As of 23 December 2022
SUSTAINABILITY RISKS
ERIC Fund Management GmbH (the „Fund Manager“) is the alternative investment fund manager of PropTech1 Fund I GmbH & Co. KG and of PT1 Early-Stage Fund II GmbH & Co. KG (each the “Fund”). 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 since 01.01.2021 if the target company already reached a certain size/maturity (Series-A and above). 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.
NO CONSIDERATION OF SUSTAINABILITY ADVERSE IMPACTS
The Fund Manager does currently not consider adverse impacts of investment decisions on sustainability factors (i.e. environmental, social and employee concerns, respect for human rights and the fight against corruption and bribery) within the meaning of Art. 4 SFDR. Currently, the Fund Manager is not in a position to positively assume it will in all cases be able to always obtain sufficient information from portfolio companies to satisfy the disclosure obligations of Art. 4 SFDR as further detailed in the RTS. Furthermore, the Sustainable Finance Disclosure Regulation (EU 2019/2088) is new and untested, there is no or only very limited practical experience with the application of its provisions. If and to the extent a practicable market practice and administrative practice evolves ensuring a sufficient flow of information, the Fund Manager will assess anew whether to consider sustainability adverse impacts.
REMUNERATION DISCLOSURE
As a registered alternative investment fund manager within the meaning of section 2 (4) of the KAGB and a manager of a qualifying venture capital fund as defined in article 3 (b) of the 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.
SUSTAINABILITY-RELATED DISCLOSURES
Summary
The Fund considers ESG principles within its investment processes i) by excluding certain sectors from its investment focus, ii) by conducting a structured ESG due diligence prior to each investment as of 01.01.2021 at least as long as the startup already reached a certain size/maturity (Series-A and above) at the time of entering into the investment. The Fund Manager takes into account such exclusions as well as the results of the ESG due diligence prior to the investment as well as after an investment on the basis of ongoing reports in a proportionate and appropriate manner considering the organizational structures and investment strategy of the Fund.
No sustainable investment objective within the meaning of the SFDR
The Fund promotes environmental or social characteristics (Article 8), but does not have sustainable investments as defined in Article 9 as its objective.
Environmental or social characteristics of the financial product
The Fund does not invest in portfolio companies whose business includes
illegal economic activities pursuant to the respective applicable laws;
the financing and production of weapons and ammunition of all kinds;
the operation of casinos or equivalent enterprises including online betting and online casinos; or
pornography.
As part of the ESG due diligence which is being conducted prior to each investment of the fund since 01.01.2021, if the startup already reached a certain size/maturity (Series-A and above), environmental and social aspects are addressed. The specific topics and questions may vary depending on the type of portfolio company. Generally, questions regarding the ecological footprint as well as diversity, inclusion, working conditions and corporate governance are included. The results of this assessment are not legally binding. However, they are considered as material factors in the respective investment decision.
Investment strategy
The Fund invests in portfolio companies which are active in the field of property technology, in particular with the optimization of workflows, processes or complete business models by taking advantage of new information and communication technology in the real estate sector as their business model (e.g. in the areas of real estate finance, management and brokerage, architecture and construction industry, connected home and other real estate-related technologies and services.
Proportion of investments
The Fund does not invest a fixed percentage in portfolio companies aligned with environmental and/or social characteristics. The Fund will invest fully in line with its investment strategy. No portion of the Fund’s capital will be allocated to other asset classes.
Monitoring of environmental or social characteristics
On behalf of the Fund, the Fund Manager monitors prior to the investment as well as after an investment i) whether the portfolio companies’ business activities comprise of any of the above mentioned exclusions, ii) furthermore, regular ESG reporting, e.g. annual reporting, has been agreed upon for all new portfolio companies as of 01.01.2021 that already reached a certain size/maturity (Series-A and above) at the time making the investment. Post-investment monitoring is conducted through close informal exchange and communication with the portfolio companies of the Fund. However, the Fund Manager does not initiate regular reviews, at least as long as the data reported by the Portfolio does not give raise to any reasonable doubts.
Methodologies
Currently, the methodologies applied consist of obtaining information from the portfolio companies prior to the investment, i.e. within the due diligence process, as well as following the investment, i.e. in the course of regular exchange between the Fund Manager and the Fund’s portfolio companies. As a rule, there is currently no quantitative measurement with regard to environmental or social characteristics and, as a rule, no sustainability indicators are currently used.
Data sources and processing
Apart from regular communication between the Fund Manager and the Fund’s portfolio companies, the Fund Manager does not conduct further research or investigations on a regular basis, at least as long as the data reported by the portfolio does not give raise to any reasonable doubts.
Limitations to methodologies and data
The information collected via the Funds Manager’s due diligence for the Fund is 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 investment is made for several years, the Fund Manager considers it a priority to establish and maintain a trustful working relationship with the Fund’s portfolio companies in order to ensure compliance with the restrictions described in this section.
Due diligence
The assessment of how the Fund’s investment in the portfolio company relates to the environmental or social characteristics mentioned above is carried out as part of the due diligence process. No further reviews will be conducted beyond such due diligence process unless the Fund Manager deems it appropriate to conduct an ad hoc review in a specific case.
Engagement
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.
Further Initiatives
In addition to this, the fund manager is a signatory of the UN Principles for Responsible Investment and herewith commits to their guidelines in relation to responsible investment practices. This comes along with an annual reporting that will be conducted in line with the guidelines and requirements laid out by the UN PRI. Furthermore, the fund is a member of the initiative “Leaders for Climate Action”, which supports environmental awareness.
