I. Art. 3 (1) SFDR – Sustainability Risks
Halder GmbH (the “Fund Manager”) 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. The Fund Manager considers and assesses sustainability risks as part of the due diligence process prior to each investment. The Fund Manager generally remains free in its decision to refrain from investing or to invest despite sustainability risks in which case the Fund Manager can also apply measures to reduce or mitigate any sustainability risks. The Fund Manager will apply the principle of proportionality in dealing with sustainability risks taking due account of the size and nature of the investment as well as its transactional context and the respective margins for action.”
II. Art. 4 (1) SFDR - Principal Adverse Impacts Statement
Disclosure on principal adverse impacts on sustainability factors
No consideration of sustainability adverse impacts
The Fund Manager does currently not consider adverse impacts of investment decisions on sustainability factors (i.e. environmental, social and employee concerns, respect for human rights and the fight against corruption and bribery) within the meaning of Art. 4 SFDR. Currently, the Fund Manager is not in a position to positively assume it will in all cases be able to always obtain sufficient information from portfolio companies to satisfy the disclosure obligations of Art. 4 SFDR as further detailed in the RTS. Furthermore, the Sustainable Finance Disclosure Regulation (EU 2019/2088) is new and untested, there is no or only very limited practical experience with the application of its provisions. If and to the extent a practicable market practice and administrative practice evolves ensuring a sufficient flow of information, the Fund Manager will assess anew whether to consider principal sustainability adverse impacts.”
III. Art. 5 (1) SFDR – Remuneration
As a registered alternative investment fund manager within the meaning of section 2 (4) of the KAGB, the Fund Manager 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 determination of the remuneration.”
IV. Art. 10 (1), 8 (1) Product Disclosures
Halder VII GmbH & Co. KG (the “Fund”) deems the assessment of environmental, social and corporate governance (ESG) topics to be inevitable to achieve attractive returns. Thus, the Fund Manager considers these topics in the course of its due diligence. Moreover, ESG principles are considered by excluding certain sectors from the investment focus. In addition, the Fund is committed to support its portfolio companies to incorporate ESG issues into their daily business operations and has implemented regular ESG reporting requirements to this end.
No sustainable investment objective
The Fund promotes environmental or social characteristics (Article 8 SFDR) but does not have sustainable investments (Article 9 SFDR) as its objective.
Environmental or social characteristics of the financial product
The Fund does not invest in portfolio companies whose business includes:
- Research and innovation activities considered as illegal according to the applicable legislation in the country of the portfolio company;
- 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);
- The production of, and trade in, tobacco, distilled alcoholic beverages, other non-alcoholic recreational drugs and related products;
- The financing and production of, and trade in, weapons and ammunition of any kind;
- Oil and gas or metals and mining exploration, extraction or operations;
- The research, development or technical applications relating to electronic data programs or solutions, which are intended to enable to illegally (i) enter into electronic data networks; or (ii) download electronic data.
The Fund will focus on majority investments, in particular management buy-outs, in the DACH region. The Fund aims to invest in companies with value creation potential in, among others, expansion into key geographies, a strategic repositioning, inorganic expansions, and organizational and governance improvements.
Proportion of investments
The Fund does not invest a fixed percentage in portfolio companies aligned with environmental and/or social characteristics, but will only invest in line with its investment strategy. No portion of the Fund’s capital will be allocated to other asset classes.
Monitoring of environmental or social characteristics
On behalf of the Fund, the Fund Manager monitors prior to the investment (i.e. through its due diligence process as described below in more detail) as well as after an investment whether the portfolio companies’ business activities comprise of any of the above-mentioned exclusions and how ESG related activities develop in light of certain key performance indicators which are collected quarterly (as described below in more detail). Such regular post-investment monitoring also includes an annual review and written confirmation by the portfolio companies’ managing directors during the annual financial audit process. However, the Fund Manager does not initiate additional regular external reviews, at least as long as the data reported by the portfolio does not give rise to any reasonable doubts.
Currently, the methodologies applied consist of obtaining information from the portfolio companies prior to the investment, i.e. within the due diligence process, as well as following the investment, i.e. in the course of regular exchange between the Fund Manager and the Fund’s portfolio companies. Therefore, certain key performance indicators are used to measure the improvement of ESG issues at the level of the portfolio companies, which are reported to the Fund on a regular basis, mostly quarterly. Such key performance indicators will be defined in each case in consultation with the respective portfolio company and in light of its individual situation and business model.
Data sources and processing
Apart from its due diligence (as described below in further detail), monitoring and regular communication between the Fund Manager and the Fund’s portfolio companies, the Fund Manager does not conduct further research or investigations on a regular basis, at least as long as the data reported by the portfolio does not give raise to any reasonable doubts.
Limitations to methodologies and data
The Fund Manager relies on external consultants for ESG due diligences. Such external consultants rely on information they obtain from the portfolio company, their independent research as well as industry specific information and know-how forming the basis of their service. With regard to the ongoing monitoring, standard procedure relies on annual review and confirmation by the managing directors of the portfolio companies. Therefore, 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, the Fund Manager considers it important to establish and maintain a in principle trustful professional working relationship with the Fund’s portfolio companies to ensure and work towards compliance with the restrictions and key performance indicators described in this section.
The assessment of how the Fund’s potential investment in the potential portfolio company relates to the environmental or social characteristics mentioned above is carried out by external consultants as part of the due diligence process prior to the investment. Further reviews may be conducted beyond such ESG due diligence process and regular monitoring if, and to the extent, the Fund Manager deems it appropriate to conduct an ad hoc review in a specific case.
Should the Fund Manager on behalf of the Fund determine any potential issues relating to environmental or social characteristics, the Fund Manager will engage in discussions with the portfolio company’s manager in order to resolve such issues, provided that such efforts will always remain at a level that the Fund Manager, in its sole discretion, considers to be proportionate in light of the size and strategic importance of the respective investment in the portfolio companies and that takes into account the respective negotiation positions and transactional context.”