Statement on ESG and Sustainability
Aurum Fund Management Ltd. (“Aurum”, “We” or “Us”) believes it is imperative that the investment and financial services industry is aware of the risks and opportunities related to sustainability. Aurum recognises the impact sustainability factors can have on the planet, its species as well as social capital; healthcare and education.
This Statement describes Aurum’s approach to sustainability, ESG and related initiatives.
Industry engagement
As Aurum operates a multi manager approach to investment, we regularly engage with our underlying managers on Environmental, Social and Governance issues such as carbon impact, diversity and inclusion and fund governance. This ensures we are aware both of the risks and opportunities inherent in the underlying manager’s portfolios, but also enables us to share best practice and improve standards in the wider industry. Over time, our conversations are evolving and we are engaging further on more in-depth topics, providing advice and guidance as necessary.
Embedded Impact®
Aurum’s Embedded Impact® solutions aim to deliver returns that go beyond financial returns. Aurum manage two Embedded Impact® portfolios where the management fees generated are donated to Environmental and Social programmes. In addition to this Aurum donates a percentage of its bottom line profits to these same types of programmes. Further information on the impact of our philanthropic work can be found here: https://www.aurum.com/environmental-and-social/esg-impact-report/
PRI signatory
Aurum is a signatory to the United Nations Principles for Responsible Investment (“PRI”). The PRI works to understand the investment implications of ESG factors and to support signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole. As part of our manager engagement we implement Principle 4, promoting acceptance and implementation of the Principles with our underlying managers. This ongoing engagement is reflected in the number of our underlying managers which have themselves become PRI signatories. The AUM of the Aurum funds invested in hedge funds managed by PRI signatories has more than doubled during 2020 from c. 6% as at 31 December 2019 to c. 13% as at 31 December 2020. Aurum is also a signatory to the PRI/Ceres investment statement on deforestation and forest fires in the Amazon basin as part of its commitment to biodiversity and climate change.
Task Force on Climate-related Financial Disclosures
Reflecting Aurum’s focus on climate change and support for the Paris Agreement’s aim of keeping the increase in global average temperatures to below 2oC above pre-industrial levels, it is a supporter of the Task Force on Climate-related Financial Disclosures (“TCFD”). Aurum is starting the process of implementation of the TCFD recommendations, and we endeavour to continue to involve and enhance our approach to carbon transparent reporting through time. We have also been engaging with our underlying managers on this topic to ensure they are aware of the climate related risks and opportunities and how these can impact returns over different time frames.
Project regeneration
To offset Aurum’s carbon footprint, it sponsors a regeneration programme to reforest a degraded palm oil plantation in Hutan, Indonesia. This is particularly important as degraded land continues to emit carbon. By reforesting these areas, carbon is captured in the growing trees and emissions from the degraded land are limited. This project supports local communities who have been shown to be the most effective land stewards, as well as capturing carbon and increasing biodiversity. This is reflected by the 38 types of tree seedlings used, as well as the increase in orangutan and hornbill numbers which represent a functioning ecosystem. To encourage wider carbon offsetting and environmental philanthropy, Aurum has actively engaged with a number of hedge fund industry participants. This has been primarily to provide thought leadership and encourage others to engage in meaningful environmental regeneration initiatives.
The EU’s Sustainable Financial Disclosure Regulations
The Sustainable Finance Disclosure Regulation (“SFDR”) is the first set of regulations under the EU’s Action Plan for financing sustainable growth. The Action Plan aims to reorient capital flows towards a more sustainable economy, foster long termism and manage the increasing importance of sustainability risks. The aim of SFDR is to increase transparency by imposing sustainability disclosure requirements on investment management firms at both the product and manager level.
Aurum supports the EU’s Action Plan and transparency objectives that underpin the SFDR. However given the nature of its investments Aurum cannot currently provide the necessary sustainability transparency disclosures required under SFDR. In particular, the Aurum Funds are multi manager products which invest in hedge funds managed by external managers. In practice, this means the core investment decisions taken by Aurum are which hedge fund to invest in and it is those hedge funds which take investment decisions which may be directly impacted by sustainability risk and have an adverse impact on sustainability factors.
Underlying hedge funds are selected which have diversified portfolios with many holding several hundred to several thousand positions at any one time and with significant ongoing portfolio turnover. Furthermore, as Aurum invests via pooled fund structures there is a limited ability to influence which positions are held. As such, it is not currently feasible for Aurum to monitor or provide data on such holdings in real time.
Accordingly the Aurum range of funds have, where appropriate, included the following disclosures addressing Articles 6 and 7 of the SFDR in their prospectuses:
The Investment Manager has determined that, for the purposes of the Sustainable Finance Disclosure Regulation (Reg. (EU) No. 2019/2088), sustainability risk (which is defined as an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the relevant investment) is not relevant [for the Fund].
The Investment Manager does not, for the purposes of the Sustainable Finance Disclosure Regulation (Reg. (EU) No. 2019/2088), consider the adverse impact of investment decisions on sustainability factors (which are defined as environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters).