Sustainability-Related Disclosures
This disclosure ensures compliance with the Sustainable Finance Disclosure Regulation (SFDR 2019/2088 and 2022/1288).
As these regulations have not yet been fully consolidated, the first part of this disclosure addresses SFDR 2019/2088 and the second part SFDR 2022/1288.
SFDR Statement (2019/2088)
The following disclosure relates to Vanagon Ventures Management GmbH (LEI: 984500D3945760C48F31):
This statement includes three sections:
- Transparency of sustainability risk policies (2019/2088 – 3-1)
- Transparency of adverse sustainability impacts (2019/2088 – 4-1-b)
- Transparency of remuneration policies in relation to the integration of sustainability risks (2019/2088 – 5)
1. Transparency of Sustainability Risk Policies
Vanagon Ventures Management GmbH (“Vanagon”) 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.
Vanagon considers sustainability risks as part of the due diligence process before any investment. This also includes an assessment of sustainability risks. Such assessment is being done through an informal process as appropriate in light of the circumstances of the individual case. The results of such assessment are considered when the investment decision is being taken.
However, Vanagon remains free in its decision to refrain from investing or to invest despite sustainability risks, in which case Vanagon can also apply measures to reduce or mitigate any sustainability risks. At all times, Vanagon will apply the principle of proportionality, taking due account the strategic relevance of an investment and its transactional context.
2. Transparency of Adverse Sustainability Impacts
Vanagon considers adverse impacts of its investment decisions on sustainability factors and will report on them. Sustainability factors are environmental, social, and employee concerns, respect for human rights, and the fight against corruption and bribery.
Given that the Sustainable Finance Disclosure Regulation (EU 2019/2088) (EU 2022/1288) ("SFDR") and the accompanying Regulatory Technical Standards ("RTS") are new legislative acts, there is very little or no practical experience or practice concerning the application of their respective provisions. Therefore, substantial legal uncertainties would remain when applying those provisions to the strategies pursued by Vanagon.
3. Transparency of Remuneration Policies in Relation to the Integration of Sustainability Risks
As a registered alternative investment fund manager within the meaning of section 2(4) of the KAGB, Vanagon is not required to have a remuneration guideline or policy under the requirements of the KAGB.
This exemption, however, does not affect our commitment to a fair and transparent remuneration policy. Our approach to compensation is rooted in principles of equity and fairness. We ensure that pay decisions are free from bias and based on objective factors such as job responsibilities, experience, performance, and market competitiveness. Our remuneration process is transparent, clearly communicating how pay levels and adjustments are determined, with regular benchmarks against local standards to ensure market competitiveness.
Additionally, we are fully compliant with relevant wage and labor laws, including the principles of minimum wage, overtime pay, and equal pay for equal work as outlined in Article 157 of the Treaty on the Functioning of the European Union.
While sustainability risks are not currently a factor in determining remuneration, our overall policy is designed to attract and retain talent while adhering to our core values of fairness and regulatory compliance.
SFDR Statement (2022/1288)
The following disclosure relates to Vanagon Ventures Fund I GmbH & Co. KG (LEI: 98450074BD01B093FD08):
Statement of Principal Adverse Impacts on Investment Decisions on Sustainability Factors
Vanagon Ventures Management GmbH considers principal adverse impacts (‘PAI’) of its investment decisions on sustainability factors. The present statement is the consolidated statement on principal adverse impacts on sustainability factors of Vanagon Ventures Management GmbH. This PAI statement covers the reference period 1 January 2023 to 31 December 2023.
This PAI statement is a regulatory requirement, as Vanagon does not only invest in companies with environmental (E) and social (S) characteristics, but also in investments with a sustainable investment objective that must be screened for PAI. The objective of the PAI screening is to avoid greenwashing.
The following data points for PAI have only been collected for companies with a sustainable investment objective, for this reporting period, this includes only The LandBanking Group and Senken. 2 additional PAI were chosen including, “Investments in companies without carbon reduction initiatives” and “Incidents of discrimination.”
Neither company showcased no red flags or severe breaches during the reporting period. Click here to download the full PAI statement.
The present statement on PAI on sustainability factors covers the reference period from 1 January 2023 to 31 December 2023. The earliest historical comparison will be provided in June 2025.
The following disclosure relates to Vanagon Ventures Fund I GmbH & Co. KG (“Fund”) (LEI: 98450074BD01B093FD08):
- Summary
Vanagon’s financial product, classified as an Article 8+ fund under the SFDR, integrates certain environmental and social characteristics into its investment decisions for the majority of its investments. Additionally, 22.2% of investments have a sustainable investment objective. Even though a majority of our invested companies are focused on the environmental space, due to their early stage we chose to be 8+ to reduce their reporting burden.
Vanagon’s investment thesis focuses on companies that build digital solutions at the intersection of climate and finance, including entities active in carbon markets, natural capital, circularity, transparency software, digital finance infrastructure or similar sectors. To achieve this, the following environmental and social characteristics have been chosen:
Environment
- Climate mitigation
- Transition to a circular economy
- Sustainable Land Use
- Protection of Biodiversity
- The avoidance and reduction of environmental pollution
Social
- Compliance with recognised labour standards (no child labour, forced labour or discrimination)
- Compliance with employment safety and health protection
- Appropriate remuneration, fair working conditions, diversity, and training and development opportunities
- Exposure to controversial weapons
Governance
- Anti-Corruption
- Data Protection
And the sustainable investment objective chosen is “Climate mitigation” and “Climate adaptation.”
E and S characteristics are rigorously assessed before and after investments using qualitative and quantitative inquiries through a third-party tool. The Fund incorporates both positive screenings and investment exclusions (negative screening) during the decision-making process.
For the reporting period of FY23, out of the ten investments made by the end of December 2023, seven companies complied with the transparency requirements to the best of their abilities and provided data according to the sustainability indicators chosen for each characteristic. Two companies out of the seven also completed the PAI as they were investments with a sustainable investment objective. One company is currently in hibernation, therefore no data points were sourced from them. No severe red flags were highlighted. All companies are in early stages will be assisted in implementing internal policies such as human rights policy, anti-corruption policy, cybersecurity risks programme, ESG policy, Customer and Employee policy and DEIB policy going forward. We also noted that we had a higher percentage of women on the board in comparison to the deal flow we received. Lastly, we looked at scope 1, 2 and 3 emissions which indicated the companies were energy efficient in relation to its revenues and had a low carbon footprint.
- No significant harm to the sustainable investment objective
77.8% of the investments in The Fund promote environmental or social characteristics for investments that do not have a sustainable objective. Additionally, all investments follow the Do No Significant Harm Principle outlined in the EU Taxonomy. The Fund implements minimum safeguards (Article 3 and Article 18 Taxonomy Regulation) and an exclusionary policy to ensure alignment with the standards defined in the following documents:
- International Labor Organization (ILO) standards
- Principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labor Organization on Fundamental Principles and Rights at Work
- International Bill of Human Rights
- United Nations Guiding Principles (UNGPs)
- United Nations Global Compact (UNGC) Principles
- the Organization for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises
- Environmental or social characteristics of the financial product
The following environmental and/or social characteristics are promoted by Vanagon Ventures Fund I GmbH & Co. KG:
Environment
- Scope 1: Direct GHG (greenhouse gas) Emissions, Scope 2: Indirect Emissions and Scope 3: Indirect Emissions from Value Chain (#tCO2e).
- Total Energy Consumption (#kWh)
- Activities in Fossil Fuels
- ESG Policy
Social
- Anti-Discrimination and Equal Opportunities Policy
- Human Rights Policy
- Work Related Injuries
- Female Full Time Employees
Governance
- Anti-Corruption and Anti-Bribery Policy
- Privacy and Data Security Policy
- Cyber Security Risks Programme/Training
- Number of Female Board Members
- Sustainable investment objective of the Financial Product
22.2% of The Fund's investments are directed towards sustainable objectives, contributing to the environmental goals as defined by the Taxonomy Regulation EU 2020/852, and adhere to the 'Do No Significant Harm' criteria.
- Climate Change Mitigation: Does not lead to significant Greenhouse Gas (GHG) Emissions
- Climate Change Adaptation: Does not lead to an increased adverse impact of the current climate and expected future climate, on the activity itself or on people, nature, or assets.
- Investment strategy
- Proportion of investments
- Monitoring of Environmental or Social characteristics and the sustainable investment objective
- Methodologies
- Data sources and processing
- Limitations to methodologies and data
- Due diligence
- Engagement policies
- Designated Reference Benchmark
The Fund will conduct investments in portfolio companies that build digital solutions at the intersection of climate and finance, including entities active in carbon markets, natural capital, circularity, transparency software, digital finance infrastructure or similar sectors. The Fund intends to make its investments primarily in the pre-seed and seed stages.
The Fund invests fully in line with its investment strategy and investment restrictions. The Fund does not intend to make any investments that are not aligned with its environmental or social characteristics or exclusion policy.
The Fund acknowledges sustainability risks can affect risk management and, consequently, the potential value of investments. The Fund engages with companies on an ad-hoc basis and will conduct additional checks if any potential issues arise that may conflict with the Fund’s ESG criteria. To ensure ongoing adherence, the Fund continuously monitors compliance with ESG requirements, featuring an annual evaluation against selected KPIs for all portfolio companies. Additionally, the impact of investments is annually assessed using the ImpactNexus software to further ensure alignment with the Fund’s sustainability objectives.
Currently, the Fund conducts qualitative and quantitative assessments of environmental and social characteristics. These assessments occur during the annual reporting using a third-party ESG data collection tool. The methodology for calculating Scope 1, 2 and 3 emissions is done by the portfolio companies themselves or via the Business Carbon Calculator by Normative.
Information is obtained from the respective portfolio companies. An external review or verification of the information obtained will only be carried out if misrepresentations are suspected.
While navigating the complexities of ESG data reporting, where the quality and availability of information can vary widely among companies, industries, and regions, and third-party ESG data providers' scoring methodologies may lead to inconsistencies, the Fund acknowledges the importance of accurate data for informed decision-making. To address these challenges and to minimize the risk of undetected misrepresentations, the Fund engages in rigorous due diligence, externally verifying portfolio companies' disclosures when discrepancies are suspected.
Understanding that investments are long-term, the Fund is committed to fostering transparent and honest relationships with portfolio companies to ensure adherence to the restrictions described previously. To further enhance the accuracy and precision of the ESG data collected, Vanagon collaborates closely with ACE Alternatives GmbH, an outsourced ESG officer. This collaboration includes offering webinars and personalized one-on-one assistance to portfolio companies, simplifying the ESG reporting process and ensuring the data received is as truthful and precise as possible. This proactive approach exemplifies Vanagon's dedication to upholding high ESG standards and strengthening the overall integrity of its investment process.
Vanagon adopts a qualitative method to monitor the promotion of social and environmental characteristics, and the 22.2% of investments with a sustainable objective over the investment period, utilizing publicly available and material information, which may include financial reports, industry updates, and insights from third-party vendors.
After Vanagon receives self-reported data from the portfolio companies, an initial informal due diligence is conducted using ESG tools to identify and prioritize potential risks for mitigation. As a minority investor, Vanagon engages as frequent as possible with these companies, ensuring they comply with the Fund's social and environmental standards, continuously showcase improvement, and adhere to regulations.
Vanagon recognizes that engaging with sustainability issues in investee companies can positively influence both investment outcomes and societal benefit. Working in tandem with investment teams, Vanagon identifies a range of engagement themes pertinent to both the firm and its clients. There are two main avenues for this engagement: corporate and public policy.
Corporate engagement sees Vanagon utilizing its shareholder rights to encourage companies towards better sustainability and governance practices, employing various strategies such as value engagement, SDG engagement, and enhanced engagement for addressing significant breaches in conduct. The engagement efforts are strategic and outcome-oriented which will be compared with data reported in the next and subsequent reporting cycles to gauge improvements.
In terms of public policy, Vanagon engages with governments and regulators to support regulations that enhance ESG considerations, aligning with principles of transparency and appropriate influence.
No specific index is designated as a reference benchmark for the purpose of attaining the environmental or social characteristics promoted by the Fund.
Date of Publication:
This document was created on 01/07/2024. If you have any questions, please do not hesitate to contact us at esg@ace-alternatives.com.
.png)