SFDR
Sustainable Finance Disclosure Regulation (EU) 2019/2088 (the “SFDR”) governs financial institutions’ disclosure and transparency requirements regarding integrating sustainability risks into investment decisions.
Contrarian Ventures, UAB (the “Management Company”) is managing Contrarian Ventures Net Zero 2022 KUB, which is disclosing under SFDR article 8, and Smart Energy Fund powered by Ignitis Group,which is disclosing under SFDR article 6.
Below is information on sustainability-related information disclosure in Management Company and its investment procedures and policies.
SUSTAINABILITY RISKS CONSIDERATION (ARTICLE 3 OF THE SFDR)
Sustainability risks refer to events or conditions that, if realized, could materially and adversely impact the value of investments. These risks may exist independently or contribute to other risks, such as market, operational, liquidity, and counterparty risks. Integrating sustainability risks into the investment process is, therefore, essential for supporting sustainable, long-term, risk-adjusted returns for investors.
Management Company focuses on driving the success of technology-enabled climate tech businesses, which will accelerate the transition to a net-zero future. In addition, the Management Company focuses and proactively works on creating value and supporting founders, thereby highlighting the importance of sustainable activities at the Portfolio Companies levels.
- Climate Impact and Risk Mitigation Framework
Mitigating adverse impacts is central to the Management Company’s climate-oriented investment strategy. It has implemented processes to assess climate relevance within potential investments, ensuring that thoughtful management of sustainability risks and opportunities contributes to long-term value creation. Where practicable, the Management Company aims to generate value beyond financial returns by continuously refining its approach to managing sustainability risks.
- Investment and Sustainability Policies
The Management Company’s Investment and Sustainability Policies outline how sustainability risks are integrated into the investment decision-making process and portfolio management. These policies guide investments’ evaluation, selection, and exclusion, ensuring they align with the Company’s environmental, social, and governance objectives and its broader climate and impact goals.
INTEGRATION OF SUSTAINABILITY RISKS INTO THE INVESTMENT DECISION
- Pre-Investment (Due Diligence Phase)
Prior to making an investment decision in a new Portfolio Company, the Management Company conducts a thorough evaluation of the potential investment’s alignment with its core investment thesis. This due diligence process includes a comprehensive ESG risk assessment, utilizing structured questionnaires to gauge the company’s adherence to sustainability criteria and to analyze its anticipated climate impact.
Recognizing that many early-stage companies may not have a fully developed ESG framework, the Management Company establishes an ESG baseline for the target company and identifies potential risks associated with its operations. This approach ensures that sustainability considerations are integrated into the investment decision-making process from the outset.
- Investment (Onboarding Phase)
Following the Investment Committee’s approval, the Management Company collaborates with the Portfolio Company to establish specific impact Key Performance Indicators (KPIs) that will be monitored and reported throughout the investment’s holding period. Additionally, the Portfolio Company is required to continuously assess, monitor, and report on essential ESG factors, ensuring ongoing alignment with sustainability objectives.
- Post-Investment (Monitoring Phase)
During the holding period, the Management Company systematically monitors impact data from the Portfolio Company at predefined intervals. Depending on the availability of data, the Management Company may also conduct additional in-depth analyses of climate impact.
In instances where specific ESG risks are identified, the Management Company evaluates the Portfolio Company’s progress in addressing and mitigating these risks. The Management Company is committed to enhancing the Portfolio Company’s climate impact performance while also ensuring strong financial returns.
Comprehensive ESG metrics across all portfolio investments are collected, analyzed, and consolidated, with significant developments and insights communicated to investors in a timely manner.
- Divestment (Exit Phase)
The Management Company seeks to divest to reputable, like-minded investors who share a commitment to reducing carbon emissions and supporting the Portfolio Company’s mission and vision. The divestment process is designed to be organized, transparent, and equitable.
SUSTAINABILITY RISKS LINKED TO REMUNERATION (ARTICLE 5 OF THE SFDR)
The Management Company’s remuneration strategy is designed to align financial incentives with the integration of sustainability risks and impact objectives, as required under Article 5 of the SFDR. The performance of impact Key Performance Indicators (KPIs), which include considerations of specific environmental, social, and governance (ESG) criteria, is directly linked to the financial carry of the fund. This alignment incentivizes the entire investment team to promote sustainable growth and manage sustainability risks within the Portfolio Companies they supervise.
Each team member plays a crucial role in integrating ESG criteria and addressing sustainability risks in investment decisions, thereby facilitating their effective implementation by the Portfolio Companies. By tying the financial success of the fund to the achievement of impact KPIs, the Management Company reinforces its commitment to sustainability while ensuring that positive impact and risk management go hand in hand.
Final assessments of impact KPIs are validated during Investment Committee meetings, with oversight provided by a compliance officer. This process ensures that both financial and sustainability-related objectives, including sustainability risk considerations, are met.