Climate Change Data

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Increasingly challenging political environment regarding Cuba-US relations negatively affecting performance.
• New US measures strengthening the US Cuban Embargo, limiting remittances, restricting travel, enforcing Title III of the Helms-Burton Act, and penalizing oil transport.
• Significant adverse impact on the Cuban economy and tourism, particularly in Havana.
• Shortages of diesel and petroleum products in Cuba.

Mitigation Strategies

• Seeking to position assets in the adverse climate.
• Leveraging long-standing experience to invest and negotiate attractive opportunities despite challenges.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Third-party Assurance: Ernst & Young LLP

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Cuba ratified the Paris Agreement on Climate Change and committed to decarbonizing its economy by 2050; Cuba's 'Tarea Vida' plan includes measures to mitigate climate change impacts.

Social Achievements

• Cuba has one of the lowest homicide rates in the Western Hemisphere; Cuba's 2019 Constitution guarantees equal opportunities for women.

Governance Achievements

• The Company is a registered closed-ended collective investment scheme, complying with Guernsey regulations; The Board regularly reviews its own performance and the performance of the Investment Manager.

Climate Goals & Targets

Environmental Challenges

• The Covid-19 pandemic negatively impacted the global tourism industry and Cuba's economy, affecting the Company's assets; U.S. government restrictions on Cuba created challenges for operations and investment.
• Risks relating to the Company and its Investment Strategy; Joint Venture Risk; Real Estate Risk; Construction Risk; Tourism Risk; Valuation Risk; Dependence on Third Party Service Providers; Loss of Key Fund Personnel; Risks Relating to Investment in Cuba and the U.S. Embargo; Helms-Burton Risk; Liquidity and Transfer Risk; Currency Risk; Tax Risk.

Mitigation Strategies

• The Board discussed current issues with the Investment Manager to limit the impact of the pandemic; The Investment Manager actively manages the liquidity position of the Company, its subsidiaries and the joint ventures in which it invests so that cashflows are transferred to bank accounts outside of Cuba.
• The Company carried out extensive due diligence investigations to ensure compliance with U.S. legislation; The Investment Manager closely follows developments relating to the relationship between the United States and Cuba and monitors all new restrictions adopted by the United States to measure their possible impact on the assets of the Group.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Cuba committed to generate 24% of electricity from renewable sources by 2030, to avoid the emission of an estimated 30.6 million kilotons of carbon dioxide equivalent (ktCO2eq); increase energy efficiency in commercial, institutional, residential, and agriculture sectors, to avoid the emission of an estimated 700,000 ktCO2eq; reduce carbon-intensive ground transportation, to avoid the emission of an estimated one million ktCO2eq annually, by cutting fossil fuel consumption in vehicles by 50% by 2030; increase its forest coverage to 33%, or by 165,000 hectares, in the period 2019-2030, removing 169.9 million tons of atmospheric CO2; install 5,000 solar pumping systems by 2030 for livestock and irrigation; 100% treatment of waste waters in order to reduce an estimated 8 million ktCO2eq in emissions annually in the period 2020-2030.

Social Achievements

• Cuba opened its first two hotels that are specifically geared toward members of the LGBTQ+ community.
• In December 2021 a draft Family Code was presented for consultation that allows same-sex marriage and permits same-sex couples to adopt children.
• A draft Penal Code and Criminal Enforcement Law was presented that include provisions related to gender-based violence.

Governance Achievements

• The Board regularly reviews its own performance to ensure that it has the appropriate mix of relevant experience and skills to ensure the effective overall operation of the Company.
• The Board has established an Audit Committee, a Management Engagement Committee and a Nomination Committee.

Climate Goals & Targets

Environmental Challenges

• Covid-19 pandemic and its negative impact on the Cuban tourism sector and the Cuban economy
• Continuation under the Biden administration of President Trump’s intensified Cuba embargo policies
• Increased discount rates as a result of higher levels of perceived risk
• Liquidity issues faced by the country
• The Russian-Ukrainian conflict that erupted in February 2022 resulted in an abrupt halt in Russia and Ukraine tourism to the island.
• The continued high levels of tension between the United States and Cuba and the maintenance by the Biden administration of harsh U.S. sanctions imposed during the Trump administration
• Numerous transitional difficulties associated with the implementation of the currency reform measures

Mitigation Strategies

• The Investment Manager has closely followed all developments relating to the adoption and implementation of these new measures, and has communicated its views and interacted regularly at all appropriate levels in order to extend their application to the operations of the joint venture companies in which the Company has a participation.
• The Investment Manager actively monitors and manages the liquidity position of the Company, its subsidiaries and the joint ventures, in which it invests to the greatest extent possible so that cashflows of the Company are transferred to bank accounts outside Cuba.
• The operator of the Company’s tourism assets has refocused its marketing efforts to attract tourists from its historical principal tourist supplier (Canada) and other countries.
• The Board discusses current issues with the Investment Manager to limit the impact of the pandemic on the business of the Company.
• The Investment Manager closely follows developments relating to the relationship between the United States and Cuba and monitors all new restrictions adopted by the United States to measure their possible impact on the assets of the Group.
• The Group has adapted its investment model to the existing sanctions

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Climate Goals & Targets

Environmental Challenges

• Emerging Risks relating to the Cuban Financial System
• Currency Devaluation Risk
• General Liquidity of the Cuban Financial System and Repatriation Risk
• Risks relating to war in Ukraine
• Public Health Risk Global Pandemic Risk
• Risks Relating to the Company and its Investment Strategy
• Portfolio and Operational Risks
• Joint Venture Risk
• Real Estate Risk
• Construction Risk
• Tourism Risk
• Insurance Risk
• Valuation Risk
• Dependence on Third Party Service Providers
• Loss of Key Fund Personnel
• Risks Relating to Investment in Cuba and the U.S. Embargo
• General Economic, Political, Legal and Financial Environment within Cuba
• U.S. Government Restrictions relating to Cuba
• State Sponsor of Terrorism Designation
• Helms-Burton Risk
• Transfer Risk – U.S. Sanctions
• Currency Risk
• Risks relating to Regulatory and Tax Framework
• Tax Risk

Mitigation Strategies

• The Investment Manager has closely followed all developments relating to the adoption and implementation of these new measures and communicates its concerns and interacts regularly at all appropriate levels in order to extend their application to the operations of the joint venture companies in which the Company has a participation.
• The Investment Manager, together with its Cuban partners, seeks at all times to adapt operations and develop creative solutions to deal with the new circumstances created by the financial reforms being adopted.
• The cash and currency positions of each of the joint venture companies in which the Company has a participation are continuously monitored for the purpose of reducing currency risk to the greatest extent possible.
• The Investment Manager actively monitors and manages the liquidity position of the Company, its subsidiaries and the joint ventures in which it invests to the greatest extent possible so that cashflows of the Company are transferred to bank accounts outside Cuba.
• Wherever possible, in order to mitigate devaluation risk, the Investment Manager requires that the joint venture companies in which the Company has an interest declare and distribute dividends, on an interim basis, as frequently as possible.
• The Board discusses current issues with the Investment Manager to limit the impact of the Covid-19 pandemic on the business of the Company and recognises that the tourism sector is particularly affected by the various travel restrictions that have been imposed to fight the Covid-19 pandemic in numerous countries and that such restrictions may re-emerge in the future.
• The Company’s investment strategy and objective is subject to regular review to ensure that it remains attractive to investors.
• The Board sets, and monitors, its investment restrictions and guidelines, and receives regular reports which include performance reporting on the implementation of the investment policy, the investment process and application of the guidelines.
• Prior to entering into any agreement to acquire an investment, the Investment Manager will perform or procure the performance of due diligence on the proposed acquisition target.
• The Group tries to structure its equity investments in Cuban joint venture companies so as to include a viable exit strategy.
• The Investment Manager, or the members of the on-the-ground team, regularly attend the Board meetings of the joint venture companies through which Group interests are held, and actively manage relations with the management teams of each joint venture company, the relevant Cuban shareholders and relevant third parties to ensure that Group interests are enhanced.
• The Investment Manager regularly monitors the level of real estate risk in the Cuban market and reports to the Board at each meeting regarding recent developments.
• The Investment Manager works closely with the on-the-ground team, the external hotel managers and the joint venture managers to identify, monitor and actively manage local real estate risk.
• The Investment Manager regularly monitors all construction and refurbishment activities carried out within Group companies and works closely with the on-the-ground management team and the joint venture managers to identify, monitor and actively manage all construction risks.
• The Investment Manager regularly monitors the local and regional tourism markets and meets regularly with the external hotel management to identify, monitor and manage global and local tourism risk and to develop appropriate strategies for dealing with changing conditions.
• The Investment Manager regularly monitors the availability of local and international hard currency insurance coverage for the Cuban joint venture companies in which it has an interest.
• As part of the valuation process, the Investment Manager engages an independent third-party valuer to provide an independent valuation report on each of the indirectly owned real estate assets of the Group.
• The Board receives reports from its service providers on internal controls and risk management at each Board meeting.
• In order to mitigate key manager risk, the Investment Manager makes every effort to spread knowledge and experience of the Cuban market within the organisation so as to reduce reliance on a small team of individuals.
• The Company benefits from the services of its highly experienced on-the-ground management team consisting of eight members.
• The Investment Manager closely follows developments relating to the relationship between the United States and Cuba and monitors all new restrictions adopted by the United States to measure their possible impact on the assets of the Group.
• The Investment Manager follows all developments relating to the designation of Cuba as a state sponsor of terrorism and remains moderately optimistic that domestic and international pressure will lead to a reversal of this nakedly political designation in the coming period.
• At the time of acquiring each of its interests in Cuban joint venture companies, the Company carried out extensive due diligence investigations in order to ensure that no claims existed under applicable U.S. legislation, and in particular that there were no claims certified by the U.S. Foreign Claims Settlement Commission under its Cuba claims program with respect to any of the properties in which the Company acquired an interest.
• The Company does not carry out any international transfers in U.S. Dollars or through U.S. banks or intermediaries.
• The Investment Manager regularly reviews the tax rules that may affect the operations or investments of the Company and seeks to structure the activities of the Company in the most tax efficient manner possible.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Renewable Energy

Environmental Achievements

• Investment in solar panels at the Meliã Trinidad Península Hotel to limit its dependence on electricity from the national grid.

Social Achievements

• Not disclosed

Governance Achievements

• Internalisation of management, resulting in an annual cost saving of US$1.2 million per year.

Climate Goals & Targets

Environmental Challenges

• Continued economic and overall liquidity issues faced by Cuba, including high inflation (45%), shortages of critical products, and rolling power cuts.
• Difficulty in transferring dividends from Cuban joint ventures in hard currency due to monetary constraints.
• US sanctions against Cuba, including its designation as a State Sponsor of Terrorism, impeding access to standard international financial services.
• Slow recovery of Cuba's tourism sector.
• Complex monetary reforms in Cuba causing uncertainty and disruption.

Mitigation Strategies

• Ongoing discussions with Cuban counterparties to facilitate dividend payments.
• Internalisation of management to reduce costs.
• Development of new strategies to generate positive cash flow and increase asset value.
• Implementation of measures to improve the profitability of the Company's assets.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Null

Certifications: Null

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed