Article 10 SFDR ─ sustainability-related information about financial products that promote environmental or social characteristics
SEVEST Management GmbH (“SEVEST”) is the alternative investment fund manager of SEVEST Fund I GmbH & Co. KG (“SEVEST Fund I”) within the meaning of the German Investment Code (Kapitalanlagegesetzbuch, KAGB) and as such publishes the following information in light of the consideration of sustainability-related aspects in accordance with Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability disclosure requirements in the financial services sector (the “SFDR”).
This financial product promotes environmental or social characteristics but does not have as its objective a sustainable investment. The promoted environmental and/or social characteristics consist of sector exclusions, embedding ESG aspects within the investment process, and supporting and engaging in leading global initiatives. 100% of the investments will align with its investment strategy and investment restrictions. No reference benchmark has been designated to attain the environmental or social characteristics promoted by the financial product.
Dieses Finanzprodukt bewirbt ökologische oder soziale Merkmale, strebt aber keine nachhaltigen Investitionen im Sinne der Definition des Art. 2 Nr. 17 SFDR an. Bei den beworbenen Merkmalen handelt es sich um Ausschlusskriterien, die Einbettung von ESG-Aspekten in den Anlageprozess, und die Unterstützung und Beteiligung an führenden globalen Initiativen. 100 % der Investitionen werden im Einklang mit der Anlagestrategie und den Anlagebeschränkungen getätigt. Es wurde kein Referenzwert benannt, um die mit dem Finanzprodukt beworbenen ökologischen oder sozialen Merkmale zu erreichen.
No sustainable investment objective
This financial product promotes environmental or social characteristics but does not have as its objective sustainable investments.
Environmental or social characteristics of the financial product
The promoted environmental and/or social characteristics consist of sector exclusions, embedding ESG aspects within the investment process, and supporting and engaging in leading global initiatives.
SEVEST uses its best effort not to invest in a company with predominant business activities in arms & weapons, alcohol, gambling, tobacco, pornography and human cloning. Also, SEVEST Fund I will not invest in businesses that produce or trade any product or activity deemed illegal under laws or regulations or international conventions and agreements, or subject to international bans applicable to SEVEST Fund I or the relevant portfolio company or which systematically use harmful or exploitative forms of forced or child labour.
ESG in the investment process
SEVEST integrates material ESG factors during the investment and portfolio holding process from screening and sourcing potential opportunities through to the exit. (See “Methodologies for environmental or social characteristics” below for details on each step of the investment process).
SEVEST Fund I is supporting and engaging in the following global initiatives:
- Climate Neutral Now
- Women’s Empowerment Principles (WEP)
- UN PRI
SEVEST Fund I is a DACH-focused private equity fund that is the entrepreneurial partner of choice for DACH-based industrial, industrial technology and related software and business services companies.
Policy to assess good governance practices of the target companies
Good governance practices include sound management structures, employee relations, remuneration of staff, and tax compliance, amonst others. As part of the due diligence and ongoing investment management, the investment team will review whether a potential portfolio company has good governance practices in place.
Proportion of investments
SEVEST Fund I will invest fully in line with its investment strategy and investment restrictions. SEVEST Fund I will not invest a portion of its capital in any other asset class.
Monitoring of environmental or social characteristics
The investment team for SEVEST Fund I will initially and continuously monitor whether the investment restrictions are abided by and whether the investment falls within the investment policies.
The UN PRI form the guiding blocks of consideration during ESG due diligence, stewardship and monitoring, and reporting process for potential and actual investments made through the partnership.
(See also: “Methodologies for environmental or social characteristics” below for more details on monitoring during the investment process)
Methodologies for environmental or social characteristics
The investment screening process includes a checklist that incorporates the IFC Exclusion List and Principles of the UN Global Compact.
After the screening process, which includes, but is not limited to, ESG factors, for all relevant potential investments, SEVEST will identify whether there are any material ESG risks and opportunities.
In order to assess the ESG risks and opportunities of each potential investment, the investment team evaluating the opportunity will be required to complete an ESG assessment checklist. SEVEST may instruct external experts to perform additional ESG due diligence. Where material issues are identified, the investment committee may request further action to be taken to ensure that these issues are properly investigated, before proceeding to invest. The potential investment may be rejected if the material issues identified cannot be mitigated.
The investment team will document all material ESG risks identified, in order to ensure appropriate monitoring, and where appropriate, value creation, of the portfolio companies’ ESG performance during the ownership period.
Additionally, SEVEST Fund I will use ESG-related clauses in their shareholders’ agreements. Notable clauses include, insofar as the portfolio company does not already maintain it, adopting an ESG policy at the latest within 12 months following the closing, and completing the annual ESG survey sent by SEVEST Fund I to report on ESG metrics.
The operations teams will proactively engage with portfolio companies to help them deliver high levels of sustainable performance, both within the company and at board level to measure and address key ESG opportunities and risks, and progress made against these year-on-year.
To ensure that ESG progress made during the holding period is sustained and continued under new ownership, SEVEST will carefully review a potential buyer’s reputation regarding ESG matters, the commitment to the principles of responsible investing, and their ESG plans for the portfolio company.
Data sources and processing
SEVEST Fund I receives data provided by the (future) portfolio companies as part of the due diligence process and at regular intervals after the investment. Where necessary or beneficial, SEVEST Fund I also makes use of publicly available data. Data processing is exclusively internal and DSGVO compliant. Estimates of data are not made.
Limitations to methodologies and data
SEVEST is partly reliant on the information provided by (future) portfolio companies during the due diligence process. Moreover, in the post-investment phase, SEVEST is reliant on the company’s reported data. In both cases, complete data may not always be available due to the nature of investments. The information is verified only if and to the extent, misrepresentations are suspected.
Since SEVEST Fund I investments are made for a multi-year investment period, SEVEST places a high priority on establishing a trusting working relationship with the portfolio companies to ensure that data is submitted reliably and completely and that the above restrictions are met.
SEVEST considers the promoted ESG aspects when sourcing new portfolio companies for SEVEST Fund I and during the due diligence on targeted portfolio companies. The due diligence is performed by obtaining all information relevant to SEVEST Fund I using a due diligence questionnaire, which is then reviewed internally. If necessary, further specific information is also obtained from the potential portfolio companies, should this still be necessary after the detailed questioning. The due diligence process is not externally monitored.
SEVEST Fund I invests in the portfolio companies for a period of several years. Therefore, SEVEST makes it a priority to establish and maintain a trusting working relationship with the portfolio companies in order to continuously comply with the investment restrictions. SEVEST thus also intends to establish or strengthen the consideration of sustainability risks at the portfolio level and, therefore, is in constant dialogue with the portfolio companies.
First Release Date: 24-May-2023
Most Recent Update: 24-May-2023