Mandatory disclosures under Regulation of the European Parliament and of the Council on sustainability-related disclosures in the financial services sector (EU) 2019/2088 (“SFDR”).

Date of publication: 22.04.2023

Date of update: 25.04.2024 (disclosure of data on the consideration of principal adverse impacts, implementation of recent legislative and regulatory developments as well as editorial amendments)

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I. Sustainability risks

Leanox Impact Fund I GmbH & Co. KG (“Leanox”, LEI: HRA 11600) 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. Leanox considers sustainability risks as part of its due diligence process prior to any investment. This also includes an assessment of sustainability risks. Such assessment is being conducted using a scorecard. The results of such assessment are taken into account when the investment decision is being taken. However, Leanox remains free in its decision to refrain from investing or to invest despite sustainability risks, in which case Leanox can also apply measures to reduce or mitigate any sustainability risks. At all times, Leanox will apply the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context.

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II. No consideration of adverse impacts of investment decisions on sustainability factors

Leanox does not consider any adverse impacts of its investment decisions on sustainability factors and, hence, does not use the indicators listed in Annex I of the Regulatory Technical Standards (Delegated Regulation (EU) 2022/1288, “RTS”) to identify and assess potential adverse impacts. 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 Leanox. Moreover, 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. If and to the extent that the legal uncertainties will be resolved and a practicable market and administrative practice will evolve in this regard, Leanox will re-evaluate considering principal adverse impacts of its investment decisions in due course.

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III. Remuneration disclosures

As a manager of a qualifying venture capital fund as defined in Art. 3 (b) of Regulation (EU) No.345/2013 (“EuVECA-Regulation”), Leanox does not have and does not need to have a remuneration guideline or policy in accordance with the requirements of the EuVECA Regulation.

IV. Sustainability-related disclosures

Leanox Impact Fund I GmbH & Co. KG

Financial product: Leanox Impact Fund I GmbH & Co. KG (the “Fund”) LEI: HRA 11600

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Summary

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 and quantitative queries. The Fund incorporates inclusion (positive screening) as well as exclusion (negative screening) aspects during the decision-making process. 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 Leanox for and on behalf of the Fund.

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No sustainable investment objective

This financial product promotes environmental or social characteristics but does not have as its objective sustainable investment.

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Environmental or social characteristics of the financial product

Environmental, social and governance (ESG) factors are considered within the investment decision through a dedicated ESG scorecard. The Fund promotes environmental and/or social characteristics by implementing certain investment exclusions (see section ‘Investment strategy’) during the decision-making process.

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Investment Strategy

The Fund seeks long-term capital appreciation through equity and quasi-equity investments in socially or environmentally sustainable, European, early-stage impact innovation companies. The Fund invests industry-agnostic in startups that seek to solve an environmental or social problem at its core. The Fund further has a fifty-fifty-female principle, which signifies the goal of having gender parity in the portfolio and in its private investors. The aim is to have around 50% of female founders in its portfolio, by headcount. This means that the Fund can invest in only male, only female, and mixed teams, but by headcount across the portfolio, the ratio of men and women should be close to equal. This principle and the goal to raise its capital from 50% female private investors is rooted in the belief that it is time to bridge visionaries with role models and work towards more parity in the startup and VC scene. No investments are made in the area of exclusions. An exclusion list was created referring to the exclusion list published by the European Investment Bank (EIB). As part of the due diligence and ongoing investment management, the Fund's investment team will initially and continuously monitor whether the investment restrictions are abided by and whether the investment falls within the investment policies.

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The Partnership does not  invest, guarantee or otherwise provide financial or other support, directly or indirectly, to companies or other entities (A) whose business activity consists of an illegal economic activity (i.e., any production, trade or other activity which is illegal under the laws or regulations applicable to the Partnership or the relevant company or entity, including without limitation, human cloning for reproduction purposes), or (B) which substantially focus on:

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(i)       Tobacco: The production of, and trade in, tobacco, vaping products, e-cigarettes;

(ii)      Weapons and ammunition: The financing and production of, and trade in, weapons and ammunition of any kind, it being understood that this restriction does not apply to the extent such activities are part of or accessory to explicit European Union policies;

(iii)      Gaming: Casinos and equivalent enterprises;

(iv)      Specific electronic data programs or solutions: The research, development or technical applications relating to electronic data programs or solutions, which aim specifically at: (i) supporting any activity referred to under lit (a) through (d), (ii) internet gambling and online casinos; or (iii) pornography; or are intended to enable to illegally (i) enter into electronic data networks; or (ii) download electronic data.

("Partnership Exclusions").

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The Partnership ensures through corporate governance or otherwise that Portfolio Companies continue to comply with the above restriction during the term of the Partnership’s investment.

As part of the due diligence and ongoing investment management, the investment team will review whether a potential Portfolio Company has good governance practices in place. This might include using ESG (environmental, social, and governance) criteria to evaluate companies' performance in areas such as labour practices, human rights, and corporate governance, conducting due diligence on Portfolio Companies to assess their management structures, employee relations, and tax compliance, engaging with Portfolio Companies through to encourage improvements in governance practices if necessary. The intensity of the assessment is carried out following the principle of proportionality. Where the Managing Limited Partner sees higher risks of non-compliance, s/he will intensify her/his audit. 

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In this assessment, the Managing Limited Partner is at least partly reliant on the data provided by the (potential) Portfolio Companies. The information is verified only if and to the extent that misrepresentations are suspected.

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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 and/or social characteristics. 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 of Regulation (EU) 2020/852 (“EU Taxonomy”); hence, no portion of its investments will be aligned with the EU Taxonomy.

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Monitoring of environmental or social characteristics

The Fund has an increased awareness of the impact of environmental or social characteristics on risk management and thus on the value potential of investments. Upon investing, the Fund onboards its portfolio companies to a dedicated online platform (ImpactNexus) tracking impact-related KPIs in adherence to the Leanox Impact Framework (the “LIF”). The LIF lists for each impact factor of a portfolio company the outcomes, outputs, risks, and applicable SDGs measured through respective KPIs. Examples of KPIs might be the number of diabetes reversals observed in clinical studies, in case of a diabetes-reversal startup. Another example might be the reduction in energy usage through the installation of balcony solar panels. In terms of hydroponic agriculture, an example would be the litres of water saved through the innovative water recycling in the process. However, the consideration of these indicators strongly relies on the availability of relevant data.

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Methodologies

Currently, the methodologies applied comprise of collecting information via the due diligence data room provided by the target company and/or via inhouse research before any investment. Additionally, Leanox will apply its best efforts when negotiating an investment into a portfolio company, to reach a side letter agreement requiring the portfolio company to comply with Leanox's requirements as a financial market participant under the SFDR. The LIF lists, in a quantitative manner, for each impact factor of a portfolio company the outcomes, outputs, risks, and applicable SDGs and is conducted through impact workshops together with the portfolio company. The LIF is updated on a semi-annual basis.

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Data Sources and Processing

The Leanox scorecard, which includes a verification that the potential company does not operate within excluded sectors and/or non-designated countries, is completed by the investment manager for each of the targeted portfolio companies of the Fund. Data is obtained from the (potential) portfolio companies and from publicly available information.  No (proportion of) data is estimated. Unless misrepresentations are suspected, further research and investigation by the Fund or external verification are not being conducted regularly.

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Limitations to methodologies and data

The information collected via the Leanox scorecard 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, Leanox considers it a priority to establish and maintain trust within a good working relationship with the Fund's portfolio companies as a safeguard considering the limitations described in this section. Through active portfolio management, Leanox continues to survey that the limitations above do not affect how the environmental or social characteristics promoted by the financial product are met.

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Due Diligence

As a starting point, the assessment of how the Fund’s investments in the portfolio company relate to the environmental and social characteristics mentioned above is carried out as part of the due diligence process using an ESG scorecard next to an impact assessment, which is inherent to the overall Due Diligence process. Via the ESG scorecard, the Fund screen for ESG-related risks prior to any financial commitment, and should an issue be identified, the investment manager provides further insights into the investment committee briefing to consider during the decision-making process. Consequently, the focus of each ESG due diligence may differ. However, in all instances, Leanox will examine the areas that it regards as central to understanding the ESG profile of the business in which Leanox is considering an investment. This also includes good governance characteristics.

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Engagement Policies

Leanox aims to promote the pursuit of ESG considerations among the Fund's portfolio companies by sharing its views – in an ongoing and constructive dialogue, on matters such as adverse social and environmental impacts, as well as corporate governance. Should Leanox determine any potential issues relating the ESG or impact characteristics, it will engage with the respective portfolio company to resolve or reduce such issues, provided that such efforts will remain within a scope considered by Leanox in its absolute discretion to be proportionate considering its respective bargaining positions and transactional context.

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Designated reference benchmark

No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by the Fund.