The Sustainable Finance Disclosures Regulation (the “SFDR”) requires that financial market participant that markets a product which promotes environmental or social characteristics should publish and maintain on that financial market participant’s website certain information in respect of that product as set out in the SFDR and its supporting regulatory technical standards (the “RTS”).
This disclosure is made in respect of the Digital Infrastructure III Offshore Feeder Fund, L.P., a Cayman Islands exempted limited partnership (the “Feeder Fund”). The Feeder Fund has been established as a feeder fund that will invest substantially all of its assets in the limited partnership interests of DigitalBridge Partners III Lux, SCSp, a Luxembourg special limited partnership (société en commandite spéciale) (the “Fund”).
1. Summary
The Feeder Fund has been established to act as a feeder fund that will invest substantially all of its assets in the Fund. The manager (gérant) and alternative investment fund manager of the Fund (the “AIFM”) has determined that the Fund should be classified as an investment product that promotes, among other characteristics, environmental or social characteristics or a combination of those characteristics, within the meaning of Article 8 of the SFDR. The AIFM has also determined that the Fund does not intend to make any sustainable investments, including taxonomy-aligned environmentally sustainable investments and no assurance is given that the Fund will make sustainable investments within the meaning of the SFDR or the EU Taxonomy Regulation on the establishment of a framework to facilitate sustainable investment (2022/852) (the “EU Taxonomy Regulation”).
Since the Feeder Fund’s investment objective is to invest substantially all of its assets in the Fund, Citi Global Alternatives, L.L.C. (the "Investment Advisor") has determined that the Feeder Fund should also be classified as an investment product that promotes environmental or social characteristics within the meaning of Article 8 of the SFDR.
A summary of the Feeder Fund’s sustainability-related website disclosures is as follows. The Fund disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Feeder Fund.
No sustainable investment objective
This financial product promotes environmental or social characteristics, but does not have as its objective sustainable investments.
Environmental or social characteristics of the financial product
The Feeder Fund promotes environmental and/or social characteristics by virtue of investing substantially all of its assets in the Fund, which the AIFM has determined promotes environmental or social characteristics within the meaning of Article 8 of the SFDR. The Fund shall promote the following characteristics:
- 1Net Zero Trajectory:
- The Fund will seek the development by portfolio companies of a carbon footprint baseline calculation and an emissions reduction plan to seek to enable the Fund’s commitment towards reducing its Scope 1 and Scope 2 greenhouse gas (GHG) emissions to zero by no later than 2030, or for investments made in 2028 and thereafter - within two years from date of investment. Portfolio companies should seek to ensure they are prioritizing resource efficiency, renewable power purchasing and value chain engagement before balancing unavoidable emissions with high integrity carbon removals. The Fund will seek to ensure that at least 30% of its portfolio companies shall aim to submit an SBTi near-term and net zero goal by no later than 2029; and
- The Fund will seek to support portfolio companies in greenhouse gas emissions inventories, renewable energy procurement, emission reduction strategies and net zero roadmaps. The Fund will also seek to ensure at least 30% of its portfolio companies have a Science Based Targets Initiative (“SBTi”) approved (or similar standard which DigitalBridge deems to be of sufficient quality) net zero target which they can achieve by no later than 2040. (“Characteristic 1”).
- ESG Integration:
- The Fund will seek to show progress in respect of the performance on key performance indicators (“KPIs”), to be monitored over the duration of the holding period. These KPIs are a bespoke set that map to material ESG considerations, the ESG Data Convergence Project, and questions commonly asked by investors in the Fund (“Characteristic 2”).
Investment strategy
The Feeder Fund invests substantially all of its assets in the Fund. The Fund’s investment objective is to generate attractive risk- adjusted returns primarily through privately negotiated equity investments in any assets or businesses related to the Digital Infrastructure sector on a global basis. The Fund maintains a formal approach to integrating ESG considerations in the due diligence of all potential investments that reach the final approval of the Investment Committee. The Fund considers both macro-level and company specific ESG issues in consultation with various third-party ESG standards and frameworks. This will typically include the review of a broad range of ESG factors, and how they could materially influence the performance of a potential investment. All portfolio companies are expected to disclose and report on ESG KPIs at the portfolio company board level and through the Sponsor’s ESG data collection software each quarter. When selecting a potential investment, the AIFM also assesses the good governance practices of portfolio companies by performing due diligence on, amongst other things, interactions with stakeholders, the company’s FCPA practices and compliance programs and NGO partnerships.
Proportion of investments
The Feeder Fund invests substantially all of its assets in the Fund. The Fund seeks to apply the environmental and social characteristics outlined to at least 50% of its investments. The financial product does not intend to make sustainable investments as defined under Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐ related disclosures in the financial services sector.
Monitoring of environmental or social characteristics
The Feeder Fund relies on the Fund’s monitoring of the environmental or social characteristics for the Fund. The AIFM will monitor the achievement of the environmental and social characteristics on an ongoing basis by conducting a quarterly survey across the portfolio, focusing on key ESG areas. All portfolio companies are expected to report on ESG KPIs at the portfolio company board level and through DigitalBridge’s ESG data collection software each quarter. In certain circumstances, the Sponsor may have limited power to ensure that a portfolio company meets its ESG expectations in situations. In those circumstances, the Sponsor intends to seek to influence and encourage management teams to adopt ESG practices, where possible, and use reasonable efforts to obtain sufficient data to assess improvement in respect of the KPIs.
Methodologies for environmental or social characteristics
The Feeder Fund invests substantially all of its assets in the Fund. The Feeder Fund relies on the Fund’s approach to methodologies and data for the Fund. The Fund will assess, measure and monitor the promotion of: (i) Characteristic 1 by reviewing the number of portfolio companies that have (a) developed a carbon footprint baseline calculation; (b) developed an emissions reduction plan to seek to enable the Fund’s commitment towards reducing its Scope 1 and Scope 2 greenhouse gas (GHG) emissions to zero by no later than 2030, or for investments made in 2028 and thereafter - within two years from date of investment; (c) the number of portfolio companies that seek to ensure they are prioritizing resource efficiency, renewable power purchasing and value chain engagement before balancing unavoidable emissions with high integrity carbon removals; and (d) the Fund will seek to ensure that at least 30% of its portfolio companies shall aim to submit an SBTi near-term and net zero goal by no later than 2029; and (ii) Characteristic 2 through the assessment of the number of portfolio companies that (i) develop an ESG policy tailored to their business; (ii) assign ESG management to someone at the portfolio company (often as part of another role), and (iii) have an ESG Committee or working group in place and through ESG Board reporting. The AIFM assesses and measures the progress towards achieving these characteristics through KPIs, which are a bespoke set that map to material ESG considerations, the ESG Data Convergence Project, and questions commonly asked by investors in the Fund.
Data sources and processing
The Feeder Fund relies on the Fund’s approach to data sources and processing for the Fund. The AIFM will track relevant data on each of its portfolio companies through its ESG KPIs at the portfolio company board level and through DigitalBridge’s ESG data collection software each quarter. The AIFM, together with DigitalBridge will, where appropriate, integrate such data into the investment research, acquisition and post-acquisition monitoring process. The data is subject to processing and quality control by DigitalBridge’s deal teams and estimates may be used.
Limitations to methodologies and data
The Feeder Fund relies on the Fund’s approach to methodologies and data for the Fund. Limitations to the methodologies and data primarily arise because of a lack of available data and/or a lack of infrastructure in place for the collection and processing of the relevant data. Additionally, in evaluating an investment, the Fund may depend upon information and data provided through a number of sources, including third-party reports or advisors which may be incomplete, inaccurate or unavailable, and which could cause the Fund to incorrectly identify, prioritise, assess or analyse an investment’s profile. The Fund does not intend to independently verify all information reported in respect of investments and does not believe that these limitations will have a material impact on the promotion of its environmental or social characteristics.
Due diligence
The Feeder Fund relies on the Fund’s approach to due diligence for the Fund. The Fund’s investment process has five key aspects: (i) deal sourcing; (ii) due diligence; (iii) flexible transaction structuring; (iv) active management of portfolio companies; and (v) involvement of senior advisors and operating partners. The Fund maintains a formal approach to integrating ESG considerations in the due diligence of all potential investments that reach the final approval of the Investment Committee. In due diligence, the Fund considers both macro-level and company specific ESG issues in consultation with various third-party ESG standards and frameworks. This will typically include the review of a broad range of ESG factors, and how they could materially influence the performance of a potential investment.
Engagement policies
The Feeder Fund relies on the Fund’s approach to engagement policies for the Fund. The AIFM actively engages with its portfolio companies through quarterly surveys. In due diligence, the AIFM considers both macro-level and company specific sustainability risks in consultation with various third-party ESG standards and frameworks. Depending on the nature of the sustainability risks, the AIFM, together with DigitalBridge may engage advisors for additional analysis and expertise.
Designated reference benchmark
No specific index is designated as a reference benchmark for the Fund.
Printable summaries in English and additional languages
2. No Sustainable Investment Objective
Although this financial product promotes environmental or social characteristics, it does not have as its objective sustainable investment within the meaning of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector.
3. Environmental or Social Characteristics of the financial product
The Feeder Fund promotes environmental and/or social characteristics by virtue of investing substantially all of its assets in the Fund, which Carne Global Fund Managers (Luxembourg) S.A. (the “AIFM”) has determined promotes environmental or social characteristics within the meaning of Article 8 of the SFDR.
The Fund disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Feeder Fund.
The Fund has identified the following environmental characteristics (the “Characteristics”) which are being promoted as part of the Fund’s investment process:
- 1Net Zero Trajectory:
- The Fund will seek the development by portfolio companies of a carbon footprint baseline calculation and an emissions reduction plan to seek to enable the Fund’s commitment towards reducing its Scope 1 and Scope 2 greenhouse gas (GHG) emissions to zero by no later than 2030, or for investments made in 2028 and thereafter within two years from date of investment. Portfolio companies should seek to ensure they are prioritizing resource efficiency, renewable power purchasing and value chain engagement before balancing unavoidable emissions with high integrity carbon removals. The Fund will seek to ensure that at least 30% of its portfolio companies shall aim to submit an SBTi near-term and net zero goal by no later than 2029; and
- The Fund will seek to support portfolio companies in greenhouse gas emissions inventories, renewable energy procurement, emission reduction strategies and net zero roadmaps. The Fund will also seek to ensure at least 30% of its portfolio companies have a Science Based Targets Initiative (“SBTi”) approved (or similar standard which DigitalBridge deems to be of sufficient quality) net zero target which they can achieve by no later than 2040. (“Characteristic 1”);
- ESG Integration: The Fund will seek to show progress in respect of the performance on key performance indicators (“KPIs”), to be monitored over the duration of the holding period. These KPIs are a bespoke set that map to material ESG considerations, the ESG Data Convergence Project, and questions commonly asked by investors in the Fund (“Characteristic 2”).
4. Investment strategy
The Feeder Fund invests substantially all of its assets in the Fund.
As part of its review prospective underlying fund investments, the Investment Advisor’s operational due diligence teams assess good governance at both the level of the underlying fund manager and the underlying fund. At the manager level, the operational due diligence teams review the manager’s decision-making function, including the composition of any management committees (such as the board of directors) and the coverage and responsibility of such committees along with their voting structures. At the fund level, the operational due diligence teams assess the responsibilities of the fund’s governing body (such as the investor advisory committee), any conflict of interests, oversight of portfolio management, and other compliance related issues including sound management structures, employee relations, remuneration of staff and tax compliance.
The Fund disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Feeder Fund.
The Fund’s investment objective is to generate attractive risk-adjusted returns primarily through privately negotiated equity investments in any assets or businesses related to the Digital Infrastructure sector on a global basis.
The Fund’s investment process has five key aspects: (i) deal sourcing; (ii) disciplined due diligence; (iii) flexible transaction structuring; (iv) active management of portfolio companies; and (v) value- added involvement of senior advisors and operating partners. The Fund maintains a formal approach to integrating ESG considerations in the due diligence of all potential investments that reach the final approval of the Investment Committee. In due diligence, the Fund considers both macro-level and company specific ESG issues in consultation with various third-party ESG standards and frameworks. This will typically include the review of a broad range of ESG factors, and how they could materially influence the performance of a potential investment.
All portfolio companies are expected to disclose and report on ESG KPIs at the portfolio company board level and through the Sponsor’s ESG data collection software each quarter. These KPIs are a bespoke set that map to material ESG considerations, the ESG Data Convergence Project, and questions commonly asked by investors in the Fund.
When selecting a potential investment, the AIFM will consider the good governance practices at the potential portfolio company by performing due diligence on amongst other things:
- how the company has interacted with stakeholders in recent developments;
- if applicable, the company’s FCPA practices and compliance program, including any incidents from the past five years;
- any NGO partnerships that the company has that seek to improve ESG performance; and
- any further relevant issues relating to sound management structures, employee relations, remuneration of staff and tax compliance.
5. Proportion of investments
The Feeder Fund invests substantially all of its assets in the Fund.
The Fund disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Feeder Fund.
The Fund seeks to apply the environmental and social characteristics outlined to at least 50% of its investments. No sustainable investments (as defined under Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector) are made because the Fund considers the existing approach to be appropriate and proportionate to its investment strategy.
6. Monitoring of environmental or social characteristics
The Feeder Fund relies on the Fund’s monitoring of the environmental or social characteristics for the Fund.
The Fund disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Feeder Fund.
- The Fund will monitor the achievement of the environmental and social characteristics on an ongoing basis through conducting quarterly surveys with respect to (i) the conduct of carbon footprinting and development of a net zero strategy, and (ii) performance in respect of the ESG KPIs. All portfolio companies are expected to disclose and report on ESG KPIs at the portfolio company board level and through DigitalBridge’s ESG data collection software each quarter.
In certain circumstances, the Sponsor may have limited power to ensure that a portfolio company meets the environmental or social characteristics in situations, including, but not limited to (i) where the Fund acquires a Portfolio Company undergoing changes in management; (ii) where the Fund acquires a portfolio company in certain jurisdictions which prohibit the collection of certain ESG data (i.e., diversity data on race or gender); (iii) where the Fund acquires a passively managed asset with no board or management team; or (iv) or where there is a bolt-on acquisition. In those circumstances, the Sponsor intends to seek to influence and encourage management teams to implement improvements to ESG impact management practices, where possible, and use reasonable efforts to obtain sufficient data on the KPIs.
7. Methodologies
The Feeder Fund invests substantially all of its assets in the Fund.
The Fund disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Feeder Fund.
The Fund will assess, measure and monitor the promotion of:
- Characteristic 1 by reviewing the number of portfolio companies that have completed a GHG footprint assessment, and the number of portfolio companies that have approved a net zero strategy roadmap; and
- Characteristic 2 through the assessment of the achievement by the portfolio companies in respect of the bespoke KPIs. These KPIs are a bespoke set that map to material ESG considerations, the ESG Data Convergence Project, and questions commonly asked by investors in the Fund.
8. Data sources and processing
The Feeder Fund relies on the Fund’s approach to data sources and processing for the Fund.
The Fund disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Feeder Fund.
Data sources used to attain each of the environmental or social characteristics promoted by the Fund
- The AIFM, together with DigitalBridge, will track relevant data on each of its portfolio companies through its ESG KPIs at the portfolio company board level and through DigitalBridge’s ESG data collection software each quarter DigitalBridge will, where appropriate, integrate such data into the investment research, acquisition and post-acquisition monitoring process. The data is subject to processing and quality control by DigitalBridge’s deal teams and estimates may be used.
Measures taken to ensure data quality
- The AIFM, together with DigitalBridge’s cross-functional deal teams oversee the data collection and ultimately reports to DigitalBridge on sustainability risk management and ESG considerations across the relevant portfolio companies.
Data processing
- All data collected is processed by DigitalBridge
Proportion of data estimated
- A proportion of data for the Fund is estimated (if required), to the extent that such data may not be available
9. Limitations to methodologies and data
The Feeder Fund relies on the Fund’s approach to methodologies and data for the Fund.
The Fund disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Feeder Fund.
Limitations to the methodologies and data primarily arise because of a lack of available data or unknown situations at portfolio companies and/or a lack of infrastructure in place for the collection and processing of the relevant data.
Additionally, in evaluating an investment, the AIFM depends upon information and data provided through a number of sources, including third-party reports or advisors which may be incomplete, inaccurate or unavailable, and which could cause the Fund to incorrectly identify, prioritise, assess or analyse an investment’s ESG profile. The AIFM does not intend to independently verify all ESG information reported in respect of investments.
The Fund does not believe that these limitations should have a material impact on the Fund’s promotion of its environmental or social characteristics.
10. Due diligence
The Feeder Fund relies on the Fund’s approach to due diligence for the Fund.
The Fund disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Feeder Fund.
The AIFM incorporates a formal approach to integrating ESG considerations in the due diligence of all potential investments that reach the final approval of the DigitalBridge Investment Committee. In due diligence, the AIFM considers both macro-level and company specific sustainability risks in consultation with various third-party ESG standards and frameworks. Depending on the nature of the sustainability risks, the AIFM, together with DigitalBridge may engage advisors for additional analysis and expertise. DigitalBridge has consulted with BSR, a leading nonprofit sustainability consulting and research organization, for additional insights on relevant potential transactions.
The AIFM typically reviews a broad range of ESG factors, and how they could materially influence the performance of a potential investment. The ESG due diligence process for the Fund (see below) incorporates a robust assessment of sustainability risks, which typically includes:
- Risks associated with natural disasters and the associated physical risks resulting from climate change (i.e., flooding, fires, droughts);
- Corporate requirements and government regulations regarding electricity generation sources, particularly related to greenhouse gas emissions;
- Risks associated with employee engagement and retention;
- Data privacy and Security matters; and
- Corporate governance-related risks
The identification and management of sustainability risks is integrated into the investment decision- making process for the Fund. In accordance with the DigitalBridge Responsible Investment Policy, the AIFM and the investment teams review material ESG factors, including sustainability risks, when evaluating potential investments. The AIFM also incorporates sustainability risks into its regular portfolio monitoring procedures through data collection on the relevant risks from its portfolio companies.
11. Engagement policies
The Feeder Fund relies on the Fund’s approach to engagement policies for the Fund.
The Fund disclosures are included below for ease of reference only and are not intended to be disclosures of the Investment Advisor or the Feeder Fund.
The AIFM actively engages with its portfolio companies through quarterly surveys. In due diligence, the AIFM considers both macro-level and company specific sustainability risks in consultation with various third-party ESG standards and frameworks. Depending on the nature of the sustainability risks, the AIFM, together with DigitalBridge may engage advisors for additional analysis and expertise.
12. Designated reference benchmark
No index has been designated as a reference benchmark to meet the environmental or social characteristics for the Feeder Fund or the Fund.
