Policy on the integration of sustainability risks
Magnify Capital Partners – Sociedade de Capital de Risco, S.A.
Published on: 4 April 2023
Last updated on: 5 July 2024
Under 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), Magnify Capital Partners – Sociedade de Capital de Risco, S.A. (MAGNIFY) is required to disclose information regarding its policies on the integration of sustainability risks in its investment decision‐making process.
For this purpose, according to the SFDR, sustainability risk means 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.
MAGNIFY is a diligent and responsible management entity, and therefore is committed to its clients and abides by the applicable regulation when conducting its activity. As such, MAGNIFY has defined an investment process and an investment strategy to seek the best possible investments while ensuring a reliable portfolio and a sustainable growth.
1. Investment process and strategy
MAGNIFY has an established decision-making process which allows the integration of sustainability risks throughout its several stages until the conclusion of the investment. As a result of its activity, MAGNIFY becomes a shareholder of the invested companies, and for that reason it is committed to make responsible investments and actively contribute to a positive evolution on the environmental, social and governance (ESG) matters in each one of such companies.
The decision making-process comprises the following steps:
- Screening of the investment opportunities
MAGNIFY currently seeks investments opportunities in the real estate, retail and education sectors, according to the selection criteria set out in the management regulation of each Fund it manages. MAGNIFY does not intend to invest in other sectors which may be more exposed to sustainability risks.
When selecting an investment opportunity, apart from other elements such as product analysis and business plan, MAGNIFY takes into account the potential or actual ESG issues that may arise from each of the opportunities previously identified within its preferential sectors of activity. Based on such preliminary evaluation, MAGNIFY may immediately exclude investments that present high risks on ESG issues. - Due diligence
After the initial selection of the investment opportunities that meet MAGNIFY standards, including on ESG conditions (please refer to section 2 below for more details on MAGNIFY’S commitment with sustainability), a due diligence is conducted to the target company selected. MAGNIFY hires an external legal team to perform the aforementioned due diligence which intends, among other things, assess how vulnerable the target company is to the occurrence of ESG events that may negatively impact the value of the envisaged investment.
The due diligence scope regarding sustainability matters includes:- An analysis of the target company’s overall performance;
- An analysis of the target company’s internal ESG issues;
- The identification of any mitigation measures that can be adopted (before or after the investment has been carried out) to manage, reduce or eliminate the risks identified;
- A more detailed assessment of the target company’s activity specific ESG context.
- Final investment decision
The information collected in the previous phases is consolidated and analyzed by MAGNIFY’s management and/or the Fund’s investment committee, which take into account the identified sustainability risks and the possibility of adopting the relevant mitigation measures (if existing) and assess them jointly with the remaining risks and other items regarding the investment opportunity. For this purpose, experts from areas related to the activity of the target company may be consulted.In this context, MAGNIFY guides its investment decisions through an integrated approach that advocates the consideration and weighting of all risks, including sustainability risks, in a way adjusted and proportional to the nature, size and complexity of the envisaged investment, as well as to MAGNIFY’S activity and the costs involved.
2. Commitment with sustainability
MAGNIFY assumes its role as a market player which has the ability to promote and support responsible investment and sustainable growth. As a management entity and shareholder of the companies in which it invests, MAGNIFY is committed to sustainable development values. Therefore, MAGNIFY guides its investment activity with the responsibility corresponding to such perspective, considering both the timing of the investment and its foreseeable evolution in the future.
As such, MAGNIFY supports the Sustainable Development Goals defined by the United Nations, and recognizes their relevance in our collective way to achieve better economic, social and environmental conditions, which will globally benefit our society and our planet. In particular, MAGNIFY considers that its activity may especially relate to the goals which advocate sustainable economic growth and decent work for all, quality education, reduction of inequalities, and sustainable industrialization and consumption, which are key to sustain the livelihoods of current and future generations:
Thus, MAGNIFY wishes to reinforce its business positioning as a reliable, inclusive and responsible management entity. For that, MAGNIFY increasingly integrates sustainability concerns on its activity, notably by considering environmental, social and governing criteria on its investment decisions as detailed in point 1 above.
Bearing in mind the growing relevance of sustainability matters, MAGNIFY permanently monitors the most relevant developments in the area and is available to periodically review and adjust its policies.
All the information published on MAGNIFY’s website regarding sustainability matters is permanently updated, and any changes or amendments will be duly explained and published, as required by the SFRD.