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Regulation (EU) 2019/2088, the Sustainable Finance Disclosure Regulation (SFDR), came into effect on March 10, 2021, mandating fund managers like Sherpa Capital, a management company authorized by the CNMV, to disclose to investors how sustainability risks are integrated into their operations.

Specifically, Article 3 of the regulation mandates that financial market participants disclose on their websites their policies regarding the incorporation of sustainability risks in their investment decision-making processes.

The following statement responds to that obligation.

At Sherpa, we adhere to the definition of sustainability risk as outlined in Article 2(22) of the SFDR. We perceive sustainability risks as potential environmental, social, or governance events or situations that, if materialized, could significantly adversely affect the value of an investment (financial risk).

In this regard, we embed ESG criteria within our investment process, ensuring that the integration of sustainability risks is integral to our decision-making for each investment. This is done in every phase of the investment process the following manner:

Identification/Deal Origination:
Sherpa employs an exclusion list to omit investments in sectors inconsistent with our and our investors’ values.

ESG Due Diligence:
Sustainability risks are identified, with an external specialist advisor conducting the ESG due diligence.

Internal Controls:
An ESG section in the Investment Committee memo discusses any significant sustainability risks or adverse events found, with mitigation plans requested by the Committee if needed.

Holding Period:
Each portfolio company sees the implementation of a proper ESG governance structure and a basic ESG action plan, alongside ESG KPIs selected based on their financial relevance to the company.