Regulatory

a. This Website is presented by Sustainable Development Capital LLP (“SDCL”), a limited liability partnership registered in England and Wales (company no. OC330266). SDCL’s registered office is at 166 Piccadilly, London, W1J 9EF. If you would like to access the Companies House register please visit their website at https://beta.companieshouse.gov.uk.

The information contained in this site has been compiled with considerable care to ensure its accuracy at the date of publication. However, no representation or warranty, express or implied, is made to its accuracy or completeness. Nothing in this information or elsewhere in this website shall exclude, limit or restrict our duties and liabilities to you under the United Kingdom’s Financial Services and Markets Act 2000 or any conduct of business rules which we are bound to comply with.

The information contained in this site should not be considered as advice or a recommendation to buy, sell or hold a particular investment. Investment markets and conditions can change rapidly and, as such, views expressed should not be taken as statements of fact, nor should reliance be placed on these views when making investment decisions.

The information contained in this site does not constitute an offer of, or an invitation to apply for, securities in any jurisdiction where such offer or invitation is unlawful or in which the person making such offer is not qualified to do so or to whom it is unlawful to make such offer or solicitation. Specifically, any funds described will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and, except in a transaction which does not violate the Securities Act or any other applicable U.S. Securities laws (including without limitation any applicable law of any of the States of the U.S.A.) may not be directly or indirectly sold or offered in the United States of America or any of its territories or possessions or areas subject to its jurisdiction or to or for the benefit of a U.S. person.

If you are in any doubt about any of the information on this website please consult your financial or other professional adviser.

United Kingdom and the rest of the European Union: SDCL is authorised and regulated in the United Kingdom by the Financial Conduct Authority (“FCA”) to conduct investment business and is subject to the FCA rules. SDCL is entered in the FCA’s register number 471124. If you would like to access the FCA register please visit their website at www.fca.org.uk/financial-services-register. The FCA regulates the financial services industry in the UK and is located at 25 The North Colonnade, Canary Wharf, London, E14 5HS. If you would like further information about the FCA you can visit its website, www.fca.org.uk.

SDCL is registered for value added tax (VAT) purposes. Its VAT number is 135592209.

Asia: Sustainable Development Capital (Asia) Limited is a joint venture between the SDCL Group and Hong Kong’s First Eastern Investment Group. Its office is at 25th Floor, The Centrium, 40 Wyndham Street, Central, Hong Kong. It is registered as a private limited company in Hong Kong (company no 1697577).

Australia: SDCL is exempt from the requirement to hold an Australian financial services licence (“AFSL”) under the Corporations Act 2001 (Cth) in respect of financial services, in reliance on ASIC Class Order 03/1099, a copy of which are on the website of the Australian Securities and Investments Commission, www.asic.gov.au. The class order exempts bodies regulated by the UK Financial Conduct Authority (“FCA”), such as SDCL, from the requirement to hold an AFSL where they provide financial services to wholesale clients in Australia on certain conditions. Financial services provided by SDCL are regulated by the FCA under the laws and regulatory requirements of the United Kingdom, which are different to the laws applying in Australia.

 

United States of America: SDCL does not intend to register with the U.S. Securities and Exchange Commission as a broker-dealer. SDCL has a wholly-owned subsidiary, Sustainable Development Capital LLC (“SDCL-US”), a limited liability company formed under the laws of the State of New York, whose place of business is at 75 Rockefeller Plaza, 18th Floor, New York, NY 10019. SDCL-US is a member firm of the Financial Industry Regulatory Authority, Inc. (FINRA) and the Securities Investor Protection Corporation and is authorized by FINRA to engage in private placements of securities, particularly for U.S.-resident clients. In light of the foregoing, SDCL-US is subject to the U.S. Securities Exchange Act of 1934, as amended, regulations promulgated thereunder by the U.S. Securities and Exchange Commission, FINRA rules, and the securities laws and regulations of the respective U.S. state securities authorities.

For important disclosures regarding SDCL-US’s Business Continuity Plan, Anti-Money Laundering Program and Privacy of Client Information, we direct you to click on the following link: CLICK HERE

This website is not operated, published or maintained by SDCL-US and should not be viewed as a solicitation of investment services and transactions by it.

 
Canada – Quebec: IMPORTANT NOTICE TO POTENTIAL INVESTORS IN QUEBEC. SDCL is not registered in Quebec to make trade and all of the assets of SDCL are situated outside of Canada. SDCL’s head office is in London, United Kingdom and it also has places of business in New York, USA and Hong Kong. As a result, it may be difficult to enforce legal rights against SDCL. SDCL’s service agent in Quebec is Fasken Martineau DuMoulin LLP, the Stock Exchange Tower, PO Box 242, Suite 3700, 800 Victoria Square, Montreal, QC, H4Z 1E9. SDCL is authorised and regulated in the United Kingdom by the Financial Conduct Authority as an investment adviser and may market “foreign securities” to “permitted clients” in reliance on the international dealers exemption contained in the Canadian Securities Administrators’ National Instrument 31-103 (Registration Requirements and Exemptions).

Canada – Ontario: IMPORTANT NOTICE TO POTENTIAL INVESTORS IN ONTARIO. SDCL is not registered in Ontario to make trade and all of the assets of SDCL are situated outside of Canada. SDCL’s head office is in London, United Kingdom and it also has places of business in New York, USA and Hong Kong. As a result, it may be difficult to enforce legal rights against SDCL. SDCL’s service agent in Ontario is FMD Service (Ontario) Inc., 333 Bay Street, Suite 2400, Bay Adelaide Centre, Box 20, Toronto, ON, M5H 2T6. SDCL is authorised and regulated in the United Kingdom by the Financial Conduct Authority as an investment adviser and may market “foreign securities” to “permitted clients” in reliance on the international dealers exemption contained in the Canadian Securities Administrators’ National Instrument 31-103 (Registration Requirements and Exemptions).

Canada – British Columbia: IMPORTANT NOTICE TO POTENTIAL INVESTORS IN BRITISH COLUMBIA. SDCL is not registered in British Columbia to make trade and all of the assets of SDCL are situated outside of Canada. SDCL’s head office is in London, United Kingdom and it also has places of business in New York, USA and Hong Kong. As a result, it may be difficult to enforce legal rights against SDCL. SDCL’s service agent in British Columbia is FMD Service (B.C.) Inc., 2900 – 500 Burrard Street, Vancouver, BC, V6C 0A3. SDCL is authorised and regulated in the United Kingdom by the Financial Conduct Authority as an investment adviser and may market “foreign securities” to “permitted clients” in reliance on the international dealers exemption contained in the Canadian Securities Administrators’ National Instrument 31-103 (Registration Requirements and Exemptions).

Other jurisdictions: The use of these web-pages in certain jurisdictions may be restricted by law. Persons using these web-pages are required to inform themselves about, and to observe, any such restrictions. These web-pages are not authorised for use in a jurisdiction: (i) where the material herein would be considered an offer to sell or the solicitation of an offer to purchase any securities and where such offer or invitation is not authorised; (ii) where SDCL is not qualified to present this material; or (iii) where the use of these web-pages would result in a requirement for SDCL to register or file with local authorities.

Bribery and Corruption: We recognise the adverse effects that bribery and corruption can have on national economies and society and have taken steps reasonably designed to eliminate bribery of any kind wherever SDCL operates. SDCL Group entities are committed to conducting their businesses fairly, honestly and openly, without the use of corrupt practices or acts of bribery to obtain an unfair advantage.

A bribe is any form of inducement made with the intention of influencing any party to do something which is dishonest, illegal or unethical. Bribes can take many forms and include business practices which, depending on the circumstances, may otherwise appear legitimate, including the offer or acceptance of direct or indirect payments, services, gifts, charitable donations, sponsorships or preferential treatment.

We have zero tolerance to bribery and corruption and have developed policies and procedures reasonably designed to prevent them, these include:

b. This Website is presented by SDCL EE Co (UK) LLP (“SDCL EECo”), a limited liability partnership registered in England and Wales (company no. OC376937). SDCL EECo’s registered office is at 166 Piccadilly, London, W1J 9EF. If you would like to access the Companies House register please visit their website at https://beta.companieshouse.gov.uk.

The information contained in this site has been compiled with considerable care to ensure its accuracy at the date of publication. However, no representation or warranty, express or implied, is made to its accuracy or completeness. Nothing in this information or elsewhere in this website shall exclude, limit or restrict our duties and liabilities to you under the United Kingdom’s Financial Services and Markets Act 2000 or any conduct of business rules which we are bound to comply with.

The information contained in this site should not be considered as advice or a recommendation to buy, sell or hold a particular investment. Investment markets and conditions can change rapidly and, as such, views expressed should not be taken as statements of fact, nor should reliance be placed on these views when making investment decisions.

The information contained in this site does not constitute an offer of, or an invitation to apply for, securities in any jurisdiction where such offer or invitation is unlawful or in which the person making such offer is not qualified to do so or to whom it is unlawful to make such offer or solicitation.

Specifically, any funds described will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and, except in a transaction which does not violate the Securities Act or any other applicable U.S. Securities laws (including without limitation any applicable law of any of the States of the U.S.A.) may not be directly or indirectly sold or offered in the United States of America or any of its territories or possessions or areas subject to its jurisdiction or to or for the benefit of a U.S. person.

If you are in any doubt about any of the information on this website please consult your financial or other professional adviser.

United Kingdom and the rest of the European Union: SDCL EECo is authorised and regulated in the United Kingdom by the Financial Conduct Authority (‘FCA’) to conduct investment business and is subject to the FCA rules. SDCL EECo is entered in the FCA’s register number 591707. If you would like to access the FCA register please visit their website at www.fca.org.uk/register. The FCA regulates the financial services industry in the UK and is located at 25 The North Colonnade, Canary Wharf, London, E14 5HS. If you would like further information about the FCA you can visit its website, www.fca.org.uk.

SDCL EECo is registered for value added tax (VAT) purposes. Its VAT number is 135592209.

Bribery and Corruption: We recognise the adverse effects that bribery and corruption can have on national economies and society and have taken steps reasonably designed to eliminate bribery of any kind wherever SDCL EECo operates. SDCL Group entities are committed to conducting their businesses fairly, honestly and openly, without the use of corrupt practices or acts of bribery to obtain an unfair advantage.

A bribe is any form of inducement made with the intention of influencing any party to do something which is dishonest, illegal or unethical. Bribes can take many forms and include business practices which, depending on the circumstances, may otherwise appear legitimate, including the offer or acceptance of direct or indirect payments, services, gifts, charitable donations, sponsorships or preferential treatment.

We have zero tolerance to bribery and corruption and have developed policies and procedures reasonably designed to prevent them, these include:

Prohibiting staff from paying or accepting any fee or commission or non monetary benefit in relation to business carried out for a client if this is likely to impair the Group’s duty to act in the best interests of its client.

Investigating all instances of alleged bribery and assisting the police and other appropriate authorities in any resultant prosecution.

Prohibiting payments either directly or through any third party that might be interpreted as a bribe.

c. SDCL EE Co (UK) LLP – RESPONSIBLE INVESTMENT POLICY

INTRODUCTION

SDCL EE Co (UK) LLP (“SDCL EE Co”) is a specialist investment firm that seeks to invest in projects that reduce the demand for energy in non-domestic buildings, industrial facilities and urban infrastructure in the UK. The projects will seek to cut energy costs and improve productivity. Reducing demand for energy through energy efficiency is one of the largest and most cost effective ways of making energy cleaner and reducing greenhouse gas emissions and offers attractive risk-adjusted investment returns.

SDCL EE Co is a member of the SDCL Group, which focuses on financing initiatives that seek to provide long-term value, increased efficiency and superior risk-adjusted returns through scalable business models that positively impact the environment and society. SDCL EE Co is committed to being a responsible investor as part of the development of long-term shareholder value and sustainable growth. A cohesive assessment and management of environmental, social and governance related matters helps to realise increased financial performance and long-term value of investments, as well as contributing towards broader societal benefits.
Given its business objectives, SDCL EE Co is focused on ensuring that all its financial interests have a strong beneficial environmental impact. This Responsible Investment Policy ensures that SDCL EE Co’s investments and loans perform well against wider environmental, social (including safety) and governance (“ESG”) standards.

This version of this Policy was reviewed and approved by the SDCL EE Co Board on [insert date]. Any comments, issues or complaints relating to it or any of SDCL EE Co’s investments should be directed to [info@sdcl-ib.com].

ANNUAL REVIEW
We undertake to prepare an annual report to the Management Board of SDCL EE Co (UK) LLP. This will consider our Responsible Investment Policy in light of the investments made, identify any material issues that have arisen, and if required, make recommendations on changes to the Policy.

COMMITMENT AS A RESPONSIBLE INVESTOR

Our environmental, social and governance management system for any investment structure we embark upon includes:

• complying with all applicable laws;
• as appropriate, seeking our suppliers and contractors commitment to minimising adverse impacts and enhancing positive effects on the environment, workers, and all stakeholders;
• as appropriate, seeking our suppliers and contractors commitment to continuous improvements in terms of management of the environment, social matters and governance;
• collaborating with other organisations to promote adoption of Responsible Investment;
• working to utilise relevant international best practice standards;
• integrating environmental, social and governance matters into the investment selection process by requiring suppliers and contractors to confirm that they will be compliant with this Policy prior to obtaining Investment Committee approval, in order to minimise risk and add value whilst continuing to monitor and optimise implementation strategies;
• this policy applies to all new investment opportunities considered by SDCL EE Co across all business lines, sectors and geographies;
• providing information, instruction, training and resources to employees so that they can work towards carrying out this policy across all investment activities;
• if a potential ESG matter is identified, SDCL EE Co, working with suppliers and contractors, will evaluate its nature and extent;
• at the time of any disposal of a financial interest, subject to any confidentiality restrictions, arranging for the appropriate disclosure of the status of any material ESG concerns including the actions performed to manage them, in order to assist the next owner; and
• reporting on compliance of investments and loans with this policy as well as risks and opportunities for improvement arising as part of its annual reporting to stakeholders.

RESPONSIBLE INVESTMENT STANDARDS

SDCL EE Co will ensure that it always has the commitment, and capacity to effectively identify, monitor and manage all potential ESG matters facing the business.
SDCL EE Co will assess its suppliers and contractors activities and investments and then monitor and record compliance of activities with the standards set out in this policy and report on any areas where there is a risk of failure to comply, either prior to investment or loan or at any point thereafter.

Where any material or potentially material ESG matter arises, SDCL EE Co will report this to all counterparties and create an action plan to address the matter and report to counterparties on the implementation of this plan.
SDCL EE Co will ensure that investee companies, contractors and major suppliers have the capacity, commitment and track record to uphold these standards and to seek ongoing improvement of operations against these standards.

ENVIRONMENT STANDARDS

SDCL EE Co operates in compliance with applicable local and national laws (as a minimum). This means taking appropriate actions to comply with all applicable environmental and planning laws and regulations that are in force (and make reasonable preparations to comply with laws and regulations shortly due to come into force), including those administered in the UK by regulatory authorities including the Environment Agency, the Health Protection Agency, Ofgem and local authorities, and be consistent with the direction of relevant current published UK government policy.

Energy Efficiency interventions typically involve a low environmental impact. However where our activities involve energy efficiency projects that do have an incremental environmental impact above and beyond a host’s existing activities, we will strive, working with contractors, investees and their suppliers, to:

• assess the environmental impact of our operations as follows:
– identify potential risks and appropriate mitigating measures through an environmental impact assessment where business operations could involve loss of biodiversity or habitat, emission of significant quantities of greenhouse gases, severe degradation of water or air quality, substantial solid waste or other significant negative environmental impacts; and
– consider the potential for positive environmental impacts from business activities;
• take appropriate actions to mitigate environmental risks, ameliorate environmental damage, and enhance positive effects as follows:
– where an activity is assessed to present significant environmental risks, work over time to apply the relevant Investor policies and guidelines, if these are more stringent than local legislation, with appropriate targets and timetable for improvements; and
– as appropriate, work over time towards achieving implementation of international environmental best practice standards;
• The following environmental risks require disclosure and reporting from contractors, suppliers and any investee companies with which SDCL EE Co engages, identifying:
– Severe degradation of water, soil or air quality;
– Production of substantial waste product;
– Production or use of substances potentially hazardous to human, plant or animal life, including genetically modified plants and pesticides;
– Emission of significant quantities of greenhouse gases;
– Loss of biodiversity or habitat; and
– Ozone depleting substances.

SOCIAL STANDARDS

LABOUR AND WORKING CONDITIONS

We comply with all applicable local and national laws (as a minimum). This means taking appropriate actions to comply with all applicable laws and regulations relating to employment, occupational health and safety, human rights, public safety and security and community matters that are in force (and make reasonable preparations to comply with laws and regulations shortly due to come into force), including those administered by the Health & Safety Executive, Health Protection Agency and local authorities, and be consistent with the direction of relevant current published UK government policy.

Further, we will obtain from suppliers and contractors undertakings:

• not to employ or make use of forced labour of any kind;
• not to employ or make use of harmful child labour;
• to pay wages which meet or exceed industry or legal national minima;
• to treat employees fairly in terms of recruitment, progression, terms and conditions of work and representation, irrespective of gender, race, colour, disability, political opinion, sexual orientation, age, religion, social or ethnic origin, or HIV status;
• to allow consultative work-place structures and associations which provide employees with an opportunity to present views to management;
• for remote operations involving the relocation of employees for extended periods of time, to ensure that such employees have access to adequate housing and basic services; and
• uphold labour standards in accordance with the laws of the country in which the relevant entity operates and as defined by the fundamental principles of the International Labour Organisation Declaration.

HEALTH AND SAFETY STANDARDS

We comply with applicable local and national laws (as a minimum). Further, we will obtain from our suppliers and contractors assurances that they will:
• assess the health and safety risks arising from work activities;
• take appropriate actions to eliminate or reduce risks to health and safety as follows:
– where an activity is assessed to present significant health and safety risks, work over time to apply the relevant Investor policies and guidelines, if these are more stringent than local legislation, with appropriate targets and timetable for improvements; and
– as appropriate, work over time towards international best practice standards for health and safety.

OTHER SOCIAL STANDARDS

We are also aware of the potential effect of our actions on the wider community. Where appropriate, SDCL EE Co will require its suppliers contractors to evaluate and monitor on an ongoing basis the potential risks and impacts of our activities and identify appropriate mitigation measures through a social impact assessment. The following social risks would be expected to require disclosure and reporting from any contractor or investee company or major supplier with which SDCL EE Co engages:
• The payment of wages below legal minimum levels;
• The unfair treatment of employees;
• The absence of a right to freedom of association and collective bargaining or equivalent permitted consultative work-place structures and associations;
• Hazardous working conditions with an unusual level of risk to workers compared to that generally prevailing in the wider workplace;
• Illegal workers, including child labour, forced labour or migrant workers without requisite working permits;
• Involuntary resettlement; and
• Threat to cultural or archaeological heritage or indigenous peoples.
Where appropriate, we will require our suppliers and contractors to commit that they:
• take account of our impact on employees, contractors, the local community and all others affected by our operations as follows:
– identify potential adverse effects and appropriate mitigating measures through a social impact assessment in cases involving resettlement, critical cultural heritage, indigenous peoples, non-local labour or other issues where the negative impact could be significant; and
– consider social development contributions; and
– take appropriate actions to mitigate risks, ameliorate negative impacts, and enhance positive effects.

GOVERNANCE: BUSINESS INTEGRITY AND GOOD CORPORATE GOVERNANCE STANDARDS

There are other considerations, which we work towards, including:
• complying with all applicable laws and promote international best practice, including those laws and international best practice standards intended to prevent extortion, bribery and financial crime;
• having a clearly-defined and transparent governance and management structure with effective procedures, controls and checks and balances in place, including the implementation of high standards in respect of board composition (or equivalent top tier governing body), management information and independent review. This includes:
– An appropriate balance of executive and non-executive directors (or the equivalent top tier of management oversight applicable);
– Appropriate safeguards to oversee audit and remuneration, including separated audit and remuneration sub-committees where justified by the scale of the organisation;
– Regular board meetings (or equivalent top tier governing body) with agreed agenda and papers circulated in advance, including a regular board pack with relevant management information to enable full and proper scrutiny;
– An annual programme of board agenda topics including an annual review of RI matters arising;
– A respected firm of accountants acting as auditors who are independent of the board and shareholders (or equivalent top tier governing body and economic owners); and
– Promote transparency, accountability and good governance through regular reporting of financial and other information to investors and lenders and deal with regulators in an open and co-operative manner.
• upholding high standards of business integrity and honesty;
• dealing with regulators in an open and co-operative manner;
• prohibiting all employees from making or receiving gifts of substance in the course of business;
• prohibiting the making of payments as improper inducement to confer preferential treatment;
• prohibiting contributions to political parties or political candidates, where these could constitute conflicts of interest;
• properly recording, reporting and reviewing financial and tax information;
• promoting transparency and accountability grounded in sound business ethics;
• using information received from our partners only in the best interests of the business relationship and not for personal financial gain by any employee;
• clearly defining responsibilities, procedures and controls with appropriate checks and balances in company management structures;
• using effective systems of internal control and risk management covering all significant issues, including environmental, social and ethical issues;
• being in compliance with UKGIB’s Client Integrity policy (which sets standards of good business practice and reputation required of businesses and their investors), Anti-Money Laundering policy and Tax policy (which identifies certain approaches to tax avoidance which are not acceptable to UKGIB); and

• Having suitable policies and a code of conduct on key business integrity matters such as bribery and corruption, gifts, anti-money laundering, extortion, financial crime, privacy and use of privileged information and the upholding of high standards of integrity and honesty grounded in sound business ethics, as well as the management systems required to successfully implement such policies and evaluate and report on compliance.

UNITED NATIONS ENVIRONMENT PROGRAM – FINANCE INITIATIVE (UNEP FI)

Sustainable Development Capital LLP is a member of the UNEP FI Property Working Group (PWG). Its purpose is to encourage property investment and management practices that achieve the best possible environmental, social and financial results.

SDCL EE Co aims to comply with the recommendations of the PWG in all its activities.

The Property Working Group strives to encourage sustainability in property finance.

Aims of the Property Working Group:

• Promoting and encouraging Responsible Property Investment by assembling evidence to show how it can protect or enhance financial returns throughout the lifecycle of buildings while simultaneously reducing negative environmental and social impacts;
• Demonstrating clearly how the principles of Responsible Property Investment can be applied to property assets, portfolios and financing;
• Working autonomously or with others to develop tools and mechanisms, such as appropriate measurement regimes, or ‘how to’ toolkits, etc. to develop and promote best practice in property investment organizations;
• Liaising with policy-makers in establishing the appropriate policy and regulatory environments for Responsible Property Investment practices to flourish; and
• Being a centre of excellence on Responsible Property Investment by facilitating access to, relevant information, best practice and expertise.
Assisting property investors and property fund and asset managers in adopting Responsible Property Investment (RPI) practices is an ongoing area of PWG work. PWG has recently finished a ‘toolkit’ series that informs concerned managers who wish to pursue RPI practices about the next best things they can do. The group will continue to assemble and share best practices from across the globe on all manner of responsible property investment and asset and property management.

PWG will also enforce the involvement in policy development and explore public and private financing mechanisms for energy efficiency (EE) retrofit market: PWG are set to undertake a project with a view to explore drivers and barriers of capital into commercial and residential EE retrofit market.
The group will continue to focus on the field of common metrics for property ESG performance: Main areas of work will include furthering the debate around property environmental analysis, identifying approaches to integrating environmental metrics into investment performance analysis, and promoting active engagement of property investment industry in the design of environmental metrics.

Bribery & Corruption: SDCL EE Co (UK) LLP (the “Firm”) is committed to ensuring that it, its partners, employees, agents and anyone contracted to it comply with the requirements of the UK Bribery Act 2010.

The Firm is committed to conducting its business fairly, honestly and openly, and has a zero- tolerance approach towards bribery and corruption.

The Firm has implemented a risk-based approach to identify areas where it may be at risk to bribery and has put in place systems and procedures to reduce and manage this risk. It reserves the right not to deal with other entities that do not make the same commitment.

The Firm has adopted and implemented a number of policies and procedures which are intended to prevent the Firm, its partners, staff or agents being involved in bribery. These are reviewed regularly to ensure they remain effective.

For further information on the Firm’s bribery risk policies and procedures please contact the Compliance Officer, to whom the partners have given day-to-day responsibility for ensuring that the Firm’s anti-bribery policies and procedures are adhered to.

Sustainable Development Capital LLP (SDCL) Internal Capital Adequacy Assessment Process (ICAAP) Pillar III Disclosure and Policy

BACKGROUND

Sustainable Development Capital LLP (“SDCL”) is incorporated in the UK and is authorised and regulated by the FCA as an investment firm. SDCL is part of the Sustainable Development Capital LLP Group (“Group”). SDCL is the principal UK trading entity for the Group and provides services for a significant number of the Group’s mandates. At the time of the ICAAP dated 30th April 2016, SDCL is subject to the FCA’s Interim Prudential sourcebook for Investment Businesses (“IPRU-INV”) and the group Internal Capital Adequacy Assessment Process (“ICAAP”) and these disclosures have been prepared on this basis. In that sourcebook under Chapter 11 the FCA sets out that it has a minimum financial resources requirement of €125,000.

SUMMARY

The Capital Requirements Directive (“CRD”) requirements have three pillars. Pillar 1 deals with the minimum capital requirements. Pillar 2 is the ICAAP which assesses what capital is required by the firm to meet the risks the firm faces. Details of the Pillar 1 and 2 disclosures are contained within SDCL’s 2016 ICAAP. Pillar 3 deals with public disclosure of risk management policies, capital resources and capital requirements in order to improve market discipline.

SDCL has identified its principal risks as reputational and operational. SDCL is required to disclose its risk management objectives and policies for each separate category of risk which include the strategies and processes to mitigate those risks.

SDCL has assessed operational and reputational risk and in its ICAAP and set out appropriate actions to manage them. SDCL will make Pillar 3 disclosures on an annual basis.

CONFIRMATION

The information contained within this document has not been audited by SDCL’s external auditors and does not constitute any form financial statement and must not be relied upon in making a judgement on SDCL.

CONFIDENTIALITY

SDCL regards information as proprietary if sharing that information with the public would undermine its competitive position. Proprietary information may include information on products or systems, which if shared with competitors, would render SDCL’s investment therein less valuable. Further, SDCL must regard information as confidential if there are obligations to customers or other counterparty relationships binding SDCL. In the event that any such information is omitted, we shall disclose as such and explain the grounds why it has not been disclosed.

RISK MANAGEMENT OBJECTIVE

The Management Board of SDCL is responsible for determining the level of risk that is acceptable in running the firm (i.e. the firm’s risk appetite) and SDCL has a conservative approach to risk.

Risks are mitigated through the application of limits and controls and a monitoring process at operational level. On a day-to-day basis it is the responsibility of the Compliance Officer to monitor risks and determine the firm’s appetite.

GOVERNANCE FRAMEWORK

On at least an annual basis the Management Board of SDCL, meet to review the assessment and consider whether the level of risk that the firm is running (i.e. the firm’s risk appetite) is acceptable.

It is the policy of the Management Board of SDCL that when the Member’s Capital reaches 75% of annual fixed costs it triggers the “Amber” caution. At this point the Designated Members must look to take action to shore up the capital position, either through seeking new capital or by looking to cut costs.

RISK MANAGEMENT FRAMEWORK

A core objective of the Risk Management Framework is the consistent identification and reporting of risk. This is achieved via the following:

• Understanding the business environment
• Setting business objectives
• Risk identification
• Risk evaluation
• Developing risk response
• Assessing control activities
• Ensuring appropriate and timely risk information and communication
• Ongoing monitoring of the risk

RISK MANAGEMENT METHODOLOGY

The firm determines the risks it faces and to manage and mitigate those risks where they exceed acceptable levels. This is based on the impact and likelihood of occurrence.

SDCL completes risk assessments using risk maps in order to identify significant risks relating to SDCL’s activities, document the responsibility for the risks and how they are being reported upon and manage and mitigate against these risks where they exceed acceptable levels.

RISK APPETITE

The firm aims to maintain a low risk profile, and therefore has set a risk appetite such that no risk on its risk assessment process should be greater than a likelihood of ‘critical’ and impact of ‘remote’. SDCL recognises that there is a degree of subjectivity in this approach and therefore the firm has set the following additional risk appetite targets:

a. Trading error limit = £50,000
b. Non-Regulatory Breaches limit = 1% of all transactions
c. Regulatory Breaches = 0.5% of all transactions
d. Complaints limit = 0.5% of all transactions
e. FCA notifiable breaches limit = 0
f. Member’s Capital (defined as the Pillar I Capital Requirement as a percentage of Available Capital Resources) must not be higher than 75%

The nature of the LLP’s business is by definition low risk. No leverage or derivatives are employed in the investment process.

CATEGORISATION OF RISKS

SDCL recognises it is principally exposed to operational and reputational risk.

Operational Risk

One quantative evaluation of operational risk is to assess the potential cost of an orderly wind-down. This has been considered under Section 5 of the ICAAP, and the scenario outcome identified was that additional capital should be held to mitigate against this risk. Such risks include:
• IT
• Acts of God
• Key Staff
• Litigation against SDCL

Despite operational risk being its primary risk, due to the nature of the firm both its orderly wind down cost and the AIFM Fixed Overhead Requirement (“FOR”) exceed its operational risk charge. Consequently, the Management Board has elected to hold the orderly wind-down as a minimum, it being the higher value of the two. Its Pillar II assessment of £919,000 exceeds its Pillar I requirements.

Reputational Risk

This is one of the key risks to any Investment Manager, and can be triggered by events both internally, such as poor fund performance, and externally. It is not easy to quantify this risk and the firm has no loss data available internally to judge the impact that this would have.

However, having considered the risk, the Management Board considers that the following circumstances could lead to a reputational risk crystallising:

• Failure to adhere to regulatory requirements, including investment restriction breaches
• Any period of sustained sub-standard fund performance or sub-standard advice
• New business activities being conducted either inside or outside the UK in an inappropriate manner

These risks were all considered to lead to a scenario whereby the revenue would be eroded because of the reputational damage. However, given the scenario conducted for the economic downturn in Section 7, of the ICAAP, the Management Board did not consider that a separate scenario would add any further information to the evaluation.

Based upon the output of the scenario, as sufficient capital exists to maintain a sufficiently robust capital ratio the Management Board made no additional provision.

CAPITAL RESOURCES AND REQUIREMENTS

The Pillar 1 capital requirement is defined as the higher of the following:
• Base Capital Requirement (€125,000); OR
• Fixed Overhead Requirement; OR
• The sum of Market and Credit Risk Requirements; or
• the AIFMD FOR; or
• the AIFMD Funds under Management requirement

SDCL’s Pillar 1 requirement as at 30 April 2016, based on the AIFMD Fixed Overhead Requirement, was £757,800:

pillar-i-requirement

SDCL’s’ Pillar 2 Capital Requirement is calculated by the firm in accordance with its ICAAP. This includes an assessment of the adequacy of capital resources to support current and future activities and to cover the key risks faced by the business, including relevant stress scenarios. The ICAAP is reviewed and approved at least annually by
SDCL’s Management Board.

Based on its ICAAP assessment, the directors of the business consider that an appropriate level of capital to support current and future business requirements, taking into account the consideration of stress events and various key risk scenarios, is £919,000.

REMUNERATION POLICY

The Management Board of SDCL determines the Remuneration Policy. The Management Board sets and agrees the Remuneration Policy of SDCL; reviews take place on an annual basis.

Any performance related remuneration is subject to the profits of SDCL and is agreed by the Management Board. The Management Board may consider, amongst other things, the short and long term financial position of SDCL along with other appropriate risk assessments before reaching a decision.

Total remuneration for 2015/16 was:

total-remuneration-for-2015-16

Calls are recorded for regulatory purposes