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SFDR DISCLOSURE
Last updated: February 13, 2024
The Regulation (EU) no. 2019/2088 of the European Parliament and of the Council of November 27, 2019 on sustainability-related disclosures in the financial services sector (SFDR) requires financial market participants such as Future Fund General Partner (the GP) to provide information to investors with regard to the integration of sustainability risks, the consideration of adverse sustainability impacts, the remuneration in relation to sustainability risks and the promotion of environmental or social characteristics, and sustainable investment.
We believe that in order to make good investments environmental and/or social factors should not be overlooked, and we intend to promote certain environmental and/or social characteristics for the fund managed by the GP, i.e., imec.istart future fund CommV (imec.istart future fund or the Fund)
To avoid any misunderstanding, we clarify that the Fund does not have or pursue sustainable investments in accordance with article 9 of the SFDR, as its purpose.
You will find under Part I the GP AIFM level disclosures and under Part II the article 8 SFRD disclosures for the financial product imec.istart Future Fund.
1. GP AIFM LEVEL DISCLOSURES
The information below regarding the policies of the GP on sustainability is made in accordance with articles 3, 4 and 5 of the SFDR (last updated in December 2022).
Integration of sustainability risk in the investment policies
A sustainability risk means "an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investment". For imec.istart future fund, sustainability risks are risks which, if they were to become reality, would cause a material negative impact on the value of its portfolio companies (sustainability risk).
There will be no formal consideration of sustainability risks in the decision-making process regarding imec.istart future fund in accordance with article 3 of the SFDR and we do not plan to do so in the future. The GP will re-evaluate the possibility to consider sustainability risks in the decision-making process on an annual basis. There will, however, be an annual report on ESG performance of our portfolio companies as included in imec.istart future fund’s ESG Policy. In doing so, the GP can assess and evaluate the overall ESG performance of our portfolio companies and provide guidance and support when needed, to the extent the Fund has the possibility to do so and the identified risk is material from both a financial and, or sustainability perspective.
In the pre-investment phase, an ESG risk and impact evaluation is part of the regular due diligence process. On the one hand, the GP performs a screening of possible short and long-term risks that may occur within the candidate portfolio companies. On the other hand, the GP also examines which themes the portfolio companies can generate positive impact on and establishes a link with the UN SDGs. However, if the GP presumes that a portfolio company is potentially eligible under the EU Taxonomy, the team will notify the portfolio company and may give support and guidance for further analysis and reporting.
The GP includes ESG information, where relevant or available, in the (i) initial screening of an investment opportunity, (ii) due diligence in relation to a potential investment, and (iii) monitoring of the portfolio companies. This includes thematic sustainability information sourced from trustworthy sources and the use of an internal evaluation questionnaire to identify, analyze and document sustainability matters. This information is used when reviewing and approving an investment opportunity.
Principal adverse impact of investment decisions on sustainability factors
In accordance with article 4.1(b) of the SFDR, the GP states that it does not consider the adverse impacts of investment decisions on the sustainability factors as referred to in article 4.1(a) of the SFDR and does not make the disclosures as described in article 4.1(a) of the SDFR.
Given that the investment scope of the GP is primarily focused on start-ups in an early stage of their lifecycle, most of the portfolio companies are not able to provide the necessary data that would allow the GP to report on what the adverse impacts of the investment decisions would be, based on the different criteria set forth in the SFDR and the legislation implementing the SFDR.
Although the GP integrates high-level ESG risk and impact screening and monitoring into the investment process, the GP is not able to communicate data and evolution reporting in accordance with the reporting requirements of the SFDR. At a later stage, the Fund can reevaluate, depending on the size of its own team and the ability of the portfolio companies to provide the necessary data for compliant reporting.
Integration of sustainability risk in the remuneration policy
The GP, as a sub-threshold manager of the Fund, does not have an obligation to have a formal remuneration policy in accordance with article 40 and following the Belgian law of April 19, 2014 on alternative entities for collective investments and their managers.
In practice, in accordance with general venture capital remuneration and award processes, a significant portion of an investment professional's compensation is typically in deferred instruments aligned to the performance of investments, meaning that the value of an investment professional's compensation will be negatively impacted by a sustainability risk that impacts the value of the underlying investment.
2. IMEC.ISTART ARTICLE 8 SFDR DISCLOSURES
Summary
imec.istart future fund Comm.V (the Fund) is a financial product that promotes environmental and/or social characteristics, but does not have as its objective sustainable investment and does not invest in sustainable investments. No reference benchmark has been designated for the purpose of attaining the environmental and/or social characteristics promoted by the Fund.
The Fund is an early-stage venture capital fund which will be focused on providing follow-up investments in Seed and Series A rounds of certain of the best-in-class portfolio companies of the imec.istart ecosystem. This includes companies active in the imec.istart acceleration program, program alumni, and companies participating in imec.istart’s bespoke scouting and matchmaking programs. However, up to approximately 20% of the total fund size can be invested in companies outside the imec.istart ecosystem over the course of the investment horizon of the Fund.
The Fund mainly focuses on investments into companies with digital technology as a core component.
No sustainable investment objective
This financial product promotes environmental or social characteristics but does not have sustainable investments as its objective.
Environmental or social characteristics of the financial product
The Fund will aim at promoting the following, non-limited, list of environmental and social characteristics (i) reducing greenhouse gas emissions (SDG13), (ii) clean and affordable energy (SDG7), (iii) circular and sustainable production and consumption (SDG12), (iv) good health and well-being (SDG3), (v) creation of local high-quality jobs (SDG8), (vi) diversity, inclusion and equity (SDG5+10), (vii) education, learning & development (SDG4), (viii) data security, privacy and business ethics, and (ix) good governance and transparency in decision-making (SDG16).
(Note: the related SDGs above are for indicative purposes only and may not perfectly overlap with one another, nor do they exclude positive impact on any of the other SDGs. )
It is, however, neither expected nor required that every portfolio company falls within the scope of any of the ESG priorities listed in the ESG policy. Nonetheless, for the start-ups who can demonstrate a measurable (expected) impact on one or more of these priorities, this will be taken into consideration and positively affect their overall evaluation score in imec.istart’s selection and self-reporting assessments.
Investment strategy
The investment strategy of the Fund will be focused on providing follow-up investments in Seed and Series A rounds of, for the most part, the best-in-class portfolio companies of the imec.istart ecosystem. However, up to approximately 20% of the total fund size can be invested in companies outside the imec.istart ecosystem over the course of the investment horizon of the Fund.
The investment strategy will more specifically focus on investments into companies with digital technology as a core component.
An ESG policy will be implemented that need to be considered for purposes of making investments in portfolio companies.
The Fund does not directly or indirectly invest in, guarantee, or otherwise provide financial or other support to companies or other entities that engage in certain activities and/or sectors and are explicitly excluded in the product documentation.
Such exclusions, inter alia, relate to companies which:
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Consultancy firms, agencies, engineering bureaus or third-party software development houses (i.e., in general project-based businesses or service companies).
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Start-ups with product targeting industries such as:
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Gambling;
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Adult entertainment;
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Illegal substances/narcotics;
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Tobacco;
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Coal;
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Unconventional oil & gas; and
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Alcohol; and
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Weapons.
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Start-ups developing products to help prevent or counter any negative effects on health or the environment in these industries, could however be eligible. Companies violating any of the minimum protection standards to comply with social and governance protection mechanisms from the UN guiding principles on business & Human Rights and OECD guidelines.
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Start-ups developing copies of existing products, i.e., me-too products without an innovative component. The innovative aspect can however be in the technology component and/or the business model.
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Start-ups with direct links to one of the “countries mentioned in the FATF list of ‘High-Risk Jurisdictions subject to a Call for Action’”, as per the Belgium FPS Finances website.
An analysis of the good governance practices of portfolio companies is also an integral part of the risk and impact screening for ventures of the Fund. Good governance, including but not limited to sound management structures, employee relations, remuneration of staff, and tax compliance are an integral part of the transaction documentation for investments.
Pre-investment, an ESG risk and impact evaluation is part of the regular due diligence process. On the one hand, a screening of possible short and long-term risks that may occur within the candidate portfolio companies is performed. For this the Fund bases itself on the input provided by the companies themselves and uses its experience and in-depth sector knowledge. To this end, an analysis is made of typical risks in the supply chain of these companies, environmental, social and governance risks that may occur within the companies themselves as well as the risks or negative impact that may occur during the use and end-of-life phase of the products and services. AML and KYC screening, a check of the exclusion criteria and risk analysis of dual use are for example part of this process.
In parallel, it also examines which themes the companies can generate positive impact on and establishes a link with the UN SDGs. The Fund promotes Environmental and/or Social characteristics, but will not make any sustainable investments, nor will it qualify as environmentally sustainable under the EU taxonomy. However, if the investment team presumes that a portfolio company is potentially eligible under the EU Taxonomy, the team will notify the portfolio company and may give support and guidance for further analysis and reporting.
Based on this screening, an evaluation is made. Where necessary, concrete agreements are made for future monitoring and reporting. When issues are noticed during this screening that require extra follow-up for investment, these are discussed within the investment committee to establish tailor-made agreements.
In the definitive transaction documentation, the Fund will define the reporting requirements and add the extra agreed actions to be taken in to account.
Proportion of investments
All investments of the Fund can be categorized as “#1 Aligned with E/S characteristics”. None of the Fund’s investments are included under “#2 Other”.
Our investment strategy leads us to invest in companies at a very early stage in development, often just consisting of a few team members and a technology prior to proof of concept. As a result, we consider the direct impact on environmental factors still relatively low for almost all our portfolio companies. We believe that their positive impact will be larger on the social and governmental characteristics, hence we expect the accurate proportion of our investments to evolve over time, as the additional SFDR related frameworks regarding social and governmental characteristics are rolled out.
Our ESG policy and assessment are tailored to the needs of, and requirements for, early-stage companies. Our approach is detailed in two procedures: an ESG assessment (pre-investment) and an ESG monitoring and reporting (post-investment).
Monitoring of environmental or social characteristics
We believe that applying an ESG policy not only mitigates business risks, but also creates long-term value for businesses, resulting in better financial return for the Fund. Hence, the Fund strongly encourages its portfolio companies, their founders and CEOs to actively incorporate ESG principles in their daily business activities. It is, however, neither expected nor required that every portfolio company falls within the scope of any of the ESG priorities as listed in the ESG policy. Nonetheless, for the start-ups who can demonstrate a measurable (expected) impact on one or more of these priorities, this will be taken into consideration and positively affect their overall evaluation score in imec.istart’s selection and self-reporting assessments.
Through an annual follow-up of the ESG performance of the portfolio companies of the Fund, the Fund aims to identify and improve, as the case may be, the environmental consequences, social and human rights issues of an
investment, the observation and acknowledgement of fundamental employees’ rights, the absence of corruption and bribery by any of the parties involved in the investment, and the compliance with applicable environmental, human rights and labor rights.
Post-investment, although ESG monitoring is always included in the normal interactions with our portfolio companies, the Fund also provides an annual evaluation. To this end, an annual monitoring moment is foreseen in which the portfolio company is asked for data and an evaluation. Based on this evaluation, improvement or follow-up actions are discussed with the portfolio company. This gives the investment team a good insight into the practices, decisions and events of the portfolio companies related to environmental topic, social affairs, and governance themes over the full value chain of the companies. It’s an opportunity to monitor the impact and possible risks for growing companies. A detailed overview of our good governance practices is provided in our ESG policy.
The Fund can draw on a broad experience and a large knowledge network to support portfolio companies in a variety of ESG topics where necessary. This support will be offered by the investment managers, or the portfolio companies can be referred to experts from the imec.istart network. Illustrative examples of expert advice could be HR support and more specifically tips & tricks regarding the management of remote teams, expertise on the impact of software compute power for companies in a scaling phase or cyber & data security expertise.
Methodologies
Qualitative performance monitoring in the field of ESG themes is done on a regular basis through the contacts that the Portfolio Managers maintain with the portfolio companies. When observations or incidents occur at the portfolio companies related to the topics as defined in the ESG policy, these are followed up by the Portfolio Manager and, where necessary, escalated within the relevant governance structure. In addition, an annual formal screening takes place where both the risk and impact performance results are analyzed, and where necessary the dialogue is opened to realize improvements or report positive realizations correctly.
Data sources and processing
To measure the ESG performance of the Fund, the Fund retains the right of sourcing data on the portfolio companies’ products or services from the companies themselves through interviews.
Pre-investment, this ESG-related risk assessment and impact data gathering is an integral part of the due diligence on the prospective ventures of the Fund. Each time the Fund makes an investment, the portfolio company’s focus will be screened for any exclusion criteria and its ESG-related risk factors are detailed, according to the procedure described in the ESG policy.
In the definitive transaction documentation, the Fund will define the reporting requirements and add the extra agreed actions to be taken in to account.
Post-investment, the ESG data and performance analysis of all portfolio companies of the Fund are evaluated on an annual basis through a detailed interview with the portfolio companies to reflect evolutions in their processes, products, or management structure. Based on this evaluation, improvement or follow-up actions are discussed with the portfolio company. This gives the investment team a good insight into the practices, decisions and events of the portfolio companies related to environmental topic, social affairs, and governance themes over the full value chain of the companies. It’s an opportunity to monitor the impact and possible risks for growing companies.
Reporting on the Fund's investments will be done in accordance with Annex IV to the Regulatory Technical Standards of the SFDR.
Limitations to methodologies and data
Data quality and reliability is largely anchored on the data gathered by the portfolio companies themselves, and the analyses of our Portfolio Managers, that is largely based on a limited set of comparison data.
However, our investment horizon is at a very early stage and the relevance of the data is relative. The companies that the Fund invests in, are not yet at scale level, so the impact on the environmental or social characteristics is not always representative.
Due diligence
The Fund conducts due diligence on the company’s technology, team, commercial roadmap, financial and legal status, intellectual property strategy, as well as on ESG and impact aspects.
An ESG-related risk assessment and impact analysis is thus an integral part of the due diligence performed by the Fund.
Please refer to the Sections “Investment Strategy” and “Data Sources and processing” above for a further description of the Fund’s due diligence.
Engagement policies
Following an investment and during the holding period, the Portfolio Managers monitor the portfolio companies’ ESG compliance, as well as their financial and non-financial performance, taking into account the stage of maturity of the portfolio company. It is, however, neither expected nor required that every portfolio company falls within the scope of any of the ESG priorities as listed in the ESG policy.
The executive task of monitoring the ESG commitments is assigned to the Portfolio Manager of the Fund dedicated to the specific portfolio company.
In the definitive transaction documentation the Fund will define the reporting requirements and add the extra agreed actions to be taken in to account.
Index as reference
Not applicable since there is no reference benchmark designated for the purpose of attaining the environmental and/or social characteristics promoted by the fund.