Sustainability (SFDR) Disclosure

Transparency and SFDR Classification

Fund Overview: Solon Merchant Capital Partners Fund I SCSp (the “Fund”) is an Alternative Investment Fund focused on private credit, distressed credit, special situations and real estate opportunities including investments in performing and non-performing loans (NPLs), primarily those secured by real estate assets in Greece and South & Eastern Europe. The Fund’s strategy centers on distressed debt acquisition and recovery, and it does not promote environmental or social characteristics nor does it have a sustainable investment objective as defined under the EU Sustainable Finance Disclosure Regulation (SFDR). Consequently, the Fund is not classified as an “Article 8” or “Article 9” product under SFDR. It is managed with a traditional investment approach aimed at financial returns, and thus can be considered a non-ESG oriented fund (often referred to as an Article 6 fund under SFDR). In keeping with regulatory transparency requirements, this section provides information on how sustainability risks are treated in the Fund’s investment process and the Manager’s stance on principal adverse sustainability impacts.

Sustainability Risk Integration

Integration of Sustainability Risks: In accordance with Article 6 of SFDR, Solon Capital Advisers S.à r.l. (the “Manager”), as the Fund’s AIFM, considers relevant sustainability risks as part of its overall risk management for the Fund. Sustainability risks refer to environmental, social or governance events or conditions that, if they occur, could cause a material negative impact on the value of an investment. Given the Fund’s focus on real asset-backed credits, the Manager assesses factors such as environmental issues affecting collateral properties (e.g. flood or seismic risk, pollution or contamination liabilities) and relevant social or governance issues (e.g. legal disputes or regulatory changes impacting real estate values) during due diligence. These considerations are integrated into credit risk analysis and property valuations to the extent that they could materially influence the loan recovery value or the success of a debtor workout.

Impact on Investment Decisions: While sustainability risks are evaluated, they are not the primary drivers of investment decisions for this Fund. The core investment thesis is based on credit fundamentals and legal enforceability of loan recovery, with sustainability factors considered primarily insofar as they may affect financial performance or risk. For example, if an underlying property collateral has significant environmental damage or is subject to new environmental regulations that could impair its value, the Manager will factor that into the risk assessment and pricing of the NPL. Conversely, if no material sustainability risk is identified, the presence or absence of ESG characteristics will not have a material influence on the decision to acquire a credit exposure. The Manager has determined that, given the Fund’s specific strategy and typically short to medium-term horizon for resolving stressed & distressed credit assets, sustainability risks are not likely to significantly impact the Fund’s overall returns. Nonetheless, the Manager remains vigilant in identifying any material ESG-related issues to mitigate potential negative effects on investment value and Manager’s reputation. All identified risks, including sustainability-related ones, are controlled in line with the Manager’s standard risk management framework.

No Consideration of Principal Adverse Impacts (PAI)

Article 4(1)(b) SFDR Statement: In accordance with Article 4(1)(b) of SFDR, the Manager does not currently consider the principal adverse impacts of its investment decisions on sustainability factors for the Fund. “Principal adverse impacts” (PAIs) refer to certain predefined indicators of negative effects that investments might have on environmental and social factors (for example, carbon emissions, energy efficiency, social violations, etc.). The decision not to formally assess PAIs at the entity or Fund level has been made after careful evaluation of the Fund’s nature and context. The reasons for not considering PAIs at this time include:

Nature of the Fund’s Investments: The Fund’s portfolio consists of stressed or distressed debt (such as NPLs) where the Fund is an acquirer of existing loans (in the secondary market) rather than an equity stakeholder in operating companies or properties. This means the Fund has indirect exposure to underlying assets (real asset collateral) and initially no corporate control over the debtors. As such, the typical PAI metrics (which are designed for measuring a company’s ongoing environmental and social impacts) are not directly applicable or actionable for this investment strategy. The Fund’s role is to recover debt value, not to influence the operations of underlying borrowers, limiting its ability to affect or measure any sustainability outcomes of those borrowers. Where the fund invests in replacement financing (such as asset backed bridge loans) or directly into real assets (such as Commercial or Other Real Estate), it will typically consider environmental factors as part of its standard asset valuation and expected returns.
Data Availability and Reliability: There is limited availability of data to accurately measure PAIs in the context of the distressed credit markets (particularly NPLs in Greece and South & Eastern Europe). Borrowers associated with NPL portfolios (which may include individuals, small or medium sized businesses, corporates or other defunct entities) generally do not report on sustainability indicators like greenhouse gas emissions, waste management, or social practices. Similarly, while the Fund’s assets are linked to real estate collateral, detailed environmental or energy performance data for those properties is often unavailable or not provided during loan acquisition. The lack of reliable, standardized data means any assessment of adverse sustainability impacts would be largely speculative and potentially misleading. The Manager has determined that attempting to collect and monitor PAI metrics for each NPL investment would be disproportionately difficult and not meaningful given the context, thereby not currently feasible.
Proportionality and Resource Focus: Solon Capital Advisers S.à r.l. is a relatively small AIFM focusing its expertise on credit recovery and asset management within the stressed & distressed, asset-backed credit space. The Manager believes that dedicating resources to a formal PAI framework – which involves extensive data gathering, analysis, and reporting on a broad set of environmental and social indicators – would divert attention from the Fund’s core investment objectives without delivering clear benefits to investors. Instead, the Manager concentrates on the most material risks and opportunities related to financial performance. Any sustainability-related concerns are handled through the risk integration process described above, rather than through a separate PAI measurement process.
Fund Structure and Regulatory Context: The Fund is an unregulated S.C.Sp. (special limited partnership) aimed at professional investors, and it does not commit to any sustainability target or benchmark. Under the current SFDR framework, consideration of PAIs is encouraged but remains a voluntary “comply or explain” choice for financial market participants of the Manager’s size and type. The Manager has opted to exercise the Article 4(1)(b) discretion to not consider PAIs, as permitted, because the relevance of those specific indicators to the Fund’s strategy is low and industry methodologies for certain asset classes (such as NPLs) are still in nascent stages. The Manager continuously monitors regulatory developments in sustainable finance and recognizes that approaches to adverse impact reporting may evolve with time.

Future Outlook: The Manager will keep its stance on PAI consideration under regular review. If in the future data availability improves, or if market and regulatory standards adapt to better fit asset classes such as NPLs, the Manager may re-evaluate its approach. Should the decision be made to begin considering principal adverse impacts in the investment process, the Manager will update this disclosure accordingly and provide the necessary information in line with SFDR requirements. At present, however, there is no definite timeline or intention to adopt PAI monitoring for the Fund, given the current conditions and focus of the investment strategy.

Regulatory Information

AIFM and Fund Status: Solon Capital Advisers S.à r.l. is a Luxembourg-based Alternative Investment Fund Manager (AIFM) registered with the Commission de Surveillance du Secteur Financier (CSSF) with registration number A00003858. It serves as the external AIFM to Solon Capital Merchant Partners Fund I, which is structured as an unregulated Luxembourg special limited partnership (Société en Commandite Spéciale, S.C.Sp.). Being “unregulated” in this context means the Fund is not a regulated retail fund or Part II fund, but it remains an alternative investment fund managed under the oversight of the authorized AIFM. All investors in the Fund are qualified professional investors, and the Fund is closed to the general public.

SFDR Compliance: This disclosure is provided in accordance with Regulation (EU) 2019/2088 – the Sustainable Finance Disclosure Regulation. In particular, it addresses the requirements of Article 6 (transparency of integration of sustainability risks) and Article 4(1)(b) (transparency of principal adverse impact consideration on sustainability factors on a “comply or explain” basis) as they pertain to the Manager and the Fund. The Fund, having neither an ESG promotional mandate nor a sustainability objective, falls under the scope of SFDR’s general disclosure obligations to ensure investors are informed about how sustainability is taken into account in its management. The Manager confirms that sustainability risks have been considered in the manner described above and that it does not consider PAIs for the reasons stated. This statement reflects the Manager’s policies as of the date of publication and will be updated if and when any material changes occur (for example, if the Fund’s classification or the Manager’s PAI consideration stance changes).

Legal Disclaimer: Nothing in this disclosure should be construed as the Fund promoting any environmental or social characteristics or as making sustainable investments within the meaning of SFDR Articles 8 or 9. The information is intended to provide transparency on how Solon Capital Advisers manages sustainability-related matters in relation to the Fund, in line with regulatory requirements. Investors should be aware that the Fund’s investment decisions are primarily guided by financial criteria and risk-adjusted returns. Sustainability risks are monitored to the extent they pose material financial risks, and principal adverse impacts on broader sustainability factors are not presently accounted for in the decision-making process. Solon Capital Advisers S.à r.l. remains committed to compliance with all applicable financial regulations and will continue to ensure that its disclosures and policies are aligned with the current laws and guidance from European and Luxembourg authorities.