SUSTAINABILITY RISK POLICY
The European Commission’s Regulation (EU) 2019/2088 on Sustainable Finance Disclosure Regulation (SFDR) aims to provide greater transparency on the degree of sustainability of financial products. The SFDR defines “sustainability risks” as environmental, social, or governance (ESG) events or conditions that, if they occur, could cause an actual or a potential material negative impact on the value of the investment.
GCM Grosvenor has integrated sustainability risks, as a sub-set of risks generally that could cause an actual or potential material negative impact on the value of an investment, as part of its investment decision-making and risk monitoring process. If appropriate for an investment, GCM Grosvenor may conduct sustainability risk-related due diligence and/or take steps to mitigate sustainability risks and preserve the value of the investment.
GCM Grosvenor views ESG factors as key elements of investment return, volatility, and risk mitigation, and believes the consideration of such factors is an important aspect of our fiduciary responsibility to clients. The degree of ESG integration into a given portfolio will depend on the client mandate, investment strategy and portfolio structure. While ESG factors may be considered when making an investment decision, unless otherwise specified in the portfolio’s investment strategy, GCM Grosvenor-sponsored funds, other than those subject to either Articles 8 or 9 of the SFDR, do not pursue an ESG-based investment strategy or limit their investments to those that meet specific ESG criteria or standards. Any reference herein to environmental or social considerations is not intended to qualify our duty to maximize risk-adjusted returns.
The remuneration policies of GCM Grosvenor’s investment advisory firms, Grosvenor Capital Management, L.P. and GCM Customized Fund Investment Group, L.P., are consistent with its approach to the integration of sustainability risks into the investment decision-making process. As sustainability risks are a type of financial risk, the investment advisory firms acknowledge that failure to consider such risks could have an adverse impact on the performance of investments and the performance of the funds and portfolios managed by them. Pursuant to their remuneration policies, the investment advisory firms award fixed and variable remuneration to staff. Variable remuneration is awarded on a discretionary basis and takes into account the performance of an individual employee, the performance of the funds and/or portfolios, and the overall financial performance of the investment adviser’s group. Accordingly, to the extent that sustainability risks have an adverse impact on performance of the funds or the portfolios, this is likely to be reflected in the overall level of variable remuneration awarded to staff.
NO CONSIDERATION OF PRINICIPAL ADVERSE IMPACTS
GCM Grosvenor and its affiliated investment advisory firms consider ESG factors in their investment process in furtherance of their objective of delivering attractive risk-adjusted returns. While such considerations may include both an investment’s potential material positive and negative impacts on certain ESG factors, they do not formally consider adverse impacts of investment decisions on sustainability factors as set forth in the draft SFDR regulatory technical standards. GCM Grosvenor, through its affiliated investment advisory firms, has chosen not to do so at the present time as it considers that its existing ESG policies and procedures are appropriate, proportionate and tailored to the investment strategies of the funds managed by its advisory firms. GCM Grosvenor and its affiliated investment advisory firms continue to monitor regulatory developments with respect to SFDR and other ESG-related laws and regulations and will, when required or as they deem appropriate, make changes to their policies and procedures.