European Sustainable Finance Disclosure

Sustainable Finance Disclosure Regulation

The Sustainable Finance Disclosure Regulation¹ (“SFDR”) seeks to establish a pan-European framework to facilitate Sustainable Investment.

The following disclosures relate to Guggenheim Partners Europe Limited (in its capacity as investment advisor and manager of European Collateralized Loan Obligations (“CLOs”).

Integration of Sustainability Risks

Guggenheim Partners Europe Limited has regard to the terms of Guggenheim Investment’s ESG integration Statement for the CLOs under its management. In doing so, ESG factors (including the consideration of sustainability risks) are integrated into the investment decision-making process.

Assessment of the Impact on Likely Returns

An assessment is undertaken by Guggenheim Partners Europe Limited of the likely impacts of the sustainability risks, on their financial product's returns. Even where sustainability risks are identified there can be no guarantee of the correct assessment of the impact of sustainability risks on the financial product's investments or proposed investments. Where a sustainability risk occurs in respect of an asset, there could be a negative impact on, or loss of its value.

Statement on Principal Adverse Impacts of Investment Decisions on Sustainability Factors

Guggenheim Partners Europe Limited (in its capacity as collateral manager) does not consider principal adverse impacts of investment decisions on sustainability factors for its managed CLOs. It does not consider adverse impacts of investment decisions on sustainability factors on the basis that for three of its four managed CLOs, investments in these CLOs must, at the least, be in compliance with detailed and extensive ESG stipulations which the firm has determined is a more appropriate manner to address its sustainability goals.

The CLOs’ ESG stipulations set out various investment exclusions that are primarily linked to an issuer’s main business activities and/or their revenue streams. Investments in Bilbao CLO II and Bilbao CLO III must not breach any of the 23 mandated ESG stipulations noted in their Offering Circulars at the time of entering into a binding commitment for such investments, whereas investments in Bilbao CLO IV must not breach any of the 33 ESG stipulations noted in its ESG Offering Circular at the time of entering into a binding commitment for such investments. Further information on these ESG considerations is available in the relevant Offering Circulars.

Irrespective of ESG stipulations, all issuers who are proposed for investment are evaluated for ESG risk before inclusion in client portfolios in addition to their compliance with the relevant portfolio’s ESG stipulations (where applicable). ESG factors are weighed alongside traditional credit risks when researching and forming opinion on potential investments. ESG assessment is carried out by research analysts on individual issuer level and industry level.

Issuers may be deemed ineligible by Guggenheim Partners Europe Limited for investment due to incompatibility with the portfolio’s ESG stipulations and/or for other ESG considerations that would not otherwise be ineligible as per the ESG stipulations.

Recognizing that an issuer’s risk profile may change over time, our approach seeks to incorporate a forward-looking assessment of ESG factors. In practice, this means that we may assess an issuer’s ESG characteristics more favourably if it is taking concrete steps to improve its risk profile by improving governance, addressing environmental or social policies, or deploying capital towards projects that are likely to lead to a more sustainable enterprise. The inverse is also true if we believe an issuer’s ESG characteristics are likely to deteriorate in the future.

Remuneration Considerations

Guggenheim Partners Europe Limited's remuneration policies (i) promote sound and effective risk management and (ii) discourage excessive risk taking, including without limitation, with respect to sustainability risks. A sustainability risk is an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of an investment.

The assessment of Guggenheim Partners Europe Limited's staff performance is based on a multi-year framework in order to take into account the long-term performance of staff, as well as the performance of the financial product under management. Performance objectives are therefore a multi-year process, ensuring that staff and end investors' interests are aligned.

Variable remuneration is dependent upon the performance of the business unit(s), the performance of the relevant firm and the performance of the employee concerned. This serves to discourage excessive risk taking, as no one individual can influence Guggenheim Partners Europe Limited 's performance. The determination of an individual's entitlement to variable remuneration will take into account the individual staff member's performance in the relevant performance period taking into consideration both financial and non-financial criteria. As part of the measurement of performance used to calculate variable remuneration this will include the consideration of relevant types of current and future risks, including sustainability risks.

¹Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector.