Sustainability Risk Policy – Disclosure Statement
MV Credit Partners LLP & MV Credit Sarl (“MV Credit” or the “Firm”) - March 2021
In accordance with the requirements of Article 3 of Regulation EU) 2019/2088 on sustainability‐related disclosures in the financial services sector (“SFDR” or the “ESG Disclosure Regulation”) MV Credit has chosen to formulate and disclose its policy on the integration of sustainability risks into its investment decision-making processes.
MV Credit’s Investment Philosophy
MV Credit’s investment philosophy is committed to delivering attractive risk-adjusted returns for its investors over the long-term. Our investment approach follows a buy-and-maintain strategy, constructing diversified portfolios of European credits that typically have a market-leading position in stable sectors - targeting non-cyclical, defensive industries and regions where the team has a deep understanding.
Our success, tested across market cycles, is based on the following investment principles:
- Active buy-and-maintain investment philosophy;
- Credit-driven approach focused on less cyclical industries;
- Extensive expertise across Western Europe;
- Thorough due diligence processes;
- Strong long-term relationships with top-tier private equity sponsors; and
- Focus on responsible investing in stable cash-generative businesses through the integration of sustainable risks1
MV Credit consistently applies the same approach, refined and enhanced for more than 20 years.
Consideration of Sustainability Factors in MV Credit’s Investment Process
Investment analysis of non-financial factors, including the sustainability factors takes place as part of MV Credit’s pre-investment due diligence procedures and ongoing monitoring processes. MV Credit believes that such factors may materially impact upon an investee company’s financial performance and ability to meet its financial obligations in the long term. MV Credit therefore views incorporating consideration of these non-financial factors with respect to investments as being in line with its duties acting as an agent for its investors.
The below briefly outlines how MV Credit approaches the integration of sustainability risk from an investment risk perspective. This approach is applicable to all asset classes MV Credit invests in.
Each investment process considers ESG integration according to MV Credit’s investment philosophy. We believe that ESG risks and opportunities stem from factors including an issuer’s management strength and strategy, the use of human and natural resources, as well as regulatory and political considerations. ESG factors can be critical to evaluating the sustainability of an issuer and the expected impact on investment performance. MV Credit’s investment team assesses the materiality of these factors in each investment decision. As part of the integration of ESG risk consideration in our investment process, we incorporate a screening model alongside the inclusion of other relevant ESG considerations in our investment analysis:
i. Negative Exclusion (i.e., the exclusion of specific sectors, issuers, or themes where investor or regulatory restrictions apply).
ii. ESG Screening (i.e., investing in companies demonstrating low ESG risk factors, and / or companies that are well situated to deliver lasting growth, relative to peers).
iii. ESG integration (i.e., the inclusion of ESG factors alongside traditional financial analysis of companies by investment managers).
ESG is an important aspect of our risk management – designed to limit potential downside risk, generating increased performance. We assess risk at the market, sector and company levels. We work to promote good business practices, and we believe there are opportunities for investing in companies and technologies that enable more environmentally friendly economic activity.
At the asset level, MV Credit examines the ESG attributes of a company before investing in it by adopting a risk materiality (case-by-case) approach whilst simultaneously utilising a MV Credit proprietary ESG checklist / questionnaire. Whilst the checklist / questionnaire ensures consistency (driving a cohesive assessment framework for tracking KPI development and in turn the ESG-related risks throughout the life of the investment), the risk materiality approach corroborates / ensures that relevant ESG considerations not captured by the checklist / questionnaire are not omitted.
To support our Investment Professionals, we have dedicated ESG Investment Procedures outlining the various guidelines on how to approach screening; risk materiality assessment (case-by-case considerations); as well as the checklist / questionnaire; and an overview of necessary procedural steps which must be taken.
Every Investment Memorandum has a mandatory ESG section which is presented to the Investment Committee / Board. During the Investment Committee / Board, the ESG assessment findings are presented to the Manager Board as part of the investment proposal. ESG compliance is determined through deliberation on the combined ESG assessment findings.
In reaching its decision, the Manager Board will carefully deliberate based on MV Credit’s investment values.
The operational aspects of internal oversight and reporting of sustainability risk incorporation across the Firm primarily resides with the ESG Committee and the Investment Team.
As part of the investment process the oversight and mandatory incorporation of ESG considerations as part of the investment due diligence resides with the Portfolio Managers and Senior members of the investment team. As with all prospective investment due diligence areas – it is the responsibility of the Investment Team coverages to summarize and present all material / relevant ESG risk (and mitigants) to the Investment Committee/ Board.
The ESG Committee’s purpose is to independently review and establish MV Credits’s ESG policy, investment procedures and principles. The Committee is further responsible for ESG related reporting on an annual basis and is present to assist the Manager Board, the Investment Team, and firm employees to enforce and implement ESG procedures for the purpose of responsible investing and monitoring.
Finally, it is the ESG Committee’s responsibility to oversee management’s tolerance for ESG risks and considerations and to formulate, recommend and sanction ESG deliberation whenever appropriate. The scope of the Committee covers oversight of ESG guidelines and investment principles and the effective incorporation of ESG initiatives within the firm.
Use of Data, Tools and Third Parties
As part of our post-investment ESG monitoring, MV Credit utilises third-party consultants to aggregate and analyse ESG data from all our existing investments through an extensive annual data collection campaign. The data (derives from a proprietary KPI assessment) is validated by both the consultants and the underlying borrower / portfolio company.
MV Credit has adopted a number of complementary and related policies which provide an overview of its approach. These include, but are not necessarily limited to,:
- ESG Policy
- ESG Investment Procedures
- Portfolio Management Procedures
- Risk Management Policy
- Stewardship Code Disclosure Statement
- Statement on the UK Modern Slavery Act
- Personal Account Policy
- Whistleblowing Policy
- Inducement Policy
- Anti- Bribery policy
- Conflicts of Interest Policy
Transparency and Reporting
MV Credit is a signatory to the UN Principles for Responsible Investment (UN PRI) and fulfils the reporting requirements that being a PRI signatory entails, in the form of the annual Transparency Report which is available on the PRI website (www.unpri.org).
At a corporate level, MV Credit (UK) is certified in accordance with The Carbon Neutral Protocol (https://carbonneutral.com/the-carbonneutral-protocol) – the leading global standard for carbon neutral programmes – to demonstrate that our carbon neutral claim is robust and credible. Our CarbonNeutral® company certification, awarded by Natural Capital Partners (https://www.naturalcapitalpartners.com - leading experts in carbon neutrality and climate finance), provides transparent, independent assurance of our climate action.
MV Credit has reviewed its Remuneration Policy in accordance with the requirements of Article 5 of SFDR to ensure consistency with the Firm’s integration of sustainability risks as described above. The relevant details incorporated in that respect are featured below:
- Central to MV Credit’s remuneration policy is the promotion of sound and effective risk management and this has now been extended beyond financial risks to encompass sustainability risks. In summary, relevant individuals who are involved in implementing and/or overseeing MV Credit’s Sustainability Risks Policy will be assessed in this respect as part of the determination of variable remuneration awards by reference to their risk-adjusted performance. MV Credit does not have any quantitative sustainability-focused performance targets at either a portfolio or asset level and therefore this is a qualitative assessment in respect of adherence to the Firm’s internal procedures for integration of sustainability risk as outlined above.
- Further, another key aspect of MV Credit’s remuneration policy is with respect to avoiding creating an environment which rewards or encourages excessive risk-taking. Again, this principle has been extended beyond financial risk to incorporate sustainability risks and for those individuals who have a role in ensuring or overseeing that the Firm’s sustainability risk policy is adhered to this is factored into decisions in respect of variable remuneration awards.
No consideration of sustainability adverse impacts
MV Credit has considered, and continues to consider, ESG factors in its investment process but it does not consider adverse impacts of investment decisions on sustainability factors as specifically set out in Regulation 2019/2088 on sustainability-related disclosures in the financial services sector dated 27 November 2019 (SFDR). MV Credit has chosen not to do so for the present time as it considers that its existing policies and approach are appropriate and tailored to the investment strategies of its investment funds. MV Credit continues to closely monitor regulatory developments with respect to the SFDR and other applicable ESG-focused laws and regulations, including the implementation of related and secondary legislation and regulatory guidance, and will, where required or otherwise appropriate, make changes to its existing policies and procedures.
Last updated March 2021.
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 2020 certification – based on 2019 emission data.