Sustainability-related disclosures
a) Summary
Stabelo Fund I promotes, among other objectives, the environmental or social characteristics resulting from its investments.
The Fund only invests in sustainable mortgages that offer both financial and social returns to investors. 100% of the Fund’s mortgage investments are sustainable mortgages.
Stabelo’s narrative of responsible mortgage investing focuses on three objectives for sustainability:
- Promote responsible lending
- Fair and transparent mortgage products
- Climate change mitigation
Sustainability is an important part of Stabelo Group’s strategy and a key element for future success. All Group entities are involved in the review, planning and implementation of the Group’s sustainability commitments and ambitions.
The assessment of sustainability risks is an integrated part of the investment decision-making of the Fund Manager. In the investment decision making process, sustainability risks are assessed at the stage of product development as well as in the decision to invest in individual investment objects and are monitored for the Fund portfolio on an ongoing basis.
The operation of internal controls is monitored and reported internally to ensure effectiveness of the intended measures. The monitoring is overseen by senior management, independent review functions and Board.
b) No sustainable investment objective
This Fund promotes, among other characteristics, environmental or social characteristics but does not have sustainable investments as its objective.
c) Environmental or social characteristics of the financial product
A well-functioning mortgage market is a critical part of the local and global economy. A healthy degree of competition and access to a wide range of alternatives in the mortgage market will benefit customers and safeguard a well-functioning marketplace. Stabelo’s mortgage lending activities increase the level of competition in the Swedish mortgage market that is dominated by large universal banks. This together with a stated aim to influence general best practices in the Swedish mortgage market will benefit borrowers and promote a better-functioning marketplace.
Fundamentally, Stabelo believes that lending practices that do not make customers well-being a top priority are imprudent and not sustainable. Lending practices that have a lax approach towards customer long-term affordability and financial robustness will ultimately have a negative impact on credit quality of the mortgage assets financed by investors. Furthermore, we believe that a mortgage offering should fair and easy to understand without hidden costs and agendas. This enhances borrowers’ ability to make sound financial decisions.
Stabelo Fund I only invests in Swedish mortgages that offer both financial and social returns to investors.
Stabelo’s narrative of responsible mortgage investing focuses on three objectives for sustainability:
- Promote responsible lending – it is crucial that borrowers are not put at added risk of financial distress or burdensome debt load. Borrowers should be able to service and repay their debt without distress.
- Fair and transparent mortgage products – simple and transparent mortgage products that borrowers understand enhance their ability to make financial decisions that are sound overall.
- Climate change mitigation – incentivising borrowers to make investments to increase the energy efficiency of their homes will protect them and lenders against rising energy prices that could be connected to transition risks associated with reaching the goals set out in the Paris Agreement.
Furthermore, increasing the diversity of mortgage financing and ensuring availability of mortgage financing outside the banking system will support financial stability. This has proven to be especially true in times of stress in the overall banking system. In addition, mortgages financed outside the banking system do not contribute to money creation within the financial system and thereby have a positive impact on financial stability.
d) Investment strategy
Stabelo Fund I invests in Swedish residential mortgages with a conservative credit risk profile including a maximum LTV of 60% at origination. The Fund only invests in sustainable mortgage assets compliant with its Policy for responsible investments. Investments are governed by strict investment policies. The main role of the fund manager is to ensure that all investments are in fulfilment with the investment policies.
The assessment of sustainability risks is an integrated part of the investment decision making of the Fund Manager. In the investment decision making process, sustainability risks are assessed at the stage of product development as well as in the decision to invest in individual investment objects and are monitored for the Fund portfolio on an ongoing basis. Fund risks with a potential or actual adverse impact are weighted in terms of portfolio returns that may be affected by the risk. The risk is analysed based on probability and impact, where the possible impact on the investment objects is also considered. It is the actual or potential adverse impact on the value of the investment portfolio that is the guideline for the choice of investment object.
e) Proportion of investments
Stabelo Fund I only invests in Swedish mortgages that offer social returns to investors i.e. all of the mortgage investments are sustainable mortgages. The Fund does not have a hard commitment to invest in a minimum proportion of investments with an environmental objective aligned with the EU taxonomy (“green mortgages”). The Fund cannot control the proportion of taxonomy-aligned properties that are offered to the Fund for purchase monthly. The Fund does not find it appropriate to decline to purchase a number of high-quality mortgage assets that are in-line with the Fund’s investment criteria only to maintain a certain proportion of taxonomy-aligned activities. However, the Fund actively invests in Taxonomy-aligned mortgage assets (green mortgages) and Stabelo Group actively promotes its green mortgages initiative.
f) Monitoring of environmental or social characteristics
Sustainability is an important part of Stabelo Group’s strategy and a key element for future success. All Group entities are involved in the review, planning and implementation of the Group’s sustainability commitments and ambitions and progress on sustainability goals are reviewed by the Board.
The Group CEO and the Senior Executive Management Team have an annual cycle of review covering the performance over the past year as well as formulating the ESG goals for the coming year. The annual ESG goals are aligned with the overall ESG strategy.
Stabelo’s operational sustainability work is steered by a Sustainability Council. The Sustainability Council meets quarterly chaired by Stabelo’s Head of Sustainability.
We report on our sustainability work annually and our sustainability report will include climate reporting in line with the Task Force on Climate-related Financial Disclosures (“TCFD”) guidelines.
Stabelo’s narrative of sustainable mortgage investing focuses on three strategic objectives for sustainability, and the Group CEO and the senior management team monitor the progress on those objectives as follows:
- Promote responsible lending – We have a recurring strategic goal of promoting responsible mortgage lending. We monitor this by continuously measuring the number of mortgage customers in financial distress compared to the overall market. Our target is to not have any customers in financial distress.
- Fair and transparent mortgage products – We have a recurring strategic goal of offering fair, transparent mortgage products that are easy to understand. We monitor this by measuring customer satisfaction scores as well as the frequency of customer complaints related to the nature of our mortgage offering.
- Climate change mitigation – We have a recurring strategic goal of incentivising our mortgage borrowers to make investments to increase the energy efficiency of their home. One way we monitor performance in this area is to measure the growth of our Green Investment Mortgages that offer attractive financing for investments in energy efficiency connected to the home. Another of Stabelo’s strategic goals is to make its mortgages 100% digital and we monitor our progress towards this goal on annual basis.
The operation of internal controls is monitored and reported internally to ensure effectiveness of the intended measures. The monitoring is overseen by senior management, independent review functions and Board.
G) Methodoligies
When comparing customers in distress compared to the overall market, we measure loans more than 60 days in arrears compared to 2 of the largest mortgage providers.
As customer satisfaction scores we use both established web-based independent providers as well as customer surveys carried out by independent providers.
Green mortgages are defined as belonging to the 15% most energy efficient properties in the market carrying an EPC rating of A or B. Green investment mortgages used to finance investments in solar panels are also defined as Green mortgages.
h) Data sources and processing
The mortgage book of Stabelo Fund I is an important data source used to monitor the portfolio and progress towards strategic goals. Furthermore, customer behaviour including payment behaviour and customer communication are important sources of data that we actively collect and monitor.
We use Trustpilot and NPS Scores to monitor our customer satisfaction ratings and continuously log customer complaints that are related to the nature of our mortgage offering. Customer complaints related to the nature of our mortgage offering are discussed in the context of our annual strategic sustainability planning.
We use data provided by the Swedish National Board of Housing, Building and Planning (Boverket) to collect and monitor the EPC ratings associated with the underlying properties in the mortgage portfolio. The data is used in the lending process to distinguish “Green mortgages” from “neutral mortgages”.
i) Limitations to methodologies and data
The limitations associated with using customer satisfaction scores and customer complaints when evaluating our mortgage offering are that not all customers provide a rating and not all customers complain although they are dissatisfied.
A limitation associated with using the EPC rating to distinguish “green mortgages” from neutral mortgages is that not all Swedish properties have an EPC rating although the number is increasing.
j) Due diligence
The assessment of sustainability risks is an integrated part of the investment decision making of the Fund Manager. In the investment decision making process, sustainability risks are assessed at the stage of product development as well as in the decision to invest in individual investment objects and is monitored for the portfolio on an ongoing basis. The risk of potential or actual adverse impact on the Fund is weighted in terms of portfolio returns that may be affected by the risk. The risk is analysed based on probability and impact, where the possible impact on the investment objects is also considered. It is the actual or potential adverse impact on the value of the investment portfolio that is the guideline for the choice of investment object.
Sustainability risk refers to an environmental, social or governance-related event or circumstance which, if it were to occur, would have an actual or potentially significant adverse impact on the value of the investment (“sustainability risk”).
Stabelo’s Policy for the integration of sustainability risks and due diligence provides details of the sustainability risks that Stabelo considers most relevant. The relevant risks are those assessed with a high probability of occurrence in the short to medium term combined with a high potential impact on the financial performance of the portfolio.
k) Engagement policies
Not Applicable. Stabelo Fund I does not invest in companies.
