DISCLOSURES PURSUANT TO THE SUSTAINABLE FINANCE DISCLOSURE REGULATION (EU) 2019/2088
As the world, and the European Union being part of it, is increasingly faced with the catastrophic and unpredictable consequences of climate change, resource depletion and other sustainability-related issues, urgent action is needed to mobilise capital not only through public policies, but also by the financial services sector. Therefore, financial market participants should be required to disclose specific information regarding their approaches to the integration of sustainability risks and the consideration of adverse sustainability impacts.
For this reason, the European Union adopted the Regulation (EU) 2019/2088 (Sustainable Finance Disclosure Regulation – SFDR) with the aim to integrate sustainability risks, the consideration of adverse sustainability impacts, and promote environmental or social characteristics and sustainable investments without so-called “greenwashing”. The SFDR classifies all funds according to their ESG commitment and positive contribution to environmental and social objectives. In addition, to avoid harm to investor interests, fund managers must disclose how and to what extent they use the criteria for environmentally sustainable economic activities to determine the environmental sustainability of their investments in line with the Regulation (EU) 2020/852 (Taxonomy Regulation), which inter alia amended the SFDR.
Article 9 SFDR funds are the so-called “Dark Green Funds” because they have sustainable investments as an objective, with detailed disclosures both in pre-contractual documentation and in periodic disclosures. Sporos Platform meets this requirement by investing in start-ups and SMEs which contribute significantly to the Taxonomy Regulation environmental objective of circular economy, do not harm the other environmental or social objectives, and follow good governance practices.
From the very onset, we at Sporos Platform have always believed in the necessity for private finance to act as the principle private vehicle for the transition towards a Circular Economy. We welcome the opportunity to hold ourselves to the highest standards and we aspire to be an example in our industry.
1. Sustainability risks
Sporos Impact Ventures AEDAKES, identified by the Legal Entity Identifier (LEI 2138007QOK3W75DIHX50), actively considers sustainability risks in its investment decision-making process. These risks encompass environmental, social, or governance events or conditions that have the potential to adversely impact the value of investments, whether currently or in the future. As an integral part of its customary protocol, Sporos diligently performs due diligence before making investments, incorporating a thorough evaluation of sustainability risks. The outcomes of these assessments play a crucial role in shaping Sporos' investment choices. While adhering to its discretionary authority, Sporos retains the flexibility to proceed with an investment even in the presence of identified sustainability risks. In such instances, Sporos may implement appropriate measures to mitigate these risks.
2. Statement on Principal Adverse Impacts of investment decisions on sustainability factors
I. SUMMARY
Sporos takes into account the significant adverse impacts of its investment decisions on sustainability factors. This current statement marks the inaugural consolidated overview of Sporos' principal adverse impacts on sustainability factors. The reporting period spans from September 1, 2023 , to December 31, 2023.
Sustainability factors encompass environmental, social, and employee considerations, as well as a commitment to human rights and the fight against corruption and bribery. Sporos utilizes a predefined set of sustainability indicators at the portfolio company level, comprising mandatory indicators outlined in items 1-14 of Table 1 , and indicators no. 17 and 18 of Table 1, no. 6 and 20 of Table 2, and no. 8 of Table 3 of the Commission Delegated Regulation (EU) 2022/1288 (which supplemented the SFDR). Throughout this process, Sporos upholds the principle of proportionality, considering the strategic importance of an investment and its transactional context.
As a fund in its initial stages at the time of this statement's adoption, the investees in the Fund's portfolio did not exhibit significant negative impacts. The 2023 portfolio consisted of one startup and one greenfield project, both featuring a substantial circular economy element with a minor operational footprint. The operational startup's products and services have a notably positive impact on environmental and climate protection, surpassing operational emissions.
A comprehensive Sustainable Development Goals (SDG) assessment, within the context of the 2030 Agenda for Sustainable Development adopted by the General Assembly of the United Nations on September 25, 2015, will be undertaken with investee companies to clarify data availability in portfolio companies and internal data collection processes. In certain categories, such as greenhouse gas (GHG) emissions, insufficient time due to the fund's recent inception hindered data collection exercises and internal capacity organization among investees. Consequently, total numbers across the fund in all categories are not presently available. In the future, aligning with our established investment strategy, Sporos anticipates collaborating with an external Environmental, Social, and Governance (ESG) partner of reputable standing to provide targeted support in generating necessary data for portfolio companies.
I. ΠΕΡΙΛΗΨΗ
Ο Sporos λαμβάνει υπόψη του τις σημαντικές αρνητικές επιπτώσεις των επενδυτικών του αποφάσεων στους παράγοντες βιωσιμότητας. Αυτή η παρούσα δήλωση σηματοδοτεί την εναρκτήρια ενοποιημένη επισκόπηση των κυριότερων αρνητικών επιπτώσεων του Sporos στους παράγοντες βιωσιμότητας. Η περίοδος αναφοράς εκτείνεται από την 1η Σεπτεμβρίου 2023 έως την 31η Δεκεμβρίου 2023.
Οι παράγοντες βιωσιμότητας περιλαμβάνουν περιβαλλοντικούς, κοινωνικούς και σχετιζόμενους με τους εργαζομένους, καθώς και τη δέσμευση για τα ανθρώπινα δικαιώματα και την καταπολέμηση της διαφθοράς και της δωροδοκίας. Ο Sporos χρησιμοποιεί ένα προκαθορισμένο σύνολο δεικτών βιωσιμότητας σε επίπεδο εταιρείας χαρτοφυλακίου, που περιλαμβάνει υποχρεωτικούς δείκτες που περιγράφονται στα σημεία 1 έως 18 του Πίνακα 1 του Παραρτήματος I του Κατ' εξουσιοδότηση Κανονισμού (ΕΕ) 2022/1288 ("RTS"), μαζί με τον δείκτη αριθ. 6 του Πίνακα 2 του Παραρτήματος Ι. Σε όλη αυτή τη διαδικασία, ο Σπόρος τηρεί την αρχή της αναλογικότητας, λαμβάνοντας υπόψη τη στρατηγική σημασία μιας επένδυσης και το συναλλακτικό της πλαίσιο.
Ως αμοιβαίο κεφάλαιο στα αρχικά του στάδια κατά τον χρόνο έγκρισης της Δήλωσης, οι επενδύσεις στο χαρτοφυλάκιο του Αμοιβαίου Κεφαλαίου δεν παρουσίασαν σημαντικές αρνητικές επιπτώσεις. Το χαρτοφυλάκιο του 2023 αποτελούνταν από μία startup και ένα project greenfield, και τα δύο διαθέτουν ένα σημαντικό στοιχείο κυκλικής οικονομίας με μικρό λειτουργικό αποτύπωμα. Τα προϊόντα και οι υπηρεσίες της επιχειρησιακής startup έχουν ιδιαίτερα θετικό αντίκτυπο στην προστασία του περιβάλλοντος και του κλίματος, ξεπερνώντας τις λειτουργικές εκπομπές.
Θα πραγματοποιηθεί μια ολοκληρωμένη αξιολόγηση των Στόχων Βιώσιμης Ανάπτυξης (SDG) με τις εταιρείες στις οποίες επενδύονται για να διευκρινιστεί η διαθεσιμότητα δεδομένων σε εταιρείες χαρτοφυλακίου και οι εσωτερικές διαδικασίες συλλογής δεδομένων. Σε ορισμένες κατηγορίες, όπως οι εκπομπές αερίων του θερμοκηπίου, ο ανεπαρκής χρόνος λόγω της πρόσφατης ίδρυσης του ΑΚΕΣ εμπόδισε τις ασκήσεις συλλογής δεδομένων και την οργάνωση της εσωτερικής ικανότητας μεταξύ των επενδύσεων ικανότητας των εταιρειών στις οποίες έχουν πραγματοποιηθεί επενδύσεις. Κατά συνέπεια, οι συνολικοί αριθμοί στο ταμείο σε όλες τις κατηγορίες δεν είναι επί του παρόντος διαθέσιμοι. Στο μέλλον, ευθυγραμμιζόμενη με την καθιερωμένη επενδυτική μας στρατηγική, ο Sporos προσδοκά τη συνεργασία με έναν εξωτερικό εταίρο Περιβαλλοντικής, Κοινωνικής και Διακυβέρνησης (ESG) αξιόπιστου κύρους για την παροχή στοχευμένης υποστήριξης στη δημιουργία απαραίτητων δεδομένων για εταιρείες χαρτοφυλακίου.
II. DESCRIPTION OF POLICIES TO IDENTIFY AND PRIORITISE PRINCIPAL ADVERSE IMPACTS ON SUSTAINABILITY FACTORS
Sporos has formulated and enacted an Environmental, Social, and Governance (ESG) policy, along with sustainability clauses integrated into shareholder agreements, to discern and prioritize significant adverse impacts on sustainability factors. These policies received approval from Sporos' governing body on 15.01.2024, with the responsibility for their execution and application entrusted to Andrei Geica, [Partner, Chief Public Policy and Impact Officer] .
As already referenced above under 2.I, the mandatory indicators outlined in items 1-14 of Table 1 of Delegated Regulation 2022/1288 are stipulated by the Regulatory Technical Standards (RTS). Sporos, in adherence to its business strategy, has selectively chosen other indicators, specifically no. 17 and 18 of Table 1, no. 6 and 20 of Table 2, and no. 8 of Table 3 of Delegated Regulation 2022/1288, based on their relevance to the investment strategy.
Before committing to any investment, Sporos rigorously engages in due diligence, assessing the potential adverse impacts on sustainability factors. This examination involves employing a sustainability questionnaire covering indicators considered by Sporos at the portfolio level. Recognizing the importance of comprehensive and accurate data, Sporos actively collaborates with trusted external partners possessing a high-level reputation in sustainability assessment. This strategic alliance enhances the depth and reliability of information gathered, particularly in instances where publicly available data may be insufficient.
Throughout the holding period post-investment, Sporos routinely examines adverse impacts on sustainability factors, gathering relevant data on an annual basis. At the close of each reference period, Sporos consolidates the data, prioritizing adverse impacts by evaluating both their likelihood and severity. In the pursuit of information related to adverse sustainability indicators, Sporos seeks publicly available data and resorts to reasonable assumptions or direct input from portfolio companies when necessary. Acknowledging the possibility of errors, Sporos commits to vigilantly identifying and rectifying any inaccuracies.
These policies undergo regular scrutiny, specifically on an annual basis, to stay abreast of legal or regulatory changes, data availability, and market dynamics. Consequently, Sporos remains open to incorporating additional indicators in the future, ensuring a robust and informed approach, potentially with the assistance of trusted external partners, to detect and assess emerging significant adverse impacts.
III. ENGAGEMENT POLICIES
Sporos has instituted a robust Environmental, Social, and Governance (ESG) policy and is actively working towards incorporating sustainability clauses into term sheets and contractual agreements. This strategic initiative aims to diminish the principal adverse impacts assessed through the indicators outlined in the table above, aligning with Sporos' established targets.
As part of its proactive approach, Sporos commits to engaging with its portfolio companies to initiate discussions on any (potential) principal adverse impacts. One of the exclusion elements considered by Sporos prior to any investment is the assessment on the willingness and good faith of the potential investee companies to address principal adverse sustainability impacts and the Team’s commitment to the transition to the Circular Economy .
However, in cases where there is a persistent lack of reduction in principal adverse impacts over multiple periods, Sporos will collaboratively consult with the Company's management to identify the root causes. Subsequently, working in tandem with the Company's management, Sporos will develop a tailored set of measures designed to curtail principal adverse impacts in the future.
In the unlikely scenario where no positive development can be reported, and the negative impacts prove to be substantial, Sporos reserves the option to consider divesting its stake in the company. This prudent approach underscores Sporos' commitment to actively managing and mitigating adverse impacts while maintaining flexibility to address evolving situations within its portfolio.
IV. REFERENCES TO INTERNATIONAL STANDARDS
Sporos, having achieved full operational status as of the end of Q4 2023 , is committed to embracing a comprehensive approach to sustainable investment practices. In alignment with this commitment, Sporos intends to undertake various international pledges, encompassing prominent initiatives such as the United Nations-supported Principles for Responsible Investment (UNPRI), the United Nations Framework Convention on Climate Change (UNFCCC) Paris Agreement, and participation in Leaders for Climate Action, among other pertinent commitments. Beyond these, Sporos is dedicated to adhering to the highest standards set forth in European Union policies related to sustainable finance practices and Circular Economy objectives. By actively engaging with these international initiatives and aligning with EU policy standards, Sporos aims to contribute meaningfully to global sustainability efforts while upholding best practices in the field of responsible investing.
V. REMUNERATION DISCLOSURE
Sporos' remuneration policy is meticulously crafted to align with and foster robust and effective risk management, including the consideration of sustainability risks. The foundation of this policy rests on the principle of equal pay for equal work or work of equal value, ensuring parity between male and female workers. Deliberately designed to prevent conflicts of interest that might compromise the impartiality of staff in favour of personal or entity-related interests, Sporos' remuneration policies and practices prioritize the safeguarding of investors and investee companies.
In adherence to the SFDR requirements, Sporos conducts a thorough assessment of employees' performance when determining variable remuneration. For specific individuals, qualitative criteria are employed, assessing their compliance with relevant entities' sustainability policies, notably the Sustainability Risk Policy. This evaluation is particularly pertinent for the Chief Public Policy and Impact Officer, entrusted with ensuring alignment with Sporos' investment strategy, EU legislation adherence, and conformity with EU Circular Economy Policies both pre- and post-investment.
The performance dimensions under consideration encompass short, medium, and long-term priorities, strategically aligned to drive sustained shareholder value while incorporating risk management, control measures, and conduct objectives. Sporos maintains a commitment to pay-for-performance alignment by avoiding the assignment of relative weightings to these dimensions, considering market practices and other relevant factors. In the comprehensive evaluation of performance, sustainability risk factors are duly considered for select employees, reinforcing Sporos' commitment to responsible and sustainable business practices.
VI. SUSTAINABILITY-RELATED DISCLOSURES
A. SUMMARY
The Fund actively pursues a venture capital strategy with a core objective of sustainable investments, as defined in Article 2(17) of the SFDR. Sustainable investments, within this context, refer to investments in economic activities contributing to environmental or social objectives, ensuring no significant harm to such objectives while maintaining good governance practices among investee companies.
All of the Fund's sustainable investments align with environmentally sustainable economic activities, primarily falling under the scope of Article 9(d) (Circular Economy) in EU Taxonomy. While the primary focus is on Circular Economy, there may be overlaps with other environmental objectives by the very nature of these objectives, which will be transparently disclosed and duly considered. No index as reference benchmark has been designated (Art. 9(1) SFDR).
In order to determine the sustainability of a potential investment, life cycle assessments (“LCA”), among other things, are conducted as part of the due diligence process during and after the investment decision process, with strict covenants in termsheets for the development of a Circular Economy Transition Plan and for its follow-up. Furthermore, (potential) portfolio companies are required to complete an ESG questionnaire, which, inter alia, requests information on (adverse) sustainability indicators. The LCAs are amended as soon as new products or processes need to be taken into account. The portfolio companies are requested to report on ESG on an annual basis and ad-hoc in case of severe breaches.
It is worth noting that, in line with Sporos’ investment strategy, the Taxonomy Regulation excludes non-financial undertakings that do not publish non-financial information according to Art. 19 (a) and Art. 29(a) of Directive 2013/34 (each of which is incorporated into Greek legislation by virtue of articles 151 and 154 of Greek law 4548/2018 on sociétés anonyms, respectively) and Art. 8 of the Taxonomy Regulation from mandatory reporting obligations. This covers the majority, if not all, investments in startups and SMEs that Sporos will have in its portfolio during the lifetime of the fund. However, as a testament to our commitment to sustainability and the belief in the objectives of the Taxonomy Regulation and SFDR, Sporos will require and assist its investee companies to provide equivalent information on a voluntary basis to inform Sporos’ Taxonomy KPI numerators for financial undertakings, even before the European Commission has had the opportunity to reach a positive impact assessment on the inclusion of these types of companies. We believe this is for the benefit of our investee companies, of our investment, and for the transition to a circular economy model, especially in terms of cost-savings, attracting further investments, and improving the Fund’s exit strategy. It is worth noting that there is currently no expected timeline for the inclusion of these companies under these mandatory reporting obligations.
In the absence of publicly available data, the Fund either collects data for the LCAs and the (adverse) sustainability indicators directly from its (potential) portfolio companies, bases them on scientific studies, or estimates them appropriately. In this respect, there is a risk of false information. All actions and decisions outlined in the subsequent sections are made by Sporos Impact Ventures AEDAKES on behalf of and for the Fund.
A. ΠΕΡΙΛΗΨΗ
Το Αμοιβαίο Κεφάλαιο επιδιώκει ενεργά μια στρατηγική επιχειρηματικού κεφαλαίου με βασικό στόχο τις βιώσιμες επενδύσεις, όπως ορίζεται στο άρθρο 2 παράγραφος 17 του κανονισμού περί γνωστοποιήσεων αειφορίας στον τομέα των χρηματοπιστωτικών υπηρεσιών (SFDR). Οι βιώσιμες επενδύσεις, στο πλαίσιο αυτό, αναφέρονται σε επενδύσεις σε οικονομικές δραστηριότητες που συμβάλλουν σε περιβαλλοντικούς ή κοινωνικούς στόχους, διασφαλίζοντας ότι δεν υπάρχει σημαντική βλάβη σε αυτούς τους στόχους, διατηρώντας παράλληλα πρακτικές καλής διακυβέρνησης μεταξύ των εταιρειών στις οποίες επενδύονται.
Όλες οι βιώσιμες επενδύσεις του ΑΚΕΣ ευθυγραμμίζονται με περιβαλλοντικά βιώσιμες οικονομικές δραστηριότητες, που εμπίπτουν κατά κύριο λόγο στο πεδίο εφαρμογής του άρθρου 9 στοιχείο δ) Κυκλική Οικονομία στον Κανονισμό (ΕΕ) 2020/852 ("EU Taxonomy"). Ενώ η κύρια εστίαση είναι στην Κυκλική Οικονομία, ενδέχεται να υπάρχουν επικαλύψεις με άλλους περιβαλλοντικούς στόχους, οι οποίοι θα γνωστοποιηθούν με διαφάνεια και θα ληφθούν δεόντως υπόψη. Σημειωτέον, επί του παρόντος δεν υπάρχουν κατ' εξουσιοδότηση πράξεις που να καθορίζουν Τεχνικά Κριτήρια Διαλογής (TSCs) για την Κυκλική Οικονομία εντός της EU Taxonomy. Ωστόσο, ο Sporos δεσμεύεται να τηρεί τις διεθνείς βέλτιστες πρακτικές για επενδυτικά κριτήρια, βασικούς δείκτες απόδοσης (KPIs) και κατηγορίες παρακολούθησης μέχρι την έγκριση των TSC από την Ευρωπαϊκή Επιτροπή. Δεν έχει οριστεί δείκτης ως σημείο αναφοράς (Άρθρο 9(1) SFDR ).
Προκειμένου να καθοριστεί η βιωσιμότητα μιας πιθανής επένδυσης, οι αξιολογήσεις κύκλου ζωής («LCA»), μεταξύ άλλων, διεξάγονται ως μέρος της διαδικασίας δέουσας επιμέλειας κατά τη διάρκεια και μετά τη διαδικασία επενδυτικής απόφασης, με αυστηρές συμφωνίες σε φύλλα όρων για την ανάπτυξη Σχέδιο Μετάβασης στην Κυκλική Οικονομία και για την παρακολούθησή του. Επιπλέον, οι (δυνητικές) εταιρείες χαρτοφυλακίου υποχρεούνται να συμπληρώσουν ένα ερωτηματολόγιο ESG, το οποίο, μεταξύ άλλων, ζητά πληροφορίες για (δυσμενείς) δείκτες βιωσιμότητας. Οι ΑΚΖ τροποποιούνται μόλις πρέπει να ληφθούν υπόψη νέα προϊόντα ή διαδικασίες. Οι εταιρείες του χαρτοφυλακίου καλούνται να υποβάλλουν έκθεση για το ESG σε ετήσια βάση και ad-hoc σε περίπτωση σοβαρών παραβάσεων.
Αξίζει να σημειωθεί ότι, σύμφωνα με την επενδυτική στρατηγική του Σπόρου, η Ταξινομία της ΕΕ εξαιρεί μη χρηματοοικονομικές επιχειρήσεις που δεν δημοσιεύουν μη χρηματοοικονομικές πληροφορίες σύμφωνα με το άρθρο. 19 (α) και άρθ. 29(α) της Οδηγίας 2013/34 και άρθ. 8 Ταξινόμηση από τις υποχρεωτικές υποχρεώσεις αναφοράς. Αυτό καλύπτει τις περισσότερες, αν όχι όλες, επενδύσεις σε νεοφυείς επιχειρήσεις και ΜΜΕ που θα έχει ο Σπόρος στο χαρτοφυλάκιό του κατά τη διάρκεια ζωής του ταμείου. Ωστόσο, ως απόδειξη της δέσμευσής μας στη βιωσιμότητα και της πίστης στους στόχους της Ταξινόμησης της ΕΕ και της SFDR, η Sporos θα απαιτήσει και θα βοηθήσει τις επενδυόμενες εταιρείες του να παρέχουν ισοδύναμες πληροφορίες σε εθελοντική βάση για να ενημερώσουν τους αριθμητές του Sporos Taxonomy KPI για χρηματοπιστωτικές επιχειρήσεις. ακόμη και πριν η Ευρωπαϊκή Επιτροπή είχε την ευκαιρία να καταλήξει σε μια θετική εκτίμηση επιπτώσεων για τη συμπερίληψη αυτών των τύπων εταιρειών. Πιστεύουμε ότι αυτό είναι προς όφελος των εταιρειών στις οποίες επενδύουμε, της επένδυσής μας και για τη μετάβαση σε ένα μοντέλο κυκλικής οικονομίας, ιδίως όσον αφορά την εξοικονόμηση κόστους, την προσέλκυση περαιτέρω επενδύσεων και τη βελτίωση της στρατηγικής εξόδου του Αμοιβαίου Κεφαλαίου. Αξίζει να σημειωθεί ότι δεν υπάρχει επί του παρόντος χρονοδιάγραμμα για την ένταξη αυτών των εταιρειών σε αυτές τις υποχρεωτικές υποχρεώσεις αναφοράς τουλάχιστον έως το 2027.
Ελλείψει δημοσίως διαθέσιμων δεδομένων, το ΑΚΕΣ είτε συλλέγει δεδομένα για τις ΑΚΖ και τους (δυσμενείς) δείκτες βιωσιμότητας απευθείας από τις (δυνητικές) εταιρείες του χαρτοφυλακίου του, τα βασίζει σε επιστημονικές μελέτες ή τα εκτιμά κατάλληλα. Από αυτή την άποψη, υπάρχει κίνδυνος ψευδών πληροφοριών. Όλες οι ενέργειες και οι αποφάσεις που περιγράφονται στις επόμενες ενότητες λαμβάνονται από την Sporos Impact Ventures ΑΕΔΑΚΕΣ για λογαριασμό και για λογαριασμό του ΑΚΕΣ.
B. NO SIGNIFICANT HARM TO THE SUSTAINABLE INVESTMENT OBJECTIVE
The Fund’s investments not only avoid harm but generate significant positive outcomes for the planet. In order to assess whether an investment does not significantly harm any of the sustainable investment objectives, the Fund conducts a due diligence prior to each investment which includes a preliminary assessment of the environmental footprint of a potential portfolio company’s product or service in conjunction with external highly reputable partners, as well as an ESG questionnaire to identify and assess any principal adverse impacts on sustainability factors. The ESG questionnaire contains the sustainability indicators 1-14 of Table 1 of Delegated Regulation 2022/1288 as stipulated by the Regulatory Technical Standards (RTS), and indicators no. 17 and 18 of Table 1, no. 6 and 20 of Table 2, and no. 8 of Table 3 . Conversely, as long as no principal adverse impacts are identified for a portfolio company of the Fund, it can be assumed that the Fund’s sustainable investments do not cause significant harm to any environmental or social investment objective.
Furthermore, the Fund strives to be fully aligned with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. For that purpose, the Fund has integrated a set of ESG related questions (including the alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights) in its pre-investment ESG questionnaire as well as in the post-investment monitoring and support processes.
C. SUSTAINABLE INVESTMENT OBJECTIVE OF THE FINANCIAL PRODUCT
The Fund has sustainable investment as its objective (Art. 9(2) SFDR). No index has been designated as a reference benchmark (Art. 9(1) SFDR).
The Fund is an impact venture capital fund supporting startups and SMEs that have a quantifiable positive impact on the planet while building scalable businesses. The Fund wants to contribute to a circular economy that operates within the planetary boundaries and where impact investment is the new ‘normal’. We believe that in 2050, the circular economy will simply be, ‘the economy’.
As part of the LCAs, the Fund measures the attainment of its sustainable investment objective through sustainability indicators which are defined for each portfolio company individually after an investment of the Fund. Such sustainability indicator(s) is/are tracked quarterly and reported on annually.
Pursuant to Art. 5 lit. (a) of the Taxonomy Regulation, the Fund’s investments in general will contribute to the transition to a Circular Economy.
D. INVESTMENT STRATEGY
The Fund shall aim at investing (the “Investment”) on market terms in Eligible SMEs or SPVs active primarily, within the meaning of the Hellenic Development Bank of Investment’s Greek Green Funds Call issued on 03.08.2020 (the “HDBI Call”), in the space of circular economy, with strategic targeted investments in blue growth and bioeconomy, resource and energy efficiency, clean energy production, storage and technology, anti-pollution and biodiversity conservation technology, industrial symbiosis, sustainable tourism & real estate, climate resilience and/or carbon neutrality (the “Investment Targets”). Investments shall be made by participating via securities in the form of equity and may include shares or units (common or preferred, voting, or non-voting), as well as bond loans convertible to equity (including convertible notes with profit sharing rights), and/or or bonds interest entitlement or other rights pursuant to applicable law, the Regulatory Framework and HDBI Call. The Fund shall not acquire pre-existing securities of any form (i.e., shares, units, or bonds) from the shareholders or creditors of the Portfolio Company. This does not prevent the Fund (represented by the Manager) from acquiring transferable securities or shares by exercising rights that are intended to secure its Investment, where such rights have been reasonably agreed upon their placement or by exercising options that seek to achieve a precise ratio of each Investment in the overall capital structure of the Investment Target, based on a valuation of the Investment Target that was carried out on the occasion of a subsequent transfer or issue of transferable securities or shares, through transfer of existing transferable securities or shares to the Fund either without consideration or against symbolic consideration.
The Fund investment policy seeks to achieve the best possible returns on its investments for the benefit of Unitholders, by investing in a sufficient number of companies, in various sectors, focusing on innovative enterprises in dynamic economic sectors willing to develop and utilise circular economy tools and methods, as well as in companies and industries from the entire spectrum of productive activity that base their competitiveness on applications of technology, innovation, and primary scientific research. The objective is, on the one hand, to diversify Investments throughout various markets and, on the other hand, to make a sufficient number of Investments, in accordance with the Investment Policy. The Fund shall invest in Eligible SMEs and/or SPVs each of which, at the time of Initial Investment, shall be at a start-up, growth or expansion stage and targets to invest in ca. 15-25 Eligible SMEs and/or SPVs in total (but, for the avoidance of doubt, without any restriction on the number of Investments that it will make). The Manager shall inform the Investment Target that the Investment is made in the context of implementation of a particular project.
E. PROPORTION OF INVESTMENTS
The Fund will invest fully in line with its investment strategy and investment restrictions, i.e. it will only make sustainable investments (100 %). Sporos is currently working on ensuring that a majority – if not all – of its sustainable investments with an environmental objective are Taxonomy-aligned.
At Sporos, our unwavering commitment to environmental sustainability aligns seamlessly with the principles of the Taxonomy Regulation. Our strategic investment approach centres around supporting innovative and dynamic small companies within our portfolio. Acknowledging the specific criteria outlined in Art. 19(a) and Art. 29(a) of Directive 2013/34 (each of which is incorporated into Greek legislation by virtue of articles 151 and 154 of Greek law 4548/2018 on sociétés anonyms, respectively), along with Art. 8 of the Taxonomy Regulation, certain non-financial undertakings may be excluded from technical screening criteria . This exclusion could impact the numerator of KPIs, potentially resulting in a nominal value of zero, which would make the Taxonomy Regulation non-applicable.
In line with our steadfast dedication to the Taxonomy Regulation, we affirm our commitment to include these companies and assist them to voluntarily produce the required data and take into account the Taxonomy Regulation's requirements to the fullest extent possible, considering their size and scope. It's important to note that the European Commission is yet to conduct an impact assessment for the inclusion of these types of companies, recognising potential administrative burdens. However, at Sporos, we strive to strike a balance tailored to each of our investee companies, ensuring a thorough yet pragmatic approach.
Additionally, the Taxonomy Regulation allows for exceptional cases where financial market participants cannot reasonably obtain relevant information to reliably determine alignment with technical screening criteria. In such instances, we, as financial market participants, are authorised to make complementary assessments and estimates based on information from alternative sources. To ensure transparency in our disclosures to investors, Sporos provides clear explanations for our conclusions, including the reasons for resorting to complementary assessments and estimates. We invite you to join us in fostering a greener future through strategic, compliant, and forward-thinking investments."
Considering the nature of Circular Economy, the Fund intends to invest in transitional economic activities, especially taken into consideration the imperative goal of ensuring the transition of ‘traditional’ SMEs that form the blanket of the economic system in the EU, in order for such a transition to be successful. Therefore, the minimum share of investments for transitional economic activities is 1% but will be determined and disclosed as the Fund deploys its capital over its lifetime.
The degree to which the Fund’s sustainable investments are investments in environmentally sustainable economic activities is measured (by default) by turnover. Where information about the degree to which an investment in a (potential) portfolio company is in an environmentally sustainable economic activity is not readily available from public disclosures, such information will be obtained directly from the (potential) portfolio company.
Furthermore, the Fund and its portfolio companies comply with the minimum safeguards of Art. 18 of the Taxonomy Regulation.
The compliance of the investments with the Taxonomy Regulation will not be subject to an assurance by auditors but will be subject to review by reputable third parties as well as by its specific Circular Board, comprising individuals and organisations with significant sectorial expertise, adherence and belief in sustainable objectives, and national and international reputation.
F. MONITORING OF THE SUSTAINABLE INVESTMENT OBJECTIVE
To consistently gauge progress toward our sustainable investment objective and assess sustainability indicators, the Fund employs a dynamic monitoring approach throughout its lifecycle. Impact performance data undergoes regular evaluation, occurring either quarterly or annually, contingent on the investee company's profile. LCA data and models, crucial at the outset of each investment period, receive updates at the conclusion of the investment term. This collaborative process involves engaging with our portfolio companies to reflect any shifts in their processes or products resulting from the investment.
To fortify our ESG oversight, we employ an annual ESG questionnaire, a comprehensive tool administered to all portfolio companies. The questionnaire serves as a conduit for collecting and evaluating ESG-related information, ensuring a holistic understanding of each company's sustainability landscape. Additionally, the Fund tracks (adverse) sustainability indicators for every portfolio company on an annual basis through the ESG questionnaire.
Emphasising a proactive stance on risk management, the Fund mandates portfolio companies to furnish written incident reports should they identify any issue posing a material risk to the realization of our sustainable investment objective. This multifaceted monitoring approach allows us to maintain a comprehensive grasp on the sustainability performance of our investments, ensuring alignment with our circular economy objectives.
G. METHODOLOGIES
To gauge the fulfilment of our sustainable investment objective, a dedicated science team within our trusted external partner, acting on behalf of the Fund, employs a robust science-based impact methodology. This method meticulously evaluates the climate and environmental impact of each investment in our portfolio. To precisely quantify the impact of a portfolio company's groundbreaking product or service, the Fund engages in the commissioning of LCAs. These assessments delve into the climate and various environmental impacts spanning all stages of a product's life – from raw material extraction through materials processing, manufacture, distribution, and usage. The calculated impact considers both the environmental improvements (impact perspective) and the business growth of the company (business perspective).
Throughout the holding period post-investment decision, the Fund strategically defines one to a maximum of four sustainability indicators for each portfolio company. These indicators encompass crucial metrics such as tons of GHG emissions, energy demand, resource consumption, and/or tons of waste. Notably, when investing in enabling technology companies—entities facilitating the reduction of ecological footprints for third parties—proxies are employed as sustainability indicators, ensuring a comprehensive assessment of their environmental impact. This methodical approach underscores our commitment to quantifying and enhancing the sustainability performance of our investments.
H. DATA SOURCES AND PROCESSING
To ensure the accuracy and comprehensiveness of LCA data for a portfolio company's product or service, a meticulous approach is taken. The company itself serves as the primary source of LCA data, offering insights into production processes and resource utilization. In cases where specific data is unavailable, a thorough modeling process or data acquisition from peer-reviewed scientific studies is employed. These LCAs are executed by experts extensively trained in LCA norms and standards, equipped with access to well-documented process data from globally recognized LCA databases.
For effective impact reporting and forecasting, portfolio companies collaborate with Sporos by providing current and projected business data aligned with their business plans. This includes critical information such as units sold, customers acquired, and more. To ensure the ongoing relevance of LCA data and models, regular updates are conducted in consultation with portfolio companies, accommodating any changes in their processes or products.
Additionally, vigilant monitoring of the target markets of start-ups is undertaken to identify and incorporate significant changes that might impact the environmental performance of a portfolio company. This invaluable data is meticulously stored in Sporos' data warehouse, adhering to stringent privacy standards as no customer data is requested or stored in this process. This robust methodology guarantees that our assessments remain dynamic, reflective of the evolving landscape, and anchored in the highest standards of accuracy and transparency.
J. LIMITATIONS TO METHODOLOGIES AND DATA
The data gathered from (potential) portfolio companies undergo verification processes, either internally or externally, triggered only in instances where misrepresentations are suspected. While this diligent approach helps maintain data integrity, it acknowledges the possibility that false information may go undetected in certain cases. Given the Fund's long-term investment horizon spanning several years, establishing and nurturing a trustworthy working relationship with portfolio companies is deemed a priority to guarantee adherence to our sustainable investment objective.
At present, there are no evident limitations regarding the accuracy of the data and the reliability of the sources employed. The Fund remains committed to transparency and diligence in addressing potential inaccuracies, leveraging a proactive approach to mitigate risks and uphold the integrity of our sustainability assessments.
K. DUE DILIGENCE
As an integral component of the due diligence process, an initial evaluation of how an investment aligns with the sustainable investment objective of the Fund is undertaken. This comprehensive process encompasses various elements, including a thorough LCA, conducted by Sporos' impact team, providing an insightful forecast of the (potential) portfolio company's product or service. Additionally, an ESG checklist and a technical assessment are integral parts of this due diligence phase. The technical assessment undergoes validation by technical experts, sourced either within Sporos' network, the Circular Board, or through professionally conducted assessments where applicable.
While the due diligence process involves meticulous scrutiny, the decision to initiate internal or external reviews or verifications is reserved for instances where misrepresentations are suspected. This balanced approach ensures a robust assessment while maintaining efficiency and flexibility in response to specific circumstances.
L. ENGAGEMENT POLICIES
The concept of engagement is integral to realizing the sustainable investment objective of the Fund. Beyond the confines of the Fund's portfolio companies, Sporos envisions fostering a positive impact by sharing insights and scientific knowledge. Collaborating with fellow venture capital funds, public institutions, and foundations is a cornerstone of this approach, aiming to elevate the entire ecosystem. Sporos actively engages with a spectrum of financial and non-financial market participants, startup communities, and public institutions to shape a comprehensive 'startup journey' for high-impact, marketable ideas, guiding them from ideation to growth stages. In addition, Sporos has already organised two editions of the ‘Athens Circular Forum’, the first such circular economy-focused event of its kind in Greece, to bring policymakers, market participants, and the general public in contact with each other around the concept of a circular economy. Sporos will continue to conduct such public awareness campaigns and activities in an ever-growing manner through its network and the increasing number of stakeholders who understand the opportunities that this transition has to offer. Our overarching goal is to propel impact investment into the mainstream, advocating for a circular economy with purpose-driven companies, heightened impact measurement standards, and more ambitious environmental legislation.
As part of our commitment, Sporos adheres to ESG principles for both its own organization and the Fund. Leveraging its role as a venture capital investor, Sporos wields significant influence over the Fund's portfolio companies through shareholdings, extending to matters related to sustainability. Sporos dedicates its best efforts to inspire and guide portfolio companies in upholding their circular economy commitments, forging specific co-developed plans. In cases where sustainability-related issues are identified, the Fund actively encourages and supports remedial actions, affirming its commitment to sustainable practices and continuous improvement.
M. ATTAINMENT OF THE SUSTAINABLE INVESTMENT OBJECTIVE
The Fund’s sustainable investment objective is to contribute to a general transition of the economic system to a circular economy. In order to measure the attainment of this sustainable investment objective, Sporos, for and on behalf of the Fund, applies the following sustainability indicators: tons of GHG emissions, energy demand, resource consumption and/or tons of waste. With regards to enabling technology companies, i.e., companies that support third parties to decrease their ecological footprint, proxies are used. The Fund uses a science-based methodology that assesses the climate and environmental impact of all its (potential) investments. In order to quantify the impact of a start-up’s innovative product or service, the Fund assesses by means of a LCA the climate and other environmental impacts associated with all stages of a product’s life – from raw material extraction through materials processing, manufacture, distribution, and use.
The Fund thus not only assesses the GHG emissions involved but gets a broader understanding of emissions, including plastic, water, land use footprints. By comparing the results with reference products on the market, the Fund can assess how much better a start-up’s innovation is (= improvement rate). Impact is calculated by assessing the environmental improvement (impact perspective) and the growth of a company (business perspective). After making an investment decision, the Fund will define one to maximum four impact KPIs to be tracked and reported on an annual basis. These KPIs are quantifiable and linked to the environmental outcome(s) the portfolio company aims to achieve. In cases where the Fund invests in nascent technologies that may achieve major environmental impact only in the long run the Fund will use proxies as impact KPIs.