Sustainability Disclosure

INTRODUCTION

Enigma Strategy (“ES” or “the Firm”) Limited, company number 12315940. Enigma Strategy is authorised and regulated by the Financial Conduct Authority (“FCA”). Financial Reference Number: 926961

The firm acknowledges and embraces the escalating attention and interest in sustainable and responsible investment. This document delineates the policies of Enigma Strategy Ltd ("Enigma Strategy") concerning the integration of sustainability into its investment decision-making process.

Accordingly, this policy applies to all investment management activities conducted by Enigma Strategy, encompassing all investments directly or indirectly managed by Enigma Strategy (each referred to as a "managed account" "Investment" "Portfolio" "Model Portfolio" "Fund" and collectively as the "Funds").

The firm acknowledges the increasing environmental, social, and governance-related risks confronting the world. Given Enigma Strategy's fundamental, research-driven approach to stock-picking in investments, its research methodology inherently drives it towards identifying well-governed companies.

However, sustainability considerations may not always be the decisive factor in investment decisions. Enigma Strategy reserves the right for a Fund to include investments with adverse sustainability factors.

SCOPE

According to SFDR, "sustainability risk" refers to an environmental, social, or governance event or condition that, if it materialises, could lead to an actual or potentially significant negative effect on the value of an investment. Consequently, this policy assesses sustainability risk by considering the possibility that ESG events may result in a substantial adverse impact on the value of a Fund's investments.

This policy sets forth Enigma Strategy's framework for identifying, monitoring, and managing ESG risks on behalf of its investors.

For SFDR, sustainability risk is not concerned with the adverse impacts of Enigma Strategy’s investment decisions on sustainability factors. This is covered by a separate regime under SFDR, which is addressed on the next pages.

REGULATORY FRAMEWORK 

The EU Sustainability Risk Disclosures under Regulation (EU) 2019/2088 on sustainability-related ("SFDR") mandates firms to formalise the integration of sustainability into their operations and disclose sustainability-related information. Enigma Strategy voluntarily complies with certain SFDR requirements across all its activities, including managing investment funds directly or indirectly.

RESPONSIBILITY

Enigma Strategy's Management Committee holds ultimate responsibility for the firm's policies and procedures concerning sustainability risks.

The Management Committee at Enigma Strategy has endorsed this policy along with the associated procedures, encompassing the firm's sustainability risk appetite and the integration of sustainability risks into investment decision-making.

SUSTAINABILITY RISK MANAGEMENT

Enigma Strategy strives to detect significant issues with investee companies early on to mitigate potential losses for investors. Whenever feasible and suitable, it may endeavor to inform the relevant members of the investee company's board about these issues, either directly or indirectly through the company's investor relations department. Such concerns could involve corporate governance matters and climate change issues that Enigma Strategy believes could affect shareholder value. Alternatively, Enigma Strategy may opt to divest the relevant position to minimise potential losses.

RELEVANT SUSTAINABILITY RISKS 

As mentioned earlier, Enigma Strategy aims to identify each significant environmental, social, and governance risk that could potentially have a negative impact on the value of an investment. These risks are summarised in this section:

 

• Environmental sustainability risks affecting the value of the Funds’ portfolios: climate change; carbon emissions; energy inefficiency.

• Social sustainability risks impacting the value of our clients’ portfolios: data privacy; and consumer protection.

• Governance sustainability risks affecting the value of our client’s portfolios: inadequate external or internal audit; quality of earnings; infringement or restriction of rights of (minority) shareholders; bribery and corruption; cybersecurity; legality.

DISCLOSURES

SFDR mandates that a firm within its scope must publicly disclose information about this policy on its website. Enigma Strategy fulfills this obligation by publishing a copy of this policy on its website under "sustainability disclosure"

Additionally, SFDR requires that a firm must include, in the pre-contractual disclosures for the financial products it manages, a description of how sustainability risks are integrated into its investment decisions. Enigma Strategy meets this requirement by providing a separate summary of this policy in pre-contractual disclosures.

For clarification, "pre-contractual disclosures" refer to the prospectus or offering document for a fund, as well as the investment management agreement or other terms and conditions for a portfolio management service.

 

CONSIDERATION OF ADVERSE IMPACTS

Under the SFDR, a firm within its scope must decide whether to "comply or explain" regarding the consideration of "principal adverse impacts" (PAIs) of its investment decisions on sustainability factors, as outlined in a specific regime in the SFDR. While Enigma Strategy is otherwise voluntarily adhering to certain aspects of SFDR, it has chosen not to comply with that regime and does not assess the principal adverse impacts of its investment decisions on sustainability factors as prescribed by the PAI regime in Article 4 of SFDR.

Enigma Strategy has thoroughly assessed the requirements of the PAI Regime outlined in Article 4 of SFDR. While supportive of the policy objectives of the PAI Regime, which aim to enhance transparency for clients, investors, and the market regarding how financial market participants integrate consideration of adverse impacts of investment decisions on sustainability factors, Enigma Strategy does not currently do so. This decision stems from the inability to gather and/or measure all the data required by the SFDR for reporting, or to do so systematically, consistently, and at a reasonable cost to investors. One contributing factor is that underlying companies or issuers are not widely obligated to, and predominantly do not currently, report based on the same data.

Enigma Strategy will regularly review its decision not to comply with the PAI Regime in light of market developments.

 

 

INTEGRATION OF SUSTAINABILITY RISKS IN REMUNERATION POLICY

 

In essence, Enigma Strategy aims to align its remuneration policy and practices with the principles of sound and effective risk management, including sustainability risks where relevant. The allocation of variable remuneration to employees and the distribution of profits to partners are determined based on individual performance and contributions to the business. This assessment considers both financial and non-financial criteria, such as adherence to risk management and compliance policies, including Enigma Strategy's ESG and Sustainability Risks Policy where applicable.