Sustainability-related disclosures pursuant to Regulation (EU) 2019/2088 (“SFDR”)
Date of publication: January 2022
I. Sustainability risks
Picus Capital Management GmbH (“Picus”, LEI: 529900SI0TSI24DM7349) 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. Picus 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 through an informal process as appropriate in light of the circumstances of the individual case. The results of such assessment are taken into account when the investment decision is being taken. However, Picus remains free in its decision to refrain from investing or to invest despite sustainability risks, in which case Picus can also apply measures to reduce or mitigate any sustainability risks. At all times, Picus will apply the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context.
II. No consideration of adverse impacts of investment decisions on sustainability factors
Picus does not consider principal 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 Picus. What is more, the burden associated with considering adverse impacts on sustainability factors (particularly if sustainability indicators are used) is disproportionate in light of the very limited relevance that such impacts could have in the context of Picus investment strategy: Picus pursues an active venture capital strategy and invests mainly in start-ups with a software and technology driven business model located mainly in the European Union and partly in the US and other countries. As a result of the business and geographic focus (digital business models in mostly highly regulated jurisdictions), Picus investment decisions are rather unlikely to have severe adverse impacts on sustainability factors. Moreover, the Fund will only hold minority interests in its portfolio companies. Such minority interests are, however, generally not sufficient to exert influence on the Fund’s portfolio companies and to encourage them 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, Picus will re-evaluate considering principal adverse impacts of its investment decisions in due course. In the meantime, Picus remains free in its decision to use part of the sustainable indicators listed in Annex I of the RTS and/or an own set of indicators.
III. Remuneration disclosures
As a registered alternative investment fund manager within the meaning of section 2 (4) of the German Investment Code (Kapitalanlagegesetzbuch, “KAGB”), Picus does not have and does not need to have a remuneration guideline or policy in accordance with the requirements of the KAGB.
IV. Sustainability-related disclosures
- Picus Venture Fund II GmbH & Co. KG
Financial product: Picus Venture Fund II 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. 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 Picus for and on behalf of the Fund.
Der Fonds berücksichtigt bestimmte ökologische und/oder soziale Merkmale im Rahmen seiner Investitionsentscheidungen und Monitoring-Prozesse, strebt aber keine nachhaltigen Investitionen im Sinne der SFDR an. Die Berücksichtigung von Umwelt- und/oder Sozialmerkmalen erfolgt sowohl vor als auch nach einer Investition. Zu diesem Zweck werden zunächst und regelmäßig Informationen von den Portfoliounternehmen durch qualitative Abfragen eingeholt. Der Fonds bezieht Exklusionsaspekte (negatives Screening) in seinen Entscheidungsprozess ein. Dabei betrachtet der Fonds mehrere ESG-Themen als Schlüssel für verantwortungsvolles Investieren. Die in diesem Abschnitt beschriebenen Handlungen und Entscheidungen erfolgen jeweils durch Picus für den Fonds.
No sustainable investment objective
The Fund promotes environmental or social characteristics, but does not have 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 and equity-related investments in portfolio companies. The Fund has a technology and software driven focus; it will not focus on a specific industrial sector. The Fund intends to make its initial investments in the early to mid-stage, i.e. predominantely Series A to B rounds, but may, in exceptional cases, also invest in earlier or later stages.
The investments will be focused primarily on investments in companies in which Picus Capital GmbH, a German limited liability company affiliated with Picus and registered with the commercial register of the local court of Munich under HRB 220147 already holds a shareholding (such investment by Picus Capital the “Picus (Pre-) Seed Investments”), through which Picus Capital GmbH can already provide access advantages (e.g., contractual pro-rata subscription rights) and information advantages as a result of its early investment. The Fund may invest up to 30 % of the total capital commitments in companies that have not received a Picus (Pre-)Seed Investment and that are in a similar investment stage. Deviations from this provision require prior LPAC approval.
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 predominantly active in:
a) Performing research and innovation activities considered as illegal according to the applicable legislation in the country of the portfolio company.
b) 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, including without limitation, human cloning for reproduction purposes);
c) The production of, and trade in, tobacco;
d) The financing and production of, and trade in, weapons and ammunition of any kind;
e) Pornography & prostitution industry;
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 article 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. Moreover, the Fund obtains further information in reports from its portfolio companies where possible and specified in the SHA with the respective company. 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 in the course of its due diligence. Based on the results of such assessment the Fund identifies during its investment decision-making process whether the environmental or social characteristics promoted by the Fund are met. During the holding period, the Fund monitors and consults with its portfolio companies in order to assess whether 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 checklist is completed by the (potential) portfolio companies in the course of the due diligence conducted prior to each investment. The checklist must not be completed by the company itself, but by an external legal advisor. Moreover, during the holding period, the portfolio companies provide the Fund with reports for monitoring purposes where possible and specified in the SHA. The Fund also relies on publicly available date to continuously check the compliance with the investment exclusions. Hence, data is obtained from the (potential) portfolio companies and around 50 % 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 checklist 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 checklist 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.
Engagement is, in general, not part of the environmental or social investment strategy of the Fund. However, should the Fund determine any potential issues relating to the environmental or social characteristics promoted by the Fund or other ESG-related controversies in their portfolio companies, the Fund may engage the respective portfolio companies in discussions in order to resolve, reduce or mitigate any adverse effects. Yet, it remains at the sole discretion of the Fund to determine which efforts are appropriate and proportionate in light of the size and strategic importance of the respective portfolio company as well as the 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.
Last modified: 12 January 2023