Sustainability-Related Disclosures

The EU Sustainable Finance Disclosure Regulation (SFDR) is a set of rules that aims to (i) increase transparency on how financial market participants integrate sustainability into their investment process and (ii) make financial products comparable and better understood by end-investors.
ILX Fund I (the Fund) is the only financial product under the management of the Manager. The Fund is not a retail fund, as only Qualified Investors can participate. Current Fund participants and prospective participants to whom the Fund is marketed can access the sustainability-related entity level disclosures of the Manager through the following link and product level disclosures of the Fund through the following link. All the information contained in the different sections of the product level disclosures, required under the SFDR, is summarized hereinunder in both English and Dutch languages:

 

English

 

The Fund qualifies as an Article 9 SFDR product and has the objective to avoid, minimize or mitigate ESG risks while contributing to the SDGs by focusing on ILX Sustainability Themes (Energy Access and Clean Energy; Sustainable Industry and Infrastructure; Financial Inclusion and Food Security) and reporting quantitative and/or qualitative SDG-related results at a project level (SFDR – Website Disclosure – ILX Fund I, Section 3). All investments under ILX Fund I contribute to its sustainability objective (SFDR – Website Disclosure – ILX Fund I, Section 5).

The Fund’s investment strategy is to build a portfolio of participations in DFI (Development Finance Institution)-originated and syndicated loan facilities, diversified across geographies and sectors. The Fund aims to invest in loans with an attractive risk-return profile and which have the potential to generate positive SDG-related results. The sustainability objective of the Fund is to be attained by co-investing with DFIs in projects that contribute to economic, social and environmental objectives in emerging markets and developing economies (SFDR – Website Disclosure – ILX Fund I, Section 4).

To analyse whether its investments meet the Do No Significant Harm (DNSH) conditions of the SFDR and to identify and address the Principal Adverse Impact (PAI) of investment decisions on sustainability factors, the Fund follows the criteria determined in the Fund’s (i) Exclusion Policy; (ii) ESG Policy; and (iii) KYC & AML Policy (SFDR – Website Disclosure – ILX Fund I, Section 2).

The Manager’s methodology for achieving its sustainable investment objective is based on the robust impact and ESG frameworks of the originating DFIs, whom also have the institutional capacity to define and collect ESG and SDG-related information required to identify, report and track sustainability-related information (SFDR – Website Disclosure – ILX Fund I, Section 7).

Impact and ESG data is primarily collected from the end-borrower, through the DFI, who requires reporting of project-related ESG and SDG data according to the requirements specified in the relevant Loan Agreement. PAI data is collected from a combination of sources, which includes the originating DFI, desk research and proxies calculated by the Manager or third-party data providers (SFDR – Website Disclosure – ILX Fund I, Section 8). Given that the interaction with the borrowers is usually conducted through the DFI, the Manager depends on the indicators defined by the DFI and reported to the Manager. When needed, the Manager utilizes third-party data to estimate portfolio-level results. These models also have their limitations, as they do not derive the performance results from primary data, but are assumption-based (SFDR – Website Disclosure – ILX Fund I, Section 9).

The Manager’s ESG Due Diligence includes the assessment of the ESG reports provided by the originating DFI, which identify relevant ESG Factors that could impact society or the environment. Identified ESG risks are avoided, mitigated, or minimised through the arranging DFI’s direct engagement with the borrower and definition of ESG action plans, which are integrated as non-financial covenants in the loan agreement (SFDR – Website Disclosure – ILX Fund I, Section 10) and result in engagements with the borrower to improve their ESG behaviour (SFDR – Website Disclosure – ILX Fund I, Section 11).

SDG assessments are anchored on the Fund Participants’ SDG taxonomies and the DFI’s impact assessment and identification of relevant output/outcome SDG-related results. The DFI impact assessment enables the Manager to identify the relevant Sustainability Theme, and justify the achievement of the sustainable objective associated with the investments (SFDR – Website Disclosure – ILX Fund I, Section 10 ).

The Manager monitors the achievement of the sustainability objective of its investments by collecting impact and ESG data from the applicable impact and ESG-related annual reports provided by the DFI. For monitoring, the Manager reviews the impact reports which include data on the applicable sustainability indicators, as defined for the particular investment (i.e. GHG emissions avoidance/reduction; energy savings; jobs supported; growth of the (W)MSME or Green portfolios of FIs). For monitoring the mitigation of ESG risks, the Manager reviews the annual ESG reports and checks compliance with the agreed mitigation measures (SFDR – Website Disclosure – ILX Fund I, Section 6).

Statement on principal adverse impacts of investment decisions on sustainability factors
“ILX Management B.V. (“ILX” or the “Manager”) considers principal adverse impacts (“PAI”) of its investment decisions on sustainability factors. The present statement is the consolidated statement on principal adverse impacts on sustainability factors considered by ILX pertaining to ILX Fund I, currently its only fund under management (the “Fund”). This statement on PAI on sustainability factors covers the reference period from 1 January 2023 to 31 December 2023. ILX considers the PAI of investment decisions on sustainability factors in its due diligence processes and follows the criteria explained in its product level disclosures for the Fund, namely (i) exclusions, (ii) environmental, social and governance (“ESG”) safeguarding and (iii) know your customer due diligence analysis to address PAI of the investments channelled through the Fund. Being the first year of investments of the Fund and the first year of disclosure of the PAI indicators, ILX’s efforts have been centred in collecting and modelling data, leveraging counterpart Development Finance Institutions (“DFIs”) to require primary data on PAI indicators from the end borrowers and finding commonalities in the methodologies to estimate and disclose the data points with peers investing in private debt in emerging markets. The actions planned and targets set to mitigate ESG risks, including the corresponding PAI on sustainability factors, has been laid down in the below table and relate to the ESG action plans agreed with the end borrowers and included in the loan documentation entered into between the DFIs and the end borrowers.”

 

Nederlands

 

Het Fonds kwalificeert als een artikel 9 SFDR-product en heeft als doelstelling ESG-risico’s [Environmental, Social, Governance] te vermijden, te minimaliseren of te beperken. Tegelijkertijd draagt het Fonds bij aan de SDG’s [Sustainable Development Goals] door zich te richten op ILX-duurzaamheidsthema’s (toegang tot energie en schone energie; duurzame industrie en infrastructuur; financiële inclusie en voedselzekerheid) en door kwantitatieve en/of kwalitatieve SDG-gerelateerde resultaten op projectniveau te rapporteren (SFDR – Website Disclosure – ILX Fund I, deel 3). Alle investeringen van ILX Fonds I dragen bij aan de bijbehorende duurzaamheidsdoelstellingen  (SFDR – Website Disclosure – ILX Fund I, deel 5).

De beleggingsstrategie van het Fonds bestaat uit het opbouwen van een portefeuille van participaties in door DFI’s [Development Finance Institution] verstrekte en gesyndiceerde kredietfaciliteiten, gediversifieerd over geografische gebieden en sectoren. Het Fonds streeft ernaar te beleggen in leningen met een aantrekkelijk risico-rendementsprofiel en die het potentieel hebben om positieve SDG-gerelateerde resultaten te genereren. De duurzaamheidsdoelstelling van het Fonds moet worden bereikt door samen met DFI’s te investeren in projecten die bijdragen aan economische, sociale en milieudoelstellingen in opkomende markten en ontwikkelingseconomieën (SFDR – Website Disclosure – ILX Fund I, deel 4).

Om te analyseren of de beleggingen voldoen aan de Do No Significant Harm (DNSH) voorwaarden van de SFDR (Sustainable Finance Disclosure Regulation) en om de Principal Adverse Impact (PAI) van beleggingsbeslissingen op duurzaamheidsfactoren vast te stellen en aan te pakken, volgt het Fonds de criteria die zijn vastgesteld in het (i) Uitsluitingenbeleid; (ii) ESG Beleid; en (iii) KYC & AML [Know Your Customer & Anti Money Laundering] Beleid van het Fonds (SFDR – Website Disclosure – ILX Fund I, deel 2).

De methodologie van de Fondsmanager om zijn duurzame beleggingsdoelstelling te bereiken is gebaseerd op de robuuste impact- en ESG-kaders van de oorspronkelijke DFI’s. Deze instituten beschikken over de institutionele capaciteit  om ESG- en SDG-gerelateerde informatie te definiëren en te verzamelen die nodig zijn om duurzaamheidsgerelateerde informatie te rapporteren en te monitoren (SFDR – Website Disclosure – ILX Fund I, deel 7).

Impact- en ESG-informatie wordt voornamelijk verzameld bij de eindkredietnemer, via de DFI, die rapportage over projectgerelateerde ESG- en SDG-gegevens eist overeenkomstig de in de desbetreffende leningsovereenkomst vastgelegde vereisten. PAI-gegevens worden verzameld uit een combinatie van bronnen, waaronder de data verkregen via de DFI, desk research en door de Manager of derden berekende proxy’s (SFDR – Website Disclosure – ILX Fund I, deel 8). Aangezien de interactie met de kredietnemers doorgaans via de DFI verloopt, is de Manager afhankelijk van de door de DFI vastgestelde en aan de Manager gerapporteerde indicatoren. Indien nodig gebruikt de Manager gegevens van derden om de resultaten op portefeuilleniveau te ramen. Deze modellen hebben ook hun beperkingen, aangezien ze de prestatieresultaten niet afleiden uit primaire gegevens, maar gebaseerd zijn op aannames (SFDR – Website Disclosure – ILX Fund I, deel 9).

De ESG Due Diligence van de Manager omvat de beoordeling van de krediet verstrekkende DFI opgestelde ESG-rapporten, waarin relevante ESG-factoren worden geïdentificeerd die een impact kunnen hebben op de samenleving of het milieu. Geïdentificeerde ESG-risico’s worden vermeden, beperkt of geminimaliseerd door de directe betrokkenheid van de organiserende DFI bij de kredietnemer en de definitie van ESG-actieplannen, die als niet-financiële convenanten in de kredietovereenkomst worden opgenomen (SFDR – Website Disclosure – ILX Fund I, deel 10) en resulteren in afspraken met de kredietnemer om zijn prestaties op ESG-gebied te verbeteren (SFDR – Website Disclosure – ILX Fund I, deel 11).

SDG-beoordelingen zijn gebaseerd op de SDG-taxonomieën van de fondsdeelnemers en de impactbeoordeling van de DFI en de identificatie van relevante SDG-gerelateerde resultaten. De impactbeoordeling van de DFI stelt de Manager in staat het relevante duurzaamheidsthema te bepalen en de verwezenlijking van de duurzame doelstelling die met de investeringen gepaard gaat, te verantwoorden (SFDR – Website Disclosure – ILX Fund I, deel 10).

De Manager controleert de verwezenlijking van de duurzaamheidsdoelstelling van zijn beleggingen door impact- en ESG-gegevens te verzamelen uit de relevante impact- en ESG-gerelateerde jaarverslagen die worden aangeleverd door de DFI. Voor de monitoring beoordeelt de Manager de impactverslagen die gegevens bevatten over de relevante duurzaamheidsindicatoren, zoals gedefinieerd voor de specifieke investering (d.w.z. vermijding/vermindering van broeikasgasemissies; energiebesparingen; ondersteunde banen; groei van de (W)MSME [(Women) Micro-, Small- and Medium Enterprises] of groene portefeuilles van financiële instellingen. Voor het toezicht op de beperking van ESG-risico’s beoordeelt de Manager de jaarlijkse ESG-verslagen en controleert hij de naleving van de overeengekomen beperkende maatregelen (SFDR – Website Disclosure – ILX Fund I, deel 6).

 

Verklaring betreffende de belangrijkste nadelige gevolgen van investeringsbeslissingen voor duurzaamheidsfactoren
“ILX Management B.V. (“ILX” of de “Manager”) neemt de zogenaamde ‘belangrijke nadelige effecten’ (“PAI”) van haar voorgenomen beleggingen op duurzaamheidsfactoren mee in haar beleggingsbeslissingen. De huidige verklaring heeft betrekking op de nadelige effecten op duurzaamheidsfactoren met betrekking tot ILX Fund I, momenteel het enige fonds onder beheer (het “Fonds”) en beslaat de referentieperiode van 1 januari 2023 tot 31 december 2023. ILX neemt de belangrijke nadelige effecten (“PAI”) van haar voorgenomen beleggingen op duurzaamheidsfactoren mee in haar ‘due diligence’ -processen en volgt daarbij de criteria zoals aangegeven in de openbaarmakingen zoals die gelden voor het Fonds, namelijk met betrekking tot (i) uitsluitingen, (ii) milieu-, sociale en governance (“ESG”)-waarborgen en (iii) Ken Uw Klant -analyse. Aangezien dit het eerste jaar van investeringen van het Fonds is en het eerste jaar van openbaarmaking van de PAI-indicatoren, heeft ILX de inspanningen gericht op het verzamelen en modelleren van gegevens, het verkrijgen van primaire gegevens over PAI-indicatoren van de eindklanten van de ontwikkelingsfinancieringsinstellingen (“DFI’s”) en op het vinden van overeenkomsten in methodologieën om datapunten te schatten, openbaar te maken en te kunnen vergelijken met partijen die ook investeren in private leningen in opkomende markten. De geplande acties en gestelde doelen om ESG-risico’s te beperken, inclusief de bijbehorende PAI op duurzaamheidsfactoren, zijn vastgelegd in de onderstaande tabel en hebben betrekking op de ESG-actieplannen die zijn overeengekomen en opgenomen in de kredietdocumentatie tussen de DFI’s en hun klanten.”

 

Sustainability-Related Disclosures - ILX
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