Summary
SFDR Article 8 Funds – Website Disclosures Sections based on Articles 23 to 36 SFDR Delegated Regulation (EU) 2022/1288. PGIM Senior Loan Opportunities (Parallel Fund) II, L.P. (the “LP”) is designated as an Article 8 Fund. PGIM Senior US Debt Parallel II Fund and PGIM Senior Global Debt Parallel E Fund (the “Sub-Funds”), which are sub-funds of PGIM Private Capital Funds (Ireland) ICAV, and into which the LP invests as part of a master-feeder structure, are also designated as Article 8 Funds. Together, both the LP and the Sub-Funds are classified as the “Funds”.
Investment Strategy
The Funds seek to provide investors with attractive risk-adjusted returns primarily through privately placed floating rate leveraged (below investment grade) debt, including, but not limited to, senior secured, first lien and debt issuances, with a specific focus in middle market companies primarily in North America, the United Kingdom, Western Europe, and Australia. Certain of the Funds may only have exposure to companies located in certain of the geographical areas outlined above.
No Sustainable Investments
The Funds do not commit to making any sustainable investments or Taxonomy-aligned investments. Therefore, the Funds will not contribute to any sustainable investment objectives.
Promotion of Environmental and Social Characteristics
PGIM Private Capital ("PPC") intends for the Funds to promote the following environmental and social characteristics:
- Public health by avoiding investments in tobacco products, consumer (versus medical) vaporizers, e-cigarettes and cannabis products;
- Reduction of carbon emissions by avoiding investments in companies whose revenues are generated primarily by: (i) generation, frequency and/or transmission of electric power, steam and/or chilled water; (ii) oil and/or natural gas exploration or production; (iii) coal exploration, production or storage; (iv) processing, transportation, storage and/or wholesale marketing of oil and/or natural gas; (v) refinement, marketing, distribution and/or sale of oil and/or natural gas; or (vi) providing ancillary services to any company whose revenues are generated primarily by the activities described in the foregoing clauses (ii) through (v) (collectively, “Energy Companies”), provided that for the avoidance of doubt a convenience store that sells oil and/or natural gas byproducts (such as gasoline, motor oil or propane gas) will not be considered to be an Energy Company. For the avoidance of doubt, Energy Companies is not intended to encompass businesses that sell (x) products or services to companies involved in the activities described in the foregoing clauses (i) or (vi) or that sell (y) products to companies involved in the activities described in the foregoing clauses (ii) through (v);
- Aiming to maintain a weighted average carbon intensity ("WACI") at the level of the LP that is at least 25% lower than the WACI of the JP Morgan Global HY Corporate Index (Ticker "GCI HY”) (the "Benchmark"). In order to assist the LP in maintaining its WACI at such levels, each Sub-Fund will consider the WACI of its investments against the WACI of the Benchmark; and
- Preventing disproportionate and indiscriminate impact and harm to the public and the environment by avoiding the financing of controversial weapons.
To attain the environmental and social characteristics promoted by the Funds, PPC will screen each of the Funds’ investments against a list of prohibited industries, and commits, without Advisory Committee consent, to not to lend to issuers that are at the time of investment:
- involved in the production, development, sales and/or distribution of nuclear weapons, landmines, cluster weapons, depleted uranium, white phosphorus and biological or chemical weapons;
- cannabis growers, processors, sellers or distributors, deriving at least 5% of their revenues from such activities;
- Energy Companies (as defined above) provided that for the avoidance of doubt a convenience store that sells oil and/or natural gas byproducts (such as gasoline, motor oil or propane gas) will not be considered to be an Energy Company. For the avoidance of doubt, Energy Companies is not intended to encompass businesses that sell (x) products or services to companies involved in the activities described in the clauses (i) or (vi) of the definition of Energy Company above or that sell (y) products to companies involved in the activities described in clauses (ii) through (v) of the definition of Energy Company above; or
- involved in the production of tobacco products, consumer (versus medical) vaporizers and e-cigarettes, deriving at least 5% of their revenues from such activities. For the avoidance of doubt, this exclusion does not apply to retail and distribution businesses where tobacco products, consumer vaporizers and e-cigarettes may be a part of or incidental to their broader business.
PPC will use commercially reasonable efforts to align at least 70% of the investments of each Fund, measured by net asset value, with the environmental and social characteristics promoted by such Fund, other than during the Ramp-up Period and the Ramp-down Period (each as defined below), including using commercially reasonable efforts to engage with investment issuers with a view to aligning with this target, and including the possibility of divesting from a given investment, subject in all cases to PPC’s fiduciary duty to each Fund’s investors to obtain appropriate pricing for investment. Each Fund’s exposure is expected to be directly in each portfolio company (through a loan or debt investment) and the Funds are not expected to have indirect exposure to portfolio companies, save that the LP may obtain exposure indirectly through the Sub-Funds. PPC will monitor this target periodically and will take reasonable steps to achieve the target, taking into account each Fund’s investment strategy, the interests of investors and events such as large pre-payments by issuers in such Fund’s portfolio which increase such Fund’s cash balance from time to time.
Data Providers and limitations on data
PPC, on behalf of the Funds, will engage a third-party specialist service provider to estimate the Scope 1 and 2 emissions of each underlying holding within each Fund, with the aim of producing a WACI for such Fund. PPC, on behalf of each Fund will benchmark its WACI against the Benchmark, or a similar high-yield corporate benchmark. Should it be determined that the Benchmark is no longer the most optimal benchmark to use, the investors of the applicable Fund will be informed accordingly.
Historically, portfolio company disclosure of carbon data has been voluntary. The third-party data provider engaged by PPC utilizes an established Greenhouse Gas (GHG) emissions estimating software platform to calculate emissions estimates. Estimates facilitate portfolio level assessments, but limit accuracy of company level assessments. Carbon emissions data quality is essential to the calculation of WACI and the use of estimates on companies’ intensity or emissions may affect aggregated portfolio level data.
Engagement
In the event that the LP’s estimated WACI exceeds the level of 25% lower than the Benchmark’s WACI (when compared on an annual basis), PPC, on behalf of the relevant Fund, will use reasonable commercial efforts to engage with portfolio companies which have estimated carbon intensity above the stated average, to either 1) provide actual emissions data in order to reduce the Fund’s reliance on estimated data and/or 2) in the event that actual emissions still exceed the stated threshold, to encourage the portfolio company to reduce their emissions to a level below the stated threshold.
In addition, PPC assesses all investments for good governance standards, which comprises in particular sound management practices, employee relations, remuneration of staff and tax compliance. As part of its initial due diligence, and proprietary ESG scoring methodology, PPC will make reasonable commercial efforts to engage with management teams of issuers and include ESG related questions. In that regard, investment teams expect to analyze the following good governance related factors as part of the investment process: product safety, workplace safety, health and wellness, stakeholder engagement; board composition, succession planning, data security and labor relations.
No sustainable investment objective
The Funds do not commit to making any sustainable investments. Therefore, the Funds will not contribute to any sustainable investment objectives.
Environmental or social characteristics of the financial product
PPC intends for the Funds to promote the following environmental and social characteristics:
- Public health by avoiding investments in tobacco products, consumer (versus medical) vaporizers, e-cigarettes and cannabis products;
- Reduction of carbon emissions by avoiding investments in Energy Companies provided that for the avoidance of doubt a convenience store that sells oil and/or natural gas byproducts (such as gasoline, motor oil or propane gas) will not be considered to be an Energy Company. For the avoidance of doubt, Energy Companies is not intended to encompass businesses that sell (x) products or services to companies involved in the activities described in the clauses (i) or (vi) of the definition of Energy Company above or that sell (y) products to companies involved in the activities described in clauses (ii) through (v) of the definition of Energy Company above;
- Aiming to maintain a WACI at the level of the LP that is at least 25% lower than the WACI of the Benchmark. In order to assist the LP in maintaining its WACI at such levels, each Sub-Fund will consider the WACI of its investments against the WACI of the Benchmark; and
- Preventing disproportionate and indiscriminate impact and harm to the public and the environment by avoiding the financing of controversial weapons.
While PPC will screen each of the Funds’ investments against a list of prohibited industries in order to avoid the types of investment outlined above from the point that each Fund makes its first investment, the WACI of a Fund may exceed the level of 25% lower than the Benchmark during the following periods, as the carbon intensity of one or more portfolio companies could materially affect the WACI of such Fund during such periods:
- i. From the launch of such Fund until the end of the first full calendar quarter following the latter of:
- a. the final closing date of the Fund; or
- b. the date at which such Fund has exposure to 20 or more portfolio companies; (the "Ramp-up Period"); and
- ii. the point that such Fund has exposure to less than 20 portfolio companies during the 3 year wind down period or any extension of same (the "Ramp-down Period").
If PPC decides to adopt other environmental and social characteristics for the Fund, it shall inform investors accordingly.
Investment strategy
The Funds seek to provide investors with attractive risk-adjusted returns primarily through privately placed floating rate leveraged (below investment grade) debt, including, but not limited to, senior secured, first lien and debt issuances, with a specific focus in middle market companies primarily in North America, the United Kingdom, Western Europe, and Australia. Certain of the Funds may only have exposure to companies located in certain of the geographical areas outlined above.
To attain the environmental and social characteristics promoted by the Fund, PPC will screen each of the Funds’ investments against a list of prohibited industries, and commits, without Advisory Committee consent, to not to lend to issuers that are at the time of investment:
- i. involved in the production, development, sales and/or distribution of nuclear weapons, landmines, cluster weapons, depleted uranium, white phosphorus and biological or chemical weapons;
- ii. cannabis growers, processors, sellers or distributors, deriving at least 5% of their revenues from such activities;
- iii. Energy Companies (as defined above) provided that for the avoidance of doubt a convenience store that sells oil and/or natural gas byproducts (such as gasoline, motor oil or propane gas) will not be considered to be an Energy Company. For the avoidance of doubt, Energy Companies is not intended to encompass businesses that sell (x) products or services to companies involved in the activities described in the clauses (i) or (vi) of the definition of Energy Company above or that sell (y) products to companies involved in the activities described in clauses (ii) through (v) of the definition of Energy Company above; or
- iv. involved in the production of tobacco products, consumer (versus medical) vaporizers and e-cigarettes, deriving at least 5% of their revenues from such activities. For the avoidance of doubt, this exclusion does not apply to retail and distribution businesses where tobacco products, consumer vaporizers and e-cigarettes may be a part of or incidental to their broader business.
PPC may add further exclusion criteria, and shall inform investors accordingly.
PPC, on behalf of the Funds, assesses all investments for good governance standards, which comprises in particular sound management practices, employee relations, remuneration of staff and tax compliance. As part of its initial due diligence, and proprietary ESG scoring methodology, PPC will make reasonable commercial efforts to engage with management teams of issuers and include ESG related questions. In that regard, investment teams expect to analyze the following good governance related factors as part of the investment process: product safety, workplace safety, health and wellness, stakeholder engagement; board composition, succession planning, data security and labor relations.
If PPC determines in its sole discretion that the information provided raises good governance concerns, PPC will conduct further due diligence and, if not satisfied, will decide not to lend to the relevant issuer.
PPC will continue to monitor each investment of the Funds from an ESG perspective on a regular basis. If an investment’s ESG score (which includes in part the good governance related factors described above) materially deteriorates, the investment teams may further engage with the business to understand better the reasons for deterioration and the businesses’ planned action steps.
PPC intends to engage with issuers in the Funds’ portfolios periodically, to foster ongoing open and transparent dialogue and to improve the transparency and availability of ESG data across the Funds’ portfolios. On an ongoing basis, PPC also intends to seek, where appropriate, to include ESG information undertakings in the terms of its credit agreements with issuers, in order to obtain more ESG data from portfolio companies.
Proportion of investments
PPC will use commercially reasonable efforts to align at least 70% of the investments of each Fund, measured by net asset value, with the environmental and social characteristics promoted by the Fund, other than during the Ramp-up Period and the Ramp-down Period, including using commercially reasonable efforts to engage with investment issuers with a view to aligning with this target, and including the possibility of divesting from a given investment, subject in all cases to PPC’s fiduciary duty to such Fund’s investors to obtain appropriate pricing for investment. Such Fund’s exposure is expected to be directly in each portfolio company (through a loan or debt investment) and the Funds are not expected to have indirect exposure to portfolio companies. PPC will monitor this target periodically and will take reasonable steps to achieve the target, taking into account each Fund’s investment strategy, the interests of investors and events such as large pre-payments by issuers in such Fund’s portfolio which increase such Fund’s cash balance from time to time.
The Funds do not commit to make sustainable investments with an environmental objective aligned with the EU Taxonomy. Hence, each Fund’s share of sustainable investments with an environmental objective aligned with the EU Taxonomy is zero.
Monitoring of environmental or social characteristics
As outlined above, PPC intends to promote the following environmental and social characteristics:
- Public health by avoiding investments in tobacco products, consumer (versus medical) vaporizers, e-cigarettes and cannabis products;
- Reduction of carbon emissions by avoiding investments in Energy Companies provided that for the avoidance of doubt a convenience store that sells oil and/or natural gas byproducts (such as gasoline, motor oil or propane gas) will not be considered to be an Energy Company. For the avoidance of doubt, Energy Companies is not intended to encompass businesses that sell (x) products or services to companies involved in the activities described in the clauses (i) or (vi) of the definition of Energy Company above or that sell (y) products to companies involved in the activities described in clauses (ii) through (v) of the definition of Energy Company above;
- Aiming to maintain a WACI at the level of the LP that is at least 25% lower than the WACI of the Benchmark. In order to assist the LP in maintaining its WACI at such levels, each Sub-Fund will consider the WACI of its investments against the WACI of the Benchmark; and
- Preventing disproportionate and indiscriminate impact and harm to the public and the environment by avoiding the financing of controversial weapons.
To attain the environmental and social characteristics promoted by the Fund, PPC will screen each of the Funds’ investments against a list of prohibited industries, and commits, without Advisory Committee consent, to not to lend to issuers that are at the time of investment:
- i. involved in the production, development, sales and/or distribution of nuclear weapons, landmines, cluster weapons, depleted uranium, white phosphorus and biological or chemical weapons;
- ii. cannabis growers, processors, sellers or distributors, deriving at least 5% of their revenues from such activities;
- iii. Energy Companies (as defined above) provided that for the avoidance of doubt a convenience store that sells oil and/or natural gas byproducts (such as gasoline, motor oil or propane gas) will not be considered to be an Energy Company. For the avoidance of doubt, Energy Companies is not intended to encompass businesses that sell (x) products or services to companies involved in the activities described in the clauses (i) or (vi) of the definition of Energy Company above or that sell (y) products to companies involved in the activities described in clauses (ii) through (v) of the definition of Energy Company above; or
- iv. involved in the production of tobacco products, consumer (versus medical) vaporizers and e-cigarettes, deriving at least 5% of their revenues from such activities. For the avoidance of doubt, this exclusion does not apply to retail and distribution businesses where tobacco products, consumer vaporizers and e-cigarettes may be a part of or incidental to their broader business.
Methodologies for environmental or social characteristics
PPC, on behalf of the Funds, will engage a third-party specialist service provider to estimate the Scope 1 and 2 emissions of each underlying holding within the Funds, with the aim of producing a WACI for each Fund. PPC, on behalf of each Fund, will benchmark its WACI against the Benchmark, or a similar high-yield corporate benchmark. Should it be determined that the Benchmark is no longer the most optimal benchmark to use, the applicable Fund’s investors will be informed accordingly.
In the event that the LP’s estimated WACI exceeds the level of 25% lower than the Benchmark’s WACI (when compared on an annual basis), PPC, on behalf of the relevant Fund, will use reasonable commercial efforts to engage with portfolio companies which have estimated carbon intensity above the stated average, to either 1) provide actual emissions data in order to reduce such Fund’s reliance on estimated data and/or 2) in the event that actual emissions still exceed the stated threshold, to encourage the portfolio company to reduce their emissions to a level below the stated threshold.
Methodologies for environmental or social characteristics
PPC, on behalf of the Funds, will engage a third-party specialist service provider to estimate the Scope 1 and 2 emissions of each underlying holding within the Funds, with the aim of producing a WACI for each Fund. PPC, on behalf of each Fund, will benchmark its WACI against the Benchmark, or a similar high-yield corporate benchmark. Should it be determined that the Benchmark is no longer the most optimal benchmark to use, the applicable Fund’s investors will be informed accordingly.
In the event that the LP’s estimated WACI exceeds the level of 25% lower than the Benchmark’s WACI (when compared on an annual basis), PPC, on behalf of the relevant Fund, will use reasonable commercial efforts to engage with portfolio companies which have estimated carbon intensity above the stated average, to either 1) provide actual emissions data in order to reduce such Fund’s reliance on estimated data and/or 2) in the event that actual emissions still exceed the stated threshold, to encourage the portfolio company to reduce their emissions to a level below the stated threshold.
Data sources and processing
PPC, on behalf of the Funds, has engaged a third-party specialist service provider to estimate the Scope 1 and 2 emissions of each underlying holding within the Fund, with the aim of producing a WACI for the Funds. PPC, on behalf of each Fund, will benchmark its WACI against the WACI of the Benchmark or a similar high-yield corporate benchmark.
PPC has selected a provider that is well renowned, has global presence, and who is responsive to feedback as well as supportive when PPC questions data outliers or coverage issues. The third party specialist has documented its research methodologies and the methodologies used to calculate exposures or impacts and they are available to PPC upon request. However, as portfolio companies' disclosure of the data required to calculate certain sustainability metrics is limited, including in relation to carbon emissions data, a substantial (but not quantifiable in terms of proportion as it depends on the portfolio construction at any given point in time) amount of the data is estimated. As portfolio companies’ disclosures and transparency improve, and more ESG data becomes verifiably audited and reviewed by companies themselves, the data availability should improve over time and the need for estimates will likely be reduced.
PPC, on behalf of the Funds, has engaged a third-party specialist service provider to estimate the Scope 1 and 2 emissions of each underlying holding within the Funds, with the aim of producing a WACI for the Funds. PPC, on behalf of each Fund will benchmark its WACI against the WACI of the Benchmark or a similar high-yield corporate benchmark. The third party provider utilizes an established Greenhouse Gas (GHG) emissions estimating software platform. Portfolio companies' disclosure of the data required to calculate certain sustainability metrics is limited, including in relation to carbon emissions data, therefore a substantial (but not quantifiable in terms of proportion as it depends on the portfolio construction at any given point in time) amount of the data is estimated
Limitations to methodologies and data
Historically, portfolio company disclosure of carbon data has been voluntary. The third-party data provider engaged by PPC utilizes an established Greenhouse Gas (GHG) emissions estimating software platform to calculate emissions estimates. Estimates facilitate portfolio level assessments, but limit accuracy of company level assessments. Carbon emissions data quality is essential to the calculation of WACI and the use of estimates on companies’ intensity or emissions may affect aggregated portfolio level data. While the limitations above are relevant to the management of the Funds, PPC believes that it receives sufficient data, as outlined above, in order to manage the Funds in a manner which is aligned with the environmental and social characteristics promoted by the Funds.
Due diligence
As outlined above, to attain the environmental and social characteristics promoted by the Fund, PPC will screen each of the Funds’ investments against a list of prohibited industries, and commits, without Advisory Committee consent, and in the case of (iv) below, subject to investor approval of a pending amendment to the Funds’ amended and restated limited partnership agreement, to not to lend to issuers that are at the time of investment:
- i. involved in the production, development, sales and/or distribution of nuclear weapons, landmines, cluster weapons, depleted uranium, white phosphorus and biological or chemical weapons;
- ii. cannabis growers, processors, sellers or distributors, deriving at least 5% of their revenues from such activities;
- iii. Energy Companies (as defined above) provided that for the avoidance of doubt a convenience store that sells oil and/or natural gas byproducts (such as gasoline, motor oil or propane gas) will not be considered to be an Energy Company. For the avoidance of doubt, Energy Companies is not intended to encompass businesses that sell (x) products or services to companies involved in the activities described in the clauses (i) or (vi) of the definition of Energy Company above or that sell (y) products to companies involved in the activities described in clauses (ii) through (v) of the definition of Energy Company above; or
- iv. involved in the production of tobacco products, consumer (versus medical) vaporizers and e-cigarettes, deriving at least 5% of their revenues from such activities. For the avoidance of doubt, this exclusion does not apply to retail and distribution businesses where tobacco products, consumer vaporizers and e-cigarettes may be a part of or incidental to their broader business.
As also outlined above, the estimated WACI of the Funds will be measured and this will be used to engage with portfolio companies if necessary. The Benchmark WACI will be calculated on an annual basis.
Please also see Engagement Policies below.
Engagement policies
As outlined above, in the event that the LP’s estimated WACI exceeds the level of 25% lower than the Benchmark’s WACI (when compared on an annual basis), PPC, on behalf of the relevant Fund, will use reasonable commercial efforts to engage with portfolio companies which have estimated carbon intensity above the stated average, to either 1) provide actual emissions data in order to reduce such Fund’s reliance on estimated data and/or 2) in the event that actual emissions still exceed the stated threshold, to encourage the portfolio company to reduce their emissions to a level below the stated threshold.
PPC, on behalf of the Funds, assesses all investments for good governance standards, which comprises in particular sound management practices, employee relations, remuneration of staff and tax compliance. As part of its initial due diligence, and proprietary ESG scoring methodology, PPC, on behalf of the Funds, will make reasonable commercial efforts to engage with management teams of issuers and include ESG related questions. In that regard, investment teams expect to analyze the following good governance related factors as part of the investment process: product safety, workplace safety, health and wellness, stakeholder engagement; board composition, succession planning, data security and labor relations.
If PPC determines in its sole discretion that the information provided raises good governance concerns, PPC will conduct further due diligence and, if not satisfied, will decide not to lend to the relevant issuer.
PPC will continue to monitor each investment of the Funds from an ESG perspective on a regular basis. If an investment’s ESG score (which includes in part the good governance related factors described above) materially deteriorates, the investment teams may further engage with the business to understand better the reasons for deterioration and the businesses’ planned action steps.
PPC intends to engage with issuers in the Funds’ portfolios periodically, to foster ongoing open and transparent dialogue and to improve the transparency and availability of ESG data across the Funds’ portfolios. On an ongoing basis, PPC also intends to seek where appropriate to include ESG information undertakings in the terms of its credit agreements with issuers, in order to obtain more ESG data from portfolio companies.
1 Western Europe shall mean Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, Jersey, Liechtenstein, Luxembourg, Monaco, Netherlands, Norway, Poland, Portugal, Spain, Sweden and Switzerland.
2 “Investments” refers to actual investments by the Funds as well as assets, including cash.
