Integrating sustainability risks into investment decision-making

COIMA SGR believes that integrating environmental, social and governance (ESG) factors into the investment process is of fundamental importance. It firmly believes these elements can contribute positively to our funds’ financial results, reduce risks, and foster sustainable economic and social development. Financial market participants committed to integrating ESG criteria into their strategy can generate sustainable profits and future value for stakeholders. This allows a more efficient risk management. This includes environmental and social risks that negatively affect the valuation of individual investments. Identifying and managing such risks is part of the fiduciary duty to protect value.

COIMA SGR bases its approach on the Sustainable Development Goals, approved in 2015 by the United Nations, contributing to eight of the 17 SDGs through innovation processes, focusing on people and natural resources management.

In addition to the traditional financial valuation analysis of investments, the company combines ESG metrics to make better informed investment decisions.

The COIMA SGR method in pursuing and monitoring the set objectives and identifying and mitigating risks includes a sustainability strategy that assesses scenarios through technical and financial analysis to identify the most valuable aspects and appropriate governance structures to oversee the ESG approach.

During the investment phase, sustainability risk management consists of the following:

• Screening and selection of investment opportunities: this is based on specific exclusion criteria. The main exclusion criteria are the following:
  • avoiding development in protected natural areas;
  • avoiding construction of new buildings for the extraction, storage, transport or production of fossil fuels.
  
  
• Due Diligence: the due diligence purpose is to
  • understand the investment’s financial and sustainability risks
  • verify that the risk-return profile follows the fund’s risk profile
  
  
• Calculate the sustainability risk associated with the investment using COIMA ESG Metrics by analysing:
  • the “as is” situation: assessment of the risk associated with the investment at the time of acquisition;
  • the “target” situation: assessment of the risk associated with the investment following property redevelopment or new construction.

The main roles and responsibilities in the risk management process involve the following:

• Board of Directors: the SGR Board of Directors, as Strategic Supervision body, is responsible for fund investment and divestment policies and strategies. On the Risk Management Function’s suggestion, the BoD defines and approves the Policy for the Integration of Sustainability Risks into Investment Processes and related measurement tools.
• Chief Executive Officer: they have management functions and implement the company's risk management policies, defined by the SGR Board of Directors, verifying their adequacy and effective implementation. They are responsible for the integration of sustainability risks when implementing and verifying the investment policy for each AIF managed. They periodically review the adequacy of internal investment procedures and define and apply the remuneration policy.
• Sustainability and Innovation Committee: the SIC is an advisory and proactive committee that operates in the ESG management, Impact Investing and product innovation issues. The SIC engages in the short and medium-term sustainability objectives set by the CEO implementing ESG and Innovation corporate strategies and long-term objectives defined by the SGR Board of Directors.
• Sustainability Function: reports to the Head of Sustainability and Communication, coordinates impact and ESG issues with the support of the Sustainability Officer, who identifies, defines and manages company sustainability, particularly the investment/disinvestment process and real estate portfolios, verifying compliance with the EU Reg. 2019/2088 (Sustainable Finance Disclosure Regulation - SFDR).
• Risk Management Function: integrates sustainability risk into its tasks defined in the Risk Management Policy and Policy for Integrating Sustainability Risks into Investment Processes, under the operational methods defined in the "Risk Management Operational Process" and applies the approved assessment systems. The Risk Management Function submits the Sustainability Risk Integration Policy and related measurement tools, pre-agreed with the Sustainability Function, to the Board of Directors for approval.
• Operating Functions and Committees: operating functions are the first level control when identifying, managing and assessing the managed AIFs sustainability risk. The operating functions work with the second and third level controls to provide information and coordinate to identify the safeguards to be put in place. To make the SGR’s approach and methods for measuring and assessing the company ESG objectives and investments transparent, a non-financial “Sustainability Report” is published annually. This includes aggregate relevant information and performance on ESG issues.

For further details see the group’s “Policy for Integrating Sustainability Risks into Investment Processes” at the following link:
https://www.coima.com/en/disclosure/policy-and-procedure.

Under Art. 4 of EU Regulation 2019/2088, COIMA SGR decided to adopt the “comply” approach when assessing the harmful effects of its investment decisions on ESG sustainability factors.

Careless investment choices can have negative effects on stakeholders, the environment and society.

COIMA is aware of this and has adopted a clear framework to guide its investment decisions to minimise negative effects.

COIMA’s sustainable investment policy includes a structured approach to mitigate sustainability risks and Principal Adverse Impacts (PAI) of investment decisions on sustainability factors, outlined in the “Final Report on draft Regulatory Technical Standards”.¹

An investment screening and selection criterion is applied based on two main factors:

• Avoiding development in protected natural areas
• Avoiding construction of new buildings for the extraction, storage, transport or production of fossil fuels

These two exclusion criteria are used to address some of the most significant PAI. COIMA collects data on the impact of carbon emissions and other significant factors and uses the COIMA ESG Metrics proprietary methodology to calculate an asset and AIF’s ESG score and the associated ESG risk.

Statement on the main negative effects of investment decisions on sustainability factors

COIMA SGR follows EU Regulation 2019/2088 and best practices on the integration of ESG-related objectives in its staff remuneration and incentive policy. The remuneration policy includes a direct link between the specific indicators of managed assets’ sustainable evolution and the total variable remuneration (Incentives) and their attribution of each objective to each relevant staff member.

Funds classified under Art. 8 [Reg. 2019/2088]:

• COIMA ESG City Impact Fund
• COIMA Evergreen Fund
• COIMA Lampugnano Regeneration Fund
• COIMA Opportunity Lorenzini Fund
• COIMA Porta Nuova Liberazione fund
• COIMA Porta Nuova Bonnet Fund
• COIMA Housing Fund
• COIMA Opportunity Fund III
• COIMA Sesto Fund
• COIMA Opportunity Fund II
• COIMA Porta Nuova Centrale Fund
• COIMA Porta Romana Fund
• COIMA Odissea Fund
• COIMA Build to Core Fund
• COIMA Italian Residential Fund
• COIMA Olympic Village Fund