Sustainability Risks
Sustainability-related disclosures pursuant to Regulation (EU) 2019/2088 (“SFDR”)
Date of publication: 08 August 2022
Date of update: 30th June 2023 (disclosure of data on the consideration of principal adverse impacts, implementation of recent legislative and regulatory developments as well as editorial amendments)
I. Sustainability risks
Speedinvest GmbH (“Speedinvest”, LEI: 984500A1L4B81ABB7772) considers sustainability risks as part of its investment decision-making process. Sustainability risks are environmental, social or governance events or conditions, the occurrence of which could have an actual or potential material adverse effect on the value of the investment. Speedinvest considers sustainability risks as part of the due diligence process prior to any investment. This also includes an assessment of sustainability risks. Such assessment is being conducted using a questionnaire. The results of such assessment are considered when the investment decision is being taken. However, Speedinvest remains free in its decision to refrain from investing or to invest despite sustainability risks, in which case Speedinvest can also apply measures to reduce or mitigate any sustainability risks. At all times, Speedinvest will apply the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context.
II. Statement on principal adverse impacts of investment decisions on sustainability factors
Summary
Speedinvest considers principal adverse impacts of its investment decisions on sustainability factors. Sustainability factors include environmental, social and employee concerns, respect for human rights and the fight against corruption and bribery. The present statement is the first consolidated statement on principal adverse impacts on sustainability factors of Speedinvest for the following financial products:
▪ Speedinvest III EuVECA GmbH; Co. KG,
▪ Speedinvest II Co-Invest EuVECA GmbH; Co. KG,
▪ Speedinvest X II EuVECA GmbH; Co. KG,
▪ Speedinvest Industry & Climate Opportunity EuVECA GmbH; Co. KG,
▪ Speedinvest Opportunity I EuVECA GmbH; Co. KG, and
▪ Speedinvest IV EuVECA GmbH; Co. KG.
This statement on principal adverse impacts on sustainability factors covers the reference period from January 1, 2022 to December 31, 2022.
Speedinvest applied a pre-defined set of sustainability indicators at portfolio company level. This contained the mandatory indicators as set forth in no. 1 to 14 of Table 1 of Annex I of the Regulatory Technical Standards (Delegated Regulation (EU) 2022/1288, “RTS”) as well as the indicators no. 4 of Table 2 and no. 5 of Table 3 of Annex I. At all times, Speedinvest applied the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context. For the data we were able to collect and monitor, we identified the following risk areas for improvement, please find the action items and targets indicated in the PAI table below:
1. Share of non-renewable energy consumption and production was high. This was mostly due to companies not tracking this metric and therefore we conservatively assumed that in this instance the energy consumed was non-renewable.
2. Lack of processes and compliance mechanisms to monitor compliance with UN Global Compact principles and OECD Guidelines for Multinational Enterprises. This was mostly due to companies not tracking this metric and therefore we conservatively assumed that in this instance they did not have these processes in place.
3. Unadjusted gender pay gap.
4. Board gender diversity.
5. Investments in companies without carbon emission reduction initiatives.
6. Lack of grievance/complaints handling mechanism related to employee matters.
Zusammenfassung
Speedinvest berücksichtigt die wichtigsten nachteiligen Auswirkungen der Investitionsentscheidungen auf Nachhaltigkeitsfaktoren. Zu den Nachhaltigkeitsfaktoren gehören Umwelt-, Sozial- und Arbeitnehmerbelange, Achtung der Menschenrechte und die Bekämpfung von Korruption und Bestechung.
Bei der vorliegenden Erklärung handelt es sich um die erste konsolidierte Erklärung zu den wichtigsten nachteiligen Auswirkungen auf die Nachhaltigkeitsfaktoren von Speedinvest für die folgenden Finanzprodukte:
▪ Speedinvest III EuVECA GmbH; Co. KG,
▪ Speedinvest II Co-Invest EuVECA GmbH; Co. KG,
▪ Speedinvest X II EuVECA GmbH; Co. KG,
▪ Speedinvest Industry & Climate Opportunity EuVECA GmbH; Co. KG,
▪ Speedinvest Opportunity I EuVECA GmbH; Co. KG, und
▪ Speedinvest IV EuVECA GmbH; Co. KG.
Diese Erklärung zu den wichtigsten nachteiligen Auswirkungen auf die Nachhaltigkeitsfaktoren bezieht sich auf den Bezugszeitraum vom 1. Januar 2022 bis zum 31. Dezember 2022. Speedinvest hat eine Reihe vorgegebener Nachhaltigkeitsindikatoren auf Ebene der Portfoliounternehmen angewendet. Diese enthielten die verpflichtenden Indikatoren gemäß Nr. 1 bis 14 der Tabelle 1 von Anhang I der Regulatory Technical Standards (Delegierte Verordnung (EU) 2022/1288, “RTS”) sowie die Indikatoren Nr. 4 der Tabelle 2 und Nr. 5 der Tabelle 3 von Anhang I. Speedinvest hat stets den Grundsatz der Verhältnismäßigkeit angewendet und sowohl die strategische Bedeutung einer Investition als auch ihren Transaktionskontext berücksichtigt. Bei den Daten. Für die Daten, die wir sammeln und überwachen konnten, haben wir die folgenden verbesserungswürdigen Risikobereiche identifiziert. Die entsprechenden Maßnahmen und Ziele finden Sie in der nachstehenden PAI-Tabelle:
1. Der Anteil des Verbrauchs und der Produktion von nicht-erneuerbarer Energie war hoch. Dies lag vor allem daran, dass die Unternehmen diese Kennzahl nicht erfassten und wir daher vorsichtigerweise davon ausgingen, dass die verbrauchte Energie in diesem Fall nicht erneuerbar war.
2. Fehlende Prozesse und Compliance-Mechanismen zur Überwachung der Einhaltung der Prinzipien des UN Global Compact und der OECD-Leitsätze für multinationale Unternehmen. Dies war vor allem darauf zurückzuführen, dass die Unternehmen diese Kennzahl nicht erfassten. Daher haben wir vorsichtigerweise angenommen, dass sie in diesem Fall nicht über diese Prozesse verfügten.
3. Unbereinigtes geschlechtsspezifisches Lohngefälle.
4. Geschlechtervielfalt im Vorstand.
5. Investitionen in Unternehmen ohne Initiativen zur Reduzierung der Kohlenstoffemissionen.
6. Fehlender Mechanismus zur Bearbeitung von Beschwerden im Zusammenhang mit Mitarbeiterangelegenheiten.
Description of the principal adverse impacts on sustainability factors
Description of policies to identify and prioritise principal adverse impacts on sustainability factors
Speedinvest has implemented certain policies to identify and prioritise principal adverse impacts on sustainability factors. These policies have been approved by the governing body of Speedinvest in May 2021. The responsibility for their implementation and application has been allocated to the ESG Steering Committee of Speedinvest.
The indicators as set forth above in no. 1 to 14. are mandatory according to the RTS. All other indicators were chosen due to the fact that they are important at an early stage for companies to grow sustainably.
Prior to any investment, Speedinvest conducts a due diligence. Part of this due diligence includes checking whether the investment could have an adverse impact on sustainability factors. This check is performed by using a checklist which, inter alia, includes the adverse sustainability indicators considered by Speedinvest at portfolio level (see above).
After an investment, i.e., during the holding period, Speedinvest checks for adverse impacts on sustainability factors in regular intervals. The relevant data is collected from the portfolio companies by using the table above. At the end of each reference period, Speedinvest aggregates the relevant data. When assessing principal adverse impacts, Speedinvest prioritises the adverse impacts by taking into account the probability of occurrence and the severity of
those impacts.
Information relating to any of the indicators used is primarily obtained from the portfolio companies. However, if information is not readily available, Speedinvest will use its best efforts to obtain the information by carrying out additional research, cooperating with third party data providers or external experts or making reasonable assumptions. Thus, errors cannot be excluded completely. Yet, Speedinvest will always endeavour to identify such errors or inaccuracies and to intervene as appropriate.
The so described policies will be re-evaluated on a regular basis, i.e., semi-annually, in particular to reflect any legal or regulatory changes as well as data availability and further developments in the market. Hence, in the future, Speedinvest may also use other indicators to identify and assess additional principal adverse impacts.
Engagement policies
Speedinvest established an engagement policy to reduce the (principal) adverse impacts assessed through the indicators set forth in the table above in accordance with its set targets: Speedinvest will engage with its portfolio companies and organize, for instance, onboarding sessions and individual trainings for the respective portfolio companies to support them in avoiding or mitigating principal adverse impacts. Where there is no reduction of principal adverse impacts over more than one period, Speedinvest will work more closely with the company in order to understand the reasons which cause principal adverse impacts and to ensure to mitigate such impacts.
References to international standards
Speedinvest is a signatory of the United Nations Principles for Responsible Investment (PRI) and, thus, committed itself to adopting and implementing the six core principles. Speedinvest has, as of today, not committed to comply with the objectives of the Paris Agreement. Speedinvest does not yet use a forward-looking climate scenario because of a lack of data. This however could change in the future once more data becomes available.
III. Remuneration disclosures
As a manager of a qualifying venture capital fund as defined in Art. 3 (b) of Regulation (EU) No.345/2013 (“EuVECA-Regulation”), Speedinvest does not have and does not need to have a remuneration guideline or policy in accordance with the requirements of the EuVECA Regulation.
IV. Sustainability-related disclosures
1. Speedinvest III EuVECA GmbH & Co. KG
Financial product: Speedinvest III EuVECA GmbH & Co. KG (the “Fund” / der “Fonds”)
Summary
The Fund considers certain environmental and/or social characteristics as part of its investment decisions and monitoring processes but does not seek to make sustainable investments as defined in the SFDR. The consideration of environmental and/or social characteristics is carried out both before and after an investment. For this purpose, information is initially and regularly obtained from the portfolio companies by means of qualitative queries. The Fund incorporates exclusion (negative screening) aspects during the decision-making process and considers principal adverse impacts of its investment decisions on sustainability factors. Thereby the Fund considers several ESG themes to be the key to responsible investing. The actions and decisions described in the following section are each made by Speedinvest for and on behalf of the Fund.
Zusammenfassung
Der Fonds berücksichtigt bestimmte ökologische und/oder soziale Merkmale im Rahmen seiner Investitionsentscheidungen und Monitoring-Prozesse, strebt aber keine nachhaltigen Investitionen im Sinne der SFDR an. Die Berücksichtigung von Umwelt- und/oder Sozialmerkmalen erfolgt sowohl vor als auch nach einer Investition. Zu diesem Zweck werden zunächst und regelmäßig Informationen von den Portfoliounternehmen durch qualitative Abfragen eingeholt. Der Fonds bezieht Exklusionsaspekte (negatives Screening) in seinen Entscheidungsprozess ein und berücksichtigt nachteilige Auswirkungen seiner Investitionsentscheidungen auf Nachhaltigkeitsfaktoren. Dabei betrachtet der Fonds mehrere ESG-Themen als Schlüssel für verantwortungsvolles Investieren. Die in diesem Abschnitt beschriebenen Handlungen und Entscheidungen erfolgen jeweils durch Speedinvest für den Fonds.
No sustainable investment objective
The Fund promotes environmental or social characteristics, but does not have as its objective sustainable investment.
Environmental or social characteristics of the financial product
The Fund promotes environmental and/or social characteristics by implementing certain investment exclusions (see section ‘Investment strategy’) during the decision-making process and by considering principal adverse impacts of its investment decisions on sustainability factors.
Investment strategy
The purpose of the Fund is to build, hold and manage (including to divest) a portfolio of equity and equity-related investments in portfolio companies. Thereby, the Fund invests in early stage, i.e. pre-seed, seed and series A rounds, portfolio companies from all sectors with innovation capacity and growth potential with a focus on investments in emerging technologies.
The Fund is bound by the investment restrictions and limitations set out in the Fund’s limited partnership agreement and shall procure that such requirements, restrictions and limitations are complied with at all times. In particular, the Fund will screen each investment opportunity against its investment exclusions and no investments will be made in the area of such exclusions.
The Fund shall not invest, guarantee or otherwise provide financial or other support, directly or indirectly, to companies, including portfolio companies, or other entities whose business activity consists of:
(a) Illegal economic activity: An illegal economic activity (i.e., any production, trade or other activity, which is illegal under the laws or regulations applicable to the Fund or the relevant portfolio company, including without limitation, human cloning for reproduction purposes);
(b) Tobacco and distilled alcohol: The production of, and trade in, tobacco, vaping products, e-cigarettes and distilled alcoholic beverages and related products;
(c) Weapons and ammunition: The financing and production of, and trade in, weapons and ammunition of any kind, it being understood that this restriction does not apply to the extent such activities are part of or accessory to explicit European Union policies;
(d) Gaming: Casinos and equivalent enterprises;
(e) Specific electronic data programs or solutions: The research, development or technical applications relating to electronic data programs or solutions, which:
(aa) aim specifically at: (i) supporting any activity referred to under lit (a) through (d), (ii) internet gambling and online casinos; or (iii) pornography; or
(bb) are intended to enable to illegally (i) enter into electronic data networks; or (ii)download electronic data.
Good governance practices are assessed through a checklist as part of every due diligence process prior to any investment made by the Fund. Such practices include, in particular, sound management structures, employee relations, remuneration of staff and tax compliance within the portfolio companies. Moreover, the Fund will conduct regular monitoring of the good governance practices in its portfolio companies during the holding period. If the Fund becomes aware of severe governance issues, it will investigate them and work with all parties involved to find an appropriate solution.
Proportion of investments
The Fund will invest fully in line with its investment strategy and investment restrictions, i.e., will only make investments which are aligned with its environmental and/or social characteristics. The Fund does not make and does not intend to make sustainable investments within the meaning of Art. 2 No. 17 SFDR or environmentally sustainable investments within the meaning of Art. 3 of Regulation (EU) 2020/852 (“EU Taxonomy”); hence, no portion of its investments will be aligned with the EU Taxonomy.
Monitoring of environmental or social characteristics
The Fund has an increased awareness on the impact of environmental or social characteristics on risk management and thus on the value potential of investments. Prior to making an investment, the Fund provides its portfolio companies with a questionnaire to assess the attainment of its investment exclusions. During the holding period, the Fund uses the sustainability indicator ‘no investments in areas of investment exclusions’ to measure their attainment on a continous basis.
For this purpose, the Fund provides its portfolio companies annually with a questionnaire and will carry out further checks in order to identify potential issues with such characteristics. Further, the Fund uses the adverse sustainability indicators for the consideration of principal adverse impacts listed in the table above (see section ‘Statement on principal adverse impacts of investment decisions on sustainability factors’) and collects the relevant data from its portfolio companies before an investment and on a regular basis.
Moreover, the Fund will apply best efforts when negotiating an investment into a portfolio company to reach a side letter agreement requiring the portfolio company to notify the Fund in writing on an ad hoc basis if any ESG-related controversies become apparent and will immediately review all information so provided.
Therefore, the Fund monitors compliance with its environmental and/or social characteristics on an ongoing basis. External monitoring mechanisms are not in place.
Methodologies for environmental or social characteristics
The Fund applies qualitative assessments with regard to its environmental and/or social characteristics. The Fund conducts an initial assessment of the promoted environmental or social characteristics through a questionnaire in the course of its due diligence process prior to any investment. Based on the results of such assessment, the Fund identifies whether the environmental and/or social characteristics promoted by the Fund are met.
During the holding period, the Fund monitors and consults with its portfolio companies on a regular basis in order to assess whether said characteristics are continuously met. Further, the Fund applies best efforts when negotiating an investment into a portfolio company to reach a side letter agreement requiring the portfolio company to notify the Fund in writing on an ad hoc basis if any ESG-related controversies become apparent. In such case, the Fund
immediately reviews all information provided by the portfolio companies and determines at its sole discretion whether any actions need to be taken to address potential or existing adverse effects.
Data sources and processing
In order to attain each of the environmental and/or social characteristics promoted by the Fund, a questionnaire is completed by the (potential) portfolio companies in the course of the due diligence process prior to any investment as well as on an annual basis during the holding period. In addition, the portfolio companies shall notify the Fund in writing on an ad hoc basis if any ESG-related controversies become apparent. Hence, data is obtained only from the (potential) portfolio companies and no (proportion of) data is estimated or supplemented by information publicly available. An internal or external review or verification of the information obtained will be carried out if misrepresentations are suspected.
Limitations to methodologies and data
The information collected from the (potential) portfolio companies via the questionnaire as part of the due diligence and monitoring processes by the Fund is internally or externally verified only if and to the extent misrepresentations are suspected. Thus, it cannot be ruled out completely that false information may remain undetected in certain cases. As the Fund’s investments are made for several years, the Fund considers it a priority to establish and maintain a trustful working relationship with its portfolio companies in order to ensure compliance with the environmental and/or social characteristics promoted by the Fund. Further limitations, in particular with regard to the accuracy of the data and reliability of the data sources used, are not apparent at this time.
Due diligence
An initial assessment of how an investment relates to the environmental and/or social characteristics promoted by the Fund is carried out as part of the due diligence process using a questionnaire and, where required based on the inherent ESG risk of the portfolio company, through an enhanced analysis. As a rule, purely qualitative statements of an environmental or social nature or relating to corporate governance are requested from the portfolio companies and then taken into account in the investment decision-making process. An internal or external review or verification of the information obtained will only be carried out if misrepresentations are suspected.
Engagement policies
Engagement forms part of the environmental or social investment strategy of the Fund. The Fund will engage with its portfolio companies should principal adverse impacts become apparent (see section ‘Statement on principal adverse impacts of investment decisions on sustainability factors’). Further, should the Fund determine any potential issues relating to its environmental and/or social characteristics or other ESG-related controversies in its portfolio companies, the Fund will engage the portfolio companies’ management in discussions (e.g., in board meetings) in order to resolve, reduce or mitigate any adverse effects. Yet, it remains at the sole discretion of the Fund to determine which efforts are appropriate and proportionate in light of the size and strategic importance of the respective investment in the portfolio company as well as the bargaining positions and the transactional context.
Designated reference benchmark
No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by the Fund.
2. Speedinvest II Co-Invest EuVECA GmbH & Co. KG
The sustainability-related disclosures relating to Speedinvest III EuVECA GmbH; Co. KG apply accordingly to Speedinvest II Co-Invest EuVECA GmbH; Co. KG with the exception that the investment strategy of Speedinvest II Co-Invest EuVECA GmbH; Co. KG differs from that of Speedinvest III EuVECA GmbH; Co. KG and that the investment exclusions do not include tobacco and distilled alcohol. The investment strategy of Speedinvest II Co-Invest EuVECA GmbH; Co. KG may be summarized as being targeted at growth stage investments alongside Speedinvest II EuVECA GmbH; Co. KG.
3. Speedinvest X II EuVECA GmbH & Co. KG
The sustainability-related disclosures relating to Speedinvest III EuVECA GmbH; Co. KG apply accordingly to Speedinvest X II GmbH; Co. KG with the exception that the investment strategy of Speedinvest X II GmbH; Co. KG differs from that of Speedinvest III EuVECA GmbH; Co. KG. The investment strategy of Speedinvest X II EuVECA GmbH; Co. KG may be summarized as being targeted at investments in European portfolio companies pursuing digital business models.
4. Speedinvest Industry & Climate Opportunity EuVECA GmbH & Co. KG
The sustainability-related disclosures relating to Speedinvest III EuVECA GmbH; Co. KG apply accordingly to Speedinvest Industry; Climate Opportunity EuVECA GmbH; Co KG with the exception that the investment strategy of Speedinvest Industry; Climate Opportunity EuVECA GmbH; Co KG differs from that of Speedinvest III EuVECA GmbH; Co. KG. The investment strategy of Speedinvest Industry; Climate Opportunity EuVECA GmbH; Co KG may be summarized as being targeted at investments in European climate and industrial technology-focused portfolio companies.
5. SpeedinvestOpportunity I EuVECA GmbH & Co. KG
The sustainability-related disclosures relating to Speedinvest III EuVECA GmbH; Co. KG apply accordingly to Speedinvest Opportunity I EuVECA GmbH; Co KG with the exception that the investment strategy of Speedinvest Opportunity I EuVECA GmbH; Co KG differs from that of Speedinvest III EuVECA GmbH; Co. KG. The investment strategy of Speedinvest Opportunity I EuVECA GmbH; Co KG may be summarized as being targeted at investments in European technology-focused portfolio companies in the growth stage. Further to the investment exclusions applicable to Speedinvest III EuVECA GmbH; Co. KG, Speedinvest Opportunity I EuVECA GmbH; Co. KG shall not invest, guarantee or otherwise provide financial or other support, directly or indirectly, to portfolio companies or other entities which substantially focus on:
(a) Fossil fuel-based energy production and related activities, as follows:
(aa) Coal mining, processing, transport and storage;
(bb) Oil exploration & production, refining, transport, distribution and storage;
(cc) Natural gas exploration & production, liquefaction, regasification, transport, distribution and storage; and
(dd) Electric power generation exceeding the Emissions Performance Standard (i.e., 250 grams of CO2e per kWh of electricity), applicable to fossil fuel-fired power and cogeneration plants, geothermal and hydropower plants with large reservoirs;
(b) Energy-intensive and/or high CO2-emitting industries, as follows:
(aa) Manufacture of other inorganic basic chemicals (NACE20.13);
(bb) Manufacture of other organic basic chemicals (NACE20.14);
(cc) Manufacture of fertilizers and nitrogen compounds(NACE 20.15);
(dd) Manufacture of plastics in primary forms (NACE 20.16);
(ee) Manufacture of cement (NACE 23.51);
(ff) Manufacture of basic iron and steel and ferro-alloys (NACE 24.10);
(gg) Manufacture of tubes, pipes, hollow profiles and related fittings, of steel (NACE 24.20);
(hh) Manufacture of other products of first processing of steel( NACE 24.30, incl. 24.31-24.34);
(ii) Aluminium production (NACE 24.42);
(jj) Manufacture of conventionally-fueled aircraft and related machinery (sub-activity of NACE 30.30); and
(kk) Conventionally-fueled air transport and airports and service activities incidental to conventionally-fueled air transportation(sub-activities of NACE 51.10, 51.21and 52.23)
Investments in sectors mentioned under lit. (b) above shall, however, be allowed if the specific final recipient transaction either (i) qualifies as environmentally sustainable investment as defined in the EU Taxonomy, as amended from time to time and as supplemented by the Commission Delegated Regulation (EU) 2021/2139 or further delegated regulations associated therewith, as amended from time to time, or (ii) is eligible under the European Investment Fund’s (EIF) Climate Action; Environmental Sustainability (CA;ES) objectives in accordance with the latest criteria as published on EIF’s website as of the date of the investment.
6. Speedinvest IV EuVECA GmbH & Co. KG
The sustainability-related disclosures relating to Speedinvest III EuVECA GmbH; Co. KG apply accordingly to Speedinvest IV EuVECA GmbH; Co KG. Further, Speedinvest IV EuVECA GmbH; Co. KG is bound by the additional investment exclusions applicable to Speedinvest Opportunity I EuVECA GmbH; Co. KG as well.
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