Sustainability-Related Disclosures

A.            Disclosures relating to the Alternative Investment Fund Manager

I.               Sustainability Risks

The G-Fund Management GmbH, being an Alternative Fund Manager (“AIFM”) of alternative investment funds (“Financial Products“), takes sustainability risks into account when investing in early and growth stage companies with a focus on sustainable business models in the areas of food, cosmetics, wellness, health and education in Europe and Israel (“Investee Companies“). Currently, sustainability risks are integrated in the investment process as part of the standard due diligence and risk assessment processes.

In accordance with the Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (“Sustainable Finance Disclosure Regulation” or “SFDR”), “sustainability risk” means 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 such as a progressing climate change may lead to negative impacts on the assets of the Financial Products or their Investee Companies. With respect to climate change, there are in particular actual physical risks (e.g., extreme weather events) and transition risks (e.g. costs for the transformation of the energy system). In the field of good governance and with regards to social characteristics, there are, for example, risks concerning the reputation of Investee Companies or potential claimed damages. Corresponding political and regulatory measures may also lead to considerable costs and the reduction of asset values.

To the extent that sustainability risks materialize, this may result in a significant reduction of the Financial Products’ net asset value and thus have a strong adverse impact on returns.

The AIFM considers sustainability risks as part of its investment strategy in the following phases of an investment:

§   Pre-Investment (sourcing and screening)

§   Investment (due diligence)

§   Holding (portfolio management, monitoring, reporting)

§   Exit (performance evaluation, disclosure)

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

The AIFM does not consider principal adverse impacts of its investment decisions on sustainability factors as set out in the SFDR.

Principal adverse impacts according to the SFDR are the most significant negative impacts of investment decisions on sustainability factors relating to environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters. Considering these impacts would require the AIFM to report according to a set list of indicators for which there is not sufficient data available to the AIFM. Until there is more practical guidance with regard to applying the detailed provisions on principal adverse impacts with insufficient data, the AIFM will regularly review the possibility to consider principal adverse impacts.

At this point, however, due to the blind pool-character of the fund portfolio, the AIFM is not able to determine ex ante whether all of the Financial Products’ Investee Companies will be providing sufficient data to properly consider all principal adverse impacts. As the AIFM is managing Financial Products, which will be minority shareholders in Investee Companies, the AIFM is not in the position to ensure the adherence to standards or high-quality reporting on all necessary data for the assessment of principal adverse impacts on sustainability factors. Moreover, gathering data from early-stage Investee Companies would often put a disproportionate burden on the relatively small management teams.

III.            Remuneration policies in relation to the integration of sustainability risks

The AIFM integrates sustainability risks in its remuneration policies. As a sub-threshold manager, the AIFM is not required to have a comprehensive remuneration policy.

Sustainability-Related Disclosures

B.            Disclosures relating to the Financial Product (Art. 10 SFDR)

I.               Summary

G-Fund Invest I GmbH & Co. KG (“Financial Product”) promotes environmental and social (“E/S”) characteristics but does not have a sustainable investment objective.

Specifically, the Financial Product promotes the following E/S characteristics:

§   Sustainable use of water resources

§   Transition to a circular economy

§   Pollution prevention and reduction

§   Protection and restoration of biodiversity and ecosystems

§   Combating inequalities

The Financial Product invests in early and growth stage companies with a focus on sustainable business models in the areas of food, cosmetics, wellness, health and education. Of these investments, none are targeted as sustainable investments but all are targeted to promote E/S characteristics.

The attainment of the E/S characteristics promoted by the Financial Product is being monitored throughout the lifecycle of an investment. The Financial Product will use different methods for the attainment and monitoring of the E/S characteristics, for example structured interviews with as well as quantitative and qualitative questionnaires for Investee Companies. The collected data will be reviewed and evaluated and, on this basis, the methodology used will be refined. By this, existing limitations to the methodologies and data are being addressed.

The Financial Product carries out a due diligence process with every investment, among other things including negative screening lists.

To ensure an appropriate reaction to sustainability-related incidents, the Financial Product has implemented measures and internal procedures.

[German Version:

G-Fund Invest I GmbH & Co. KG (“Finanzprodukt”) fördert ökologische und soziale (“E/S”) Merkmale, hat aber kein nachhaltiges Anlageziel.

Im Einzelnen fördert das Finanzprodukt die folgenden E/S-Merkmale:

 Nachhaltige Nutzung der Wasserressourcen

 Übergang zu einer Kreislaufwirtschaft

 Vermeidung und Verringerung der Umweltverschmutzung

 Schutz und Wiederherstellung von Biodiversität und Ökosystemen

 Bekämpfung von Ungleichheiten

Das Finanzprodukt investiert in Unternehmen in der Früh- und Wachstumsphase mit Schwerpunkt auf nachhaltigen Geschäftsmodellen in den Bereichen Lebensmittel, Kosmetik, Wellness, Gesundheit und Bildung. Keine dieser Investitionen ist als nachhaltige Investition gedacht, aber alle zielen auf die Förderung von E/S-Merkmalen ab.

Die Verwirklichung der durch das Finanzprodukt geförderten E/S-Merkmale wird während des gesamten Lebenszyklus einer Investition überwacht. Für das Finanzprodukt werden verschiedene Methoden zur Erreichung und Überwachung der E/S-Merkmale eingesetzt, z. B. strukturierte Interviews mit sowie quantitative und qualitative Fragebögen für die investierten Unternehmen. Die gesammelten Daten werden überprüft und ausgewertet, und auf dieser Grundlage wird die verwendete Methodik verfeinert. Auf diese Weise werden bestehende Beschränkungen der Methodik und der Daten angegangen.

Das Finanzprodukt führt bei jeder Investition einen Due-Diligence-Prozess durch, der unter anderem auch Negativ-Screening-Listen umfasst.

Um eine angemessene Reaktion auf nachhaltigkeitsbezogene Vorfälle zu gewährleisten, hat das Finanzprodukt Maßnahmen und interne Verfahren eingeführt.]

II.             No sustainable investment objective

 

This Financial Product promotes environmental or social characteristics, but does not have as its objective sustainable investment.

III.            Environmental or social characteristics of the Financial Product

The Financial Product promotes environmental and social (“E/S”) characteristics through the incorporation of ESG considerations within its investment processes.

Specifically, the Financial Product promotes the following environmental characteristics, each measured with a corresponding sustainability indicator:

§   Sustainable use of water resources

• • Sustainability indicator: Proportion of investments with a water management policy

§   Transition to a circular economy

• • Sustainability indicator: Improvement of resource consumption through product design, choice of material, re-functioning by an investment in comparison with the market (qualitative analysis)

§   Pollution prevention and reduction

• • Sustainability indicator: Increased durability, repairability, upgradeability, recyclability of products by an investment in comparison with the market (qualitative analysis)

§   Protection and restoration of biodiversity and ecosystems

• • Sustainability indicator: Proportion of investments with an internal guideline for the protection of biodiversity and ecosystems

 

Further, the Financial Product promotes the following social characteristics:

§   Combating inequalities

• • Sustainability indicator: Proportion of investments with a guideline for the protection of human rights

 

The above-listed factors are not considered as conclusive or final, since the investments of the Financial Product will only be entirely determined at the end of the investment phase (so-called “blind pool”). Thus, the factors may have to be refined at a later date.

IV.           Investment strategy

The Financial Product promotes E/S characteristics and incorporates ESG principles in the entire investment processes consisting of the following phases:

§   Pre-Investment (sourcing and screening)

§   Investment (due diligence)

§   Holding (portfolio management, monitoring, reporting)

§   Exit (performance evaluation, disclosure)

The investment strategy guides investment decisions based on factors such as investment objectives and risk tolerance.

The purpose of the Financial Product is to build, hold and manage a portfolio of equity and quasi-equity investments in early and growth stage companies with a focus on sustainable business models in the areas of food, cosmetics, wellness, health and education. The Financial Product’s investments will have a geographical focus in Europe and Israel. The investments are based on a new consumer model who lives in a highly environmentally and health-conscious manner.

In order to comply with each of the E/S characteristics set out above the Financial Product carefully selects its investment opportunities during the pre-investment and investment phase.

In the pre-investment phase, the AIFM reviews publicly available information on a potential investment regarding the above-mentioned sustainability indicators. Furthermore, the Financial Product applies a negative screening on all potential investments to determine unsuitable investments. The negative screening contains exclusion lists with regards to certain branches and products. In particular, the exclusion covers weapons and ammunition, child labor, pornography or sale of alcoholic beverages, tobacco, cannabis and radioactive material, gambling or illegal software.

In the investment phase, the AIFM verifies the promotion of individual environmental and/or social characteristics by a potential Investee Company by querying the corresponding sustainability indicators using an ESG questionnaire in the due diligence process. Potentially, the Financial Product agrees on individual targets regarding the promotion of environmental and/or social characteristics with Investee Companies.

 

The assessment of good governance practices of Investee Companies is partially incorporated in the Financial Product’s legal due diligence as far as good governance practices have been adopted by law. Good governance practices include sound management structures, employee relations, remuneration of staff and tax compliance. The Financial Product uses a standard questionnaire with qualitative and quantitative enquiries regarding governance practices in a potential investment. The questionnaire is based in the OECD Guidelines for Multinational Enterprises.

V.             Proportion of investments

The Financial Product does not make any sustainable investments within the meaning of the SFDR and the Taxonomy Regulation (Regulation (EU) 2020/852). The Financial Product targets that all investments are aligned with the above-mentioned E/S characteristics. Since the Financial Product’s asset portfolio consists a blind pool, it reserves the discretion to make investments in “Other” assets (i.e., investments that are neither aligned with the E/S characteristics, nor are qualified as sustainable investments) in accordance with its investment guidelines as provided in the fund documents.

VI.           Monitoring of environmental or social characteristics

The Financial Product undertakes to monitor E/S characteristics on an ongoing basis. To this end, the AIFM queries the sustainability indicators from its Investee Companies annually. If needed, the AIFM consults with the management of an Investee Company regarding the agreed sustainability targets.

VII.         Methodologies for environmental or social characteristics

The Financial Product may apply one or a combination of the following methods to assess its alignment with the promotion of the E/S characteristics listed above:

§   Structured interviews with the management team and (key) employees of Investee Companies

§   Quantitative and qualitative questionnaires

§   Obligate Investee Companies to submit periodic environmental and social reports

§   Negative screening with regards to branches and products

Based hereon, the Financial Product applies different measures to adjust its alignment with the promotion of the E/S characteristics listed above.

 

VIII.        Data sources and processing

Data for measuring the attainment of E/S characteristics is gathered from public information and provided by Investee Companies in the form corresponding to the applied method(s) of data collection listed above.

Certain measures are taken to ensure data quality including: enhancing the readability of questionnaires including the definition of technical terms; ensuring the questionnaire is completed or the interview is given by a qualified respondent of the Investee Company; and including the option to provide documentary evidence to support responses where appropriate.

Data is collected in both quantitative (e.g. headcount by gender split) and qualitative (e.g. description of policies or measures) forms. Data is extracted from questionnaire or interview responses and in its processing may be aggregated to form summary statements at the level of the Financial Product.

The proportion of data that is estimated by Investee Companies is unable to be quantified in advance. No external sources are used to verify the data received from Investee Companies.

IX.           Limitations to methodologies and data

An identified limitation to the methodologies described above with regard to the use of questionnaires to measure the attainment of E/S characteristics is that whilst the questionnaire may indicate trends or data points, it is limited with regard to detailed information provided on the underlying reasons for the outcome.

However, this does not affect the attainment of the E/S characteristics promoted by the Financial Product as the attainment itself will be reflected in the data. In order to address such a limitation, ongoing dialogue is maintained with Investee Companies to gain a more comprehensive understanding of the E/S characteristics measured.

X.             Due diligence

In order to attain each of the E/S characteristics set out above the Financial Product carefully selects its investment opportunities during the pre-investment and investment phase. As stated above, the Financial Product applies a negative screening on all potential investments to determine unsuitable investments.

Apart from publicly available information, the AIFM verifies the promotion of individual environmental and/or social characteristics by a potential Investee Company by querying the corresponding sustainability indicators using an ESG questionnaire in the due diligence process. The Financial Product may agree on individual targets regarding the promotion of environmental and/or social characteristics with Investee Companies.

XI.           Engagement policies

The Financial Product will use the following measures to engage in ESG-related matters of Investee Companies and to adjust its alignment with the promotion of the E/S characteristics listed above:

§   Discard investment opportunities

§   (Contractual) Target agreements with Investee Companies

§   Execution of minority shareholder rights in Investee Companies

§   Execution of rights as an advisory board member to an Investee Company (where available)

In order to respond to ESG related incidents or controversies appropriately, the Financial Product has implemented internal procedures where an appropriate escalation mode is identified.