Sustainability-related disclosures pursuant to Regulation (EU) 2019/2088 (“SFDR”)

Date of publication: February 22, 2022

Date of update: June 29, 2023 (addition of sustainability-related disclosures regarding TechVision Fonds II GmbH & Co. KG)

I.     Sustainability risks (Art. 3)

TVF Management GmbH (“TVFM”, LEI: 391200AWOTUVN8I9HB24) 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. TVFM considers and assesses sustainability risks during its due diligence process prior to any investment. Such assessment is being conducted by using a questionnaire. The results of such assessment are taken into account when the investment decision is being taken. However, TVFM remains free in its decision to refrain from investing or to invest despite sustainability risks, in which case TVFM can also apply measures to reduce or mitigate any sustainability risks. At all times, TVFM will apply the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context.

II.   No consideration of adverse impacts of investment decisions on sustainability factors (Art. 4)

TVFM does not consider any adverse impacts of its investment decisions on sustainability factors and, hence, does not use the sustainability indicators listed in Annex I of the Delegated Regulation (EU) 2022/1288 (as amended from time to time, “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 the SFDR, the Regulation (EU) 2020/852 (“EU-Taxonomy”) and the accompanying RTS are relatively new legislative acts, 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 TVFM. Moreover, the burden associated with considering adverse impacts on sustainability factors by using sustainability indicators is disproportionate in light of the very limited relevance that such impacts could have in the context of TVFM’s investment strategy: TVFM pursues an active venture capital strategy and invests in young start-ups mainly in Germany. As a result, TVFM’s investment decisions will hardly ever have an impact on sustainability factors. Furthermore, the fund(s) managed by TVFM will only hold minority interests in their portfolio companies. Such minority interests are, however, generally not sufficient to encourage the portfolio companies to collect and report the relevant data to TVFM. Thus, it is currently not foreseeable for TVFM; whether the information for the identification and assessment of principal adverse impacts can be obtained regularly and in full from all of the portfolio companies.

If and to the extent that the legal uncertainties will be resolved and a practicable market and administrative practice will evolve in this regard, TVFM will re-evaluate considering principal adverse impacts of its investment decisions in due course. In the meantime, TVF remains free in its decision to use part of the sustainable indicators listed in Annex I of the RTS and/or an own set of indicators.

III.     Remuneration disclosures (Art. 5)

As a registered alternative investment fund manager within the meaning of section 2 (4) of the German Investment Code (Kapitalanlagegesetzbuch, “KAGB”), TVF does not have and does not need to have a remuneration guideline or policy in accordance with the requirements of the KAGB.

IV.       Sustainability-related disclosures for TechVision Fonds II GmbH & Co. KG (Art. 10, 8)

Financial product: TechVision Fonds II GmbH & Co. KG (the “Fund”)

LEI: 391200X250VXV8HQGB11

Summary

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 inclusion (positive screening) as well as exclusion (negative screening) aspects during the decision-making process. Thereby the Fund considers several ESG themes to be the key to responsible investing. The actions and decisions described in the following section are each made by TVFM for and on behalf of the Fund.

No sustainable investment objective

The Fund promotes environmental or social characteristics, but does not have sustainable investment as its objective.

Environmental or social characteristics of the financial product

The Fund promotes environmental and/or social characteristics by implementing certain investment exclusions (see section ‘Investment strategy’) and by considering certain ESG criteria during the decision-making process.

Whilst identifying suitable investment opportunities, the Fund takes into consideration the following ESG criteria:

• Environment: consumption of fresh water; pollution of wastewater; use of raw materials; emissions and toxins; carbon footprint; generation of waste;
• Social: diversity, equal treatment, equal opportunities; human rights; child labor; modern slavery; fair treatment of employees;
• Governance: management compensation; tax transparency; shareholder structure; risk and incident management; supervisory structure.

Investment strategy

The purpose of the Fund is to build, hold and manage (including to divest) a portfolio of investments in innovative, high-growth and technology-oriented companies. The portfolio companies may, for example, be direct or indirect spin-offs from a research or university institution or existing companies that have developed a technology or technology-based service themselves, use it significantly, commercialize it or market it. The Fund primarily invests in the earlystages of aportfolio company (so-called Pre-Seed, Seed or Series A investments as well as participation in any follow-on financing rounds). Geographically, the Fund invests exclusively in portfolio companies that have their registered office in Germany, in particular in the statutory districts of the Sparkassen participating in the Fund as well as in the “Euregio Maas-Rhein”.

The Fund shall not invest in portfolio companies:

a)     that manufacture or trade in weapons, or manufacture or trade in systems, components or software that are primarily used in weapons or have the primary purpose of harming people or restricting their freedom;

b)     whose business success is significantly based on making customers dependent on their product in the sense of a disease or on creating a pathological addiction in their customers;

c)     who are involved in corruption and/or bribery, promote it or maintain corrupt structures within the company itself;

d)     whose primary business purpose is the exploitation of natural resources, the destruction of the environment or ecosystems, or massive adverse emissions;

e)     whose business success significantly depends on the exploitation of human labor, the unequal treatment of people or other disregard for human rights.

Moreover, the Fund shall only invest in portfolio companies that meet the minimum requirements set forth by the Fund with regard to its ESG criteria (see section ‘Environmental or social characteristics of the financial product’).

The Fund’s investment strategy is continuously implemented as part of the investment process: Each investment opportunity will be reviewed as part of the due diligence process in light of the Fund’s investment strategy, in particular with regard to the investment exclusions as well as the ESG criteria. After an investment, i.e., during the holding period, the Fund will regularly monitor its portfolio companies and support them when and where deemed relevant.

Good governance practices are assessed through a questionnaire 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.

Proportion of investments

The Fund will invest fully in line with its investment strategy and investment restrictions, i.e., will only make investments which are aligned with its environmental or social characteristics (i.e., its investment exclusions and ESG criteria). The Fund does not make and does not intend 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 EU Taxonomy.

Monitoring of environmental or social characteristics

The Fund has an increased awareness of the impact of environmental or social characteristics on risk management and thus on the value potential of investments. In order to monitor the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions and ESG criteria), the Fund consults with the portfolio companies in regular intervals and will carry out further checks in order to identify potential issues with such characteristics. Moreover, the Fund obtains further information in annual reports from its portfolio companies. Therefore, the Fund monitors compliance with its environmental or social characteristics (i.e., its investment exclusions and ESG criteria) on an ongoing basis. External monitoring mechanisms are not in place.

Methodologies for environmental or social characteristics

The Fund applies qualitative assessments with regard to its environmental or social characteristics (i.e., its investment exclusions and ESG criteria).

The Fund conducts an initial assessment of the promoted environmental or social characteristics in the course of its due diligence by providing its (potential) portfolio companies with a questionnaire. At the same time, the individual ESG criteria are identified and evaluated. Based on the results of such assessment the Fund identifies pre-investment whether the environmental or social characteristics promoted by the Fund are met. During the holding period, the so conducted assessment forms the basis to measure and monitor if the characteristics are continuously being met.

Data sources and processing

In order to attain each of the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions and ESG criteria), a questionnaire is completed by the (potential) portfolio companies in the course of the due diligence conducted prior to each investment. Moreover, during the holding period, the portfolio companies provide the Fund with annual reports for monitoring purposes. The Fund also relies on publicly available data to continuously check the compliance with the investment exclusions and ESG criteria. Hence, most data is obtained from the (potential) portfolio companies and around 20% of the relevant data is estimated or supplemented by information publicly available. An internal or external review or verification of the information obtained will be carried out if misrepresentations are suspected.

Limitations to methodologies and data

The information collected from the (potential) portfolio companies via the questionnaire as part of the due diligence is internally or 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. However, the portfolio companies’ self-disclosures are backed by guarantees in the investment contracts. 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 its portfolio companies in order to ensure compliance with the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions and ESG criteria). Further limitations, in particular with regard to the accuracy of the data and reliability of the data sources used, are not apparent at this time.

Due diligence

An initial assessment of how an investment relates to the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions and ESG criteria) is carried out as part of the due diligence process using a questionnaire and, where required based on the inherent ESG risk of the portfolio company, through an enhanced analysis. 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. An internal or external review or verification of the information obtained will only be carried out if misrepresentations are suspected.

Engagement policies

Engagement forms part of the environmental or social investment strategy of the Fund. The Fund intends to engage in managing ESG across its portfolio companies, e.g., by setting ESG targets and implementing management incentives.

Designated reference benchmark

No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by the Fund.