Sustainable Finance Disclosure Regulation
The following disclosures are made by Providence Equity Partners L.L.C. (“Providence”) in accordance with Articles 3(1), 4(1)(b) and 5(1) of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (“SFDR”).
Information about Policies on Integration of Sustainability Risks
“Sustainability risk” is defined in SFDR as “an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment.” In relation to Providence, sustainability risks are risks which, if they occur, would cause a material negative impact on the value of the portfolios of the alternative investment funds under management (“AIFs”).
Providence recognizes the importance of environmental, social and governance (“ESG”) considerations in the performance of its investments. Providence is committed to the integration of ESG into its investment decision-making process and internal policies. It believes that a continued focus on socially responsible and sustainable investing can result in investments that generate meaningful returns for its investors and are consistent with investing for growth. To that end, and where consistent with its fiduciary and other duties and as otherwise commercially practicable, Providence considers guiding principles that incorporate ESG factors, including sustainability risks, alongside other factors into its investment decision-making process and ownership strategy. As part of its broader approach to the selection and diligence of prospective investments, Providence will seek to identify, assess, monitor and, where necessary, mitigate risks, including sustainability risks, on an investment-by-investment basis with a view to preserving the value of the AIFs’ investments; taking account of the relevance and materiality of such risks. In addition, sustainability risks may also be integrated into post-investment monitoring and reporting processes, where appropriate, for particular portfolio companies. Notwithstanding the above, sustainability risks may not be relevant to certain non-core investment activities of the AIFs, such as derivatives for hedging arrangements.
Investors should be aware that integrating sustainability risks into the investment decision-making process for the AIFs’ investments and its ESG guiding principles does not mean that ESG integration is the sole or primary consideration for such investment. Instead, Providence evaluates and weighs a variety of financial factors, which can include ESG considerations (where believed to be financially material), to make its investment decisions.
No Consideration of Principal Adverse Impacts
Providence does not consider the adverse impacts of its investment decisions on sustainability factors as the current sustainability impact profile of a given investment opportunity will not preclude an investment from being included in the AIF’s portfolio. While Providence will undertake certain engagement activities with investee companies, the AIFs’ investment strategies do not specifically seek to reduce negative impacts that may be associated with portfolio companies.
Remuneration Policy
Providence’s remuneration policies are consistent with its approach to the integration of sustainability risks into the investment decision-making process to ensure sound and effective risk management.
Investment professionals are compensated through a combination of fixed and variable remuneration, and the structure of remuneration is designed to align the long-term interests of investment professionals with the AIFs they manage.
As sustainability risks are a type of financial risk, Providence acknowledges that failure to consider such risks, like other financial risks, could have an adverse impact on the performance of investments and the performance of the AIFs managed by it.
To the extent that sustainability risks have an adverse impact on the performance of the AIFs, this is likely to be reflected in the overall level of variable remuneration awarded to staff.