SUSTAINABILITY-RELATED DISCLOSURES:
SUSTAINABILITY STRATEGY OF 4L CAPITAL AG
Financial product: Sustainability strategy of 4L Capital AG
LEI: 529900L40ASP24IT4X36
1. SUMMARY
With its sustainability strategy, 4L Capital AG identifies investments that promote sustainable development in the context of the Sustainable Development Goals (SDGs) by means of the appropriate investment decision they take.
In order to provide a practical framework for implementing the fundamental concept of sustainable development, this strategy focuses on the 17 Sustainable Development Goals (SDGs) of the United Nations: https://sdgs.un.org/goals; https://www.bmz.de/de/agenda-2030. (Reference: 3. Environmental and social characteristics of the financial product).
The Impact Management Project (IMP)/ Impact Frontiers method is used to assess the sustainability impact of investments and forms the basis of investment decisions:: https://impactmanagementproject.com/, https://impactfrontiers.org/ (Reference: 7. Methodologies, Reference: 5. Allocation of investments).
The sustainability of investments is analysed and verified in four steps (Reference: 6. Monitoring of environmental and social characteristics, 10. Due diligence) using different data sources (Reference: 8. Data sources and processing, 9. Limitations regarding methods and data):
- Evaluation: 5 dimensions of sustainability of each outcome
- Categorisation of the outcomes (Reference 4. Investment strategy)
- Measurement and illustration: Scoring of the impact of each outcome
- Composition of sustainability and calculation of the sustainability score
No sustainable investment is targeted (Reference: 2. No sustainable investment target) and no reference value is used. (Reference: 12. Specific reference value). Information on the participation policy under: Reference: 11. participation policy
2. NO SUSTAINABLE INVESTMENT OBJECTIVE
This financial product targets environmental or social features, but does not target sustainable investments.
3. ENVIRONMENTAL OR SOCIAL CHARACTERISTICS OF THE FINANCIAL PRODUCT
When making selection from investment classes with focus on environmental and social characteristics, our focus is on the following SDGs and their sub-goals:
- SDG 3: Good health and well-being
- Promoting access to healthcare for all
- Combating specific diseases
- SDG 6: Clean water and sanitation
- Promoting access to water resources and improving water quality
- Promotion of sustainable water management
- SDG 7: Affordable and clean energy
- Promotion of renewable energy
- Promotion of energy efficiency
- SDG 9: Industry, innovation and infrastructure
- Promoting the modernisation of infrastructure
- Promoting resource efficiency
- SDG 11: Sustainable cities and communities
- Reducing environmental pollution and improving air quality in cities and municipalities
- Promoting resource efficiency
- SDG 12: Responsible consumption and production
- Promoting the efficient use of natural resources
- Promotion of the circular economy
- SDG 13: Climate action
- Combating climate change in all its forms, especially with view to meeting the 1.5° target
Sources: https://sdgs.un.org/goals; https://www.bmz.de/de/agenda-2030
These sub-goals of the SDGs merely represent our focus for the investments within the sustainability universe and do not constitute concrete ecological and/or social characteristics with a verifiable claim to fulfilment.
4. INVESTMENT STRATEGY
The global economy and financial markets as well as the level of risk appetite affect, among other things, particular implementations of the investment strategy.
The sustainability strategy of 4L Capital AG focuses in particular on investments that contribute to sustainable development through appropriate investment decisions. The selection of these investments can be viewed under: Point 7: Methods.
In order to be included in the sustainability universe of 4L Capital AG, investments must reach a score higher than the minimum score defined internally byv4L Capital AG. Through this definition, the investments can be categorised according to the Impact Management Project/ Impact Frontiers:
The possible categories are as follows:
- Potential to cause harm ⇒ Investment will not be selected
- Causes harm ⇒ Investment will not be selected
- Takes action to avoid harm ⇒ Investment will not b selected
- Benefits stakeholders ⇒ Investment will only be selected if a further impact is achieved in the next higher category
- Contributes to solutions ⇒ Investment can be selected
There is no explicit policy to assess the good governance practices of the companies in which investments are made. However, these aspects may form part of the assessment of the 5 dimensions of sustainability.
5. PROPORTION OF INVESTMENTS
There is no division of investment within the universe of the sustainability strategy. The method described (point 7:Methods) applies to all investment products in the universe.
6. MONITORING OF ENVIRONMENTAL AND SOCIAL CHARACTERISTICS
No specific determination of sustainability indicators is made.
Investment products within the sustainability investment universe with a focus on the SDGs are assessed using the Impact Management Projects (IMP) / Impact Frontiers https://impactmanagementproject.com/; https://impactfrontiers.org/.
For the purpose of due diligence and verification, investments are reviewed internally and externally (external data provider) in relation to the SDGs, in relation to the dimensions of sustainability as well as in relation to fundamentals.
7. METHODOLOGIES
Investment decisions are made using the Impact Management Project (IMP) / Impact Frontiers method to assess the sustainability impact of investments: https://impactmanagementproject.com/; https://impactfrontiers.org/.
4L Capital AG may consider an investment in the sustainability investments universe with focus on the SDGs to have multiple sustainability outcomes. These outcomes should constitute an integral part of the investments.
Initially, investments are evaluated on the basis of 5 dimensions for individual outcomes and assigned a score from 0 to 5. These outcomes can then be categorised by comparing them with minimum requirements (threshold scores). As a result a score can be calculated and mapped for each individual dimension of an outcome.
In addition, by weighting the individual outcomes, the composition of the sustainability of the investment can be calculated, as well as a sustainability score for the entire investment product.
A. Evaluation: 5 dimensions of sustainability of each outcome
The individual dimensions of sustainability (who, what, how much, enterprise contribution, risk) are broken down into several subcategories, the majority of which can be rated with a score from 0 to 5. The individual subcategories can also be weighted differently. Furthermore, threshold values are defined that must at least be reached in order to include various investments in the universe.
B. Categorisation of the outcomes
By defining different threshold scores, the individual effects can be categorised according to the Impact Management Project/ Impact Frontiers.
The potential categories are as follows:
- Potential to cause harm ⇒ Investment will not be selected
- Causes harm ⇒ Investment will not be selected
- Takes action to avoid harm ⇒ Investment will not b selected
- Benefits stakeholders ⇒ Investment will only be selected if a further impact is achieved in the next higher category
- Contributes to solutions ⇒ Investment can be selected
C. Measurement and illustration: Scoring of the impact of each outcome
Multiplying the scores from 0 to 5 by weighting gives a score for each dimension relative to
- the maximum possible score = always 5 points multiplied by the weightings (∑100%)
- the threshold score
D. Composition of sustainability and calculation of the sustainability score
The individual dimensions of sustainability can be weighted differently.
A total score for individual outcomes is calculated by multiplying the individual weightings by the scores of the dimensions of the outcome.
Furthermore, the individual outcomes can then be weighted so that a percentage sustainability score for the investment can be calculated by multiplying the sum of these weightings by the scores of the outcomes. In addition, the composition of the sustainability of the investment, distributed over the individual outcomes (100% in total) can be specified.
The sum of the proportionally weighted individual outcomes represents the sustainability score of the investment product.
8. DATA SOURCES AND PROCESSING
The data sources for the analysis refer in particular to investment-specific publicly available information such as company reports and sustainability reports, websites, an external data provider as well as external data from the OECD, the World Bank, the SDG Index, the SDG Report, the IPCC reports, from Our World in Data and an individual and specific assessment by 4L Capital AG.
To ensure quality of data, only data is used from sources that 4L Capital AG has identified as valid. The data is carefully researched and stored in investment-specific files for further analysis. The share date which is estimated is approx. 15%.
9. LIMITATIONS TO METHODOLOGIES AND DATA
4L Capital AG is not aware of any significant limitations to the methods and data. When necessary and where accurate data is not available for specific investments, estimates are provided. This can be seen in the internal documentation.
The limitations do not affect the fulfilment of the environmental and/or social characteristics, as the methodology described allows for this flexibility and openness with regard to the SDGs.
10. DUE DILIGENCE
Please refer to point 6: Monitoring of environmental or social characteristics.
In addition, duty of care is provided on the basis of the quality of the construct validity, the internal validity and the reliability. External validity and objectivity are not feasible on the basis of dynamic development and individual considerations and cannot be regarded as expedient against the background of sustainable development.
11. ENGAGEMENT POLICIES
4L Capital AG’s participating policy is described here: https://4l.capital/mitwirkungspolitik/.
No management procedures exist with regard to sustainability-related disputes.
12. DESIGNATED REFERENCE BENCHMARK
No benchmark is used for the sustainability strategy.
EU TAXONOMY
In compliance with legal regulations (Art. 6 Taxonomy Ordinance), we are required to disclose the following information on the basis of the choice of investment strategy:
The “do no significant harm” principle applies only to those investments underlying the financial product that take into account the EU criteria for environmentally sustainable economic activities.
The investments underlying the remaining portion of this financial product do not take into account the EU criteria for environmentally sustainable economic activities.
As at: 27.12.2022
Update: 23.03.2023
