SFDR sustainability information

I. Integration of Sustainability Risks into the Investment Process (SFDR 3)

Introduction

Invest-NL Asset Management (Invest-NL AM) has the mission to mobilise risk capital for scalable, innovative companies that contribute to the transition to a CO2-neutral, circular, innovative economy and a healthy and resilient society. 

This policy of Invest-NL AM describes the strategy and the manner in which sustainability risks are integrated into the investment processes and procedures. Recognising, managing, and monitoring sustainability risks is an important part of the risk management process.

Invest-NL AM invests in private markets, meaning information about ESG risks and ESG integration is not always available or standardised. Additionally, investments are made across various strategies and companies at different stages of development. As a result, the financial impact of ESG considerations often only becomes material after the capital has been allocated. The sustainability risks are mapped out by the fund managers and provide Invest-NL AM with information about the guidelines and ESG integration and risks in the process. When selecting fund managers, Invest-NL AM always assesses their capacity and expertise to identify and mitigate sustainability risks.

Responsible Investment

Policy

In the investment process, the ESG policy is fully integrated, with ESG Due Diligence being a key component. Any shortcomings or missing elements in the fund manager’s policy are monitored, and where necessary, the manager is advised or supported. The manager complies with Invest-NL AM’s exclusion list and reports on topics including sustainability risks and impact indicators.

ESG Due Diligence within the Fund Selection Process

• The impact objectives of the fund
• The fund’s exposure to material ESG risks
• The approach of the fund manager regarding ESG
• ESG capacity and diversity within the fund management team

ESG Agreements with the Fund Manager

• Reporting requirements
• Compliance with international standards
• Activity-related and conduct-related exclusions

Dialogue with the Fund Manager

• Strengthening impact focus
• Improving ESG practices and ESG integration
• More transparency about impact objectives and realised impact
• A Theory of Change has been developed linking the fund’s activities to the intended social outcomes.

Reporting in accordance with SFDR Article 8

• DIGF promotes environmental and social characteristics through ESG-integrated investment decisions
• Sustainability factors are assessed at the time of investment and throughout the entire lifecycle of the investment

Strategy

The Fund invests in Venture Capital funds with groundbreaking technologies that contribute to creating value chains and ecosystems for a circular and future-proof economy, and to accelerating a healthy, resilient society. The Fund invests across several strategies related to four themes, all contributing to at least one of the Sustainable Development Goals (SDGs):

• Climate and Circular Economy
• Ecosystems and Environment
• Health and Well-being
• Innovation

Sustainability Risks Policy

Integration of sustainability risks into the investment process is an important part of risk management.  Invest-NL AM explicitly considers these risks with every investment to identify potential risks and estimate the possible negative financial consequences (financial materiality). Additionally, we assess the possible impact on society and the environment (impact materiality).

Do No Significant Harm (DNSH) Principle

We aim to prevent serious adverse effects in all our investments. This is integrated into our policy;

• Strict criteria are applied per theme in the due diligence process to ensure the DNSH principle;
• Exclusion criteria based on activity and behaviour are established for all investments in companies and funds;
• Engagement to encourage fund managers to improve policies, implementation, and/or governance structures.

Sustainability Risks

Invest-NL AM sees sustainability risks as an integral part of investment risks arising from Ecological, Social, or Governance topics. The (financial) materiality of these risks depends on, for example, the sector, the size of the investment, or the investment horizon.

Invest-NL AM distinguishes three topics when assessing sustainability risks;

Ecological risks: potential financial risks related to a company's activities connected to climate, environment, and/or surroundings. Examples include impact on climate change, water and land use, land and water pollution, biodiversity loss, and deforestation.

Social risks: risks associated with the interests, rights, and wellbeing of people. For example, the implementation of diversity and inclusion policies, attention to impacts on local communities, safe workplaces, healthy living and working environments, and respect for fundamental human rights.

Governance risks: concern practices of governance, leadership style, compensation, internal controls, tax avoidance, risk management, corruption, and implementation of an ESG policy. Good governance can positively influence financial results, and vice versa.

In the investment process, screening and qualitative and quantitative analysis during due diligence are integrated parts of risk management. Subsequently, an engagement plan is established for each fund and monitored at least annually for progress.

ESG Due Diligence

ESG analysis is an integral part of the investment process. First, it assesses whether the fund aligns with the strategy and sustainable principles of Invest-NL AM. 

Screening

Criteria are applied for all investments to exclude companies and funds that do not meet international standards such as the UN Global Compact, OECD Guidelines, and UN Guiding Principles on Business and Human Rights. The following exclusion criteria apply to all investments made by Invest-NL AM:

Activity-based exclusions:

• Weapons and Ammunition; The development, production, trade, or distribution of weapons or ammunition.
• Controversial Weapons; The provision of strategic parts or services for anti-personnel mines, cluster munitions, chemical weapons, nuclear weapons, biological weapons, or autonomous weapon systems targeting humans; The production, processing, supply, or storage of weapons-grade nuclear missile materials.
• Mining; Companies involved in exploration, mining, extraction, distribution, or refining of hard coal and lignite.
• Fossil Fuels; The traditional fossil fuel value chain, including exploration, transportation, distribution, refinery, storage, and electricity generation from fossil fuels, including companies deriving revenue from electricity generation with a GHG intensity of over 100g CO2e/kWh.
• Gambling; The development or offering of gambling products or services.
• Tobacco; and distilled alcohol The production, cultivation, and/or trade of tobacco and/or distilled alcoholic beverages and related products.
• Illicit Drugs; The production and/or trade of illegal narcotics.

Conduct-based exclusions:

• Non-Compliance with Global Norms; Companies found to violate the principles of the UN Global Compact, OECD Guidelines for Multinational Enterprises, and UN Guiding Principles on Business and Human Rights.
• Corruption and Money Laundering; Companies involved in corruption, money laundering, or terrorism financing; companies at increased risk of involvement in such practices due to their sector/activities, which fail to take adequate preventative measures.
• Tax Evasion; Companies whose actions are not aligned with applicable tax regulations or that engage in tax evasion or aggressive tax avoidance. 
• Human Rights Violations; Companies involved in or complicit with human rights violations in their own operations or supply chains; companies involved in or complicit with forced and/or child labour in their own operations or supply chains. 
• Animal Testing; Companies directly involved in animal testing unless they demonstrate strict adherence to the 3Rs (Replacement, Reduction, Refinement); Animal testing for non-medical purposes outside the agrifood-tech and biotech sectors is considered restricted. 
• Iresponsible Medical Companies; Companies with a history of socially irresponsible behaviour related to pricing and/or marketing of medical products or services, such as price fixing or anti-competitive practices; Cross-Border Waste Trade; companies engaging in cross-border trade in waste (or waste streams) that fail to comply with international standards.

The fund managers declare that all current and future underlying investments in the fund comply with these principles. Additionally, fund managers making investments aimed at contributing to a sustainable living environment and combating climate change are asked to specify the portion of their investments that meet the ‘substantial contribution’ criteria of the EU Taxonomy.

Qualitative Assessment

All fund managers are asked to prepare a Theory of Change illustrating how their investments in underlying companies contribute to solving a societal issue and how value is created.

The assessment framework used to evaluate fund managers includes how they assess their investments' exposure to sustainability risks. Invest-NL also evaluates the strategy of the fund manager regarding sustainability risks. This includes considering impact on people and the environment (impact materiality) as well as the financial impact of sustainability risks and opportunities (financial materiality) for the companies in the fund. Potential risks are identified, and measures taken by the fund manager to ensure ESG objectives and mitigate risks are reviewed. If the analysis indicates that the fund manager has not adequately integrated all risks, Invest-NL can establish additional (binding) agreements with the fund manager. 

Quantitative Assessment

Invest-NL AM invests through funds in various themes, each with sector-specific sustainability risks and impact metrics. The availability of data depends on the stage of the underlying companies and the sector in which investments are made. Whenever possible, relevant impact and ESG data will be requested from fund managers.

Engagement and Monitoring

Engagement is an important tool for Invest-NL AM to stimulate positive change and to monitor and manage ESG risks.

Through our investments, there is potential to promote ‘Good Practice’ in responsible business conduct, ESG management, and impact maximisation. By engaging in constructive dialogue with the fund manager, Invest-NL AM aims to help them better identify, understand, and manage ESG risks and opportunities.

Annual ESG monitoring occurs, during which ESG information is collected. If an action plan was developed based on a previous ESG assessment, progress is monitored and discussed with the fund manager or company.

Reporting

As a manager, Invest-NL AM reports to investors via an annual report that covers both financial results and developments related to sustainable factors of fund investments.

II. Considerations on Principal Adverse Impacts (art 4. SFDR)

The Dutch Impact Growth Fund (DIGF) of Invest-NL Asset Management is not yet invested at this moment. Therefore, it is not possible to report Principal Adverse Indicator’s (PAIs) as intended under the Sustainable Finance Disclosure Regulation (SFDR). Currently, PAI reporting is not applicable to our activities. 

We are monitoring developments in the SFDR and remain committed to operating and reporting transparently and responsibly.

III. Remuneration Policy Regarding the Integration of Sustainability Risks (art. 5 SFDR)

The remuneration policy of Invest-NL Asset Management aligns with that of Invest-NL. Invest-NL Asset Management has an independent obligation to comply with the legal remuneration requirements applicable to the management of the Dutch Impact Growth Fund.

The salary structure of Invest-NL is benchmarked against the median of the Financial Services market. Employees receive a fixed monthly salary which is not dependent on any specific target.

The remuneration policy of Invest-NL AM is in line with the requirements of the Sustainable Finance Disclosure Regulation (SFDR), which stipulates that the remuneration policy must contribute to responsible and sustainable risk management. Invest-NL AM exclusively applies a fixed remuneration structure, thereby avoiding performance-dependent incentives to take excessive sustainability and/or investment risks.

The Board of Directors (BoD) establishes the organisation’s remuneration policy, and the remuneration committee (of the Supervisory Board) determines the remuneration policy for the BoD.

IV. Fund Disclosures (Article 10 SFDR)

The key aspects of the sustainability information for the Dutch Impact Growth Fund. This overview complies with Articles 24-36 of the Delegated Regulation EU 2022/1288 (SFDR RTS).

Download the Dutch Impact Growth Fund disclosures here: [DOCUMENT TOEVOEGEN]

Summary

Product Name

Dutch Impact Growth Fund <legal entity>

No Sustainable Investment Objective

The Fund promotes ecological or social characteristics but does not have a sustainable investment objective. The Fund considers significant adverse effects on sustainability factors.

Ecological or Social Characteristics of the Product

The Fund invests in funds aligned with sustainable principles. The Ecological and/or Social characteristics are safeguarded through ESG integration, contribution to one or more of the SDGs (3,5,6,7,8,9,12,13,14,15), and the exclusion policy.

Investment Strategy

The Fund operates a Fund of Fund (FoF) strategy and invests in Dutch and European VC managers contributing to societal transition in Climate & Circular Economy, Ecosystems & Environment, Health & Well-being, and Innovations. Operational, investment, and ESG Due Diligence is always part of the FoF selection process.

Share of Investments

At least 80% of investments will fall into category #1 aligned with E/S characteristics. These investments do not consider the EU taxonomy criteria for sustainable economic activities.

Monitoring Ecological or Social Characteristics

The selected funds contribute to at least one of the SDGs (3,5,6,7,8,9,12,13,14,15), and ESG Due Diligence is part of the selection process. Progress towards the targeted characteristics is monitored at least once a year.

Methodology

Prior to investment, discussions are held with the fund manager regarding which relevant Ecological and Social impact KPIs are reported.

Data Sources and Processing

The primary source of information is data received from the companies, collected by the responsible fund manager. On a case-by-case basis, and as deemed necessary, Invest-NL may call upon external data sources to gain better insight into ESG performance.

Methodological Limitations

The Fund invests in private markets, meaning information about ESG risks and ESG integration is not always available or standardised. Additionally, investments are made across different strategies and companies in various stages of development. As a result, the financial materiality of ESG considerations may vary.

Due Diligence

Investments in the Fund undergo a due diligence process before and periodically afterwards to identify the actual and potential negative impacts of investments on sustainability factors. The aim is to prevent, mitigate, and report how the Fund manages identified risks.

Engagement Policy

The Manager engages with the fund manager, paying attention to strategy, corporate governance, and sustainability policies.

Benchmark

The Fund does not utilise a benchmark.