Responsible Investment

Explorer is a Private Equity company, which manages private equity funds, in accordance with Portuguese law. As such, it is an alternative investment fund manager ("AIFM"), covered by Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on disclosure of sustainability-related information in the financial services sector (Sustainable Finance Disclosure Regulation - hereinafter "SFDR").

Explorer is not covered by the criteria in Article 4(3) and (4) of SFDR that define larger institutions.

Sustainability risks (Art. 3 SFDR)

Explorer believes that integrating environmental, social and corporate governance (ESG) factors into investment and asset management policies benefits society and the environment. That's why Explorer is progressively incorporating ESG factors into the funds it manages and in the development of new investment products. We aim to add value by identifying risks and opportunities.

The definition of sustainability risk adopted by Explorer is that contained in SFDR:

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 investment.

Explorer considers sustainability risks in a systematic and integrated way in the investment process only in relation to financial products classified under articles 8 or 9 of SFDR.

For the remaining funds, Explorer does not include specific considerations of sustainability risks in its investment processes in a generalised and systematic way, although they can be (and often are) considered alongside other types of risks that may affect a particular investment, as is required of any careful and diligent management entity that respects the fiduciary duty to which it is subject - which includes, by way of example, carrying out due diligence processes prior to investments, covering compliance with applicable legal standards and corporate governance rules or even technical environmental due diligence, among others. On the other hand, there are certain activities which, by their very nature, are contrary to the basic principles underlying a sustainable society, in no way contributing to, or even harming, society and/or the environment - which is why, whenever relevant to the investment policy of the funds in question, exclusions are applied to certain activities, such as companies that promote labour exploitation, child labour, ignore workers' rights or are associated with illegal or fraudulent practices. Investments are not made in sectors that have been identified as excluded in the fund management regulations (as a general rule: the production and commercialisation of arms, gambling, tobacco and human cloning). In addition, the risk level of the counterparty may also be a factor in the initial exclusion of the transaction.

In line with the above, the investments underlying funds that do not include specific consideration of sustainability risks do not take into account the EU criteria applicable to environmentally sustainable economic activities.

As a diligent and judicious management entity, Explorer will increasingly endeavour to integrate sustainability risks into its internal processes and investment decisions, as well as assessing the potential impacts of these risks on the performance of the funds under management, to the extent that they prove material to the activity of the funds under management, and in compliance with the investment policies set out in the funds' documents.

Sustainability Policy

No consideration of the negative impacts of investment decisions on sustainability factors

Explorer does not generally and systematically consider the negative impacts of investment decisions on sustainability factors, as it currently does not have due diligence policies that cover such negative impacts as a whole, as required by the SFDR.

To this end, it is important to take into account the universe of companies typically invested in by Explorer which means that Explorer is currently unable to properly consider such impacts in a generalised manner for all the assets under management. In fact, currently there is a lack of data of satisfactory quality, or that could be obtained at a cost and with resources commensurate with Explorer's size and activity.

On the other hand, the majority of management mandates currently in place also do not provide for such factors to be taken into account when making investment decisions.

Without prejudice, Explorer already has put in place internal processes that allow it to identify certain indicators relating to the main negative impacts of investment decisions and, depending on the availability of data and the evolution of the relevant internal policies, it may increasingly consider some of these impacts.

In particular, Explorer took on for the first time the management of a fund that promotes environmental and social characteristics. This was a first step towards creating and perfecting processes that will make it possible to identify and measure the impact of sustainability factors. Explorer hopes that the consideration of sustainability factors can increasingly be extended to other assets under management.

As this is a constantly evolving issue, Explorer intends to review its positioning in this area on an annual basis, updating its practices and the information provided here when possible. This information refers to the period between 1 January and 31 December 2023, with the exception of the references to the Explorer Hospitality Fund, whose information refers to the date of 24/07/2024, as it was registered on 8 July 2024.

Remuneration Policy (Art. 5 SFDR)

The current remuneration policy does not currently take into account the integration of sustainability risks, although this is an aspect that may be adjusted in the future.

Classification of SFDR funds (Article 10 SFDR)

Explorer commercialises and manages funds with various investment strategies (Private Equity - Buy-out, Private Equity - Growth and Hospitality). Below is information on the promotion of environmental and social characteristics by funds managed by Explorer, in line with Article 10 of the SFDR.

Explorer does not currently commercialise or manage funds aimed at sustainable investments (as provided for in Article 9 of the SFDR). In line with the above, the investments underlying the funds under management do not aim to fulfil the EU criteria applicable to environmentally or socially sustainable economic activities, without prejudice to the information specifically disclosed in relation to the fund that promotes environmental and social characteristics.

Funds that promote social and environmental characteristics (SFDR - art. 8):

Explorer Hospitality Fund I

The fund promotes environmental and social characteristics, based on materiality criteria, although it does not aim to make sustainable investments.

Disclosure of information on Explorer Hospitality Fund I (pursuant to Article 10 of the SFDR)

Other Funds (SFDR - art. 6):

Explorer II

Explorer III

Explorer IV

FRN

EGF II

EGF III

EGF IV

EGF V

EGF VI

These funds do not promote environmental or social characteristics or a combination of these, nor do they aim to make sustainable investments.

General considerations

Explorer is fully aware of the importance of increasingly implementing sustainable practices within the financial system, as well as its responsibility as a fund manager capable of influencing portfolio companies to introduce ESG and sustainability principles into their management.

In this way, and considering the interests of investors, portfolio companies and other stakeholders, Explorer incorporates a set of values and principles of responsible investment into its activity, and intends to progressively include environmental, social and corporate governance issues in the various decision-making processes throughout the life cycle of each investment. This is an ongoing process that depends, among other things, on the establishment of robust and objective procedures, and the availability of reliable data to support those .

This is, therefore, a subject under continuous review, and the policies, procedures and information provided here will be updated whenever necessary. Likewise, Explorer continually assesses the funds under its management and will update, whenever relevant, the information regarding their classification under SFDR.

 Collaborations

Explorer has been a signatory to the United Nations Principles for Responsible Investment since 2018. The 6 Principles for Responsible Investment guide our attitude towards our investments and the development of a more responsible financial system. As a signatory to the United Nations Principles for Responsible Investment, Explorer is committed to:

• Incorporate ESG factors into investment analysis and decision-making processes
• Being an active manager and incorporating ESG factors into our management policies and practices
• Promote the appropriate dissemination of ESG actions by the entities in which we invest
• Promoting the acceptance and implementation of the UNPRI Principles in the investment/financial industry
• Co-operate in improving the effectiveness and implementation of the UNPRI Principles
• Publicise activities and progress in implementing the UNPRI Principles

Explorer is a member of BCSD Portugal, a non-profit organisation that brings together and represents more than 140 leading companies in Portugal that are actively committed to the transition to sustainability. Created in 2001, it has a broad sectoral representation and companies of different sizes, from companies that are part of the PSI20 stock exchange index to smaller ones.

Updated on 24/07/2024