Sustainability Risks

The EU Sustainable Finance Disclosures Regulation (2019/2088) on sustainability-related disclosures in the financial services sector (the “SFDR”) defines “sustainability risks” as environmental, social or governance events or conditions that, if they occur, could cause an actual or a potential material negative impact on the value of the investment. Each of MacKay Shields Europe Investment Management Limited and MacKay Shields LLC (together with any relevant delegate, the “Manager”) has integrated sustainability risks, as a sub-set of risks generally that could cause an actual or potential material negative impact on the value of an investment, as part of its investment decision-making process. If appropriate for an investment, the Manager may conduct sustainability risk-related due diligence and/or take steps to mitigate sustainability risks and preserve the value of the investment. Further information on the manner in which sustainability risks are integrated into investment decisions is available upon request from the Manager.

For further information on the Manager’s strategy-specific ESG policies, please see policies here.

No Consideration of Sustainability Adverse Impacts

Notwithstanding the fact that the Manager considers sustainability risks that could cause an actual or potential material negative impact on the value of an investment, the Manager does not consider the adverse impacts of its investment decisions on sustainability factors, within the meaning of Article 4(1)(a) of the SFDR, for the time being. The Manager does not currently do so because, among other reasons, the final regulatory technical standards which set forth the scope of “principal adverse impacts” and the corresponding mandatory reporting template have not yet been adopted by European legislators, which makes voluntary compliance with Article 4(1)(a) challenging. In addition, the Manager is not, in its view, currently in a position to obtain and/or measure all the data which it would be required by the SFDR to report, or to do so systematically, consistently and at a reasonable cost with respect to all their investment strategies to clients and investors. This is in part because underlying investments are not widely required to, and may not currently, report by reference to the same data. Depending on the outcome of the final regulatory technical standards, the Manager intends at a later stage to consider on a voluntary basis, applying the same standards as in the SFDR, the “adverse impacts of investment decisions on sustainability factors” in relation to those strategies where it has sufficient influence and control on the investment, and, if the Manager decides to consider the “adverse impacts of investment decisions on sustainability factors”, it will update this statement accordingly.