Sustainability-related disclosures pursuant to Regulation (EU) 2019/2088 (“SFDR”) – editorial changes and necessary regulatory amendments due to the new RTS (EU) 2022/1288; integration of PT1 Early-Stage Fund II GmbH & Co. KG
As of 03 July 2023
I. SUSTAINABILITY RISKS
[The following text does not apply to the ERIC Opportunity Club Funds.]
ERIC Fund Management GmbH (the “Fund Manager”) (LEI: 391200YQUH0SXNKOEJ32) is the alternative investment fund manager of PropTech1 Fund I GmbH & Co. KG and of PT1 Early-Stage Fund II GmbH & Co. KG. The Fund Manager considers sustainability risks as part of its investment decision-making process. Sustainability risks are environmental, social or governance events or conditions, the occurrence of which could have an actual or potential material adverse effect on the value of the investment. The Fund Manager considers and assesses sustainability risks as part of the due diligence process prior to each investment. This also includes an assessment of sustainability risks. Such assessment is being conducted by using a questionnaire. The results of such assessment are taken into account when the investment decision is being taken. The Fund Manager generally remains free in its decision to refrain from investing or to invest despite sustainability risks in which case the Fund Manager can also apply measures to reduce or mitigate any sustainability risks. The Fund Manager will apply the principle of proportionality in dealing with sustainability risks taking due account of the size and nature of the investment as well as its transactional context and the respective margins for action.
II. NO CONSIDERATION OF SUSTAINABILITY ADVERSE IMPACTS
The Fund Manager does not consider adverse impacts of its investment decisions on sustainability factors and, hence, does not use the sustainability indicators listed in Annex I of the Regulatory Technical Standards (Delegated Regulation (EU) 2022/1288, “RTS”) to identify and assess potential adverse impacts. Sustainability factors are environmental, social and employee concerns, respect for human rights and the fight against corruption and bribery. Given that the SFDR, the Regulation (EU) 2020/852 (“Taxonomy”) and the accompanying RTS are relatively new legislative acts, there is very little or no practical experience or practice with regard to the application of their respective provisions. Therefore, substantial legal uncertainties would remain when applying those provisions to the strategies pursued by the Fund Manager. Furthermore, the administrative burden associated with considering adverse impacts on sustainability factors for the Fund Manager and the portfolio companies (particularly if sustainability indicators are used) is disproportionate in light of the limited relevance that such impacts could have in the context of the Fund Manager’s investment strategy: The Fund Manager pursues an active venture capital strategy and invests in young start-ups mainly active in Europe. The Fund will only hold minority interests in its portfolio companies. Such minority interests are, however, generally not sufficient to encourage the Fund’s portfolio companies to collect and provide the relevant data. Therefore, the Fund Manager is not in a position to positively assume it will be able to obtain sufficient information from portfolio companies to satisfy the disclosure obligations of Art. 4 SFDR. If and to the extent that the legal uncertainties will be resolved and a practicable market and administrative practice will evolve in this regard, the Fund Manager will re-evaluate considering principal adverse impacts of its investment decisions in due course.
III. REMUNERATION DISCLOSURE
As a registered alternative investment fund manager within the meaning of section 2 (4) of the German Investment Code (Kapitalanlagegesetzbuch, “KAGB”) and a manager of a qualifying venture capital fund as defined in Art. 3 (b) of Regulation (EU) No. 345/2013 (“EuVECA-Regulation”), the Fund Manager does not have and does not need to have a remuneration guideline or policy in accordance with the requirements of the KAGB or the EuVECA Regulation. Sustainability risks are not considered with respect to the determination of the remuneration.
IV. SUSTAINABILITY-RELATED DISCLOSURES
1. PropTech1 Fund I GmbH & Co. KG
Financial product: PropTech1 Fund I GmbH & Co. KG (the “Fund” / der “Fonds”)
The Fund considers certain environmental and/or social characteristics as part of its investment decisions and monitoring processes but does not seek to make sustainable investments as defined in the SFDR.
The consideration of environmental and/or social characteristics is carried out both before and after an investment. For this purpose, information is initially and regularly obtained from the portfolio companies by means of qualitative queries. The Fund incorporates exclusion (negative screening) aspects during the decision-making process by excluding certain sectors from its investment focus and by conducting a structured ESG due diligence prior to each investment. Thereby the Fund considers several ESG themes to be the key to responsible investing. The actions and decisions described in the following section are each made by the Fund Manager for and on behalf of the Fund.
No sustainable investment objective
The Fund promotes environmental or social characteristics but does not pursue as its objective sustainable investment.
Environmental or social characteristics of the financial product
The Fund promotes environmental and/or social characteristics by implementing certain investment exclusions (see section ‘Investment strategy’) during the decision-making process.
The purpose of the Fund is to build, hold and manage (including to divest) a portfolio of equity, equity-related investments in portfolio companies.
The Fund invests in portfolio companies which are active in the business area „Property Technologies“, i.e. in particular the introduction or optimization of procedures, processes or complete business models with the help of the latest information and communication technology in the real estate industry (e.g., in the areas of real estate financing, management, brokerage, architecture or construction, connected home and other real estate-related technologies and services). The focus is on portfolio companies based in Europe, with a focus on companies from the German-speaking region. The fund generally pursues a long-term and sustainable investment strategy.
At least 75% of the total capital commitments shall be invested in companies domiciled in Western and Central Europe. Investments in companies domiciled outside Europe may only be made if these companies have their registered office in the USA, whereby they must comply with any special regulatory requirements that may apply in this respect; further, if the main activity of the companies has a focus on Europe.
The Fund is bound by the investment restrictions and limitations set out in the Fund’s limited partnership agreement and shall procure that such requirements, restrictions and limitations are complied with at all times. In particular, the Fund will screen each investment opportunity against its investment exclusions and no investments will be made in the area of such exclusions.
The Fund shall not invest, guarantee or otherwise provide financial or other support, directly or indirectly, to companies, including portfolio companies, or other entities whose business activity constitutes an illegal economic activity under the applicable law;
- involves the financing or production of arms and ammunition of any kind;
- involves the operation of casinos and similar establishments including online betting and online casinos; or
- involves pornography.
Furthermore, the Fund shall not make direct investments in real estate.
Good governance practices are assessed through an informal process as appropriate in light of the circumstances of each individual case. Such practices include, in particular, sound management structures, employee relations, remuneration of staff and tax compliance within the portfolio companies. Moreover, the Fund will conduct regular monitoring of the good governance practices in its portfolio companies during the holding period. If the Fund becomes aware of severe governance issues, it will investigate them and work with all parties involved to find an appropriate solution.
Proportion of investments
The Fund will invest fully in line with its investment strategy and investment restrictions, i.e., will only make investments which are aligned with its environmental or social characteristics (i.e., its investment exclusions). The Fund does not make and does not intend to make sustainable investments within the meaning of Art. 2 no. 17 SFDR or environmentally sustainable investments within the meaning of Art. 3 Taxonomy; hence, no portion of its investments will be aligned with the Taxonomy.
Monitoring of environmental or social characteristics
The Fund has an increased awareness on the impact of environmental or social characteristics on risk management and thus on the value potential of investments. In order to monitor the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions), the Fund consults with the portfolio companies in regular intervals and will carry out further checks in order to identify potential issues with such characteristics. Therefore, the Fund monitors compliance with its environmental or social characteristics (i.e., its investment exclusions) on an ongoing basis. External monitoring mechanisms are not in place.
Methodologies for environmental or social characteristics
The Fund applies qualitative assessments with regard to its environmental or social characteristics (i.e., its investment exclusions).
The Fund conducts an initial assessment of the promoted environmental or social characteristics in the course of its due diligence. Based on the results of such assessment the Fund identifies pre-investment whether the environmental or social characteristics promoted by the Fund are met. During the holding period, the so conducted assessment forms the basis to measure and monitor if the characteristics are continuously being met.
Data sources and processing
In order to attain each of the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions), a questionnaire is completed by the (potential) portfolio companies in the course of the due diligence conducted prior to each investment.
Moreover, during the holding period, the Fund regularly consults with the portfolio companies and relies on publicly available data to continuously check the compliance with the investment exclusions. Hence, most data is obtained from the (potential) portfolio companies and around 10% of the relevant data is estimated or supplemented by information publicly available. An internal or external review or verification of the information obtained will be carried out if misrepresentations are suspected.
Limitations to methodologies and data
The information collected from the (potential) portfolio companies via the questionnaire as part of the due diligence is internally or externally verified only if and to the extent misrepresentations are suspected. Thus, it cannot be ruled out completely that false information may remain undetected in certain cases. As the Fund’s investments are made for several years, the Fund considers it a priority to establish and maintain a trustful working relationship with its portfolio companies in order to ensure compliance with the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions). Further limitations, in particular with regard to the accuracy of the data and reliability of the data sources used, are not apparent at this time.
An initial assessment of how an investment relates to the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions) is carried out as part of the due diligence process using a questionnaire and, where required based on the inherent ESG risk of the portfolio company, through an enhanced analysis. As a rule, purely qualitative statements of an environmental or social nature or relating to corporate governance are requested from the portfolio companies and then taken into account in the investment decision-making process. An internal or external review or verification of the information obtained will only be carried out if misrepresentations are suspected.
Should the Fund Manager on behalf of the Fund determine any potential issues relating to environmental or social characteristics (i.e., the exclusions referenced above), the Fund Manager will engage in discussions with the portfolio company’s manager in order to resolve such issues, provided that such efforts will always remain at a level that the Fund Manager, in its sole discretion, considers to be proportionate in light of the size and strategic importance of the respective investment in the portfolio companies and that takes into account the respective negotiation positions and transactional context.
Designated reference benchmark
No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by the Fund.
2. PT1 Early-Stage Fund II GmbH & Co. KG
Financial product: PT1 Early-Stage Fund II GmbH & Co. KG
- any illegal economic activity (i.e., any production, trade or other activity, which is illegal under the laws or regulations applicable to the Fund or the relevant portfolio company);
- the financing and production of, and trade in, weapons, military equipment, armaments, ammunition or arms, of any kind, including any activities which foster, support or enable the aforementioned activities;
- gambling (Glücksspiel) and betting, including online gambling platforms/providers (Glücksspielanbieter);
- eroticism and Pornography; or
- the research, development or technical applications relating to electronic data programs or solutions, which are intended to enable to illegally (i) enter into electronic data networks; or (ii) download electronic data.