Bluegem Capital (Luxembourg) S.à r.l

Sustainability Risk Policy

OCTOBER 2024

Introduction

Bluegem Capital (Luxembourg) S.à r.l. (the “Company”) is a private limited liability company (société à responsabilité limitée) incorporated under the laws of the Grand Duchy of Luxembourg, having its registered office at 4-6, rue de la Boucherie, L-1247 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg Trade and Companies Register under number B283767.

The Company is authorised by the Commission de Surveillance du Secteur Financier (the “CSSF”) as an alternative investment fund manager within the meaning of chapter 2 of the Luxembourg Law of 12 July 2013 on alternative investment fund managers, as amended (the “AIFM Law”).

The Company is part of the same group as Bluegem Capital Partners LLP, located in the United Kingdom, together the “Bluegem Group”.

Purpose

Pursuant to EU Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (the “SFDR”), financial market participants shall publish on their websites information about whether or not consider principal adverse impacts of investment decisions on sustainability factors.  One of the main objectives of the SFDR is to create transparency on how sustainability risks are considered in the management of AIFs.

Sustainability Risk Policy

The Company delegates the portfolio management function to Bluegem Capital Partners LLP, a suitably qualified and skilled investment manager. Therefore, “investment decisions” as defined under SFDR are delegated to the Bluegem Capital Partners LLP, subject to the Company’s ongoing oversight.

The responsibility of the Company in the context of sustainability risks is to ensure that Bluegem Capital Partners LLP, in its capacity as delegated investment manager, adheres to its own sustainability risk policy - see hereunder:

Sustainability Risks Policy Statement of Bluegem Capital Partners LLP

Scope of the policy

In recent years investors have increasingly sought to understand how their money is used and the impact of their investments.

Institutional investors are ever more interested in the non-financial criteria in their portfolio’s construction. In other words, they want their investments to be aligned with their sustainable development convictions, with their corporate values and with their worldview.

In accordance with investors’ interests and with the requirements of Article 3 of Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services sector (“SFDR”), Bluegem Capital Partners LLP, the “Investment Manager”, has chosen to formulate and disclose its policy on the integration of sustainability risks into its investment decision-making processes.

Contacts

All question regarding this policy should be addressed to legal@bluegemcp.com

Limited Disclosure

Whilst the Investment Manager supports the objectives of SFDR in encouraging financial market participants to embrace consideration of sustainability risk within their investment decision making processes, due to the nature of the investment strategy employed by the investment manager, as agreed with investors, it is not practicable to formally integrate sustainability risk in a manner which may be achievable by other types of investment strategies.

Definition

Sustainability risk refers to any environmental, social or governance event or condition that could affect the performance and / or the reputation of issuers in the portfolio. Sustainability risks can be broadly divided in the following 3 categories:

Environmental: environmental events can create physical risks for companies in the portfolio. These events could for instance result from the consequences of climate change, loss of biodiversity, change in ocean chemistry, etc. Further to physical risks, companies could also be negatively impacted by mitigation measures adopted to address environmental risks. Such mitigation risks will impact companies differently depending on their exposure to the aforementioned risks and their adaptation to them.

Social: refers to risk factors related to human capital, supply chain and the way companies manage their impact on society. Questions around gender equality, remuneration policies, health and safety and risks associated with working conditions in general are addressed under the Social dimension.

Risks of human or labour right violations within the supply chain are also part of the Social dimension.

Governance: these aspects are linked to governance structures such as board independence, management structures, employee relations, remuneration and compliance with fiscal practices. Governance related risks have in common that they stem from a failure of company oversight and/or the lack of incentive for company management to uphold high governance standards.

Approach

Sustainability risks are considered throughout both the investment process and ongoing asset management activities. When a sustainability risk is detected during the origination process, the investment team can utilize several methods to mitigate and manage these identified sustainability risks, whether through commercial terms or documenting specific conditions, or indeed by rejecting the transaction if the sustainability risk is deemed to be insufficiently mitigated. Investments are actively monitored through the asset management process, responding to materializing sustainability risks quickly through engagement with the management of portfolio companies.

Methodology

Investment analysis of non-financial factors, including the sustainability factors takes place as part of the Investment Manager’s pre-investment due diligence procedures and ongoing monitoring processes.

The Investment Manager 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. the Investment Manager therefore views incorporating consideration of these non-financial factors with respect to investments as being in line with its duties acting as portfolio manager.

The below briefly outlines how the Investment Manager integrates sustainability risk from an investment risk perspective.

·         Each investment process considers ESG integration according to the relevant investment fund’s investment policy. The Investment Manager believes that ESG risks and opportunities stem from factors including management strength and strategy, the use of human and natural resources, as well as regulatory and political considerations. ESG factors are critical to evaluating sustainability and expected impact on investment performance.

·         The investment team assesses the materiality of these factors in each investment decision. As part of the integration of sustainability risk consideration in our investment process, Bluegem Capital Partners LLP incorporates in its investment analysis:

      • Negative screening (i.e., the exclusion of specific sectors, issuers, or themes where investor or regulatory restrictions apply)

      • ESG integration (i.e., the inclusion of ESG factors alongside traditional financial analysis of companies by investment managers)

      • Corporate engagement (i.e. the engagement and dialogue with company management to act as responsible majority investors).

Sustainability risk is an important aspect of risk management – designed to limit potential downside risk, generating increased performance. The Investment Manager assesses risks at market, sector and company level and works to promote good business practices, as it believes there are opportunities for investing in companies that enable more environmentally friendly economic activity.