Encavis Portfolio Management

Sustainability risks

According to ‘Regulation (EU) 2019/2088 of the European Parliament [...] on sustainability‐related disclosures in the financial services sector’, Encavis Portfolio Management GmbH is required as an investment adviser to publish certain information on its website. For example, we have a legal obligation to disclose the manner in which sustainability risks are integrated into our investment advice. Further, our remuneration policies must include information on how these policies are consistent with the integration of sustainability risks.

A ‘sustainability risk’ is an environmental, social or governance event or condition that, if it occurs, could have an actual or potential material negative impact on the assets, financial situation, profits or reputation of a company, and hence on the value of the investment. Sustainability risks can affect all known risk types and contribute as a factor to the materiality of these risk types.

Taking sustainability risks into account in investment decisions is also known as taking an ‘outside-in’ perspective. The issue at stake here is whether and how an event or condition that classes as a sustainability risk, but does not originate from within the investment object or the company management, can adversely impact the economic development of the investment object and hence diminish returns on the investment. Such events and conditions include, amongst other things, extreme weather conditions and other consequences of the climate crisis such as supply chain problems, as well as issues such as social unrest, tax evasion or corruption, etc.

Encavis Portfolio Management GmbH takes sustainability risks into account when offering investment advice on renewable energy projects. Before recommending a power plant, we commission experts to conduct due diligence tests and then assess the implications of the results. The way we take sustainability risks into consideration depends on what the customer requests. Either we analyse the environmental report (where available), or we take such risks into account as part of our due diligence process. When offering investment advice, Encavis Portfolio Management GmbH uses the due diligence results as a basis for analysing the financial instrument with all its opportunities and risks. Sustainability risks are explicitly included in this assessment.