European Sustainable Finance Disclosure

Sustainable Finance Disclosure Regulation

The Sustainable Finance Disclosure Regulation¹ (“SFDR”) seeks to establish a pan-European framework to facilitate Sustainable Investment.

The following disclosures relate to Guggenheim Partners Europe Limited (in its capacity as investment advisor and manager of European Collateralized Loan Obligations (“CLOs”).

Integration of Sustainability Risks

Guggenheim Partners Europe Limited have regard to the terms of the ESG integration statement for financial products under their respective management. In doing so ESG factors (including the consideration of sustainability risks) are integrated into the investment decision-making process.

Assessment of the Impact on Likely Returns

An assessment is undertaken by Guggenheim Partners Europe Limited of the likely impacts of the sustainability risks, on their financial product's returns. Even where sustainability risks are identified there can be no guarantee of the correct assessment of the impact of sustainability risks on the financial product's investments or proposed investments. Where a sustainability risk occurs in respect of an asset, there could be a negative impact on, or loss of its value.

Statement on Principal Adverse Impacts of Investment Decisions on Sustainability Factors

Guggenheim Partners Europe Limited (in its capacity as manager) considers the principal adverse impacts of investment decisions on sustainability factors for its managed CLOs (in-scope of SFDR). Guggenheim Partners Europe Limited publishes Principal Adverse Impact Statements annually for its in-scope managed CLOs and the Principal Adverse Impact Statements are available below.

For the purposes of this statement, by “principal adverse impacts” is meant the negative, material or likely to be material effects on sustainability factors caused, compounded by or directly linked to our investment decisions. We prioritise and report on principal adverse impacts of our investment decisions on sustainability factors on basis of and covering the indicators listed in the Principal Adverse Impacts Statements.

Through the consideration of principal adverse impacts, Guggenheim Partners Europe Limited monitors and reports on 14 mandatory principal adverse impact indicators and two voluntary indicators (for its in-scope managed CLOs). How and to what extent we consider, and address principal adverse impacts will evolve over time and hence continuously alter this statement. Further, there are differentiations between the CLOs managed by Guggenheim Partners Europe Limited.

All issuers who are proposed for investment are evaluated for ESG risk before inclusion in client portfolios in addition to their compliance with the relevant portfolio’s ESG stipulations (where applicable). ESG criteria is weighed alongside traditional credit risks when researching and forming opinion on potential investments. ESG assessment is carried out by research analysts on individual issuer level and industry level.

Issuers may be deemed ineligible by Guggenheim Partners Europe Limited for investment due to incompatibility with the portfolio’s ESG stipulations and/or for other ESG considerations that would not otherwise be ineligible as per the ESG stipulations.

Recognizing that an issuer’s risk profile may change over time, our approach seeks to incorporate a forward-looking assessment of ESG criteria. In practice, this means that we may assess an issuer’s ESG characteristics more favourably if it is taking concrete steps to improve its risk profile by improving governance, addressing environmental or social policies, or deploying capital towards projects that are likely to lead to a more sustainable enterprise. The inverse is also true if we believe an issuer’s ESG characteristics are likely to deteriorate in the future.

Remuneration Considerations

Guggenheim Partners Europe Limited's remuneration policies (i) promote sound and effective risk management and (ii) discourage excessive risk taking, including without limitation, with respect to sustainability risks. A sustainability risk is an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of an investment.

The assessment of Guggenheim Partners Europe Limited's staff performance is based on a multi-year framework in order to take into account the long-term performance of staff, as well as the performance of the financial product under management. Performance objectives are therefore a multi-year process, ensuring that staff and end investors' interests are aligned.

Variable remuneration is dependent upon the performance of the business unit(s), the performance of the relevant firm and the performance of the employee concerned. This serves to discourage excessive risk taking, as no one individual can influence Guggenheim Partners Europe Limited 's performance. The determination of an individual's entitlement to variable remuneration will take into account the individual staff member's performance in the relevant performance period taking into consideration both financial and non-financial criteria. As part of the measurement of performance used to calculate variable remuneration this will include the consideration of relevant types of current and future risks, including sustainability risks.

¹Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector.

Sustainability-Related Disclosures

Bilbao CLO II DAC – Principal Adverse Impact Statement (2022)
Bilbao CLO III DAC – Principal Adverse Impact Statement (2022)
Bilbao CLO IV DAC – Principal Adverse Impact Statement (2022)