The manner in which sustainability risks are integrated into the investment decisions of IFM
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. To the extent that environmental, social and governance (“ESG”) factors (including the six environmental objectives prescribed by the Taxonomy Regulation: climate change mitigation, climate change adaptation, the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control and the protection and restoration of biodiversity and ecosystems) represent material risks and/or opportunities to maximising long-term risk-adjusted returns, they will be considered as part of the IFM’s investment decision making.
When considering an investment, IFM may analyse a range of factors or utilise tools as deemed relevant by IFM. Integrating ESG factors during the pre-investment phase raises awareness of potential risks and opportunities that can affect investments.
IFM may challenge an investee company’s commitment to improve on ESG factors in management engagements, where appropriate and considered to be effective.
The ability of the IFM to assess and influence ESG issues varies significantly by investment. Situations where the IFM has access to detailed, precise and exhaustive ESG data allows IFM to better detect and address ESG issues relative to situations where IFM may be limited to public information.
The likely impacts of sustainability risks on the returns
While the analysis of ESG factors is an integral component across the IFM’s investment capabilities and one of a number of inputs to the selection of investments and portfolio construction, the investment process of IFM is primarily designed to maximise long-term risk-adjusted returns for Investors. Therefore IFM does not maximise portfolio alignment with sustainability risks as a separate goal in its own right nor does it precisely attribute the impact of ESG factors.
Adverse sustainability impacts
IFM does not currently consider the principal adverse impacts of investment decisions on sustainability factors in accordance with the specific regime outlined in the Disclosure Regulation (the PAI Regime). Taking into account the size, nature and scale of the IFM’s activities and the types of products the IFM currently makes available, IFM has decided not to comply with the PAI Regime at this time.