The SFDR regulation introduces uniform requirements within the European Union for financial market participants and financial advisors to disclose information related to sustainability.

Avallon sp. z o.o., headquartered in Lodz, Poland, LEI code: 259400VLSSAUSNAF3D85 („Avallon”), falls within the scope of the SFDR Regulation as a financial advisor, i.e. as an investment firm that provides investment advisory services within the meaning of Article 2(11)(d) of the SFDR Regulation.

The disclosure by way of this statement on compliance with the SFDR Regulation (the „Statement”)applies to Avallon to the extent that it provides investment advisory services.

The information covered by the Statement is provided solely for the purpose of complying with the SFDR Regulation and may not form the basis of any claim in connection with the provision of investment advisory services by Avallon.

In accordance with Article 3 (2) of the SFDR, financial advisors shall publish on their websites information on their strategies (policies) for addressing risks to sustainability in the provision of investment or insurance advice 1 . In carrying out this obligation, Avallon declares as follows.

According to the SFDR, a sustainability risk is defined as an environmental, social or governance situation or condition that, if it occurs, could have an actual or potential material adverse effect on the value of investments made by Avallon’s customers.

Examples of risks to sustainability are:

1. environmental hazards, which may include climate change, carbon emissions, air pollution, sea level rise, coastal flooding or wildfires;
2. Social risks, which may include human rights violations, human trafficking, child labor or gender discrimination; and
3. Sustainability risks, which may include lack of diversity on the board or at the executive level, violation or limitation of shareholder rights, concerns about employee health and safety, poor data security or IT security.

Avallon does not, as a general rule, advise clients on sustainable investments or the sustainability aspects and risks of specific investments. As such, Avallon does not have a strategy (policy) for considering sustainability risks in providing investment advice. In contrast, Avallon takes general market risks into account when advising clients, which may also include taking into account material sustainability risks if they may have a material impact on the market value of investments.

As the regulation of sustainability‑related disclosures in the financial services industry evolves, industry standards for incorporating sustainability risks into investment decision‑making or the provision of investment advisory services develop, and as the availability of sustainability data increases (including primarily corporate sustainability reporting), Avallon may develop and implement strategies (policies) for incorporating sustainability risks into the provision of investment advisory services in accordance with current market standards.

Pursuant to Article 4(5) of the SFDR, financial advisors shall publish and maintain on their websites information on whether they take into account the main adverse effects on sustainability factors in providing investment or insurance advice, or information on why they do not take into account the main adverse effects of investment decisions on sustainability factors in providing investment or insurance advice, as well as information on whether and when they intend to take such adverse effects into account. In carrying out this obligation, Avallon declares as follows.

Principal adverse impacts on sustainability factors (“PAI”) means the issues identified in Annex I of the RTS.

In providing investment advisory services, Avallon does not consider the main adverse effects on sustainability factors (PAI).

The main reason Avallon does not consider PAI in the provision of investment advisory services is that investment advisory contracts do not provide for the goal of mitigating the main adverse effects of investments on sustainability factors, and the main criterion for the investment advice provided is the clients’ investment objectives and assessment of the current market situation.

The inclusion of PAI in the provision of investment advisory services would require access to data and information to calculate the PAI indicators listed in Appendix I to the RTS for the products for which Avallon provides investment advisory services. During the reporting period to which this statement relates, Avallon did not see fit to obtain the reliable and credible data necessary to determine the value of such PAI indicators.

Avallon regularly evaluates the scope and availability of the data and information referred to above. Thus, as sustainability disclosure regulations evolve and as the availability of sustainability data increases (including primarily in corporate sustainability reporting), Avallon does not rule out starting to include PAI in the provision of investment advisory services.

This statement on the main adverse effects of investment advisory services on sustainability factors covers the reference period from January 1 to December 31, 2025.

In accordance with Article 4(5) of the SFDR, financial advisors shall include in their compensation policies information on how to ensure the consistency of these policies with the issue of addressing sustainability risks, and publish this information on their websites. In carrying out this obligation, Avallon states the following.

The remuneration policy for individuals whose tasks include activities that materially affect Avallon’s risk profile has been appropriately adjusted to ensure its consistency with the strategy (policy) regarding the consideration of risks for sustainable development in the provision of investment advisory services. The remuneration policy does not refer, when evaluating an individual’s performance, to the consideration of risks for sustainable development in the provision of investment advisory services by Avallon. Provisions have been made in the remuneration policy to take into account the issue of taking into account risks for sustainability in the provision of investment advisory services by Avallon when evaluating the individual performance of a person.

Avallon has adopted a remuneration policy in accordance with the mandatory provisions of Polish law, according to which employees receive fixed remuneration and may additionally receive discretionary remuneration. Among other forms of remuneration that are awarded on a fixed basis, Avallon may award employees variable discretionary bonuses on an annual basis. The level of remuneration depends, among other things, on the performance of the individual employee or Avallon, and the total amount of variable remuneration may reflect the sum of the employee’s performance evaluation and Avallon's overall performance, as well as the employee’s conduct in accordance with any relevant internal procedures, policies and compliance requirements.

PRE‑CONTRACTUAL DISCLOSURES PURSUANT TO ART. 6 SFDR

Name of financial product: [Avallon MBO Fund III S.C.A. SICAV‑RAIF domiciled in Luxembourg, Luxembourg / Avallon MBO Fund IV S.C.A. SICAV‑RAIF domiciled in Luxembourg, Luxembourg]

LEI code of the financial product: 

Avallon MBO Fund III S.C.A. SICAV‑RAIF: 984500B07E814FF87283, 

Avallon MBO Fund IV S.C.A. SICAV‑RAIF: 984500F40E9A0IA7DA80, 

Pursuant to Article 6(2) of the SFDR Regulation of the European Parliament and of the Council (EU) 2019/2088 of 27 November 2019 on disclosure of information related to sustainability in the financial services sector (2019/2088) (“SFDR” or “SFDR Regulation“), Avallon sp. z o.o. (“Avallon“), as a financial adviser, i.e. as an investment firm that provides investment advice within the meaning of Article 2(11)(d) of the SFDR Regulation, is required to include a description of the following elements in its pre‑contractual disclosure: 

1. the way in which sustainability risks are taken into account in the investment advisory services provided by Avallon; and
2. the results of the assessment of the likely impact of sustainability risks on the return on the financial products for which Avallon advises,

or, where sustainability risks are considered to be insignificant, to provide a clear and concise explanation of why those risks are considered to be insignificant. 

In discharging the above obligation, Avallon declares as follows.

According to the SFDR, a sustainability risk is defined as an environmental, social or governance situation or condition that, if it occurs, could have an actual or potential material adverse effect on the value of the investments made by Avallon’s clients. 

Examples of risks to sustainability are: 

1. environmental risks, which may include climate change, carbon emissions, air pollution, sea level rise, coastal flooding or wildfires;
2. social risks, which may include human rights violations, human trafficking, child labour or gender discrimination; and
3. Sustainability risks, which may include a lack of diversity on the board or at executive level, infringement or limitation of shareholder rights, concerns about employee health and safety, poor data or IT security safeguards.

HOW SUSTAINABILITY RISKS ARE TAKEN INTO ACCOUNT IN AVALLON’S INVESTMENT ADVISORY SERVICES

Avallon takes into account the risks to sustainability in the investment advisory services it provides by taking steps to identify such risks in relation to the financial products or investments in respect of which Avallon provides investment advisory services and, to the extent possible, by assessing the actions to manage such risks, including actions to reduce or eliminate such risks, taken by financial market participants in relation to the financial product in question or by the companies in which investments are made.

Any financial product or investment on which Avallon advises is subject to analysis from a sustainability risk perspective in accordance with guidelines published by the European Bank for Reconstruction and Development and the International Finance Corporation (IFC). In addition, each financial product or investment is subjected to detailed due diligence, which addresses, among other things, legal and sustainability risks. This analysis is based on information obtained in response to questions formulated in questionnaires prepared by Avallon individually or in collaboration with external advisors. Risks relating to any investment are carefully documented, including through environmental reports.

Taking into account the guidelines indicated, Avallon only provides investment advisory services as to financial products or investments for which the identified sustainability risks are low or insignificant. In particular, Avallon does not provide investment advice on financial products or investments subject to exclusion based on environmental or social criteria. 

At the same time, we point out that Avallon does not use concretised KPIs in assessing risks to the sustainability of financial products or investments for which Avallon provides investment advice. 

ASSESSMENT OF THE LIKELY IMPACT OF SUSTAINABILITY RISKS ON THE RETURN ON FINANCIAL PRODUCTS

Investing in financial products or investments for which Avallon provides investment advice involves a variety of risks that may affect the return on those products or investments. 

In the case of risks to sustainability, the impact of any such risk on a financial product or investment for which Avallon provides investment advice will depend on the exposure of the product or investment to such risk, as well as the scale and likelihood of the risk occurring. As indicated above, Avallon not only takes steps to identify risks to sustainability in relation to the financial products or investments in relation to which it provides investment advisory services, but also, to the extent possible, assesses the activities involved in managing such risks. Consequently, by providing investment advice only as to financial products or investments for which identified sustainability risks are low or insignificant, Avallon limits the impact of sustainability risks on the return on these financial products or investments. However, Avallon does not systematically estimate the likely impact of these risks on the return of these financial products or investments.

The disclosures listed in this Statement are subject to ongoing updating in accordance with Article 12 of the SFDR.

The obligation to update on an ongoing basis does not apply to the statement on the main adverse effects of investment advisory services on sustainability factors submitted by Avallon in accordance with Article 4 of the SFDR.