Sustainability-Related-Disclosures

SFDR Statement on Principal Adverse Impacts

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 (“SFDR”) requires AQR Capital Management (Europe) LLP (the “AIFM”) to determine whether it considers the principal adverse impacts of investment decisions on sustainability factors. The AIFM is supportive of the aim of this requirement which is to improve transparency to investors, however, the AIFM has concluded that it could not at a reasonable cost to investors justify the consideration of principal adverse impacts of investment decisions on sustainability factors given the size, nature and scale of its activities in relation to the services provided for AQR Lux Funds. The AIFM’s position on this matter will be reviewed periodically by reference to market developments and as data availability and accuracy improves.

SFDR Statement from AQR Capital Management (Europe) LLP as AIFM for AQR Lux Funds on Sustainability Risks

Following the entry into force of Regulation (EU) 2019/2088 of the European Parliament and of the Council on sustainability-related disclosures in the financial services sector, also known as the Sustainable Finance Disclosure Regulations (“SFDR”), ‘sustainability risk’ is defined in SFDR as an environmental, social or governance event or condition which, if it occurs, could cause an actual or potential material negative impact on the value of an investment (“Sustainability Risks”). SFDR obliges consideration of this risk at both product and entity levels.

Sustainability Risks are principally linked to climate-related events resulting from climate change (i.e. Physical Risks) or to society’s response to climate change (i.e. Transition Risks), which may result in unanticipated losses that could affect the Funds’ investments and financial condition. Social events (e.g. inequality, inclusiveness, labour relations, investment in human capital, accident prevention, changing customer behaviour, etc.) or governance shortcomings (e.g. recurrent significant breaches of international agreements, bribery issues, products quality and safety, selling practices, etc.) may also translate into Sustainability Risks. While not all the sub-funds of AQR Lux Funds actively promote ESG characteristics and/or sustainability factors, they remain exposed to Sustainability Risks. Such Sustainability Risks are considered in investment decision making by the portfolio manager and risk monitoring to the extent that they represent potential or actual material risks and/or opportunities to maximize the long-term risk-adjusted returns.

The risk management process establishes risk monitoring parameters through assessing:
- The incorporation of sustainability factors as part of the investment objective and the classification of the fund under SFDR, as applicable (Article 6, Article 8 or Article 9)
- How sustainability characteristics are incorporated into the pre- and post-investment decision making process
- The internal controls/reporting and compliance controls in place

In addition to the above, the AIFM has reviewed the products exposure to each category (Environmental, Social, Governance) of Sustainability Risks and based on the review, understands that the Fund has an overall low risk exposure to Sustainability Risks.