SFDR Disclosure On Extantia Website
Disclosures Pursuant To The Sustainable Finance Disclosure Regulation (EU)
Extantia Capital Management GmbH (“Extantia”, “we”, “us”, “our”) and its affiliates are advancing breakthrough climate technologies by investing directly and indirectly in daring entrepreneurs developing economically viable solutions that can significantly reduce greenhouse gas emissions.
CLASSIFICATION OF EXTANTIA FUNDS
European regulation SFDR 2019/2088 (“Disclosure”) and 2020/852 (“Taxonomy”) introduced new regulatory obligations for financial markets participants, to increase the transparency of financial products and actors with regards to sustainability.
Extantia’s investment funds are classified under either Article 9 (dark green) and Article 8 (light green). Our first proof-of-concept fund Pledge (closed in 2021), and our Allstars Fund of Funds are classified as Article 8 funds, promoting environmental characteristics in the realm of decarbonisation and other climate tech.
Our Flagship II Fund is classified as Article 9, and the intention is that 100% of Flagship’s investments follow our environmental objective. We invest in deep decarbonisation technologies that lead us to a world beyond fossil fuels. Our minimum target for emissions reduction potential per invested company is 100Mt of CO2e a year and we are actively searching for companies that have a reduction potential of over 1,000Mt of CO2e a year. The latter are called “Gigacorns”, that is, companies capable of saving at least 1Gt of CO2e a year and are commercially viable with unicorn potential.
We meet this requirement by:
1. assessing the greenhouse gas emissions reduction potential of companies as part of the standard investment process and due diligence activity.
2. assessing and monitoring the social activities of our portfolio companies with regard to social policies, diversity, employee satisfaction and fulfilment, and workplace accidents,
3. assessing and monitoring the governance practices of our portfolio companies with regards to sustainability risks, governance KPIs, management diversity, and data management.
These measures are covered in the Extantia Projected Impact Calculation (EPIC) methodology (see the link for further details). When being assessed through the EPIC methodology, target/portfolio companies’ contribution to environmental objectives, compliance with the UNGC Principles, as well as social and good governance practices are evaluated.
Extantia takes an active engagement in portfolio companies to promote ESG practices. This includes dialogues with companies, board meetings, shareholder voting, and partnerships with the Extantia’s Net Zero circle. We encourage portfolio companies to include responsible practices by regularly assessing and monitoring their environmental footprint, social policies and governance practices. We implement an ESG Clause in all our Term Sheets and investment agreements to which portfolio companies need to adhere. Our investment strategy aims at a reduction in worldwide carbon emissions. It is aligned with the Paris Agreement by investing in climate solutions to reach Net Zero GHG emissions by 2050. In this race to Net Zero, Extantia has initiated and built the “Net Zero Circle”, a community of visionary investors that share a common passion for climate action. More information about the community can be found here: https://extantia.com/net-zero-circle/
Extantia is also aligned with the Principles of Responsible Investing (PRI) set out by the United Nations. Through our investments, we support the following UN Sustainable Development Goals:
SDG 3: Ensure healthy lives and promote well-being for all at all ages
SDG 7: Ensure access to affordable, reliable, sustainable and modern energy for all
SDG 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
SDG 9: Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
SDG 12: Ensure sustainable consumption and production patterns
SDG 13: Take urgent action to combat climate change and its impacts
Policies on the integration of sustainability risks in investment decision-making processes (Article 3 SFDR)
Extantia aspires to follow responsible and sustainable investment strategies and thus considers sustainability risks in our investment decision-making processes. By doing so, we seek to identify and capture value-creating opportunities as well as to mitigate sustainability risks. A sustainability risk means “an environmental, social or governance (ESG) event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investment”.
Extantia has integrated sustainability risks in its extensive due diligence processes. When evaluating a potential investment, Extantia analyzes potential economic risks relating to ESG matters. Reasonable steps are taken to mitigate ESG-related risks. Extantia regularly reviews its sustainability risk policies to ensure alignment with current regulatory and market best practices as they may evolve over time.
No Consideration of Adverse Impacts of Investment Decisions on Sustainability Factors (Article 4 SFDR)
Extantia does not consider adverse impacts of its investment decisions on sustainability factors on an entity level. Due to the difficulty in gathering the necessary data points for our different investment vehicles, including the Fund of Funds Allstars, and our initial Pledge fund, we have decided to consider negative externalities associated with all target investments, instead of the PAI regime.
Additionally, due to the early-stage nature of target investments, data collection on the mandatory PAIs is not always possible. Thus we have decided to opt out of the PAI regime on an entity level until we are more confident in the data collected. However, we strive to fulfil all PAI requirements for the Flagship II fund, which is done through materiality mapping and comprehensive due diligence exercises. This includes an extensive ESG questionnaire which is based on the Regulatory Technical Standards (RTS) of the EU SFDR regulation for all our direct investments, as part of our EPIC methodology. Extantia gathers this data on the principal adverse sustainability impacts (PAIs) to identify areas of improvement and engagement with the target companies before investment.
Additionally, Extantia follows an initial exclusionary approach, by not investing in any venture that has the following attributes:
– Has an expected long-term net-negative impact on climate change (assessed with a lifecycle analysis and carbon calculations)
– Derives more than a third of its revenues from the extraction, manufacturing of, or trading in coal, oil, or natural gas, unless using technology intended to reduce net greenhouse gas emissions
– Is involved in the production of and trade in tobacco and distilled alcoholic beverages,
– Is involved in gambling or pornography
– Is directly involved in the production of landmines, cluster munitions, chemical or biological weapons, or nuclear weapons in contravention of the Treaty on the Non-Proliferation of Nuclear Weapons.
Sustainability Risks’ Integration In Remuneration Policies (Article 5 SFDR)
At Extantia, we scientifically measure, aggregate and track the Return on Impact at fund, portfolio & team level.
To include the portfolio’s impact in Extantia’s carry allocation, we have defined Impact Carry KPIs from within the ESG sphere, and for each there will be annual values developed at company level. These Impact Carry KPIs and their weights in the calculations are:
|Number||Impact Carry KPI||ESG category||Units||Weight|
|1||GHG emissions reduction||Environmental||t CO2e||70%|
|4||Gender diversity in the company||Social||%||5%|
|5||Gender diversity in the management board||Governance||%||5%|
|6||Gender diversity in the supervisory board||Governance||%||5%|
For each KPI, there is a target metric to be achieved by the end of the fund’s lifetime, and an interim target to be reached annually. Both of these are discussed with the startup at the time of the investment. We therefore regularly monitor these Impact Carry KPIs, and their achievement is tied to us receiving 30% of our carry.
At the time of an investment in a Portfolio Company, we define for each Impact Carry KPI a target value that will be the reference value to achieve over the lifetime of the investment. As the exact lifetime of any investment cannot be determined ex-ante, a Target Value shall be set to each of the three first years following the investment. For each Portfolio Company, we will annually review the performance against the Target Value.
A detailed explanation of the calculation methodology can be found in EPIC.