Evli Private Equity III

Financial product’s sustainability information in accordance with EU Sustainable Finance Disclosure Regulation (SFDR) 2019/2088 (sustainability‐related disclosures in the financial services sector). This is a financial product in accordance with Article 8 of the SFDR.

Publication date: December 5, 2022
Legal Entity Identifier: 3248585-8 (business identity code)

a) Summary

This financial product promotes environmental or social characteristics, but its objective is not to make sustainable investments.

The fund promotes environmental and social characteristics as part of investment activities by integrating sustainability factors into the due diligence process carried out prior to investment, assessing fund managers during the investment period, excluding certain industries, and engaging with fund managers through active dialogue. The fund complies with Evli’s Principles for Responsible Investment and the separate responsibility principles of private equity funds.

The fund encourages the fund managers of target funds to incorporate sustainability factors into the various areas of their operations. During the investment period, the portfolio managers regularly monitor and assess the fund managers’ ESG practices and performance on the basis of the target funds’ ESG reporting and a regular ESG survey carried out by the fund, and engage in active cooperation with the aim of reducing the likelihood of sustainability risks materializing. The fund issues each target fund its own ESG rating, which is based on an assessment carried out by the fund’s investment team. Evli’s Principles for Responsible Investment and the responsibility principles of Private Equity funds set the framework for Evli’s engagement.

In addition, the fund encourages management companies to report climate data and set their own climate targets. The fund promotes climate change mitigation by meeting Evli’s climate targets. Evli’s goal is to achieve carbon neutrality by 2050 at the latest, and it has set an interim target of a 50 percent reduction in indirect emissions from all investments by 2030, provided that this is possible in the investment environment. The comparison year is 2019. The fund-specific share of the emission reduction target may vary between funds.

The approach to ESG integration is driven by a need to understand how the fund manager takes account of key ESG questions at different stages of the investment process. Before making an investment, the principal objective is to understand the current level of ESG management of the target fund’s management company. The fund requires all the target funds’ management companies to set their own ESG policy and to commit to responsible investment practices. The fund will not make new commitments to fund management companies that do not have their own ESG policy and that are not committed to responsible investment practices. When deciding upon new investments, the target fund’s exclusion practices are assessed and the aim is to avoid investing in industries that Evli has excluded. The fund of funds manager can, under certain conditions, deviate from Evli’s exclusion criteria. Furthermore, exclusion may be agreed upon with a management company of the target fund with respect to a certain industry. Before making a commitment to a target fund, the fund will make its own ESG assessment of the target fund. The fund requires good corporate governance from the fund managers of target funds.

All active investments of the fund promote environmental and social characteristics. The proportion of target fund management companies that report on their carbon intensity, the proportion of management companies that have climate targets, and the proportion of management companies that take account of and report on the principal adverse impacts on the environment and society (PAI indicators) of their investment decisions are used to measure the implementation of the environmental and social characteristics promoted by the fund. The fund will carry out a separate ESG assessment on the management company before making a commitment. The ESG assessment is repeated annually. It collects data on sustainability indicators that are relevant to the promotion of the fund's environmental and social characteristics. The data is not verified by a third party and the completeness of the data is reported at the same time. The completeness of the data does not affect compliance with the above principles.

b) No sustainable investment objective

This financial product promotes environmental or social characteristics, but its objective is not to make sustainable investments.

c) Environmental or social characteristics of the financial product

The fund promotes environmental and social characteristics as part of investment activities by integrating sustainability factors into the due diligence process carried out prior to investment, assessing fund managers during the investment period, excluding certain industries, and engaging with fund managers through active dialogue. The fund complies with Evli’s Principles for Responsible Investment and the separate responsibility principles of private equity funds.

The fund encourages the fund managers of target funds to incorporate sustainability factors into the various areas of their operations. During the investment period, the portfolio managers regularly monitor and assess the fund managers’ ESG practices and performance on the basis of the target funds’ ESG reporting and a regular ESG survey carried out by the fund, and engage in active cooperation with the aim of reducing the likelihood of sustainability risks materializing. The fund issues each target fund its own ESG rating, which is based on an assessment carried out by the fund’s investment team.

In addition, the fund encourages management companies to report climate data and set their own climate targets. The fund promotes climate change mitigation by meeting Evli’s climate targets. Evli’s goal is to achieve carbon neutrality by 2050 at the latest, and it has set an interim target of a 50 percent reduction in indirect emissions from all investments by 2030, provided that this is possible in the investment environment. The comparison year is 2019. The fund-specific share of the emission reduction target may vary between funds.

Environmental and social factors are also promoted through the fund’s broad exclusion practices. The fund aims to exclude investments that are harmful or controversial industries such as tobacco, adult entertainment, controversial lending, weapons and firearms, and peat production. The fund will also not invest in target funds that do not exclude companies that are in contact with child labor or corruption, for example.

d) Investment strategy

The fund complies with both Evli’s general and the fund’s own Principles for Responsible Investment. The fund will not make new commitments to fund management companies that do not have their own ESG policy and that are not committed to responsible investment practices. When deciding upon new investments, the target fund’s exclusion practices are assessed and the aim is to avoid investing in industries that Evli has excluded. The fund of funds manager can, under certain conditions, deviate from Evli’s exclusion criteria. Furthermore, exclusion may be agreed upon with a management company of the target fund with respect to a certain industry. Before making a commitment to a target fund, the fund will make its own ESG assessment of the target fund.

The fund requires good corporate governance from the fund managers of target funds. An assessment of the quality of corporate governance is an integral part of the assessment of the fund’s potential target funds. The governance assessment deals with four aspects of the corporate governance of the business activities of the fund manager and its management (effective governance structures, relationships with employees, remuneration of personnel and compliance with tax provisions), and the risk assessment capacity related to corporate governance and the tools available for this. Similarly, the target funds of Evli Private Equity III require their investments to follow good governance practices in accordance with the target fund’s ESG policy.

e) Proportions of investments

All active investments of the fund promote environmental and social characteristics.

f) Monitoring of environmental or social characteristics

The proportion of target fund management companies that report on their carbon intensity, the proportion of management companies that have climate targets, and the proportion of management companies that take account of and report on the principal adverse impacts on the environment and society (PAI indicators) of their investment decisions are used to measure the implementation of the environmental and social characteristics promoted by the fund. During the investment period, the portfolio managers regularly monitor and assess the fund managers’ ESG practices and performance on the basis of the target funds’ ESG reporting and a regular ESG survey carried out by the fund.

g) Methods concerning environmental or social characteristics

The environmental and social characteristics promoted by the financial product are monitored and reported using the sustainability indicators mentioned above.

h) Data sources and data processing

The fund will carry out a separate ESG assessment on the management company before making a commitment. The ESG assessment is repeated annually. It collects data on sustainability indicators that are relevant to the promotion of the fund's environmental and social characteristics. The data is not verified by a third party and the completeness of the data is reported at the same time.

i) Limitations of methods and data

The achievement of the promoted environmental and social characteristics is reported annually through the sustainability indicators mentioned above, in conjunction with which the completeness of the data is also reported. All active investments of the fund promote environmental and social characteristics by observing Evli’s Principles for Responsible Investment and the responsibility principles of Private Equity funds. The completeness of the data does not affect compliance with the above principles.

j) Due diligence

The fund’s approach to ESG integration is driven by a need to understand how the fund manager takes account of key ESG questions at different stages of the investment process. Before making an investment, the principal objective is to understand the current level of ESG management of the target fund’s management company. The fund requires all the target funds’ management companies to set their own ESG policy and to commit to responsible investment practices. The fund encourages the fund managers of target funds to incorporate sustainability factors into the various areas of their operations. The fund will not make a commitment to a fund that does not have an ESG policy or that is not committed to responsible investment practices (such as the United Nations Principles for Responsible Investment, UNPRI). Furthermore, the fund will carry out a separate ESG assessment of each target fund before making a commitment. This assessment will be repeated annually. The methods are based on data collected from the management companies, which is not verified by a third party.

k) Engagement policies

The financial product can be used to engage with the target funds’ management companies as part of the promotion of environmental and social characteristics. Evli’s Principles of Responsible Investment and the responsible investment principles of Private Equity funds set the framework for Evli’s engagement and conduct in the event of observed breaches of the norms.

l) Designated reference value

The fund does not have a benchmark index.

Information on environmental and social characteristics of the fund in accordance with article 8 of Sustainable Disclosure Regulation (in force from January 1, 2023)