Sustainable Finance Disclosure Regulation

The Sustainable Finance Disclosure Regulation ("SFDR") came into law on 10th March 2021 in Europe. Article 23 of the AIFMD requires that disclosures must be made regarding (i) the manner in which sustainability risk management is integrated in the investment decision making process and (ii) the Manager's assessment of the likely impact of sustainability risks on the returns of each Sub-Fund.

Sustainability risk is defined as an environmental, social or governance event or condition which, if it occurs, would cause a material negative impact on the value of investments held in a Sub-Fund.

The Manager has incorporated the assessment of sustainability risks and opportunities into their investment decision making process and provides more detailed information on this subject on their website. The Manager’s commitment to the promotion of ESG characteristics wherever possible in the end investments arising from the Maanger’s investment process and the Manager’s assessment of sustainability risks has been integrated into the Manager’s investment decision making process which is summarised as follows.

The Manager pursues a thematic investment approach typically implemented through the selection of managers with fund vehicles. Given the Manager allocates Fund capital to selected funds, the Manager has no direct control over the selection and screening of individual investment instruments. Attention is therefore paid both to the ESG characteristics of the manager and the ESG characteristics of the fund vehicle they are managing. An investment into a fund requires a sustainability assessment of both the manager and the investment programme of the fund. The Manager’s due diligence on the officers and staff of the manager includes documentation on the steps the firm has taken to adopt ESG sustainability policies and principles and the general culture within the firm. Changes in staff or organisation may cause adverse changes in culture or policy so to monitor this risk the Manager requires the firm to report quarterly on those changes. The investment programme of the fund is researched to establish whether it has been classified under SFDR and if not, then what classification it would fall under.

Financial market instruments are diverse but may be thought of as being distributed along a "sustainability impact spectrum" ranging from those which have no sustainability characteristics to those which are closely connected to sustainability risks and opportunities. The instruments used in the investment programme of the fund are identified and located on this spectrum to help inform an assessment of the proportion of the investment programme that may be exposed to sustainability risks and opportunities.

Sustainable Risk Finance Disclosure Regulation (2019/2088) (the "Disclosure Regulation")

Culross makes the following disclosures in accordance with Articles 3(1), 4(1)(b) and 5(1) of the Disclosure Regulation.

Sustainability risk policies

A sustainability risk means "an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investment". In the context of Culross Funds, sustainability risks are risks which, if they were to crystallise, would cause a material negative impact on the value of the sub-Funds of Culross Funds.

Before any investment decisions are made on behalf of Funds managed by Culross, the investment committee will have completed a process that identifies the relevant and material sustainability risks associated with each such proposed investment. Consideration of these risks is part of the risk management assessment conducted by the investment committee prior to an investment being made. Following its assessment, the investment committee makes investment decisions having regard to the relevant Fund’s investment policy and objectives. Sustainability risks then continue to be assessed throughout the holding period of each investment and during the divestment phase.

No consideration of sustainability adverse impacts

Culross does not consider the principal adverse impacts of its investment decisions on sustainability factors in the manner prescribed by Article 4 of the Disclosure Regulation.

Article 4 of the Disclosure Regulation requires fund managers to make a clear statement as to whether or not they consider the "principal adverse impacts" of investment decisions on sustainability factors. Although Culross takes sustainability and ESG very seriously, it uses its own procedures, policies and metrics to assess the adverse impacts of investment decisions on sustainability factors and these do not align with those prescribed under Article 4 of the Disclosure Regulation. The data required to be collected from underlying managers is not presently available in a standardised format which would allow the combination and amalgamation of such data into a single PAI statement. As such Culross regards the task of producing a complete PAIS to be insuperable at the current time. Culross considers their approach more appropriate and tailored to the Funds that Culross manages.

Accordingly, Culross does not currently consider the prescribed adverse impacts of their investment decisions on sustainability factors within the meaning of Article 4 of the Disclosure Regulation. However, Culross will keep this situation under ongoing review as the availability of data changes.