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

Virida Capital Management B.V. (hereafter “VIRIDA” or “Manager”) is considered a financial market participant in accordance with the Sustainable Finance Disclosure Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (“SFDR”) Financial market participants are required to publish information on their website about the following policies.

The information provided sets out how VIRIDA and the financial product promote environmental or social characteristics, without having as its objective sustainable investment as required by Article 8 SFDR

Disclosures relating to VIRIDA pursuant to Art. 3, 4 and 5 SFDR

1 Sustainability risk policies (Article 3 SFDR)

In accordance with Art. 2 (22) SFDR a “sustainability risk” is defined as an environmental, social, or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment.

Responsible investment and environment, social, and governance (ESG) integration are core to VIRIDA’s investment strategy. VIRIDA aims to take sustainability risks into account before any investment decision is made. Currently, sustainability risks are integrated in the investment decision process as part of the standard due diligence and risk assessment processes. This ensures that they are incorporated into the assessment and recommendation provided to the investment committee. Our commitment to acknowledging these risks is expressed in our ESG Investment Policy.

VIRIDA uses its best effort to take into account the “minimum safeguards” that are:

Furthermore, VIRIDA follows the guidelines set by its internal policies:

VIRIDA understands the value and importance of investing in companies that have a positive impact. As such, sustainability risks are taken into account while VIRIDA seeks to invest in companies that are not only financially healthy, but will also directly contribute to the energy transition while avoiding harm to direct stakeholders, society, and the environment.

In its free discretion, VIRIDA may decide to make an investment even if sustainability risks have been determined. In such cases, VIRIDA will apply appropriate mitigation measures to manage its investment.

2 No consideration of adverse impacts of investment decisions on sustainability factors (Article 4 SFDR)

VIRIDA does not consider principal adverse impacts of its investment decisions on sustainability factors within the meaning of Art. 4 SFDR and, hence, does not use the sustainability indicators listed in Annex I of the Delegated Regulation (EU) 2022/1288 to identify and assess potential adverse impacts.

Principal adverse impacts according to the SFDR are the most significant negative impacts of investment decisions on sustainability factors relating to environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters.

VIRIDA will invest in early-stage companies with typically small teams and will typically hold minority stakes in such companies. Considering PAIs would require the Manager to report according to a set list of indicators for which there are currently no sufficient data available. Until there is more practical guidance with regard to applying the detailed provisions on principal adverse impacts with insufficient data, the Manager will regularly review the possibility to consider principal adverse impacts.

3 Remuneration policies in relation to the integration of sustainability risks (Article 5 SFDR)

As a sub-threshold manager as defined in Article 2:66a Dutch Act on financial supervision (Wet op het financieel toezicht), acting as a manager of a qualifying venture capital fund as defined in Art. 3 (c) of Regulation (EU) No 345/2013 (“EuVECA-Regulation”), VIRIDA does not have and does not need to have a remuneration guideline or policy. Consequently, integration of sustainability risks in the remuneration of staff is not a factor.

Sustainability-related disclosures pursuant to Art. 10 SFDR

a) Summary

Virida Capital I Coöperatief U.A. (the “Fund”), managed by Virida Capital Management B.V. (“VIRIDA”) promotes environmental and social characteristics but does not have a sustainable investment objective.

VIRIDA addresses the funding gap during the commercialization stages of capital-intensive scale-ups in the energy transition sector. As such it focuses on the GHG emission reduction potential of investment companies.  The Fund invests in equity and equity-like instruments in European early-stage companies focused on: renewable generation technologies, transportation & storage and energy efficiency & heating.

Samenvatting (Dutch summary)

Virida Capital I Coöperatief U.A., beheerd door Virida Capital Management B.V. bevordert ecologische en sociale kenmerken, maar heeft geen duurzame beleggingsdoelstelling.

VIRIDA pakt het financieringstekort aan tijdens de commercialiseringsfasen van kapitaalintensieve scale-ups in de energietransitiesector. Als zodanig richt het zich op het broeikasgasemissiereductiepotentieel van investeringsmaatschappijen.  Het Fonds belegt in aandelen en op aandelen lijkende instrumenten in beginnende bedrijven die zich richten op: technologieën voor duurzame energieopwekking, transport, opslag, energie-efficiëntie en verwarming.

b) No sustainable investment objective

The Fund promotes environmental and social characteristics, but does not have sustainable investments as its main objective.

c) Environmental or social characteristics of the financial product

The Fund promotes environmental and social characteristics through the incorporation of ESG considerations within the investment process. The Fund invests in energy transition start-ups, and specifically focuses on the GHG emission reduction potential of investment companies

d) Investment strategy

i. Investment Strategy

The Fund’s ESG investment principles are rooted in the belief that responsible investing can lead to superior long-term financial returns and a positive impact on society and the environment. Therefore, investments are always aligned with at least one UN Sustainable Development Goal (“UN SDG”) and look to promote both environmental and/or social characteristics.

Thematic Investments

The Fund invests in European early-stage businesses (Seed to Series B) in the energy transition, supporting founders to address the funding gap during the commercialization stages of capital-intensive scaleups. The Fund invests across the following energy transition segments: (renewable) generation technologies, transportation & storage and energy efficiency & heating. All of the Fund’s investments are aligned with this theme.

Screening

Investments are screened for both positive and negative ESG impact:

ESG Integration

All of VIRIDA’s term sheets and documentation include an ESG clause, setting out the minimum ESG standards under which the portfolio company will operate. This includes a commitment after closing to:

“Evaluate and implement best practices of its business activities with respect to Environment, Social and Governance (ESG) aspects. This includes the company’s internal practices and external impact of the business model, services/products, and an annual assessment of material ESG implications, and

Contribute at least to one of the targets of the UN sustainable development goals as set out in the UN 2030 agenda for sustainable development (UN Sustainable Development Goals)”

ii. Assessment of good governance practices

Good governance practices include sound management structures, employee relations, remuneration of staff and tax compliance. The assessment of good governance practices of portfolio companies is partially incorporated in the Fund’s legal due diligence as far as good governance practices have been adopted by law.

The Fund will hold minority positions in the portfolio companies, but aims to exercise its stewardship through investment board seats, shareholder meetings and regular interactions with investment companies. For all investments, ESG risks are monitored on an ongoing basis and all investments need to meet a minimum governance standard, as specified in VIRIDA’s Risk Policy.

If VIRIDA becomes aware of severe governance issues, it will investigate them and work with all parties involved to find an appropriate solution.

e) Proportion of investments

The Fund does not make any sustainable investments within the meaning of the SFDR and the Taxonomy Regulation (Regulation (EU) 2020/852). The Fund invests in companies that promote ESG characteristics.

The Fund will directly hold equity and quasi-equity investments in portfolio companies.

f) Monitoring of environmental and social characteristics

The Fund considers alignment with the UN SDGs and minimum good governance safeguards ahead of any investment. Furthermore, it undertakes to monitor ESG characteristics on an ongoing basis.

The following sustainability indicators will be measured on investment company level:

The following sustainability indicators will be measured at fund level:

g) Methodologies

The Fund uses the following methodologies to assess the ESG characteristics of each of its investments:

ESG engagement: Throughout its investment period, VIRIDA engages with its portfolio companies on ESG issues. This is done through several channels:

The Fund’s ESG Investment Policy further outlines the screening / investment / monitoring process. 

h) Data sources and processing

The Fund periodically collects data from its portfolio companies, which forms the basis of the periodical disclosures. ESG data is presented as part of the audited annual accounts of the Fund, available 6 months after the end of each financial year. 

VIRIDA intends to use an online ESG sustainability reporting platform, to aggregate, expedite and facilitate our impact and ESG data processing. The platform will allow portfolio companies to upload relevant information in a streamlined manner, offering support and proxy data where needed, thus lessening the reporting burden on said portfolio companies.

i) Limitations to methodologies and data

The Fund invests in early-stage companies which may not yet have developed ESG strategies.

The Fund gathers quarterly ESG data from its portfolio companies, however, for companies who have not yet reached a certain level of maturity, this data may be unavailable and/or of lower quality. The data collection could also place an economically disproportionate burden on the usually small management teams of VIRIDA’s early-stage portfolio companies, therefore, we are committed to making the process as smooth as possible.

VIRIDA does not expect that these limitations will affect the alignment with the promoted environmental and social characteristics of the Fund.

j) Due diligence

VIRIDA conducts due diligence for financial, legal and commercial, intellectual property, technical, as well as ESG matters.

ESG considerations are integrated in VIRIDA’s due diligence process as per the following. The processes are outlined in VIRIDA’s Risk Policy and ESG Investment Policy and consider:

In addition to this, positive and negative screening criteria are used during the due diligence phase. As many of the portfolio companies in which the Fund will invest will not have developed ESG strategies nor have impact measurement KPIs readily available, the due diligence process also considers the maturity stage of the portfolio company, and the steps needed for ESG data gathering and ESG process development at portfolio company level. Regular follow-ups are scheduled with the portfolio company and at the (management) board level.

k) Engagement Policies

Engagement is the active and purposeful process of dialogue with portfolio companies where VIRIDA is seeking to improve portfolio company’s business practices, especially in relation to the management of ESG issues.

VIRIDA maintains regular engagement with its portfolio companies through voting rights, monitoring and dialogue. This translates into continuous interaction with founders and senior management of the portfolio companies.

ESG topics are part of these discussions. Should an ESG issue arise at portfolio company level, the Fund’s Investment Committee will determine how to best continue engagement (for example through more regular dialogue or more frequent monitoring) until the issue has been resolved.

l) Benchmark Index

The Fund applies no reference to a designated benchmark index.

VERSION: 1DATE: 8 August 2024STATUS: Approved
Annex II SFDR Pre-Contractual Disclosures – Virida Capital I CoöperatiefDownload