At Redalpine, our vision is to invest for a better future. Environmental, Social and Governance (“ESG”) considerations have been an integral part of our decision-making process since the very starting point. Sustainability risk management is embedded in our DNA and Redalpine seeks to originate investments and help make investment decisions according to certain ESG guidelines, which are laid down in this ESG Policy (the “ESG Policy”). This ESG Policy shall apply to Redalpine Venture Partners AG as well as all entities managed or advised by Redalpine Venture Partners AG (altogether “Redalpine”, “we”, or “our”) and cover all portfolio activities of Redalpine’s investment professionals. The actions and decisions described in the following sections are each made by Redalpine for and on behalf of Redalpine Capital VII S.C.S., SICAV-RAIF (the “ Fund”) and shall apply to the Fund going forward.
At Redalpine, we strive to create value for investors and portfolio companies while remaining aware of our responsibility towards both society and the environment. We consider responsible investing an important part of our business and we acknowledge the importance of environmental, social, and governance aspects. This ESG Policy should be read and understood as an evolving, overarching guideline. In it, we will be setting forth general ESG principles, which may be shaped further through dynamic and collaborative processes. As our policy evolves, we will continue considering size, nature, and scale of our activities or portfolio companies, following the principle of proportionality. On a case-by-case basis portfolio companies will be assessed whether our ESG Policy is still appropriate to the company’s individual situation, including our own legal, regulatory, and tax requirements. We want to make a difference for our clients, society and the wider world – while also delivering financial returns.
We apply this ESG Policy within our own organization, the funds managed or advised by Redalpine, as well with other partners we cooperate with. We will make strong efforts to encourage portfolio companies to agree with our ESG Policy and to commit to pursuing our ESG values. Also, we will strive to work with partners and market participants who implement such ESG values themselves, or who can at least identify with them. The risks which are identified by Redalpine and which could present financially material ESG risks are: climate change resilience, pollution, carbon emissions, resource efficiency and depletion of finite resource, human rights in supply chains, health and safety, labor and employment practices, diversity, risk management, bribery and corruption practices and business ethics. The materiality of each risk will be determined based on the investment in question.
OUR DEFINITION OF ESG
Since no universal definition of “ESG” exists, we have decided to outline those aspect which appear to be most important for us and our business activities. We therefore summarize our ESG values and considerations as follows:
Considering the environmental impact from Scope 1 (directly caused by a company, e.g. through facilities) and Scope 2 (indirectly caused, e.g. energy, electricity, waste) to Scope 3 (caused by upstream and downstream activities, e.g. business travel, transportation of the product, customers’ energy usage). Where possible, we target to reduce such impacts across all scopes at the level of Redalpine as well as the portfolio companies.
DEI: Integrating diverse and inclusive practices across all areas of the business (e.g. diversity of the fund or the founding teams, inclusive hiring practices). With this strategy we try to promote equal opportunity on the one hand, and equity and inclusion on the other as we are convinced that talented people of all backgrounds should have equitable access to career and capital opportunities.
Team and working environment: Building a strong culture and being a conscientious employer (e.g. pay gap, parental leave, living wage).
Product design: Supporting products with consideration of the ethical and human implications on the end-user and society.
Supply chain: Working towards an ethical and environmentally resilient supply chain.
Legal and regulatory: Being on top of and aligned to the latest laws, regulations and compliance standards (e.g. GDPR (and equivalent), UN Guiding Principles of Business and Human Rights, the eight core ILO conventions);
Governance: Having appropriate governance structures in place, according to the company’s stage (e.g. board structure, share structure); writing out a code of conduct (committing the company to high ethical standards); adopting a whistle-blower policy.
Data privacy and security: Instilling a strong culture of trust, responsibility and best practice (e.g. with internal systems) around data.
INTERNAL ESG IMPLEMENTATION
We are determined to apply our ESG values as laid down above in all areas of our business activities and consequently consider them in our internal processes and day to day working environment. To raise awareness with regard to the relevance of ESG related matters, we have further decided to offer ESG trainings at least once a year for all staff members, which focus on different aspects of environmental, social or governance focus areas. With respect to our key persons, such trainings will be mandatory from 2024 onwards. Further, to emphasize our ambition with regard to minimizing negative environmental impact, we will set specific goals for the reduction of carbon emissions on the level of Redalpine in the near future.
ESG IN THE INVESTMENT PROCESS
Our ESG values are an integral part of each phase of the investment and value creation process, which is why we incorporate them into both the pre-investment and post-investment phases. Since we generally operate as a seed and early-stage investor, we are able to support and guide the portfolio companies to build and scale in a sustainable manner. At the investment stage, we consider the aforementioned ESG factors in our investment research and decision-making processes to help decide where best to invest. We vote (or propose to vote) in a considered manner and work with the portfolio companies to drive positive change. We also implement our ESG values and guidelines in divestment decisions and aim to generate as much positive impact as possible by choosing the right time for exit decisions.
In the investment phase, we consider our ESG values as outlined above as we conduct our investment due diligence processes. We therefore collect relevant information from potential portfolio companies via a questionnaire which is planned to be integrated in the due diligence process. The questionnaire will be filled out by the founders and reviewed by Redalpine investment professionals. Non-compliance might lead to the decision not to invest in a company.
Our questionnaire will require potential portfolio companies to lay down their approach to ESG related matters as set out above. Furthermore, albeit Redalpine not being required by the Sustainable Finance Disclosure Regulation (Regulation (EU) 2019/2088, “SFDR”) to publicly disclose its approach towards the integration of sustainability risks, Redalpine will integrate such considerations when rendering its investment advice. Hence, potential portfolio companies will be asked to provide answers as to potential sustainability risks which may arise for Redalpine. Following the definition of the SFDR, sustainability risks are environmental, social or governance events or conditions that, if they occur, could cause an actual or a potential material negative impact on the value of an investment. ESG risks might be considered as opportunities for improvement when rendering investment advice. However, such ESG risks may also lead to the decision not to recommend a certain investment decision.
Last but not least, our questionnaire serves the purpose to obtain information on the business areas which potential portfolio companies are actively engaged in. While Redalpine does not include investments exclusions as binding provisions in the documentation of the funds managed or advised by it, Redalpine adheres to a pre-defined set of business areas which should not be financially supported. For more details, please refer to the investment exclusions as attached in Annex I to this ESG Policy. Hence, in the pre-investment phase, Redalpine collects the necessary information to assess whether potential portfolio companies might be active in excluded areas. The decision to recommend a certain investment will then be taken on the basis of such information on a case-by-case basis.
We also apply our best efforts when negotiating an investment into a portfolio company by including, inter alia, an ESG specific section in our standard term sheet which also includes a binding requirement for regular updates and reports.
Once funds managed or advises by us have committed to invest in a company, ESG will be part of the ongoing portfolio management. To further monitor adherence to our ESG Policy, portfolio companies will be assessed by the same questionnaire used during the pre-investment phase also for the post-investment phase by our investment professionals. Portfolio companies will be asked to confirm and/or adjust the answers provided in the questionnaire on an ongoing basis. This enables us to receive and maintain a better understanding where each portfolio company stands in terms of ESG and to identify any ESG-related value creation opportunities and issues.
We will motivate our portfolio companies to notify us on an ad hoc basis if any ESG-related issues become apparent and may draw on ESG experts to support our portfolio with their ESG problems where deemed appropriate and necessary. Furthermore, as an active board member we discuss with and explain to the management how they could incorporate ESG consideration into their operations or monitor adherence to our ESG Policy in our capacity as advisor seat holder.
Financial product: Redalpine Capital VII S.C.S., SICAV-RAIF (the “Fund”) B271588
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. These considerations are carried out both before and after an investment. For this purpose, information is initially and regularly obtained from the portfolio companies.
Redalpine’s General Counsel, Chris Frank Gansen, oversees the implementation of the ESG Policy to ensure that the investment professionals have applied these principles throughout the investment cycle. Together with the respective portfolio company the responsible Redalpine investment professional prepares a bespoke action plan in the event that any sustainability risks are identified. Redalpine’s General Counsel regularly reviews the operations of the investment professionals in order to ensure optimal practices and it is the responsibility of Redalpine’s General Counsel to report directly to the Redalpine board, where necessary and applicable, should ESG incidents have been identified.
This document dates as of June 2023. We aim to update this ESG Policy once a year or whenever applicable (i.e. launch of new financial product).