Integration of sustainability risk

A sustainability risk refers to an environmental, social or governance (ESG) event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of an investment.

The fund manager does not integrate sustainability risks in its investment decision-making process for the following reasons:

(i) the performance tools used to estimate returns do not take into account such risks but mainly economic and financial risks;
(ii) since the portfolio companies in which the Fund invests do not usually report on such risks, the fund manager is not in a position to assess and integrate such risks in its investment decision-making process.

No consideration of adverse impacts of investment decisions on sustainability factors

Article 4(1) of the SFDR requires fund managers to provide a clear statement as to whether or not they consider the “principal adverse impacts” of investment decisions on sustainability factors, e.g. environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters.

Although sustainability is promoted, it does not consider the adverse impacts of investment decisions on sustainability factors in the manner prescribed by article 4(1) of the SFDR, in particular due to the fact that:

(i) no reliable and sufficiently available or accessible data is available to perform such impact measurement and provide the mandatory reporting imposed by the regulatory technical standards in a consistent manner; and
(ii) the underlying investments are not generally required to report on such factors in the manner prescribed by SFDR.

The fund manager does not intend to consider principal adverse impacts of investment decisions on sustainability factors in the near future as a mandatory investment decision criteria, but it intends to consider such principal adverse impacts for all investments for which the ESG data is either readily available or can be accessed within the same time-frame as the rest of the data on which the investment decision is based (financial, legal, tax, commercial etc).

Remuneration policy and risk integration

For the purposes of article 5(1) of the SFDR, the fund manager declares that it has not put in place a remuneration policy in light of the fact that it qualifies as a registered alternative investment fund manager and thus does not fall under such requirement under the AIFMD.

Summary

The fund is a limited partnership under the laws of the Netherlands (commanditaire vennootschap) constituted by the General Partner, as sole general partner (beherend vennoot), and the Limited Partners, as limited partners (commanditaire vennoten) and is exempted from the AIFMD license requirement.

The fund promotes sustainability and therefor qualifies as an article 8 SFDR fund.

The fund invests in businesses that are focused on having a positive impact on the community, with a focus on economic empowerment and a commitment to significantly scale that impact based on agreed target impact KPIs (key performance indicators).

The fund is a closed-ended investment vehicle dedicated to the MENA region, aiming to maximise positive and measurable social and environmental impact. The fund aims to address the critical funding gap by investing in promising early stage businesses with impact working in education, wellbeing and the environment. 

The fund’s mission is to invest in businesses with a positive social and environmental impact and provide them with technical assistance to help them scale such impact and grow their business.

The Fund actively contributes to the growth of an impact-attentive and gender-inclusive private sector in order to attract investors and improve the livelihood of marginalised populations in the region.

The Fund does not commit to a minimum proportion of sustainable investments.

No sustainable investment objective

This financial product promotes environmental or social characteristics, but does not have as its objective sustainable investments. All investments of the Fund will have a measurable and scalable social or environmental impact. They will however not qualify as “sustainable investments” within the sense of SFDR.

“This financial product promotes environmental or social characteristics, but does not have as its objective sustainable investment.”

Environmental or social characteristics of the financial product

The Fund only invests in businesses that can demonstrate a positive, measurable and scalable contribution to one (or more) of the UN Sustainable Development Goals (SDGs), especially the following:

SDG 3 – Good Health and Wellbeing
SDG 4 – Quality Education
SDG 5 – Gender Equality
SDG 6 – Clean Water and Sanitation
SDG 7 – Affordable and Clean Energy
SDG 8 – Decent Work and Economic Growth
SDG 10 – Reduced Inequalities
SDG 11 – Sustainable Cities and Communities
SDG 12 – Responsible Consumption and Production

Investment strategy

The Fund invests predominantly in early-stage equity and quasi-equity instruments issued by innovative companies that are expected to align with its promoted environmental and/or social characteristics as set in the Investment Guidelines.The targeted companies are social enterprises, which are various in form and segment, but they all share the common goal to address a shortfall in society or environment.The Fund’s mission is to invest in businesses with a positive social and environmental impact and provide them with technical assistance to help them scale such impact and grow their business. The Fund actively contributes to the growth of an impact-attentive and gender-inclusive private sector in order to attract investors and improve the livelihood of marginalised populations in the region.

The Fund applies investment restictions and an exclusions list, to avoid investments in certain sectors or activities that are not in line with the investment ojectives. While sustainability considerations are taken into account, companies may still be at a nascent stage in their ESG journey.

Proportion of investment

The Fund will solely invest in investee companies. The Fund will not, borrow money, guarantee the obligations of any other person or grant any mortgage, lien, hypothecation, charge, pledge or assignment of or security interest over its assets

Monitoring of environmental or social characteristics

The environmental and social characteristics promoted by the Fund are monitored on an ongoing basis throughout the investment lifecycle. Monitoring is coordinated by the ESG Manager, in collaboration with the investment team, and is based on information collected during due diligence and through periodic post-investment follow-up with portfolio companies. This monitoring aims to assess alignment with the Fund’s environmental and social characteristics, identify ESG-related risks, and inform engagement activities where relevant.

Methodologies

The Fund’s methodology to assess and monitor the environmental and social characteristics it promotes is based on both a qualitative and quantitative approach, taking into account the nature, sector and stage of development of portfolio companies. Specific KPIs will be defined for each investment and will be used for the purpose of measuring the attainment of the social and environmental objectives promoted by the Fund.

Data sources and processing

The fund relies on a combination of information provided directly by portfolio companies, internal analysis, and, where relevant, external ESG data sources to assess and monitor environmental and social characteristics. Monitoring is coordinated by the Fund’s ESG Manager, in collaboration with the investment team, and takes place throughout the investment lifecycle, including during due diligence and post-investment follow-up. ESG information is reviewed on a periodic basis to track progress, identify risks, and inform engagement activities where necessary.

Limitations to methodologies and data

The availability, quality and comparability of ESG data may be limited, in particular for early-stage companies and in certain emerging markets in which the Fund invests. ESG information is often based on data provided by portfolio companies and may rely on qualitative assessments or estimates. As a result, the methodologies used to assess environmental and social characteristics may involve assumptions and may evolve over time as data availability improves. These limitations are taken into account in the fund’s investment and monitoring processes and are addressed, where possible, through ongoing engagement with portfolio companies.

Due diligence

During the due diligence and ESG assessment, the General Partner meticulously evaluates the governance practices of investee companies. This includes thorough examinations of their management structures, emphasizing transparency, accountability, and effective decision-making processes. The team delves into the employee relations policies of these companies to ensure equitable treatment, diversity, and compliance with labor laws. Furthermore, staff remuneration practices are scrutinized to ensure they are fair, performance-aligned, and in line with industry standards, fostering employee motivation. Additionally, the due diligence encompasses a comprehensive review of tax compliance practices to ensure adherence to relevant regulations and ethical tax principles. By integrating these evaluations into due diligence and ESG Assessment, the General Partner aims to invest in companies that uphold exemplary governance standards, thereby safeguarding investor interests and contributing to sustainable long-term value creation.

Engagement policies

The Fund has established engagement policies to support the environmental and social characteristics promoted by the Fund. Engagement is led by the fund’s ESG Manager, in coordination with the investment team, and is implemented through structured and ongoing dialogue with portfolio companies throughout the investment lifecycle, including during due diligence, at board or advisory level where applicable, and through regular post-investment monitoring. Engagement focuses on key environmental, social and governance topics relevant to the company’s activities, sector and stage of development, including governance practices, environmental performance and social standards. Where engagement does not lead to sufficient progress, the fund may increase the level of engagement, agree on corrective action plans with management, or reassess its exposure to the investment.

Designated reference benchmark

Not applicable