Sustainability-related disclosure rules for financial market participants
Publication in accordance with the EU Disclosure Regulation:
REGULATION (EU) 2019/2088 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL (EU Disclosure Regulation) requires financial market participants to disclose the strategy and arrangements for dealing with sustainability risks at company level and at the level of the financial products offered. The norm addressees of the Disclosure Regulation within the LHI Group are LHI Kapitalverwaltungsgesellschaft GmbH (financial market participant, hereinafter referred to as "KVG") and LHI Capital Management (financial advisor, hereinafter referred to as "CapMan"). They hereby comply with the requirements of the EU Disclosure Regulation.
A sustainability risk means an environmental, social or governance event or condition that, if it occurs, can potentially or factually have a significant negative impact on the reputation, the asset, financial and earnings situation of the KVG, CapMan or the financial products managed through advisory or administrative services. These include physical environmental risks, such as extreme weather events caused by climate change or transition risks that exist in connection with the transition to a low-carbon economy.
Art. 3 EU Disclosure Regulation - Transparency of sustainability risk policies
Sustainability is a corporate concept for KVG and CapMan. Companies are successful in the long term, if they are managed with a view to the long term. In every decision, the LHI Group takes into account its long-term consequences. At KVG and CapMan this also includes all investment decisions for their financial products. The two companies already deal with sustainability risks in the product and sales process and have developed binding exclusion criteria. The impact of their own actions on sustainability factors plays a central role not only in the start-up processes but also in the portfolio management of the products as well as in disinvestment decisions. This also includes taking into account the main adverse effects of investment decisions on sustainability factors.
Sustainability factors in this context are, in particular, environmental, social and employee concerns, respect for human rights and the fight against corruption and bribery. All processes are carried out by trained employees, if necessary, accompanied by suitable external consultants.
Art. 4 EU Disclosure Regulation - Transparency of adverse sustainability impacts at entity level
Sustainable thinking and acting can be found at all levels of the Group. The actions of KVG and CapMan take into account ecological, economic and social aspects. The entire LHI Group is making its contribution to combating climate change and is gradually reducing its own CO2 footprint. CO2 emissions that cannot be avoided are compensated. Since 2020, the LHI Group has been a "climate positive" group of companies.
The investment offers of KVG and CapMan are based on the standards for sustainable investments of the United Nations (including PRI) and the sustainability standards of the European Union. In addition, formulated individual criteria are agreed at the individual investment level where required. In order to guarantee their sustainability standards, KVG and CapMan have established suitable processes to take the aforementioned standards into account in advance of the structuring and management of investment offers. An analogous procedure is used for investment services.
Each specific investment project is discussed in detail, individually evaluated and decided upon in a management meeting. The sustainability risk profile of both KVG and CapMan is therefore significantly influenced by the management. The management receives professional support from the risk management on the topic of sustainability risks. This ensures compliance with the requirements related to sustainability risks.
Simultaneously with the implementation of the technical regulatory standards for the EU Disclosure Regulation, KVG and CapMan are establishing a monitoring and reporting system in order to be able to quantify and disclose the sustainability impacts in the future. For investment products in accordance with Art. 8 and Art. 9 of the EU Disclosure Regulation, this will verify compliance with the forecast sustainability aspects and targets.
Article 5 - Transparency of remuneration policies to the integration of sustainability risks
The variable remuneration of the LHI Group's management depends in part on long-term success. KVG and CapMan play a significant role in this. Therefore, the avoidance of sustainability risks is a decisive factor for the assessment of variable remuneration at management level. The management receives its performance-related remuneration in instalments. Retained portions remain in the company for several years. These are only paid out if positive results are consistently achieved during the retention period.