Impax Asset Management : MIFIDPRU Disclosure for year ended 30 September 2023

About this update from Impax Asset Management Group Plc

Impax Asset Management Limited MIFIDPRU Public Disclosure For the Financial year: 1 October 2022 to 30 September 2023 Applicable with effect from: 28 June 2024 Introduction 3 Objectives 3 Disclosure timing requirements 3 Disclosure Validation 3 Governance Framework 4 Overview of the Board Committees 5 Directorships 5 Diversity 6 Equity, Diversity & Inclusion 6 Enterprise Risk Management Framework 7 Statement of Risk Appetite 8 Internal Capital Adequacy and Risk Assessment ("ICARA") 8 Own Funds Requirements - MIFIDPRU 4 8 Liquidity Risk - MIFIDPRU 6 8 Harms associated with business strategy 8 Composition of Regulatory Own Funds 10 Reconciliation of Regulatory Own Funds 11 Own funds requirement 12 Compliance with Overall Financial Adequacy Rule 12 Basis of Disclosure 14 Remuneration Code Disclosure 14 Governance & Remuneration Committee 14 Material Risk Takers (MRTs) 14 Key Characteristics of Remuneration Policies and Practices 14 Remuneration Approach and the link between Performance and Variable Pay 15 Risk Adjustment 16 Quantitative Remuneration Disclosures 16 Public Disclosure Introduction The Investment Firm Prudential Regime ('IFPR') is the FCA's prudential regime for MiFID investment firms which aims to streamline and simplify the prudential requirements for UK investment firms. The IFPR came into effect on 1 January 2022 and its provisions apply to Impax Asset Management Limited (the "Firm") as an FCA authorised and regulated firm. The Firm is part of the Impax group (parent company Impax Asset Management Group plc ("Impax") and is a specialist investment manager, investing in the transition to a more sustainable global economy. Impax establishes and seeks to grow a small number of scalable products and to sustain excellent investment performance. It markets these products predominantly to larger investors who can deploy a significant quantity of capital. To achieve these objectives, Impax recognises the importance of attracting outstanding investment talent and retaining a core senior management team whose interests are aligned with those of shareholders. The Firm is required to publish disclosures in accordance with the provisions outlined in MIFIDPRU 8. This disclosure document covers all aspects of the disclosure requirements within the scope of the MIFIDPRU rules applicable to non- small and non-interconnected('Non-SNI') investment firms. The Firm is a member of a UK Consolidation Group. The disclosures have been prepared on an individual basis. The Firm believes that its qualitative disclosures are appropriate to its size and internal organisation, and to the nature, scope and complexity of its activities. This disclosure has been approved for disclosure by the Board of Directors of the Firm (the "Board"). The annual audited accounts of the Firm set out further information which complements the information in this disclosure. The audited accounts are freely available from UK Companies House. This document does not constitute any form of financial statement on behalf of the Firm. The information contained herein has been subject to internal review but has not been audited by the Firm's external auditors. Objectives This document sets out the public disclosure under MIFIDPRU 8 for the Firm as of 30 September 2023, which is the Firm's accounting reference date. As a MIFIDPRU investment firm, the Firm must establish and implement disclosure requirements to provide investors, stakeholders and wider market participants with an insight into how the Firm is run. Disclosure timing requirements The Firm is required to publicly disclose the information specified in this document on an annual basis on the date it publishes its annual financial statements, which is on or before 30 June 2024. The Firm will consider making more frequent public disclosure where particular circumstances demand it, for example, in the event of a major change to its business model or where a merger has taken place. Disclosure Validation The Firm is committed to having robust internal controls to ensure the completeness, accuracy, and compliance with the relevant public disclosure regulatory requirements. This document has been subject to internal governance and verification process, and approval by the Board to ensure compliance with the regulatory requirements contained in MIFIDPRU 8. As a Non-SNI firm, the public disclosure document contains the following key areas: Governance arrangements; Risk Management objectives and policies; Own funds; Own funds requirements; and Remuneration policy and practices. Governance arrangements disclosure Governance Framework The Board is the Governing Body of the Firm. It meets regularly and as at the date hereof is comprised of: Chair & Independent Non-Executive Director: Sally Bridgeland Executive Directors Ian R Simm Bruce Jenkyn-Jones Daniel von Preyss Catherine Bremner Karen Cockburn Independent Non-Executive Director Simon O'Regan 1 The role of the Board is to provide oversight and take responsibility for the strategic leadership of the Firm within a framework of good corporate governance and prudent and effective controls which enables risk to be assessed and managed, including appropriate segregation of duties of the Senior Management Functions in accordance with the Senior Management and Certification Regime ('SM&CR') and management of conflicts of interest. The Board sets the structure in place for the Firm to meet its objectives and reviews management performance. The Board sets and oversees the Firm's values and standards and ensures that its obligations to its shareholders, its clients and others are understood. A review of the performance of the Board takes place annually and all staff are reviewed annually in respect of competence and fitness and propriety. The Board discharges daily management and oversight responsibility for the business supported by other key members of the senior management team within the Firm. The Firm seeks regulatory approval prior to appointments to the Board under the SM&CR. All Board members are registered and listed on the FCA Register and have individual responsibilities (including prescribed responsibilities under SM&CR) documented in a Statement of Responsibilities. 1 Appointed 5 March 2024 Overview of the Board Committees The Firm has not formed any stand-alone committees due to its size. As the Firm is a wholly owned subsidiary of Impax, the Firm along with other regulated subsidiaries relies upon group-wide committees (the "Group Committees"). The purpose of the Group Committees along with their respective scopes of duties and responsibilities are formalised in their individual Terms of Reference. The following Group Committees are in place: Audit and Risk Committee Remuneration Committee Management Committee Enterprise Risk Committee Investment Committees Treasury Committee Valuation Committee Best Execution Committee Product & New Business Committee Environmental Committee Conduct Committee Compliance Committee Directorships The following table details the Board of Directors of the Firm as at 30 September 2023, together with details of Directorships held by any Board member at external, commercial organisations (as at the date of this Disclosure). Role Name Number of other external directorships Chair & Independent Non-Executive Director Sally Bridgeland 6 Executive Director Ian Simm 0 Executive Director Bruce Jenkyn-Jones 0 Executive Director Daniel von Preyss 0 Executive Director Catherine Bremner 0 Executive Director Karen Cockburn 1 Appointments since 30 September 2023 Independent Non-Executive Director Simon O'Regan 0 (appointed: 5 March 2024) Diversity The Firm values the innovation and creativity that diversity of thought brings to the organisation and understands that diversity, equality and inclusion play a critical role in establishing strong governance and maintaining a healthy culture from the top as part of delivering higher standards of conduct and success of the Firm. The Firm is committed to building a workforce that reflects all aspects of diversity and intersectionality to bring a range of perspectives, ideas and insights to everything the Firm does. One of the Firm's objectives is to ensure that the composition of the Board is always suitable for it to be an effective decision-making body and to provide successful oversight and stewardship. Suitability of the members of the Board is reassessed periodically, in line with the requirements of the SM&CR. The Directors are appointed in accordance with the following suitability criteria: Being of good repute; Being able to act with honesty, integrity and independence of mind; Overseeing, monitoring and challenging management decision-making effectively; Disclosing any financial or non-financial interests that could create potential conflicts of interest; Possessing sufficient knowledge, skills and experience to perform their duties; Being able to commit sufficient time to perform management body functions in a supervisory context; and Not being restricted from taking up the position by any regulatory requirement. The assessment of an individual's adequate knowledge, skills and experience will consider: The role and duties of the position and the required capabilities; The knowledge and skills attained through education, training and practice; The practical and professional experience gained in previous positions; and The knowledge and skills acquired and demonstrated by the professional conduct of the member of the Board. Equity, Diversity & Inclusion The Firm believes that the transition to a more sustainable economy is closely linked to the transition to a more equitable society. Equity, diversity and inclusion ("E,D&I") are critical to the Firm's own organisation, to the success of the companies in which it invests, and in creating opportunity in the communities in which it operates. The Firm and Impax is committed to using the tools it has as investors to address discrimination and inequity. Investments The Firm invests in companies that are well positioned to benefit from the transition to a more sustainable economy, including companies that are leaders on human capital issues such as E,D&I. Impax is a pioneer in gender lens investing. The Firm withholds votes from companies that we believe lack sufficient diversity on their boards. The Firm engages with the companies in its investment portfolios to press for greater diversity on their leadership teams and equitable pay for all staff irrespective of gender or race. Business The Firm's E,D&I vision is to continue to build an inclusive, equitable culture where everyone feels they belong, are valued as an individual, and can thrive. Impax remains focused on increasing the number of women and racial and ethnic minorities, especially at senior levels, and to equal pay across the Firm. The Firm's priorities include: Setting goals and providing tools for managers to promote accountability for E,D&I progress; Extending the potential talent pool in recruitment and engaging with recruiters with a strong track record when it comes to diversity; and Gathering data directly and confidentially from employees across different facets of diversity and analysing results. Partnerships and Social Impact The Firm partners with organisations focused on E,D&I, spotlighting the unique challenges faced by women and minorities within its industry. The Firm offers young people from socially diverse backgrounds the opportunity to work in the investment management space. Impax also encourage colleagues to play an active role in the community - for the benefit of both the Firm's business and wider society with employees of the Firm and Impax participating in volunteering opportunities with organisations aligned with the Firm's philosophy. Risk Management Objectives and Policies The Board has responsibility for maintaining a sound system of governance, internal control and risk management. As a wholly owned subsidiary of Impax, the Firm relies on the Impax Enterprise Risk Management Framework which facilitates consistent risk management across the Group and each regulated subsidiary, including the Firm. The approach to risk management incorporates the '3 Lines of Defence' model to ensure clarity of ownership of and responsibility for risk management. Accountability for identifying, measuring, reporting, managing and mitigating relevant risk sits primarily with the 'first line', with second line (Risk and Compliance) providing independent challenge, oversight and advice and assurance on risk management. The second line risk team maintains the Enterprise Risk Management Framework. Second line Risk and Compliance attend each Board meeting of the Firm. Independent assurance on the activities of the first and second lines, is provided by internal audit (third line). Enterprise Risk Management Framework The management of risk is formalised and set out in the Risk Management Framework and associated policies and involves: Identification of Risks: Identifying and then defining key and emerging enterprise risks through methods including: 'top down' horizon scanning reviews, 'bottom up' risk and control self-assessments ("RCSAs"), assessing harms in the capital and liquidity assessment processes, holding regular meetings with business units and reviewing new products, major changes, and internal and external operating events with assigned risk owners. Measurement of Risk and managing to Risk appetite: Establishing risk appetites for each identified key risk, and monitoring management of those key risks within tolerances, engaging with key risk owners and business functions in respect of breaches to ensure appropriate actions are taken to ensure risks return to within appetite levels. Risk management and control: Maintaining the three lines of defence model with the prominent involvement of second line oversight in the business activities and forums and committees and by using effective processes to measure, manage, and control risks including RCSAs, remediating incidents and escalating risk issues, coordinating f actions to mitigate risks and ascribe proper ownership. Risk and incident monitoring: Establishing and monitoring enterprise-wide key risk indicators ('KRIs') to indicate when actions are needed to address any risks breaching appetite levels. Risk reports are produced regularly to the appropriate forums, boards and committees. Incidents are resolved according to the Global Incident Management Procedure and recorded in and reported on via the internal risk incident management database. Capital and Liquidity assessments are undertaken, including the Firm's Internal Capital Adequacy and Risk Assessment ("ICARA") process, and they include the quantification of regulatory capital and liquidity requirements. Risk governance: Policies and procedures established and embedded; risk committees; and overseeing the risk management framework. Statement of Risk Appetite The Board regards managing risk as a process of continuous improvement, evolving and enhancing the risk management framework on an ongoing basis. The Board has adopted a conservative approach to the Firm's risk appetite to maintain a strong capital position, liquidity and balance sheet throughout market cycles. The Firm identifies and further assesses key risks within the Firm's ICARA process, and maintains a Key Risk Register. Key Risk Indicators ("KRIs") have been developed for Key Risks and monitoring of KRIs with reporting to Group Committees and to the Board of the Firm. The risk assessment process seeks to identify the most significant/material harms to the clients of the Firm, to the market in which the Firm operates and to the Firm itself. Internal Capital Adequacy and Risk Assessment ("ICARA") The ICARA is a process of ongoing identification, monitoring and mitigation of the harms that a firm may pose to itself, its clients and the markets it operates in from both its ongoing business operations and those that may arise from winding down its business, and to identify the capital and liquid assets considered adequate to cover unmitigated harms that the Firm may cause itself, its clients and the markets it operates in. The Firm is required to complete an ICARA on at least an annual basis. Own Funds Requirements - MIFIDPRU 4 When assessing the adequacy of the Own Funds Requirement, the Firm has considered the key risks to the Firm's operating model. Due to our classification as a Non-SNI firm, the Firm's own funds requirement is based on the higher of the Permanent Minimum Requirement ('PMR'), the Fixed Overheads Requirement ('FOR') or the K-Factor Requirement ('KFR'). The Firm's Own Fund Requirements are detailed in Section 4. Liquidity Risk - MIFIDPRU 6 The Firm also maintains minimum liquidity at all times in compliance with the Basic Liquid Asset Requirement, to satisfy its net wind-down costs and any additional liquidity requirements which the ICARA identified for supporting the ongoing business activities of the Firm. Harms associated with business strategy The Firm has conducted a comprehensive risk identification exercise of potential harms in line with MIFIDPRU 7 Annex 1 across all business lines to ensure that all significant risks are identified. The Firm has developed a comprehensive Risk Register containing all relevant details for each risk that has been identified. All business areas of the Firm have input into the development of the risk register to ensure all areas of potential harm are identified. All risks recorded in the register are categorised in terms of potential harms to clients, the firm itself or markets. Operational Risk Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. The Firm has undertaken a risk identification and scoring exercise and the risk appetite level is set appropriately. Where through monitoring a risk is identified as tracking outside of agreed appetite it will be addressed as a priority to ensure that it is, through mitigation, brought within appetite tolerance levels. Business/Strategic Risk Business / Strategy Risk is the risk which arises from changes to the Firm's business, or where the Firm may not be able to carry out its business or strategic plans. As part of the ICARA, the Firm considers scenarios to stress test the business model, including against severe but plausible scenarios. Market Risk Market risk arises where fluctuations in value of assets, interest or exchange rates cause a divergence in the value of assets and liabilities. The impact of these market movements is considered within the stress testing analysis in the ICARA process. Credit Risk Credit risk is defined as the loss resulting from a client or counterparty's failure to repay amounts in full when due. The Firm's key exposure is to corporate cash counterparty default - the failure of a counterparty with which the Firm has placed cash. The risk is managed through limiting bank deposits to high quality credit institutions. Own funds disclosure Composition of Regulatory Own Funds The Firm's own funds consist of CET1 capital, Additional Tier 1 capital, and Tier 2 Capital. As at the Firm's financial year end on 30 September 2023, the Firm complied with all capital requirements. Composition of regulatory own funds Item Amount (GBP thousands) Source based on reference numbers / letters of the balance sheet in the audited financial statements 1 OWN FUNDS 44,408 2 TIER 1 CAPITAL 44,408 3 COMMON EQUITY TIER 1 CAPITAL 44,408 4 Fully paid-up capital instruments 10 Note 12 5 Share premium 6 Retained earnings 51,441 7 Accumulated other comprehensive income 8 Other reserves 22,124 9 Adjustments to CET1 due to prudential filters 10 Other funds 11 (-)TOTAL DEDUCTIONS FROM (29,167) Note 7 (deferred tax), COMMON EQUITY TIER 1 Note 8 (intangible assets), Directors' report (foreseeable dividend) 19 CET1: Other capital elements, deductions and adjustments 20 ADDITIONAL TIER 1 CAPITAL 0 21 Fully paid up, directly issued capital instruments 22 Share premium 23 (-) TOTAL DEDUCTIONS FROM ADDITIONAL TIER 1 24 Additional Tier 1: Other capital elements, deductions and adjustments 25 TIER 2 CAPITAL 0 26 Fully paid up, directly issued capital instruments 27 Share premium 28 (-) TOTAL DEDUCTIONS FROM TIER 2 29 Tier 2: Other capital elements, deductions and adjustments

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