Sustainability Risk Policy

(Article 3)

EU Sustainable Finance Disclosure Regulation

The Sustainable Finance Disclosure Regulation (“SFDR” or the “Regulation”) applied from 10 March 2021. The Regulation requires financial market participants such as HPE Growth B.V. (the “firm” or “HPE Growth”) to provide information to investors with regards to the integration of sustainability risks, the consideration of adverse sustainability impacts, the promotion of environmental or social characteristics, and sustainable investment.

The firm considers principal adverse impacts of investment decisions on sustainability factors in a manner appropriate to its size and the nature and scale of its activities and the types of financial product it makes available. Depending on the characteristics of the product which it is managing, and in particular the product’s designation as promoting “environmental or social characteristics” or having “sustainable investment” as its objective, the firm will determine and disclose whether, and the extent to which, it considers the principal adverse impacts of its investment decisions.

In relation to products that do not expressly claim to promote environmental or social characteristics or have a sustainable investment objective, HPE Growth does not consider the principal adverse impacts of its investment decisions.

In relation to products that promote environmental or social characteristics, or have sustainable investment as their objective, the firm considers principal adverse impacts to the extent described in that product’s pre-contractual documents. In all cases, please refer to a product’s pre-contractual information for the specific policies applicable to that product.

Therefore, this Principal Adverse Sustainability Impacts Statement (“this Statement”) specifically addresses the obligation in Article 4(1)(a) of the Regulation:

“Financial market participants shall publish and maintain on their websites:

(a) where they consider principal adverse impacts of investment decisions on sustainability factors, a statement on due diligence policies with respect to those impacts, taking due account of their size, the nature and scale of their activities and the types of financial products they make available.”

HPE Growth notes that pursuant to the Regulation, the EBA, EIOPA and ESMA (the “ESAs”) are mandated to develop regulatory technical standards (the “RTS”) with respect to climate and other environment-related adverse impacts, and with respect to social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters.

HPE Growth notes further that as of the date of this Statement, the European Commission has adopted the RTS, which has not yet been ratified. Notwithstanding the aforementioned, where adverse impacts are considered in respect of one of the firm’s products, the firm will apply the standards as set out in the adopted RTS as of the date of this Statement and will take into account ongoing advice to monitor and update its related policies and procedures where necessary due to any change in the RTS in order to ensure alignment and compliance with applicable laws and regulations.

HPE Growth will also monitor the development and adoption of any further regulation and RTS and consider, where appropriate on a product-by-product basis, the adoption of those standards to be set out in such regulation or RTS.

More information related to the firm’s responsibilities under the SFDR, and the firm’s approach to environmental, social and governance (“ESG”) factors and responsible investment in general, can be found on the firm’s website here.

Sustainability risks

 

A “Sustainability Risk” as defined in Article 2 (22) of the Regulation is: “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 an investment”.

Sustainability Risks include (but are not limited to) the following:

• environmental risks such as the impact of environmental events such as increased flooding risks on operations of portfolio companies;
• social risks such as impact of non-compliance with anti-slavery or working conditions laws and regulations by portfolio companies which could affect the community and/or society; and
• governance risks such as inadequate management oversight of portfolio companies.

 

Integration of sustainability risks in investment processes

 

The firm has a long-standing commitment to corporate responsibility. In recognition of the importance of responsible investment, the firm is a signatory to and integrates the United Nations-supported Principles for Responsible Investment (“PRI”), the United Nations Sustainable Development Goals (“SDGs”) and ESG factors throughout the investment appraisal, due diligence, decision-making and post-investment monitoring process. The Sustainability Risks as defined in Article 2(22) of the Regulation are considered to be embedded in, and inherently form part of, the ESG matters taken into account throughout the investment screening, life cycle of the investment and post-investment monitoring process.

The term ESG matters (or ESG factors) as used throughout this Sustainability Risk Policy should be interpreted in the common usage of the term, to represent ideas that have an ESG connection but are not necessarily Sustainability Risks as defined in Article 2(22) of the Regulation. Where some procedures refer to considering ESG matters rather than Sustainability Risks, that’s done to indicate that the procedure includes the consideration of matters / factors that are related to but do not fall into the specific category of Sustainability Risks as defined in the Regulation.

HPE Growth incorporates ESG matters into its investment analysis and decision-making processes by evaluating each investment opportunity based on an internal ESG framework. Physical and transition risks, and their materiality to the particular investment, are considered quantitatively and qualitatively as part of the initial investment opportunity screening stage, commercial and business due diligence, final due diligence and the investment decision stage.

The portfolio asset space in which the firm focuses, namely technology companies in developed European countries, is, in general, subject to low environmental risks, i.e. physical and transition risks compared to other markets. Therefore, in terms of Sustainability Risks, the firm  mainly differentiates its portfolio companies based on how they address social and governance risks, as opposed to environmental risks. HPE Growth takes into account social and governance characteristics of potential investment opportunities throughout its investment process.  In the initial screening stage, due diligence and investment decision stage, the product and/or service offering of investment opportunities are assessed based on their alignment with ESG matters, including the extent to which Sustainability Risks are considered by the investment opportunity’s management team. In addition, investment opportunities are assessed based on the existence and effectiveness of their policies governing relations with employees and business practices. HPE Growth believes that companies with responsible social and governance practices are likely to be less prone to problematic social and governance incidents that harm asset value.

HPE Growth is likely to reject an investment into a company based on responsible investment grounds if certain essential ESG criteria are not met at the point of initial investment appraisal.

However, the firm may consider an investment if it does not meet all ESG criteria on initial appraisal and from time to time, the firm may invest in situations that do not meet all ESG criteria upon investment provided that the investment team can demonstrate a clear action plan to achieve the required standards within a reasonable period of time post-investment (e.g., by implementing remedial action plans developed in the light of due diligence findings).