Sustainable Finance Disclosure Regulations (SFDR),
Articles 3, 4 and 5 Disclosure Document:
18 September 2023
The European Union’s (EU) Sustainable Finance Disclosure Regulation (EU 2019/2088) (SFDR) requires financial market participants and financial advisers to publish on their websites information about their policies on the integration of sustainability risks into their investment decision-making and investment advice. “Sustainability risk[1]” is defined in the SFDR as an environmental, social or governance event or condition which, if it occurs, could cause an actual or potential material negative impact on the value of an investment.
This disclosure statement considers the approach taken by Orion Resource Partners (USA) LP (Orion) in accordance with the requirements of SFDR Articles 3, 4 and 5 Orion is required to formulate and disclose its policy on the integration of sustainability risks into its investment decision-making processes.
Orion’s Investment Philosophy (SFDR Article 3)
Orion has integrated sustainability risks into its investment decision-making process for all discretionary investment management strategies. Orion has also integrated sustainability risks into its investment advice process for all Undertakings for Collective Investment in Transferable Securities (UCITS). Orion’s policies on the integration of sustainability risks into its investment decision-making and investment advice process have been incorporated into the Responsible Practice and Investment Policy and fund specific procedures across its business.
Oion’s portfolio managers are provided with information on sustainability risks and are encouraged to take sustainability risks into account when making an investment decision. Orion has appropriately competent employees to carry out the investment management pursuant to the relevant investment agreements in place between Orion and the investors.
Depending on the type of fund, Orion leadership appoints an Investment Committee for the fund. The Committee, in accordance with the Orion’s Responsible Practice and Investment Policy, is responsible to evaluate investments in accordance with Orion strategies, policies, and restrictions, and parameters arising from the terms of any prospectus, offering memorandum, private placement document, or management agreement, or as may be set by investors.
Sustainability risk would not in itself prevent Orion from making or recommending an investment. Instead, sustainability risk forms part of Orion’s overall risk management processes, and is one of many risks which may, depending on the specific investment opportunity, be relevant to Orion’s determination of risk.
Limited Disclosure
Orion recognises SFDR as a key pillar of the EU’s sustainability initiative. It is not practical to formally integrate sustainability risk in a manner which is achievable by all types of Orion’s investment strategies due to the nature of the investment strategies employed by Orion and the instruments invested in to achieve its stated investment objectives agreed with Orion investors. These funds are focused on commodities, merchant services, and resource financing.
No Consideration of Sustainability Adverse Impacts (SFDR Article 4)
Orion does not consider the principal adverse impacts (PAIs) of its investment using sustainability factors as we are monitoring further regulatory guidance and the development of industry and market practice in this area. Orion supports the objectives of SFDR with respect to transparency of due diligence policies and reporting against relevant quantitative metrics.
In respect of Orion’s portfolio investments, it has chosen not to consider these impacts currently, predominantly due to the nature of its investment and the limited capacity of Orion to materially engage with, and report on, these issues in a relevant and meaningful way. Currently, there is limited relevant information available to assess the impact of its investment decisions on sustainability factors, since Orion often invests in projects in the planning, design, and construction phases. Orion is striving to identify metrics linked to prevention or avoidance of environmental and social impacts.
Whilst uncertain as to when specifically, Orion may consider the adverse sustainability impacts it remains open to doing so in future. Orion will monitor the situation with respect to its business model and investment strategies and keep the decisions around PAIs under regular review.
Remuneration Policy (SFDR Article 5)
Orion has reviewed its remuneration procedures in accordance with the requirements of Article 5 of SFDR to support consistency with its integration of sustainability risks as described above. The relevant details incorporated in that respect are featured below.
- Central to Orion’s Remuneration Policy is the promotion of sound and effective risk management which includes financial and sustainability risks. Orion does not have any quantitative sustainability-focused performance targets at either a portfolio or asset level. Therefore, this is a qualitative assessment in respect of adherence to its internal procedures for integration of sustainability risk as outlined above.
- Further, another key aspect of Orion’s remuneration procedures is with respect to avoiding creating an environment which rewards or encourages excessive risk-taking. Again, this principle applies to financial and sustainability risks and for those individuals who have a role in overseeing that the relevant responsible investment policy is adhered to this is factored into decisions in respect of variable remuneration awards.
An individual performance assessment using the criteria above, in addition to the overall performance of the relevant business unit and investment team, is integrated into the final assessment of compensation for an individual portfolio manager as part of the assessment of business results.
Examples of sustainability risks which are potentially likely to cause a material negative impact on the value of an investment, should those risks occur, are as follows:
- Environmental sustainability risks may include climate change, carbon emissions, air pollution, rising sea levels or coastal flooding, and wildfires.
- Social sustainability risks may include human rights violations, health and safety concerns for the workforce, human trafficking, child labour, and gender discrimination.
- Governance sustainability risks may include a lack of diversity at board or governing body level, infringement or curtailment of rights of shareholders, or poor safeguards on personal data and IT security.