OLTRE VENTURE SGR S.p.A. – EUVECA MANAGER
INFORMATION REGARDING THE POLICIES ON THE INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISION-MAKING PROCESSES
The objective of Regulation (EU) 2019/2088 is to strengthen the protection of the final investor, by improving disclosure with respect to attention to risks related to sustainability, in order to be able to more fully assess the risk of one’s investment.
Impact Investing goes one step further, since in addition to not considering investment projects that can have negative effects on the environment and people, it proactively moves to seek investment projects that can have a positive impact on people’s lives, the environment, and society.
Art 3, paragraph 1 of Regulation (EU) 2019/2088
“Policies on the integration of sustainability risks in investment decision-making processes”
(Publication on the website)
By “sustainability risk” we mean an environmental, social or governance event or condition that, if it occurs, could cause a significant negative impact on the value of the investment.
Oltre Venture SGR SpA – EuVeca Manager (“Oltre Venture” or the “Management Company”) takes into account the sustainability risks in the investment decision-making process, analyzing in particular the risks and opportunities associated with ESG issues relevant to the company itself, with particular reference to the sector and the context in which it operates, through a careful and in-depth assessment of its positioning in the area of sustainability.
In this regard, the Company has prepared a pre-investment ESG checklist that is used by the Management Team in order to investigate the sustainability aspects relevant to the target Company and evaluate its positioning in terms of ESG, also by means of interviews with the Target management team.
During the compilation of the pre-investment Checklist, for each ESG area subject to analysis, the Management Team performs a qualitative analysis in terms of ESG and, on the basis of this, assigns a score on a scale from “low level” to ” high level “.
Following the identification of the ESG risks and opportunities that have emerged as the most relevant in terms of scoring, the members of the Investment Team in charge for the Portfolio Company prepare a corrective action plan, the so-called “ESG Action Plan” together with the management of the Portfolio Company. This ESG Action Plan is divided into a set of qualitative-quantitative objectives with related actions and will be implemented during the investment period, on the basis of a reasonable time schedule. Oltre Venture, as an Impact Investing operator, promotes products with social impact objectives, promoting investments which, in addition to respecting the principle of “do not harm”, generate a positive impact for all stakeholders of the company.
Art. 4, paragraph 1 of Regulation (EU) 2019/2088
“Disclosure on the main negative effects (PAI) on sustainability”
(Publication on the website – ad hoc section “adverse sustainability impacts not considered”)
Oltre Venture SGR, with reference to the provisions of Regulation (EU) 2019/2088 Art. 4 (SFDR Regulation) relating to the disclosure on sustainability in the financial services sector, adopts its own methodology for measuring social impact and undertakes to implement policies that take into account the adverse impacts (PAI) of investment decisions on sustainability factors, based on the type of financial products it intends to make available.
With reference to the due diligence policies, as regards the negative effects (PAI) identified during the investment phase (ESG pre-investment checklist and ESG Action Plan), taking due account of the size, nature and scope of the Portfolio Companies, Oltre Venture SGR compiles a post-investment ESG checklist including possible additions to the indicators for monitoring purposes. This post-investment ESG checklist aims to measure the “KPIs” or sustainability indicators to which the adverse impact indicators (PAI) of investment decisions on sustainability factors are added, in line with the schemes envisaged by the Final Report on draft Regulatory Technical Standards (hereinafter RTS) soon to be published in its final version.
To date, the aforementioned KPIs have been identified on the basis of international reporting frameworks, such as the Sustainability Accounting Standards Board Standards (SASB) published by the Sustainability Accounting Standards Board and the Global Reporting Initiative Sustainability Reporting Standards (GRI Standards) published by Global Reporting Initiative (GRI) in 2016 and subsequent developments. The KPIs include both indicators common to all the Portfolio Companies (cross-portfolio KPIs) and indicators selected on the basis of company-specific KPIs.
The Management Team of the Management Company therefore encourages and promotes the adoption of ESG practices in the Portfolio Companies in relation to the operating sector, monitors the adoption and implementation of the aforementioned ESG Action Plan and the annual collection of the reported KPIs within the post-investment Checklist.
As the regulatory framework is still being defined with regard to the technical aspects, Oltre Venture SGR is adopting a gradual alignment approach to the SFDR Regulation, in order to integrate the indicators of the adverse impacts (PAI) of investment decisions on sustainability, in line with the schemes envisaged by the RTS.
Art. 10, paragraph 1 of Regulation (EU) 2019/2088
“Transparency on the promotion of environmental or social characteristics and of sustainable investments”
(Publication on the website – ad hoc section “Information relating to sustainability”)
According to the provisions of EU Regulation 2088/2019 (hereinafter the “Regulation” or “SFDR”) regarding financial products referred to in art. 9 of the same, “Oltre III” (the first Fund established and managed by Oltre Venture SGR) is an EuVeca closed-end venture capital fund, reserved for qualified investors, specialized in impact investing to support the development and growth of SMEs and innovative startups. The Fund’s objective is to invest in sectors where there are social needs: healthcare, education, job placement, environment, services that improve the quality of life.
Oltre III is a reserved fund, focused on the services sector, in particular healthcare, education, well-being, tourism and agriculture, where important opportunities exist as well as significant demand from consumers. In general, the services sector presents less risk compared to start-ups of product companies, because the delivery models can be modified based on the level of development of the company, also in terms of sustainability, by intervening on the KPIs of an environmental, social and governance nature. Oltre III, therefore, is a product with low volatility compared to the Venture Capital sector and with an attractive risk/return ratio.
Oltre III aims to proactively align the sustainability objectives of its subsidiaries with its framework for measuring the impact created each year and its evolution over time.
During the due diligence phase of an investment in a Social SME, the Management Company establishes ex ante the social impact objectives (“SIG” or “Social Impact Goals”), concurrently with the business plan of the target company. When completing the investment, for the purpose of continuous monitoring, these SIGs, in addition to the sustainability indicators, are periodically provided by the portfolio company.
To date, as there is no market index to use as a benchmark for calculating the overall social impact related to the sustainability of the Fund, the Management Company has developed its own methodological framework aimed at assessing the progress of the social performance of the entire portfolio.
The Management Company undertakes to measure the progress of the sustainability indicators and the achievement of the SIGs of the entire Portfolio Companies of the Fund, according to its own methodology, the Overall Social Impact Multiple calculated for each Social SME. The Fund’s Social Impact Multiple is the weighted average of all the Social Impact Multiples per investment, taking into account the weighting assigned to each Social Impact Multiple. As an element of further commitment to achieve social impact, the Carried Interest of the aggregate Fund will be linked, at 70%, to the achievement of a Social Impact Multiple of the minimum Fund.
With reference to the SFDR Regulation and the schemes provided for by the RTS, since the latter are still being defined, the Management Company will adopt a gradual approach of aligning both its methodological framework and disclosure information, following the schemes provided by the RTS.