Disclosures pursuant to Regulation (EU) 2019/2088
Updated September 6, 2023
As part of its action plan on financing sustainable growth, the EU has introduced the regulation 2019/2088, i.e. the Sustainable Finance Disclosure Regulation (“SFDR”), which sets out sustainability disclosure requirements for a broad range of financial market participants, financial advisers and financial products. Such disclosure requirements relate to specific information on financial market participants’ approaches to integrating sustainability risks and considering adverse sustainability impacts as well as product specific characteristics.
As a capital management company (Kapitalverwaltungsgesellschaft) which is registered with the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin), Vidia GmbH (“Vidia”, also referred to as “we”, “us”, “our”) is subject to such disclosure obligations. The content disclosed herein has been carefully drafted to comply with the provisions of the SFDR and reflects the regulatory technical standards which the European Commission adopted on 6 of April 2022 as delegated regulation and subsequent guidance. Various legal questions relating to the SFDR have not been officially clarified by the European Supervisory Authorities or BaFin and, therefore, remain controversial or vague. Any changes to the very limited official guidance available or any issuance of further guidance may require revisions of, and major changes to, the form, scope and substance of these disclosures.
Sustainability Risks
Vidia is required to publish on its website information on its policies on the integration of sustainability risks in its investment decision-making process (Art. 3 (1) SFDR). According to Art. 2 (22) SFDR, 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 (“Sustainability Risks”).
Vidia pursues an investment strategy targeting financial returns and positive climate impact. Considering Sustainability Risks forms an integral part of our pre-investment assessment of each investment. The pre-investment phase is structured into two stages, screening (consisting of positive and negative screening criteria) and due diligence. The ESG due diligence is conducted by our Director of Impact & ESG in close cooperation with experienced external ESG consultants as well as Vidia’s investment team and involves an assessment of ESG risks (including Sustainability Risks) as well as the target company’s capacity to manage such risks. The ESG due diligence results in an ESG score which informs Vidia’s investment team when preparing, and the investment committee when taking, an investment decision.
Statement on principal adverse impacts of investment decisions on sustainability factors
Financial market participant
Vidia GmbH, LEI: 391200QRKTPFWDDFQX88
Update as of June 28, 2023 regarding PAI Indicators for 2022
Pursuant to Art. 4 (3) Commissions Delegated Regulation (EU) 2022/1288, financial market participants publishing principal adverse impact statements for the first time shall cover the period from the date on which the principal adverse impacts of investment decisions on Sustainability Factors were first considered until 31 December of that year; and such information must be published by 30 June of the following year. Vidia started its operations when it obtained its BaFin registration on February 7, 2022. Therefore, the first reporting period for PAI Indicators runs from February 7, 2022 to December 31, 2022. During that time, Vidia has launched its business, grown its team and screened a significant number of deals, but has not acquired any companies (i.e. not taken any investment decision in relation to which principal adverse impacts could have been considered and monitored). Nonetheless, the procedural descriptions herein continue to apply in Vidia’s investment process and principal adverse impacts will be considered in all investment decisions taken or to be taken in 2023.
Summary
Vidia considers principal adverse impacts of its investment decisions on sustainability factors. The present statement is the consolidated statement on principal adverse impacts on sustainability factors of Vidia.
This statement on principal adverse impacts on sustainability factors covers the reference period from January 1, 2022 to December 31, 2022.
Vidia’s first fund is being raised and has not yet made any investments during the reference period. Therefore, no principal adverse impacts on investment decisions on sustainability factors could be considered during the reference period. The following sets forth Vidia’s policies with respect to principal adverse impacts of investment decisions on sustainability factors (according to Art. 2 (24) SFDR sustainability factors mean environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters (“Sustainability Factors”)).
German translation
Vidia berücksichtigt die wichtigsten nachteiligen Auswirkungen ihrer Investitionsentscheidungen auf Nachhaltigkeitsfaktoren. Bei der vorliegenden Erklärung handelt es sich um die konsolidierte Erklärung zu den wichtigsten nachteiligen Auswirkungen auf die Nachhaltigkeitsfaktoren von Vidia.
Diese Erklärung zu den wichtigsten nachteiligen Auswirkungen auf die Nachhaltigkeitsfaktoren bezieht sich auf den Bezugszeitraum vom 1. Januar 2022 bis zum 31. Dezember 2022.
Vidias erster Fonds befindet sich im Fundraising und hat im Bezugszeitraum keine Investitionen getätigt. Daher konnten die wichtigsten nachteiligen Auswirkungen von Investitionsentscheidungen auf Nachhaltigkeitsfaktoren im Referenzzeitraum noch nicht berücksichtigt werden. Die nachfolgenden Ausführungen beschreiben Vidias Richtlinien bzgl. der wichtigsten nachteiligen Auswirkungen von Investitionsentscheidungen auf Nachhaltigkeitsfaktoren (gem. Art. 2 (24) SFDR sind das Umwelt-, Sozial- und Arbeitnehmerbelange, die Achtung der Menschenrechte und die Bekämpfung von Korruption und Bestechung („Nachhaltigkeitsfaktoren“).
Description of the principal adverse impacts of investment decisions on sustainability factors
Vidia’s first fund is being raised and has not made any investments during the reference period. Therefore, no principal adverse impacts on investment decisions on sustainability factors could be considered during the reference period. With regard to Vidia’s policies which are to be applied once Vidia’s fund has been closed and commences its investment activities, please refer to the following statements.
Description of policies to identify and prioritise principal adverse sustainability impacts
In accordance with its bespoke Vidia Impact Methodology which has been developed with and approved by Vidia’s senior management on 01.01.2022, Vidia conducts an ESG due diligence prior to closing an investment. Such ESG due diligence is conducted by Vidia’s Director of Impact & ESG,who is also responsible for implementing the Vidia Impact Methodology in close cooperation with external ESG consultants as well as Vidia’s investment team and includes an assessment of ESG risks (including principal adverse impacts on Sustainability Factors) and opportunities of investment targets. The results of the ESG due diligence are then used to form an ESG score which informs Vidia’s investment team when preparing, and Vidia’s investment committee when taking, an investment decision.
The following PAI Indicators have been chosen for their relevance considering the Fund’s investment strategy on the one hand and the Fund’s commitment to support portfolio companies in establishing sound governance frameworks on the other hand:
Vidia identifies and assesses PAI Indicators before and after making an investment on behalf of its (future) funds along the value chain of the company, including the alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. Based on the results of the assessment each potential investment receives an ESG score. Such ESG score factors in the probability of occurrence and severity of adverse impacts including potentially irremediable character. Furthermore, improvement potentials are identified and recommendations regarding respective measures to enhance the ESG score are provided. The identified improvement areas also serve as basis for establishing specific ESG targets in cooperation with the portfolio company. During the holding period the PAI Indicators will be monitored.
The assessments described rely significantly on data provided by the portfolio companies. Although, during the due diligence, Vidia, and its external ESG consultants respectively, may complement such data by information obtained from other sources such as market research (sourced internally and/or externally) and expert interviews. Errors cannot be completely excluded. However, given that each assessment will heavily depend in scope and depth on the individual circumstances of the respective transaction, there is no general margin of error that could be calculated or expected throughout the portfolio.
Engagement policies
At Vidia, we typically seek majority ownership of our (future) funds’ portfolio companies. We support the management of the portfolio companies, e.g. by sharing the expertise of our own team as well as our consultants. Together with the portfolio companies’ management teams we work towards generating financial value and positive climate impact and this involves, based on our bespoke Vidia Impact Methodology, avoiding, measuring and reducing principal adverse impacts on Sustainability Factors based on our ownership policies and practices. We expect reductions of principal adverse impacts over the reference periods in line with our set targets and will explore and resolve situations where such reductions appear to be at risk.
References to international standards
Based on its bespoke Vidia Impact Methodology, Vidia is committed to contribute to the objectives of the Paris Agreement. Therefore, Vidia seeks to invest through its (future) funds in companies whose product/service offering includes competitive and scalable climate solutions and whose growth strategy is or can be aligned with the climate goals of the Paris Agreement.
Our bespoke Vidia Impact Methodology is based on the five dimensions of impact defined by the Impact Management Project (IMP). Vidia is a signatory to the Principles of Responsible Investment (PRI) as well as a signature to the Operating Principles for Impact Management and the Global Impact Investing Network (GIIN).
Sustainability-related disclosures (Art. 9 SFDR)
Summary
Vidia Climate Fund I GmbH & Co. KG (the “Fund”) is an impact private equity fund managed by Vidia. Thus, the actions and decisions described in the following section are each made by Vidia for and on behalf of the Fund. Furthermore, Vidia also manages a feeder vehicle (solely) investing in the Fund (Vidia Climate Fund I Feeder GmbH & Co. KG, the “Feeder”, and Vidia Climate Fund I Network GmbH & Co. KG, the “Network Feeder”, together with the Feeder the ”Feeders”). Given that the Feeders only invest in the Fund, all sustainability-related disclosures are identical to those relating to the Fund and, therefore, any reference to the Fund shall hereinafter relate to the Feeders mutatis mutandis. The Fund pursues an impact private equity strategy and qualifies under Art. 9 SFDR as it has sustainable investments within the meaning of Art. 2 (17) SFDR as its objective. Sustainable investments are investments in an economic activity that contributes to an environmental objective, as measured, for example, by key resource efficiency indicators on the use of energy, renewable energy, raw materials, water and land, on the production of waste, and greenhouse gas emissions, or on its impact on biodiversity and the circular economy, or an investment in an economic activity that contributes to a social objective, in particular an investment that contributes to tackling inequality or that fosters social cohesion, social integration and labour relations, or an investment in human capital or economically or socially disadvantaged communities, provided that such investments do not significantly harm any of those objectives and that the investee companies follow good governance practices, in particular with respect to sound management structures, employee relations, remuneration of staff and tax compliance (“Sustainable Investments”).
The Fund’s sustainable investment objective is to accelerate the “decarbonisation” of the economy through private equity investments. Accordingly, the Fund invests in private companies with a focus on climate solutions. Portfolio companies within the following industry verticals: energy, industry, transportation, buildings, and food & agriculture must have a measurable positive climate impact. During the pre-investment phase, the Fund conducts an ESG due diligence and a climate impact assessment for each investment it makes. Such assessments are conducted by Vidia’s Director of Impact & ESG in close cooperation with external ESG consultants as well as Vidia’s investment team. During the holding phase, Vidia monitors and tracks ESG risks as well as climate impact based on its bespoke Vidia Impact Methodology. Vidia is committed to actively support the Fund’s portfolio companies to achieve the agreed impact targets which are the key indicators for the Fund in attaining its sustainable investment objective.
German translation
Die Vidia Climate Fund I GmbH & Co. KG (der “Fonds“) ist ein von Vidia verwalteter Impact Private Equity Fonds. Daher werden die im folgenden Abschnitt beschriebenen Handlungen und Entscheidungen jeweils von Vidia für und im Namen des Fonds getroffen. Außerdem verwaltet Vidia Feeder Vehikel, die ausschließlich in den Fonds investieren (Vidia Climate Fund I Feeder GmbH & Co. KG, der „Feeder“, sowie Vidia Climate Fund I Network GmbH & Co. KG, der “Network Feeder”, zusammen mit dem Feeder die “Feeder”). Da die Feeder ausschließlich in den Fonds investieren, sind all sind die nachhaltigkeitsbezogenen Offenlegungen identisch zu denen des Fonds, weshalb nachfolgend jede Referenz des Fonds entsprechend für die Feeder gilt. Der Fonds verfolgt eine Impact-Private-Equity-Strategie und erfüllt die Voraussetzungen von Art. 9 SFDR, da nachhaltige Investitionen im Sinne von Art. 2 (17) SFDR angestrebt werden. Nachhaltige Investitionen sind Investitionen in eine wirtschaftliche Tätigkeit, die zur Erreichung eines Umweltziels beiträgt, gemessen beispielsweise an Schlüsselindikatoren für Ressourceneffizienz bei der Nutzung von Energie, erneuerbarer Energie, Rohstoffen, Wasser und Boden, für die Abfallerzeugung, und Treibhausgasemissionen oder für die Auswirkungen auf die biologische Vielfalt und die Kreislaufwirtschaft, oder eine Investition in eine wirtschaftliche Tätigkeit, die zur Erreichung eines sozialen Ziels beiträgt, insbesondere eine Investition, die zur Bekämpfung von Ungleichheiten beiträgt oder den sozialen Zusammenhalt, die soziale Integration und die Arbeitsbeziehungen fördert oder eine Investition in Humankapital oder zugunsten wirtschaftlich oder sozial benachteiligter Bevölkerungsgruppen, vorausgesetzt, dass diese Investitionen keines dieser Ziele erheblich beeinträchtigen und die Unternehmen, in die investiert wird, Verfahrensweisen einer guten Unternehmensführung anwenden, insbesondere bei soliden Managementstrukturen, den Beziehungen zu den Arbeitnehmern, der Vergütung von Mitarbeitern sowie der Einhaltung der Steuervorschriften (“Nachhaltige Investitionen“).
Das nachhaltige Anlageziel des Fonds besteht darin, die “Dekarbonisierung” der Wirtschaft durch Private-Equity-Investitionen zu beschleunigen. Dementsprechend investiert der Fonds in private Unternehmen mit einem Fokus auf Klimalösungen. Die Portfoliounternehmen in den Bereichen Energie, Industrie, Transport, Gebäude sowie Lebensmittel und Landwirtschaft müssen einen messbaren positiven Einfluss auf das Klima haben. In der Vorinvestitionsphase führt der Fonds für jede Investition eine ESG-Due-Diligence und eine Klimafolgenabschätzung durch. Diese Bewertungen werden von Vidias Director of Impact & ESG in enger Zusammenarbeit mit externen ESG-Beratern sowie dem Investmentteam von Vidia durchgeführt. Während der Haltephase überwacht und verfolgt Vidia die ESG-Risiken sowie die Klimaauswirkungen auf der Grundlage ihrer proprietären Vidia Impact Methodology. Vidia unterstützt die Portfoliounternehmen des Fonds aktiv dabei, die vereinbarten Impact-Ziele zu erreichen, die für den Fonds die Schlüsselindikatoren zur Erreichung seines nachhaltigen Anlageziels sind.
No significant harm to the sustainable investment objective
According to the SFDR’s definition of Sustainable Investment, such investment must not, inter alia, significantly harm any environmental or social objective and this involves considering the principal adverse impacts of investment decisions of a financial product that has Sustainable Investments as its objective. Furthermore, the do-no-signifcant-harm principle in the context of the SFDR requires that the investments of such financial product are aligned with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights..
Vidia’s entity level approach to considering principal adverse sustainability impacts is described in detail above (see Description of policies to identify and prioritise principal adverse sustainability impacts) and is being applied to the investment processes of the Fund accordingly. Vidia engages experienced ESG consultants to assess principal adverse sustainability impacts before and after making an investment along the value chain of the respective portfolio company, including the alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights. From the results of the ESG due diligence an ESG score is derived which informs Vidia’s investment team when preparing, and Vidia’s investment committee when taking, an investment decision. During the holding phase, Vidia will monitor and engage with portfolio companies in order to resolve issues relating to do-no-significant-harm.
Sustainable investment objective of the financial product
Our sustainable investment objective is to accelerate the “decarbonisation” of the economy to support the goals of the Paris Agreement through private equity investments. Therefore, we only invest in companies whose business model we expect (and support) to generate a direct or indirect positive climate impact by providing solutions for reducing, avoiding or removing greenhouse gas emissions.
Investment strategy
The Fund’s investment strategy is set forth in various provisions of the Fund’s limited partnership agreement. Accordingly, the Fund invests in private companies with a focus on climate solutions. Portfolio companies within the following industry verticals: energy, industry, transportation, buildings and food & agriculture must have a measurable positive climate impact.
Due to the Fund’s operational investment strategy, it is our aim to support these portfolio companies in achieving scale-up of climate solutions and maximize climate impact over the holding period. We only invest in companies which are aligned with our investment strategy and our commitment to sustainability and positive climate impact. Therefore, in accordance with and subject to our Vidia Impact Methodology we explicitly exclude investments in companies whose business activities include, except for de minimis and indirect exposure to:
- Forced labour and/or child labour according to ILO Core Labour Standards;
- Violation of human rights as defined by the UN Universal Declaration of Human Rights;
- Cultivation, processing and sales of tobacco;
- Gambling (e.g., operating casinos, producing equipment for casinos or betting offices, online betting providers);
- Production of or trade in adult entertainment products;
- Production of or trade in military weapons and/or ammunition;
- Coal mining and trading as well as coal-fuelled power plants;
- Oil prospecting, exploration and extraction from oil shale, tar or oil sands;
- Production of nuclear energy;
- Non-sustainable, commercial logging of forests;
- Destruction or significant degradation of protected or conservation areas;
whereas in certain cases investments can be permissible if and to the extent they qualify as environmentally sustainable pursuant to the EU Taxonomy. In both phases, pre-investment as well as post-investment, we assess good governance practices of our portfolio companies. Typically seeking majority ownership of portfolio companies, Vidia is in a strong position, and intends, to assess and support sound governance practices, management structures, employee relations, remuneration of staff and tax compliance at its portfolio companies. Management participations will be used as an instrument to incentivize management teams.
Proportion of investments
In line with its investment strategy and binding legal constituting documents, the Funds intends to invest in companies to attain its sustainable investment objective, to scale their positive climate impact while controlling for do-no-significant-harm and that good governance practices are followed through its ESG due diligence and monitoring process.
Monitoring of sustainable investment objective
During the post-investment phase progress towards achieving climate impact targets and the implementation of recommended measures for ESG management improvement are monitored and continuously managed. Progress is tracked and quantified throughout the lifecycle of the Fund using KPIs.
Methodologies
Vidia’s bespoke Vidia Impact Methodology is based on the five dimensions of impact defined by the Impact Management Project (IMP) and uses IRIS+ metrics provided by the Global Impact Investing Network (GIIN). The KPIs used for quantifying and tracking progress include the PAI Indicators (as described in detail above (please refer to Description of policies to identify and prioritise principal adverse sustainability impacts) and selected IRIS+ metrics provided by the Global Impact Investing Network (GIIN).
Vidia is committed to set itself decarbonization goals for financial institutions consistent with the Science Based Targets Initiative (SBTI). Whenever feasible, Vidia will work with its portfolio companies to commit to science-based net-zero targets. The climate impact of climate solutions can usually be expressed as their contribution to “avoided” greenhouse gas emissions across the value chain. Accordingly, climate impact estimates shall be based on product- or technology-specific life cycle analyses (LCAs) and in line with guidance provided by the Greenhouse Gas Protocol.
Data sources and processing
A main source of data processed is information provided by the portfolio company. During the pre-investment phase, Vidia’s access to such information is restricted to what the portfolio company provides for due diligence purposes. Market data, originated by research (either sourced internally or externally) based on freely available information or proprietary sources of information such as, for example, expert interviews, may supplement and be used to verify the information provided by the portfolio company. If needed, the data may also be supplemented by estimates based on plausible fact-based assumptions. The need for estimates highly depends on the quality and availability of data provided by the individual portfolio company. Therefore, the proportion of estimated data cannot be provided in advance. Nonetheless, the aim is to reduce the use of estimates to a minimum. The data will be processed by Vidia’s investment team and Vidia’s Director of Impact & ESG and no acquisition will be closed unless assessed by external consultants providing for an additional layer of scrutiny regarding the data. During the post-investment phase, Vidia’s access to company data is typically very good given the Fund’s strong ownership in the portfolio companies.
Limitations to methodologies and data
Vidia’s methodologies and data depend on the quality of data provided by the portfolio companies and by third parties. Although we typically apply thorough assessments with various data sources involved (please refer to Data Sources and processing), there can be no guarantee that data provided by the portfolio companies, or third parties is complete and accurate. With our combination of internal and external assessments, we aim, and expect, to detect incomplete or false data early on and prevent it from affecting our impact target setting. Should we discover incomplete or false data within our models and calculations, our Director of Impact & ESG will review, analyse the data and suggest a solution for such issue to Vidia’s senior management team.
Due diligence
Prior to each investment, Vidia conducts a pre-screening and a due diligence covering ESG and climate impact requirements. The ESG due diligence is conducted by our Director of Impact & ESG in close cooperation with experienced external ESG consultants and Vidia’s investment team. The ESG due diligence involves an assessment of ESG risks (including principal adverse impacts on Sustainability Factors) and opportunities of investment targets. From the results of the ESG due diligence an ESG score is derived which informs Vidia’s investment team when preparing and Vidia’s investment committee when taking an investment decision.
Engagement policies
The Fund will typically seek majority ownership of portfolio companies. We provide practical management support by sharing the expertise of our own team as well as our consultants. Together with the portfolio companies’ management we work towards generating financial value and positive climate impact and this involves, based on our bespoke Vidia Impact Methodology, avoiding, measuring and reducing principal adverse impacts on Sustainability Factors constructively using the Fund’s ownership role. The Fund aligns its own interests with those of the portfolio company’s management, inter alia, through management participations. Together with the portfolio companies’ managements, we set company specific impact targets. We support the management of the portfolio companies not only in their operational value-creation, but also regarding sustainability related issues which our Director of Impact & ESG can help resolve. We seek and expect full alignment of interest and motivation regarding the agreed impact targets. In case of protracted controversies around impact targets or more broadly sustainability issues the Fund is willing and committed to exercise its rights as a majority shareholder to resolve such issues in the interest of the portfolio company and the Fund.
Attainment of the sustainable investment objective
The Fund’s sustainable investment objective is to accelerate the “decarbonisation” of the economy and to support the goals of the Paris Agreement through private equity investments. Therefore, the Fund invest in companies whose business model, or parts thereof, generates a direct or indirect positive climate impact by providing solutions for reducing, avoiding or removing greenhouse gas emissions. For each investment we set impact targets to mark the decarbonisation contribution we seek with the respective portfolio company, and we track our progress in achieving those impact targets throughout the holding phase. For the kind of investments the Fund seeks to make, i.e. private equity climate impact investments, no appropriate benchmark (e.g. EU Climate Transition Benchmark or EU Paris-aligned Benchmark) is available and the methodological requirements set out in Delegated Regulation (EU) 2020/1818 are not being complied with.
Art. 5 Disclosure
As a registered alternative investment fund manager within the meaning of section 2 (4) of the KAGB, Vidia does not have, and does not need to have, a remuneration guideline or policy in accordance with the requirements of the KAGB. Sustainability Risks are not considered with respect to the remuneration of Vidia’s team members.