1. Article 29 of the French Energy-Climate Law (LEC29)
Decree 2021-663 of 27 May 2021, known as “Decree LEC29”, issued pursuant to Article 29 of the “Energy-Climate” Law, sets out the content of the LEC29 report aimed at making market participants more transparent about their non-financial practices, in particular the consideration of climate and biodiversity risks.
The LEC29 reports must be published each year by market participants concerned.
Our most recent LEC29 reports for our management company and our only Fund in scope of the decree are found here (‘Omnes Capital SA’) and here (‘Capenergie 4’)
2. Sustainable Finance Disclosure Regulation (SFDR)
Regulation (EU) 2019/2088, known as the Sustainable Finance Disclosure Regulation (“SFDR”), was adopted on 27 November 2019 and deals with sustainability-related disclosure in the financial services sector. The Regulation aims to improve transparency between financial market participants (“FMPs”) on how they integrate sustainability risks in their investment decisions, consider potential adverse impacts, promote certain environmental or social characteristics, or aim to achieve sustainable investment objectives.
What follows from the SFDR is that Omnes needs to transparently communicate to potential investors on our website on:
- Our consideration of sustainability risks in our investment decision-making process (“Article 3 SFDR”); and
- Our policy on considering and mitigating potential negative impacts of our investment decision-making on sustainability factors (“Article 4 SFDR”); and
- Our integration of sustainability goals within our remuneration policies (“Article 5 SFDR”); and
- The processes within our Funds on how we measure the performance of our sustainable investment objectives (“Article 10 SFDR”)
Our commitment to responsible investment
Omnes has been working with entrepreneurs and infrastructure project owners since it became an independent entity in 2012 and split from Credit Agricole. We are convinced that integrating extra-financial criteria into the partnerships we develop with entrepreneurs is essential to create long-term value. We pay particular attention to preserving the environment, promoting human capital and establishing transparent and responsible governance structures. As such, we have developed a comprehensive approach to integrating salient Environmental, Social and Governance (‘ESG’) factors into our investment approach.
Our Responsible Investment policy sets out our ESG integration approach, how we implement this throughout our investment processes and how we manage risk on a structural basis.
The most recent version of our policy is available here.
Our policies and their updates are distributed to all Omnes employees. Senior members of the management teams are responsible for applying these policies throughout the investment process.
a. Sustainability risk assessment [“Article 3 SFDR”]
An important part of our policy and approach to responsible investment is that we monitor and manage the risk a sustainability-related event or situation could potentially, or actually, have on the value of a client’s investment into one of our Funds.
To this end we have a sustainability risk policy (available here) which details how we integrate sound risk management principles and tools into our investment processes.
b. Considering potential negative impacts of our investment decision-making on sustainability factors [“Article 4 SFDR”]
In April 2022, the European Commission adopted the Regulatory Technical Standards [“RTS’] under the SFDR. This included a list of Principal Adverse Impact (“PAI”) indicators which a Fund must take into account to determine that an investment Does No Significant Harm [“DNSH’].
Although our above process on screening for potential ESG risks aligns with the requirements under Recital 17 SFDR [“the precautionary principle’] the assessment does not (yet) include a full pre-deal or periodic review of all indicators for adverse impacts provided in Tables 1, 2 and 3 of Annex 1 SFDR[1].
The first consolidated statement of PAI indicators is expected to cover the period from 1 January 2023 to 31 December 2023 for those Omnes Funds that aim to achieve a specific sustainable investment objective, and is due on or before 31 March 2024.
As of 31 December 2022, these ‘Article 9’ Funds did not have enough assets in the portfolio to be able to publish meaningful PAI indicators at the level of our management company (Omnes Capital SA) and the capacity of the underlying assets to provide good quality data was not yet optimal. This is partly because we invest in small and early-stage private companies, which do not always have the capacity to report quantitatively on all numerical PAI indicators (e.g. GHG emissions, hazardous or radioactive waste) or develop and implement fit-for-purpose policies on other indicators (e.g. human rights, water management).
As such, we cannot (yet) state that we currently use PAI indicators in our investment decision making process.
We do however attempt to minimize potential negative impacts of our investments on sustainability-factors through the implementation of a strict exclusion policy, a rigorous due diligence process and ESG scoring grid, our active ownership and engagement, and our adherence to international standards.
a. Exclusion
Omnes relies on a comprehensive exclusion policy to mitigate the potential negative impacts of our investments on sustainability-factors. Investment restrictions are specified in the legal documentation of each Fund and all Funds managed by Omnes exclude investments in companies whose main activities are in:
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- production, trade or services related to the reproductive cloning of human beings;
- tobacco production;
- the manufacture and sale of lethal military weapons and ammunition;
- the manufacture of anti-personnel mines and/or cluster bombs and the manufacture of key components for the assembly and operation of such weapons;
- gambling and casinos;
- pornography;
- electricity production from coal, oil and gas;
- extraction of conventional oil and gas; or
- extraction of thermal coal and unconventional oil and gas.
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Compliance with these restrictions is checked before each investment of our Funds.
Omnes does not invest its assets in heavy industry or commodity extraction and many of our investments are made in service companies (IT, commerce, etc.), in the research sector (biotechnology, medtech, deep tech), in the renewable energy sector (wind and solar farms, repowering, etc.) and in sustainable city infrastructure.
Omnes invests residually outside the European Union, thus limiting the risks of non-compliance with OECD guidelines in terms of labour law, non-respect of human rights, or investment in countries that are not environmentally aware (discharge of toxic products, non-treatment of wastewater, etc.).
We will periodically review and tighten our exclusion policy.
b. Due diligence and ESG scoring grid
Omnes had first implemented an ESG scoring grid for certain portfolio companies in 2019, which was then extended to all our Funds and their portfolio companies in 2021.
Omnes implements this process in two steps:
1st step: Every year, each portfolio company fills in a comprehensive online questionnaire providing feedback to Omnes on various criteria: electricity consumption, male/female ratio in management bodies, implementation of employee profit-sharing plans, etc.
2nd step: Omnes’ portfolio managers complete a rating grid for each portfolio company based on 14 criteria plus a weighting mechanism adapted to the business sector and maturity level of the portfolio company (the weighting mechanisms are set by investment strategy and not by portfolio company).
This system of collecting information from the companies financed each year makes it possible to set up an annual monitoring of their progress on ESG criteria and enables the investment teams to limit the margins of error linked to self-assessment.
c. Active ownership and engagement
After an investment is made, Omnes suggests that the new portfolio company commits to an ESG action plan to help it improve its environmental, social and governance practices, reduce the potential negative impacts of its activities and make it more efficient.
The exercise of voting rights within the corporate bodies of our companies is guided by financial, strategic and ESG considerations, including monitoring compliance with the improvement plans defined by Omnes at the time of the initial investment.
Omnes does not impose results on our companies, as we believe that their operational management should remain in the hands of their managers. That said, Omnes is an active shareholder and uses its position to convince management to ensure that appropriate measures are put in place that, over time, are both financially sound and respectful of company stakeholders and the environment.
For companies listed on financial markets, Omnes undertakes to vote above the threshold of 5% of voting rights or capital held. Below this threshold, the exercise of voting rights is possible but not mandatory.
d. Adherence to international standards
Omnes is a signatory to the following initiatives:
- UNPRI;
- France Invest’s ESG Engagement Charter;
- France Invest’s Gender Equality Charter;
- International Climate Initiative (iCi);
- France Invest Level 20 Committee.
Moreover, on behalf of certain investors in our Funds we have sought to comply with the Net Zero Asset Managers Initiative.
Going forward, we intend to work across the fourth quarter of 2023 and early 2024 on three actions:
- Assist our portfolio companies with further maturing their data collection, calculation and quality for material PAI indicators; and
- Review our current applicable policies (Responsible Investment Policy and Sustainability Risk Policy) and analyse whether we adjust our policy settings and escalation processes to further inform our investable universe and our active ownership approach; and
- Work on internal capacity building across our investment teams and at the level of the management company.
c. Integration of sustainability goals within our remuneration policies [“Article 5 SFDR”]
Remuneration at Omnes reflects the success of the company and is based along multiple parameters. To have an effective risk management system it takes into account careful and diligent decision making and lacks any form of incentives for its employees in excessive risk taking for both business and sustainability.
Remuneration is also aligned with the long-term interest of our company and the allocation of fixed and variable remuneration is governed by our Remuneration Committee and our Supervisory Board. Controls on the application of our remuneration policy – which is available online – are carried out by our Compliance team.
d. The sustainable investment objectives of our Funds [“Article 10 SFDR”]
Omnes manages 45 Funds across our Renewable Energy, Venture Capital, Sustainable Cities and Co-Investment teams. A complete list of these Funds is available here.
Currently we have two Funds with a specific sustainable investment objective, namely Capenergie 5 (‘Cap5’) and Construction Energie Plus 2 (‘CEP2’). Both Funds are currently fundraising and making new investments.
This statement was published on 27 September 2023.
[1] We are aware that the mandatory list of PAI indicators is likely to expand as markets mature and market consultations give direction on priority factors