Kester’s Approach to the EU Sustainable Finance Disclosure Regulation (SFDR)


Kester Capital LLP ("Kester Capital") is a non-EU AIFM. As such, Kester Capital will be required to ensure compliance with Regulation (EU) 2019/2088 ("SFDR"), including the financial product related provisions, in the event that it enters the market of a given Member State by means of a National Private Placement Regime. In any event, Kester Capital has chosen to voluntarily align with SFDR because sustainability considerations are strongly embedded in the firm’s strategy, culture and values at all levels.

Article 3: Entity-level sustainability risk disclosures

Kester Capital recognises the importance of managing environmental, social and governance (ESG) matters in the businesses in which we invest and we are committed to integrating responsible investment principles into the way we do business, while seeking to create the best possible returns on our investments.

Kester Capital's ESG Investment Policy sets out Kester Capital's approach to the management of environmental, social and governance (ESG) issues, including the guiding and operating principles that Kester Capital works towards and the procedures we have implemented in order to integrate these principles into our activities. The ESG Investment Policy covers all Kester private equity funds, all investment activities across the deal cycle, and Kester Capital's own operations. All Kester Capital staff are required to adhere to the ESG Investment Policy. Kester uses our governance role to engage with our portfolio companies to promote and support ESG management in order to protect and create value and to be responsible in business.

Sustainability risk management is embedded in the way Kester Capital seeks to make investment decisions and in its ongoing portfolio and asset management activities. Kester defines sustainability risk as an ESG risk, which, if present, could lead to a material negative impact on the long-term value of one or more investments made by Kester Capital, and ultimately negatively impact the value returned to its investors.

Kester's ESG Investment Policy sets out how Kester embeds ESG issue management during the investment decision process. This process is led by our Investment Team members, who each understand the importance of our responsible investment commitment and principles. Kester assesses ESG risks of targeted companies when evaluating investment opportunities. Kester analyses inherent ESG risks and relevant management activities (to the extent that information is available) throughout the investment review stages, and any material findings are documented in the investment papers. To assist the Investment Team with this analysis, Kester Capital has developed a comprehensive ESG due diligence tool which forms a key part of the investment decision making process and an early stage ESG red flag checklist. Where deemed necessary by the Deal team, Kester instructs external experts to perform ESG due diligence on target companies focusing on material risks and opportunities. If Kester concludes that the ESG risks of a target company are too great and cannot be appropriately mitigated, no investment is made.

Kester meets all reporting requirements of our investors on portfolio ESG performance.

Article 4 – Principal Adverse Impacts

Kester Capital does not currently consider the adverse impacts of investment decisions on sustainability factors in the manner specifically defined by Article 4 of SFDR.

While Kester Capital recognises the importance of managing ESG matters in the businesses in which we invest, we are mindful that the detailed underlying rules in this area merit a thorough evaluation, including to ascertain the availability of the data set expected to be required to report under these relatively new requirements. As such, we are continuing to assess the disclosure requirements which are applicable to firms which opt in to consider the principal adverse impacts of their investment decisions and we will review our position with respect to Article 4 of the SFDR on an annual basis.

In the meantime, Kester Capital will continue using its own procedures, policies and metrics, that are tailored to Kester Capital and the investments that Kester Capital makes on behalf of its funds, to assess the adverse impacts of investment decisions on sustainability factors as described in further detail in our ESG Investment Policy.

Article 5: Remuneration policy in relation to the integration of sustainability risks

Kester Capital’s remuneration of employees aims to promote sound and effective risk management, as well as avoiding conflicts of interest. It does not encourage excessive risk-taking with respect to sustainability risks and variable remuneration takes into account compliance with the Firm’s policies and procedures, including the ESG Investment Policy and management of ESG issues.

Kester Capital will take any breaches of the ESG Investment Policy into account when considering potential bonus awards and any material breaches may result in forfeiture of a potential bonus in its entirety.

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