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.