Sustainable Finance Disclosure Regulation (SFDR) Statement
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”)
Project A Ventures Management GmbH ("Project A", LEI: 3912008RQ3ORI32X9I23) integrates sustainability risks in its decision-making process, as referred to under Article 3 of the Sustainable Finance Disclosure Regulation (EU 2019/2088) (“SFDR”). 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.
Project A considers sustainability risks as part of the due diligence process by implementing an investment exclusion list and following a dedicated ESG Due Diligence checklist prior to any investment, covering topics such as:
Exclusion of businesses in non-designated countries
Research of any ESG issues reported in the media with regards to the business or founders
Identification of ESG issues within the sector of investment, including material environmental impacts, health and safety, labour rights, governance
Evaluation of adverse impact of investment in biodiversity or cultural heritage assets
The results of such assessment are taken into account when the investment decision is being taken. Should an issue be identified and if the investment has been, or is intended to be, undertaken despite material ESG risks pursuant to this ESG Due Diligence checklist, investment managers must provide more details of their research and integrate it into the investment committee briefing. This is then evaluated by the investment committee before a final decision on investment.
Project A remains free in its decision to refrain from investing or to invest despite sustainability risks, in which case, Project A can also apply measures to reduce or mitigate them. At all times, Project A will apply the principle of proportionality considering the identified ESG issue, the strategic relevance of an investment and the potential to reduce and mitigate such risks.
No consideration of adverse impacts of investment decisions on sustainability factors
Currently, Project A does not consider principal adverse impacts (PAIs) on sustainability factors as described by Article 4 SFDR and the accompanying Regulatory Technical Standards (“RTS”). 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 and the accompanying RTS are still quite new legislative acts, there is very little or no practical experience or practice with regard to applying their respective provisions. Therefore, substantial legal uncertainties would remain when applying those provisions to the strategies pursued by Project A. In addition, given that Project A invests primarily in early-stage companies and these have little market experience reporting against ESG metrics, obtaining this data in full for compliance purposes remains practically unfulfillable at this time.
Project A is regularly reviewing its approach to PAIs, as well as the legal and administrative developments on the interpretation of the SFDR and RTS and will update its website accordingly when more progress has been made.
Transparency of remuneration policies in relation to the integration of sustainability risks
As a registered alternative investment fund manager (AIFM) within the meaning of section 2(4) of the German Investment Code (Kapitalanlagegesetzbuch, “KAGB”) and a manager of a qualifying venture capital fund as defined in Art. 3 (b) of Regulation (EU) No. 345/2013 (“EuVECA-Regulation”), Project A does not have a remuneration guideline (remuneration policy) in accordance with the requirements of the KAGB. Therefore, the integration of sustainability risks is not considered when determining remuneration, as defined by Article 5 of the SFDR.
Project A Ventures IV GmbH & Co. KG
Project A Ventures IV GmbH & Co. KG, below referred to as “the Fund” (LEI: 391200GV5CS2B8OJJP39) is a venture capital fund promoting, among other characteristics, environmental or social characteristics, and following good governance practices as defined under Article 8 of the SFDR.
The consideration of environmental, social and governance characteristics is carried out before the investment process. The Fund incorporates exclusion (negative screening) aspects during the investment decision-making process, as well as an ESG Due Diligence checklist to identify risks and opportunities. The actions and decisions described in the following sections are each made by Project A Ventures Management GmbH (“Project A”, LEI: 3912008RQ3ORI32X9I23) for and on behalf of the Fund.
Die Berücksichtigung von ökologischen, sozialen und Unternehmensführung Merkmalen erfolgt sowohl vor als auch nach den Investitionen. Zu diesem Zweck werden zunächst und regelmäßig Informationen von den Portfoliounternehmen anhand eines ESG-Fragebogens eingeholt. Der Fonds bezieht Exklusionsaspekte (negatives Screening) in den Investmententscheidungsprozess mit ein. Die in den folgenden Abschnitten beschriebenen Handlungen und Entscheidungen erfolgen jeweils durch die Project A Ventures Management GmbH ("Project A", LEI: 3912008RQ3ORI32X9I23) für und im Namen des Fonds.
No sustainable investment objective
This financial product promotes environmental or social characteristics but does not have as its objective sustainable investment.
Environmental or social characteristics of the financial product
Environmental, social and governance (ESG) factors are considered within the investment decision through a dedicated ESG DD checklist. The Fund promotes environmental and/or social characteristics by implementing certain investment exclusions (see section ‘Investment strategy’) during the decision-making process.
The Fund offers a dual, but synergistic investment strategy with the majority allocation in early-stage ventures (i.e., Pre-Seed, Seed and Series A rounds) and a niche allocation (up to EUR 30,15 million) to buyout investments, i.e., private equity co-investments that offer an envy logic, allowing the Fund to gain a preferred return. The investment strategy is industry agnostic, with particular emphasis on pan-European companies that offer digital business models.
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 does 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:
Weapons and ammunition
Casinos and equivalent enterprises
Internet gambling and online casinos
Specific electronic data programs or solutions relating to the aforementioned activities or pornography
Fossil fuel-based energy production and related activities
Energy-intensive and/or high CO2-emitting industries (e.g., chemicals, cement, iron and steel, etc.) unless qualified in the EU taxonomy for sustainable activities ((Regulation (EU) 2020/852) and supplemented by the EU Taxonomy Delegated Acts
In addition, the Fund shall ensure appropriate control of legal, regulatory and ethical issues should it invest in human cloning for research or therapeutic purposes and/ or GMOs.
Moreover, the ESG due diligence checklist utilised prior to any investment seeks to assess whether the prospective investee company and the industry within which it operates have a good track record with regard to governance, on issues such as corruption, health and safety and labour rights. 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. The Fund does not invest a fixed percentage in portfolio companies aligned with environmental and/or social characteristics, nor makes or intends to make sustainable investments within the meaning of Art. 2 No. 17 SFDR or environmentally sustainable investments within the meaning of Art. 3 EU Taxonomy; hence, no portion of its investments will be aligned with the Taxonomy.
Monitoring of environmental or social characteristics
Project A does not currently have a standardised proactive approach to monitor the environmental and social characteristics of portfolio companies. Project A usually obtains a board seat within the Portfolio companies it invests in. Board members meet regularly to discuss the status, growth and other topics that arise as part of the operation of the business. Should an issue related to environmental, social or governance arise, it will engage with the respective portfolio company to resolve or reduce such issues, provided that such efforts will always remain within a scope considered by Project A in its absolute discretion to be proportionate in light of its respective bargaining positions and transactional context.
Currently, the methodologies applied comprise of collecting information via the due diligence data room provided by the target company or via inhouse research prior to any investment. Additionally, Project A will apply best efforts when negotiating an investment into a portfolio company, to reach a side letter agreement requiring the portfolio company to comply with Project A's requirements as a financial market participant under the SFDR. There is currently no quantitative measurement with regards to environmental or social characteristics and no sustainability indicators are currently used.
Data Sources and Processing
The ESG checklist, which includes a verification that the potential company does not operate within excluded sectors and/or non-designated countries, is completed by the investment manager for each of the targeted portfolio companies of the Fund. Data is obtained from the (potential) portfolio companies and information is publicly available. No (proportion of) data is estimated. Unless misrepresentations are suspected, further research and investigation by Project A or external verification are not being conducted regularly.
Limitations to methodologies and data
The information collected via the ESG checklist 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 investment is made for several years, Project A considers it a priority to establish and maintain trust within a good working relationship with the Fund's portfolio companies as a safeguard considering the limitations described in this section. Through active portfolio management and, in many cases, a seat on the Board of investee companies, Project A continues to survey that the limitations above do not affect how the environmental or social characteristics promoted by the financial product are met.
As a starting point, the assessment of how the Fund’s investment in the portfolio company relates to the environmental and social characteristics mentioned above is carried out as part of the due diligence process using an ESG checklist. Via this checklist, we screen for ESG-related risks prior to any financial commitment, and should an issue be identified, the investment manager provides further insights into the investment committee briefing to consider during the decision-making process. Consequently, the focus of each ESG due diligence may differ. However, in all instances, Project A will examine the areas that it regards as central to understanding the ESG profile of the business in which Project A is considering an investment. This also includes good governance characteristics.
Project A aims to promote the pursuit of ESG considerations among the Fund's portfolio companies by sharing its views – in an ongoing and constructive dialogue, on matters such as adverse social and environmental impacts, as well as corporate governance. Should Project A determine any potential issues relating the ESG characteristics, it will engage with the respective portfolio company to resolve or reduce such issues, provided that such efforts will always remain within a scope considered by Project A in its absolute discretion to be proportionate considering its respective bargaining positions and transactional context.
Project A Buy-Out Co-Invest I GmbH & Co. KG
The disclosure relating to Project A Ventures IV GmbH & Co. KG (“PAV IV”) applies accordingly to Project A Buy-Out Co-Invest I GmbH & Co. KG (“Buy Out I”) [LEI: 391200GV5CS2B8OJJP39], with the exception that the investment strategy of Buy Out I differs from that of PAV IV, as the Fund will invest in growth, small and mid-cap digital businesses or businesses with special value opportunities through digitalization alongside a financial lead investor.
In addition, the catalogue under “Environmental or social characteristics of the financial product” for Buy Out I does not include prescribed limitations of investment on Energy-intensive and/or high CO2-emitting industries and Fossil fuel-based energy production and related activities.
Project A Opportunity III GmbH & Co. KG
The disclosure relating to Project A Ventures IV GmbH & Co. KG (“PAV IV”) applies accordingly to Project A Opportunity III GmbH & Co. KG (“Opp III”) [LEI: 391200U0CZLDTNEYAR26], with the exception that the investment strategy of Opp III differs from that of PAV IV, as the Fund builds, holds and manages (including divesting) a portfolio of equity and equity-related investments in portfolio companies. The Fund will invest in later stage growth investments inter alia in portfolio companies of Project A Ventures IV GmbH & Co. KG, Project A Buy Out Invest I GmbH & Co. KG, Project A Ventures GmbH & Co. KG, Project A Ventures II GmbH & Co. KG, Project A Ventures III GmbH & Co. KG, including a situation where securities of these portfolio companies are tokenized.
Date of Publication: 10 March 2021
This document was last updated on Tuesday 30 May 2023 for editorial amendments and additional Opp III information. If you have any questions, please do not hesitate to contact us at email@example.com.