Mandatory disclosures under Regulation of the European Parliament and of the Council on sustainability-related disclosures in the financial services sector (EU) 2019/2088 (“SFDR”):
I. Sustainability risks
HV Capital Manager GmbH (“HV”, LEI: 529900N8P7FFJJ113Y02) 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. HV considers sustainability risks as part of its due diligence process prior to any investment. This also includes an assessment of sustainability risks. Such assessment is being conducted through an informal process as appropriate in light of the circumstances of the individual case. The results of such assessment are taken into account when the investment decision is being taken. However, HV remains free in its decision to refrain from investing or to invest despite sustainability risks in which case HV can also apply measures to reduce or mitigate any sustainability risks. At all times, HV will apply the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context.
II. No consideration of adverse impacts of investment decisions on sustainability factors
HV does not consider any adverse impacts of its investment decisions on sustainability factors and, hence, does not use the indicators listed in Annex I of the Regulatory Technical Standards (Delegated Regulation (EU) 2022/1288, “RTS”) to identify and assess potential adverse impacts. Sustainability factors are environmental, social and employee concerns, respect for human rights and the fight against corruption and bribery. Given that the SFDR, the Regulation (EU) 2020/852 (“Taxonomy”) and the accompanying RTS are relatively new legislative acts, there is very little or no practical experience or practice with regard to the application of their respective provisions. Therefore, substantial legal uncertainties would remain when applying those provisions to the strategies pursued by HV. Moreover, the Fund will only hold minority interests in its portfolio companies. Such minority interests are, however, generally not sufficient to encourage the Fund’s portfolio companies to collect and provide the relevant data. If and to the extent that the legal uncertainties will be resolved and a practicable market and administrative practice will evolve in this regard, HV will re-evaluate considering principal adverse impacts of its investment decisions in due course.
III. Remuneration disclosures
Although HV considers sustainability risks as part of its investment decision-making process, such risks are not integrated in HV’s remuneration policies.
IV. Sustainability-related disclosures
1. HV Capital Fund IX Growth GmbH & Co. geschlossene Investment KG
Financial product: HV Capital Fund IX Growth GmbH & Co. geschlossene Investment KG (the “Fund” / der “Fonds”) LEI: 529900QSUU4O7F85TM07
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 inclusion (positive screening) as well as exclusion (negative screening) aspects during the decision-making process. 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 HV for and on behalf of the Fund.
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 sowohl Inklusions- (positives Screening) als auch Exklusionsaspekte (negatives Screening) in seinen Entscheidungsprozess ein. Dabei betrachtet der Fonds mehrere ESG-Themen als Schlüssel für verantwortungsvolles Investieren. Die in diesem Abschnitt beschriebenen Handlungen und Entscheidungen erfolgen jeweils durch HV 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. Furthermore, whilst identifying suitable investment opportunities, the Fund takes into consideration certain ESG criteria such as the Guideline on EIF’s criteria for Climate Action and Environmental Sustainability (CA&ES) operations in EIF’s intermediated SME and mid-cap financing (April 2022) (the “CA&ES”) as well as diversity targets during the decision-making process.
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. The Fund will invest in new portfolio companies, i.e., portfolio companies where no other investment vehicle managed or advised by HV is already invested, as well as in existing portfolio companies, i.e., portfolio companies in which another investment vehicle managed or advised by HV is invested. It will target investments in the internet, technology, software mobile and digital media market with consumer internet, b2b, or digital content business models. The Fund intends to make its initial investments in the growth stage, i.e., series B and later stages.
As part of the investment strategy, the Fund also implements investment exclusions and has defined certain ESG criteria to be considered in the investment decision-making process, both laid down in the Fund’s limited partnership agreement.
The Fund is bound by the investment restrictions and limitations and shall procure that such requirements, restrictions and limitations are complied with at all times. It 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) 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) the production of and trade in tobacco and distilled alcoholic beverages and related products;
c) the financing of the 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) casinos and equivalent enterprises;
e) the research, development or technical applications relating to electronic data programs or solutions, which:
- aim specifically at: (i) supporting any activity referred to under no. 2 through no. 4; (ii) internet gambling and online casinos; or (iii) pornography; or
- are intended to enable to illegally (i) enter into electronic data net-works; or (ii) download electronic data;
f) fossil fuel-based energy production and related activities, as follows:
- coal mining, processing, transport and storage;
- oil exploration & production, refining, transport, distribution and storage;
- natural gas exploration & production, liquefaction, regasification, transport, distribution and storage; and
- 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;
g) energy-intensive and/or high CO2-emitting industries, as follows:
- manufacture of other inorganic basic chemicals (NACE 20.13);
- manufacture of other organic basic chemicals (NACE 20.14);
- manufacture of fertilizers and nitrogen compounds (NACE 20.15);
- manufacture of plastics in primary forms (NACE 20.16);
- manufacture of cement (NACE 23.51);
- manufacture of basic iron and steel and of ferro-alloys (NACE 24.10);
- manufacture of tubes, pipes, hollow profiles and related fittings, of steel (NACE 24.20);
- manufacture of other products of first processing of steel (NACE 24.30, incl. 24.31-24.34);
- aluminum production (NACE 24.42);
- manufacture of conventionally-fueled aircraft and related machinery (sub-activity of NACE 30.30); and
- conventionally-fueled air transport and airports and service activities incidental to conventionally-fueled air transportation (sub-activities of NACE 51.10, 51.21 and 52.23).
Furthermore, the Fund has bindingly set the following ESG criteria in its limited partnership agreement:
a) The Fund targets to invest at least 30 % of its aggregate invested capital at some point during the term of the Fund, but not before the end of the investment period, in companies which are classified as contributing to CA&ES objectives in accordance with the latest criteria as of the date of the limited partnership agreement.
b) The Fund aims to achieve at some point during the term of the Fund one-third (33%) female representation at senior management level across the portfolio.
Good governance practices are assessed through an informal process as appropriate in light of the circumstances of each individual case. 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 or social characteristics (i.e., its investment exclusions and ESG criteria). The Fund does not make and does not intend to make sustainable investments within the meaning of article 2 no. 17 SFDR or environmentally sustainable investments within the meaning of Art. 3 Taxonomy; hence, no portion of its investments will be aligned with the 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. In order to monitor the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions and ESG criteria), the Fund consults with the portfolio companies in regular intervals and will carry out further checks in order to identify potential issues with such characteristics. Moreover, the Fund obtains further information in quarterly reports from its portfolio companies. Therefore, the Fund monitors compliance with its environmental or social characteristics (i.e., its investment exclusions and ESG criteria) on an ongoing basis. External monitoring mechanisms are not in place.
Methodologies for environmental or social characteristics
The Fund applies qualitative and quantitative assessments with regard to its environmental or social characteristics (i.e., its investment exclusions and ESG criteria).
The Fund conducts an initial assessment of the promoted environmental or social characteristics in the course of its due diligence. During the holding period, the so conducted assessment forms the basis to measure and monitor if the characteristics are continuously being met.
Data sources and processing
In order to attain each of the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions and ESG criteria), a checklist is completed by the (potential) portfolio companies in the course of the due diligence conducted prior to each investment. The data collected is then assessed for quality and analyzed to be integrated into the investment decision-making process. Moreover, during the holding period, the portfolio companies provide the Fund with quarterly reports for monitoring purposes as well as improvement opportunities. Hence, data is obtained only from the (potential) portfolio companies. 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 checklist as part of the due diligence through the informal process carried out by the Fund is internally or externally verified 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 or social characteristics promoted by the Fund (i.e., its investment exclusions and ESG criteria). 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.
An initial assessment of how an investment relates to the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions and ESG criteria) is carried out as part of the due diligence process using the checklist through the informal process and taking into account the inherent ESG risk of the portfolio company. An enhanced analysis is carried out where required, depending on the (potential) portfolio company’s risk profile and its stage. As a rule, at least 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 be carried out if misrepresentations are suspected.
Engagement forms part of the environmental or social investment strategy of the Fund. The Fund intends to engage in managing ESG across its portfolio companies, e.g., through an ESG onboarding process followed by regular, customized conversations around material ESG topics.
Designated reference benchmark
No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by the Fund.
2. HV Capital Fund IX Ventures GmbH & Co. geschlossene Investment KG
Financial product: HV Capital Fund IX Ventures GmbH & Co. geschlossene Investment KG (the “Fund”) LEI: 529900R9FDWJYVEX2B57
The disclosures relating to HV Capital Fund IX Growth GmbH & Co. geschlossene Investment KG apply accordingly to HV Capital Fund IX Ventures GmbH & Co. geschlossene Investment KG with the exception that the investment strategy of the latter may be summarized as being targeted at new portfolio companies, i.e., portfolio companies where no other investment vehicle managed or advised by HV is already invested. The Fund intends to make its initial investments in the early stage, i.e., angel, seed and series A.