First of all, Providence Capital takes certain sustainability risks into account when investing. Providence Capital defines a sustainability risk as the following:
“An environmental, social or governance event or condition (also known as an ESG factor) which, if it occurs, could cause an actual or potentially material adverse effect on the value of the investment”
ESG factors can – directly or indirectly – influence the value of a portfolio. For example, factors such as resource scarcity and climate legislation could negatively affect the continuity and profitability of certain companies.
Providence Capital believes that investments in unsustainable companies are generally more exposed to sustainability risks. Providence Capital therefore does not, in principle, invest in companies that do not comply with the UN Global Compact principles. By avoiding these companies, Providence Capital expects to limit the sustainability risks to which portfolios are exposed.
To determine whether companies comply with the UN Global Compact principles, Providence Capital uses data from specialized data providers and underlying investments of most investment funds are regularly screened. We report on this to our clients on a quarterly basis. In addition, of course, Providence Capital takes into account – as far as possible – all relevant aspects of an investment, such as sustainability risks, when selecting and monitoring investments.