned with the aforementioned E/S characteristics.

Our ESG policy and assessment are tailored to the needs of, and requirements for, real estate projects. Our approach is detailed in two procedures: an ESG assessment (pre-investment) and an ESG monitoring and reporting (post-investment).

Monitoring of environmental or social characteristics

We believe that applying an ESG policy not only mitigates business risks, but also creates long-term value, resulting in better financial return for the Fund. Hence, the Fund takes into account E/S characteristics when managing the real estate projects in which it has invested. It is, however, neither expected nor required that every real estate project falls within the scope of any of the ESG priorities as listed in the ESG policy.

Through an annual follow-up of the ESG performance of the portfolio companies and the underlying real estate projects and assets of the Fund, the Fund aims to identify and improve, as the case may be, the environmental consequences, social and human rights issues of an investment, and the compliance with applicable environmental, human rights and labor rights.

Post-investment, although ESG monitoring of the real estate projects is always included, the Fund also provides an annual evaluation. To this end, an annual monitoring moment is foreseen in which a real estate project will be thoroughly checked based on the available data. Based on this evaluation, improvement or follow-up actions are discussed. A detailed overview of our good governance practices is provided in our ESG policy.

Methodologies

Qualitative performance monitoring in the field of ESG themes is done on a regular basis through the assessments of the portfolio companies’ and their underlying real estate project’s performance vis-à-vis the ESG indicators as set forth for a specific portfolio company and its underlying real estate project. When observations or incidents occur at the level of the portfolio companies and/or the underlying real estate project related to the topics as defined in the ESG policy, these are followed up by the GP. In addition, an annual formal screening takes place where both the risk and performance results are analyzed.

Data sources and processing

To measure the ESG performance of the portfolio company and its underlying real estate project, the Fund will collect a standardized set of information, considering variations in data quality for each project. This includes ensuring reliability, precision, and the potential for valuable insights from data.

In the definitive transaction documentation, the Fund will define the reporting requirements and add the extra agreed actions to be taken in to account.

Reporting on the Fund’s investments will be done in accordance with Annex IV to the Regulatory Technical Standards of the SFDR.

Limitations to methodologies and data

The Fund establishes quantitative Key Performance Indicators (KPIs) for project companies and their underlying real estate projects, ensuring they are easily evaluated. These KPIs and targets are implemented to align everyone towards maximizing positive change. Complementary analysis, performed by the GP, involves subjective evaluation to understand the scale, depth, and efficiency of the ESG process without affecting the Fund’s carried interest. Estimating certain indicators, may be necessary due to limited resources, presenting a limitation in the methodology used.

However, the Fund’s investment horizon is at a very early stage and the relevance of the data is relative. The projects that the Fund invests in, are not yet at scale level, so the impact on the environmental or social characteristics is not always representative.

Due diligence

The Fund conducts due diligence on the underlying assets and real estate projects which involves an initial screening and assessment thereof, as described in the ESG Policy. This process is designed to ensure that thorough due diligence is conducted before making an investment decision. .

An ESG-related risk assessment is thus an integral part of the due diligence performed by the Fund.

Please refer to the Sections “Investment Strategy” and “Data Sources and processing” above for a further description of the Fund’s due diligence.

Engagement policies

The Fund focuses on implementing their E/S characteristics, as set out above, in their investment portfolio by selecting and supporting projects to maximize positive outcomes and minimize negative effects. This involves engaging with projects, requesting information, investigating concerns, and tracking performance. It is, however, neither expected nor required that every portfolio company and their underlying real estate projects fall within the scope of any of the ESG priorities as listed in the ESG policy.

The executive task of monitoring the ESG commitments is assigned to the GP of the Fund.

In the definitive transaction documentation, the Fund will define the reporting requirements and add the extra agreed actions to be taken in to account.

Index as reference

Not applicable since there is no reference benchmark designated for the purpose of attaining the environmental and/or social characteristics promoted by the fund.