Information on Sustainability

On 10 March 2021, the European regulation on information provision regarding sustainability in the financial sector (also called Transparency Regulation or SFDR) entered into force.

In accordance with the SFDR and the associated Taxonomy Regulation, fund managers, like Apple Tree Capital Partners B.V. (hereafter: ‘we’ or ‘Fund Manager’), must provide information on sustainability related to the funds managed. Below we explain how we deal with the Transparency Regulation.

Sustainability Policy

Qualification of Participations
Apple Tree Fund (hereafter: the ‘Fund’) invests in index derivatives*. The Fund refrains from investing in derivatives markets with limited liquidity. This means that the investment universe is limited to specific indices. For the moment, this only includes ‘broad indices’, like the AEX and the EUROSTOXX 50, where ecological or social characteristics, or sustainability do not apply as specific selection criteria.

Hence, the Fund does not promote ecological or social characteristics ('light green investments', as referred to in Article 8 SFDR) and hence does not have sustainable investments as its objective ('dark green investments', as referred to in Article 9 SFDR). The underlying investments of this financial product do not consider the EU criteria for ecologically sustainable economic activities.

Policy regarding sustainability risks
Fund Manager recognizes that (the realization of) sustainability risks might cause a negative effect on the value of the investment. A sustainability risk is, in brief, an event in the ecological, social or governance area (ESG area) that might have a negative impact on the value of the Participations. Sustainability risks in the ecological area include CO2 emissions, energy consumption, and biodiversity losses. With regards to sustainability risks in the social area, one can think of product responsibility and observance of human rights. With regards to sustainability risks in the governance field, one can think of inclusiveness and diversity, compensation, and business ethics. Fund Manager integrates sustainability risks in investment decisions to a limited extent. More detail on the relevant risks and how we consider those is provided below, under ‘Sustainability risks’.

Adverse effects of investment decisions based on sustainability factors not taken into account
Fund Manager does not consider the adverse effects of investment decisions on sustainability factors, and therefore it does not prepare a so-called annual principal adverse sustainability impact statement (PAI). Considering adverse effects of investment decisions on sustainability factors would mean that Fund Manager would have to report on this. Currently, the information required for reporting is not available within the Fund Manager. To obtain such information, Fund Manager would have to take (costly) measures. Fund Manager believes that this is, at least for now, disproportional. Notwithstanding the above, Fund Manager may reconsider the decision to not take into account adverse effects of investment decisions on sustainability factors in case relevant circumstances do occur.

Sustainability risks and reward policy
Under the AIFMD registration regime, Fund Manager is not obliged to apply the statutory reward policy. Due to the limited size of the organization, it was decided not to (voluntarily) implement specific reward policies. The SFDR requirement regarding the provision of information on the reward policy, and to which extent this policy is in line with the sustainability risks, is not applicable to Fund Manager, due to the lack of (a requirement to implement) a reward policy.

Sustainability Risks

Fund Manager understands sustainability risks refer to an event or circumstance in the ecological, social, or governance area that, if it occurs, may cause an actual, or possible substantial negative impact on the value of the investments of the Funds managed by the Fund Manager. Sustainability risks may be stand-alone risks, or they could manifest themselves through, or in conjunction with, other risks factors related to investing, like market risks, counterparty risks, or legal and regulatory risks.

The Fund invests in index derivatives. The stocks (i.e. companies) by which these indices are composed are exposed to sustainability risks. These sustainability risks may have an adverse impact on the value of the investments.

Ecological factors are mainly related to climate change. Climate change could potentially affect parts of the activities of a company, which subsequently may limit operational activities. In addition, governments throughout the world are implementing environmental legislation, and the incapability of a company to meet these standards may result in significant fines. Revaluations of assets due to changes in policy, technology, and sentiment may worsen the financial conditions of companies.
Social factors concern the relationships of a company with other companies and communities, and its attitude regarding diversity, human rights, and consumer protection. Social factors may (positively and negatively) influence the operational success of a company.
Corporate governance concerns the internal affairs of the company and the relationships with the main stakeholders of the company, including the employees and shareholders. Proper, transparent corporate governance may help prevent conflicts of interest between the stakeholders of a company and possible high litigation costs.

Because the investment universe of the Fund is limited to specific indices, the possibility to take sustainability risks into account is very limited. However, through diversification, these risks are limited within the Fund’s investment policy. By investing in index derivatives, the Fund indirectly invests in (the underlying) stock indices, and, by doing so, making use of broad indices, risks are diversified over various companies, sectors, and segments, and the impact of an occurrence of one of the sustainability risks to the value of one of the underlying companies will predominantly have a relatively limited impact on the value of the index.

* A detailed explanation of the investment policy is included in the Investment Memorandum (IM).