Mandatory disclosures under Regulation of the European Parliament and of the Council on sustainable-related disclosures in the financial services sector (EU) 2019/2088 (“SFDR”).
Fly Ventures Management GmbH (“Fly Ventures”) 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. Fly Ventures remains free in its decision to refrain from investing or to invest despite sustainability risks in which case Fly Ventures can also apply measures to reduce or mitigate any sustainability risks. At all times, Fly Ventures will apply the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context.
Fly Ventures pursues a venture capital strategy and invests mainly in companies within the digital economy sector. Given that there are rarely adverse impacts on sustainability factors within digital economy Fly Ventures does not formally consider adverse impacts of investment decisions on sustainability, however, should there occur adverse impacts during the investment process, Fly Ventures will evaluate those adverse impacts and in case of a negative outcome will refrain from an investment.
Fly Ventures has not identified any adverse sustainability impacts related to its investments to date.
Given that the Sustainable Finance Disclosure Regulation (EU 2019/2088) (“SFDR“) and the accompanying Regulatory Technical Standards (“RTS“) are new legislative acts, there is very little or no practical experience or practice with regard to applying their respective provisions. Therefore, substantial legal uncertainties would remain when applying those provisions to the strategies pursued by Fly Ventures. If and to the extent that these uncertainties will be resolved and a practicable market and administrative practice will evolve in this regard, Fly Ventures will reevaluate following them in due course.
Fly Ventures is not a member of any international bodies, organizations or required by any national or international convention or standard to comply with any further requirements.
Fly Ventures Fund I GmbH & Co. KG and Fly Ventures Fund II GmbH & Co. KG (the “Funds”) incorporates ESG principles within its investment processes and within its monitoring processes.
The Funds also invests into sustainable start-ups, but have no sustainable investment objective within the meaning of Art. 9 SFDR.
a.) Environmental and/or social characteristics of the financial product
The Funds do not invest, guarantee or otherwise provide financial or other support, directly or indirectly, to companies, including portfolio companies, or other entities whose business activity consists of: tobacco, distilled alcoholic beverages and related products, weapons and amunition, casinos and equivalent enterprises, internet gambling and online casinos, pornography, solutions intended to enable to illegally enter into electronic data networks or download electronic data.
The Funds regularly screen sustainable investments and also conduct investments in companies that either actively promote environmental and/ or social characteristics or adhere to such guidelines, however, the Funds do not invest a fixed percentage of its capital commitments into such companies and the Funds do not have sustainable investments within the meaning of Art. 9 SFDR as an objective.
b.) Monitoring of environmental and/or social characteristics
Fly Ventures monitors for the Funds’ ESG compliance on an ongoing basis. On an annual basis, Fly Ventures provides its portfolio companies with a questionnaire to assess any potential or existing adverse sustainability impacts. Fly Ventures carefully reviews such completed questionnaires upon receipt.
Currently, the methodologies applied comprise collecting information via a questionnaire from the portfolio companies either prior to the investment, i.e. within the due diligence process, or following the investment. There is currently no quantitative measurement with regard to environmental or social characteristics and no sustainability indicators are currently used. The questionnaire is completed by the portfolio company. Further research and investigation by Fly Ventures are not being conducted regularly.
d.) Limitations to methodologies and data
The information collected via the questionnaire as part of Fly Ventures’ due diligence on behalf of the Funds is 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 Funds’ investments are made for several years, Fly Ventures considers it a priority to establish and maintain a trust within a good working relationship with the portfolio company as a safeguard in light of the limitations described in this section.
e.) Engagement policies
Should Fly Ventures on behalf of the Funds determine any potential issues relating the environmental or social characteristics, it will engage the portfolio company’s manager in discussions with a view to resolving, reducing or mitigating such effects, provided that such efforts will always remain within a scope considered by Fly Ventures in its absolute discretion to be proportionate in light of the size and strategic importance of the respective investment in the portfolio companies and shall take into account the respective bargaining positions and transactional context.