WaterEquity’s Disclosures Required by Sustainable Finance Disclosure Regulations (“SFDR”)

Principles-based disclosure on ESG-related activity 

Information on transparency of sustainability risk policies in connection with the Sustainable Finance Disclosure Regulation of the European Union (EU) 2019/2088. 

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Impact Objectives 

The mission of WaterEquity LLC is to build a global capital market that accelerates universal access to safe water and sanitation. By identifying investment opportunities in financial institutions, enterprises, and infrastructure that help to help scale the delivery of safe water and sanitation, we make responsible investment choices that have a direct impact on United Nations Sustainable Development Goal 6 (“SDG6”) and multifold impact across other SDGs: 

Approach to ESG 

As a registered investment adviser, WaterEquity LLC, we have integrated environmental, social, and governance (“ESG”) factors into our investment process. These factors are codified in our ESG Policy (the “Policy”).  

When evaluating an investment opportunity, we begin by confirming the opportunity meets our minimum investment requirements and does not belong on our investment exclusion list.   

While all investments undergo due diligence, some investments may require additional due diligence and reporting requirements to ensure compliance with the Policy. We consider material ESG risks by sector, differentiating between financial institutions, enterprises, and projects, and, depending on the nature of an investment, may institute an ESG action plan to close ESG performance gaps, set ESG targets, and report on performance. In cases where candidates do not have acceptable ESG risk levels and are unwilling to agree to action plans for improvement, we will not invest.  

We consider the following ESG areas when making investment decisions: 

Environment: carbon emissions, biodiversity, waste management systems, supply chain practices that involve the use of natural resources or disposal of harmful byproducts, and the use of scarce resources.  

Social: labor policies and regulations, impact of supply chain practices on the local community, health and safety working conditions, human rights, and stakeholder engagement processes. 

Governance: potential risks, impacts, and issues on the governance and legal front, specifically those which result from the operation of the business, with a particular emphasis on those that raise significant concerns and require greater attention. 

The Policy is implemented by the investment management team and conformance is monitored by the Director, Impact & ESG. We review the policy regularly and the WaterCredit Board of Managers reviews and approves the Policy no less than annually.

Relevant Impact and ESG Standards 

Our approach to Impact and ESG management is guided and measured by principles outlined in: 

• • International Finance Corporation (“IFC”) Performance Standards; 
  • IFC Environmental, Health, and Safety Guidelines for Water and Sanitation; 
  • Sustainability Accounting Standards Board’s (“SASB”) Materiality Map;  
  • Environmental, social and quality standards issued by the International Organization for Standardization (“ISO”), in particular, those relevant to the water and sanitation sector;  
  • The Client Protection Standards and the Universal Standards for Social and Performance Management (the “Universal Standards”); 
  • The Operating Principles for Impact Management; 
  • IRIS+; and 
  • Impact Management Norms developed through the Impact Management Project and Impact Frontiers. 

Statement for presenting key performance indicators under the principal adverse impacts (“PAI”) regime 

Information on transparency of adverse sustainability impacts at entity level in connection with the Sustainable Finance Disclosure Regulation of the European Union (EU) 2019/2088. 

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This disclosure sets out the “comply or explain” decision of WaterEquity LLC not to consider the principal adverse sustainability impact (“PASI”) of our investment decisions on sustainability factors, as defined by the SFDR. While we fully consider ESG factors in our investment process, our portfolio companies, located in frontier and emerging markets, may not yet be able to provide the relevant data in sufficient quality to satisfy the PASI reporting requirements. In addition, our sole focus on ending the global water and sanitation crisis means that impact and ESG are at the heart of everything we do. We feel our existing impact and ESG programs are more than sufficient for the advisory services we provide.  

We will continue to closely monitor regulatory developments with respect to SFDR and other applicable ESG-focused laws and regulations.