Sustainability-related disclosures pursuant to Regulation (EU) 2019/2088 (“SFDR”)
Date of publicaton: May 31, 2023
I. Art. 3 SFDR – Sustainability risks
Signals Venture Capital Management GmbH (“SVC”, LEI: 984500B8107E7DEC5886) 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. SVC 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, SVC remains free in its decision to refrain from investing or to invest despite sustainability risks in which case SVC can also apply measures to reduce or mitigate any sustainability risks. At all times, SVC will apply the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context.
I. Art. 4 SFDR – No consideration of adverse impacts of investment decisions on sustainability factors
SVC 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 (C(2022) 1931 final, “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 Regulation (EU) 2019/2088 (“SFDR”) and Regulation (EU) 2020/852 (“Taxonomy”) are relatively new legislative acts and that the accompanying RTS are not even applicable yet, 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 SVC. What is more, 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, SVC will re-evaluate considering principal adverse impacts of its investment decisions in due course.
I. Art. 5 SFDR – Remuneration disclosure
As a registered alternative investment fund manager within the meaning of section 2 (4) of the German Investment Code (Kapitalanlagegesetzbuch, “KAGB”), SVC does not have, and does not need to have, a remuneration guideline or policy in accordance with the requirements of the KAGB. Sustainability risks are not considered with respect to the determination of the remuneration.
I. Art. 10, 8 SFDR – Sustainability-related disclosures
Financial product: Signals Venture Capital II GmbH & Co. KG (the “Fund” / der “Fonds”)
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. The actions and decisions described in the following section are each made by SVC 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 Exklusionsaspekte (negatives Screening) in seinen Entscheidungsprozess ein. Die in diesem Abschnitt beschriebenen Handlungen und Entscheidungen erfolgen jeweils durch SVC 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 environmental and/or social characteristics promoted by the Fund are its investment exclusions (see section ‘Investment strategy’ below).
The Fund will initially invest in early stage companies i.e., pre-Seed, Seed and Series A rounds (including late seed rounds) with an investment focus on B2B enterprise technology and B2B industrial technology companies.
The Fund’s ESG approach (i.e., its investment exclusions) comprises part of its investment strategy, which is consistently applied for every portfolio company investment. 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:
⦁ Performing research and innovation activities considered as illegal according to the applicable legislation in the country of the portfolio company;
⦁ Any 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);
⦁ The production of, and trade in, tobacco, distilled alcoholic beverages, other non-alcoholic recreational drugs and related products;
⦁ The financing and production of, and trade in, weapons and ammunition of any kind;
⦁ Oil and gas or metals and mining exploration, extraction or operations;
⦁ Retail banking;
⦁ The research, development or technical applications relating to electronic data programs or solutions, which are intended to enable to illegally (i) enter into electronic data networks; or (ii) download electronic data.
Good governance practices are assessed through an informal process as appropriate in light of the circumstances of each individual case 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 during the term of the Fund.
Proportion of investments
The Fund invests fully in line with its investment strategy and investment restrictions. The Fund does not intend to make any investments which are not aligned with its environmental or social characteristics (i.e., its investment exclusions). The Fund does not make and does not intend to make sustainable investments within the meaning of Art. 2(17) SFDR or environmentally sustainable investments within the meaning of Art. 2 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 of the impact of sustainability risks on risk management and thus on the value potential of investments. In order to monitor its environmental or social characteristics (i.e., its investment exclusions), the Fund consults with its portfolio companies on an ad-hoc basis and will carry out further checks if there are indications of potential issues with the Fund’s exclusion criteria. External monitoring mechanisms are not provided. There are currently no sustainability indicators used to measure the attainment of each of the environmental or social characteristics promoted by the Fund that could be monitored.
Methodologies for environmental or social characteristics
Currently the Fund applies qualitative assessments with regard to environmental or social characteristics (i.e., its investment exclusions). The Fund conducts its initial assessment in the course of its due diligence. The Fund’s due diligence is conducted through an informal process as appropriate in light of the circumstances of each individual case.
Data sources and processing
In order to attain each of the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions), a checklist is completed by the (potential) portfolio companies. The results of the checklist are considered in the investment decision. Data is obtained only from the (potential) portfolio companies. An external review or verification of the information obtained will only be carried out if misrepresentations are suspected.
Limitations to methodologies and data
The information collected from the (potential) portfolio companies through an informal process as appropriate in light of the circumstances of each individual case as part of the due diligence on behalf of the Fund is 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 the Fund’s portfolio companies in order to ensure compliance with the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions).
An initial assessment of how an investment relates to the aforementioned characteristics is carried out as part of the due diligence process through an informal process as appropriate in light of the circumstances of each individual case. 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. Internal and external reviews or verifications of the information obtained will only be carried out if misrepresentations are suspected.
Engagement is not part of the environmental or social investment strategy of the Fund. However, the Fund may include risk mitigation measures where appropriate.
Designated reference benchmark
No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by the Fund.