Procuritas – SFDR Disclosures – Principal Adverse Impacts

Summary

Procuritas Capital Investors VII (Procuritas Capital Investors VII (E) AB, Swedish Reg. No. 559325-9111, Procuritas Capital Investors VII (D) AB Swedish Reg. No. 559325-9103 and Procuritas Capital Investors VII Co-Investment AB, Swedish Reg. No. 559366-4138) considers principal adverse impacts of its investment decisions on sustainability factors. The present statement is the consolidated statement on principal adverse impacts on sustainability factors of Procuritas Capital Investors VII. 

This statement on principal adverse impacts on sustainability factors covers the reference period from 1 January to 31 December year 2023. 

Procuritas Capital Investor VII (from now on named ‘Procuritas’) invests in a wide range of sectors which makes the relevant principle adverse impact of its investments vary from company to company. When making investment decisions for the Fund, Procuritas explicitly screens for sustainability-related risks and opportunities, as well as negative and positive impacts that the investment has or might have. Every investment opportunity Procuritas reviews will be subject both to a high-level sustainability analysis and to a more thorough sustainability due diligence to determine the most material sustainability risks and aspects related to the investee company. Procuritas has an exclusion list that prohibits it from investing in companies related to arms, gambling, the sex industry or producing or wholesaling of alcohol, tobacco or drugs.  

Procuritas believes that investment decisions that negatively impact climate or other environment-related resources, or have negative implications for people or society, are detrimental to value creation. To this end, Procuritas considers the principal adverse impacts of its investment decisions on sustainability factors throughout all major steps of the investment and portfolio management process. The principal adverse impact indicators are currently being reported directly from the portfolio companies and monitored by Procuritas once a year as part of the data-gathering process.  

Overall, while there have been some positive changes in social and employee-related indicators, there has been a significant increase in greenhouse gas emissions and carbon intensity from 2022 to 2023.

Description of the principal adverse impacts on sustainability factors

Procuritas reports on the 14 mandatory principal adverse impact indicators. For the year 2023 the additional indicator for climate and other environment-related topics addresses natural species and protected areas and the additional indicator for social and employee, respect for human rights, anti-corruption, and anti-bribery matters, addresses the number of convictions and amount of fines for violations of anti-corruption and anti-bribery laws. In 2023, we decided to change the additional environmental indicator from high water stress to natural species and protected areas, as this indicator better aligns with Procuritas’ ESG strategy, which was updated in 2023. 

In addition to the principal adverse impact indicators defined by the SFDR, Procuritas also monitors portfolio companies’ eNPS score, as well as the share of female CEOs, the share of women in top management, and the share of female employees in the total workforce of portfolio companies. Anti-corruption, gender diversity, and employee satisfaction are focus areas of Procuritas’ sustainability strategy. 

Description of policies to identify and prioritise adverse sustainability impacts

Procuritas has an overall Responsible Investment and Stewardship policy outlining the company’s approach to sustainability throughout the whole investment process, i.e. describing how sustainability is incorporated into the investment appraisal, due diligence and decision-making processes. The policy also outlines what industries that Procuritas will not invest in. The first version of the policy was approved by the board in September 2016 and a revised version was approved in May 2021.  In addition, Procuritas has developed a Sustainability risk policy describing how sustainability risks in particular are integrated into the investment process, and how monitoring and reporting of risks are conducted. The risk policy was approved by the board in February 2022. The board is responsible for the implementation of the policies within organisational strategies and procedures.  

The processes and methods described in the Responsible Investment and Stewardship and the Sustainability risk policy help Procuritas to identify the relevant principal adverse sustainability impacts for each investment in addition to identifying how sustainability risks may impact the financial returns of a product. They also enable each investment team to, throughout the lifecycle of a product’s investment, identify and manage the impact of any principal adverse impacts, or their risk of occurring, and take suitable mitigating action. Sustainability risks and principal adverse sustainability impacts are screened, monitored and measured in a manner suitable to each Procuritas product. Procuritas will never invest in companies related to arms, gambling, the sex industry or producing or wholesaling of alcohol, tobacco or drugs. 

Procuritas gathers, monitors and aggregates data on the principal adverse impact indicators, both the 14 mandatory and the two being voluntary, from its Portfolio companies once a year through a digital data collection platform. Procuritas aim at selecting additional indicators based on the probability of occurrence and severity of adverse impacts (including their potentially irremediable character). Selection and assessment of relevant indicators were based on internal discussions, however a thorough analysis using data has not been conducted. The additional indicator for climate and other environment-related topics addresses natural species and protected areas and the additional indicator for social and employee, respect for human rights, anti-corruption, and anti-bribery matters, addresses the number of convictions and number of fines for violations of anti-corruption and anti-bribery laws. In 2023, we decided to change the additional environmental indicator from high water stress to natural species and protected areas, as this indicator better aligns with Procuritas’ ESG strategy, which was updated in 2023. 

In addition to the principal adverse impact indicators defined by the SFDR, Procuritas also monitors portfolio companies’ eNPS score, as well as the share of female CEOs, the share of women in top management, and the share of female employees in the total workforce of portfolio companies. Anti-corruption, gender diversity, and employee satisfaction are focus areas of Procuritas’ sustainability strategy. 

All the principal adverse impact data has been gathered directly from the portfolio companies. In 2023, the data collection process was further developed to enhance data quality, and Procuritas provided all portfolio companies with a GHG calculation tool and education on GHG calculations. As a result of more accurate calculations and a broader scope, greenhouse gas emissions have significantly increased.

Engagement policies

Procuritas’ Responsible Investment and Stewardship policy outlines the company’s approach to sustainability throughout the whole investment process, including ways to engage with its investee companies to make sure they have access to the resources, connections, and knowledge to address their principal adverse impacts.   

For each investment, there is always a thorough assessment of principal adverse impacts conducted. Aspects covering climate change, circular economy, biodiversity, anti-corruption, anti-discrimination, diversity and inclusion, health and safety among other topics are assessed. Each investment is unique hence the relevant aspects will vary from company to company. Procuritas wants its companies to develop an awareness of their most material sustainability risks and impacts and that they develop goals and methods to address those material impacts. Topics identified during the pre-investment phase are integrated into the value creation plan of the company. Procuritas’ provides its companies with tools both to assess material sustainability aspects and to set goals to address these topics. Procuritas also provides sustainability advisory and support to its portfolio companies through its head of ESG and other ESG experts in its network whenever necessary. If a company fails to reduce its principal adverse impacts year after year this will be followed up and addressed by the portfolio company board. 

References to international standards

Procuritas is currently a signatory of the United Nations Principles for Responsible Investment (UNPRI). The Responsible Investment and Stewardship policy, including the investment process, has been developed in accordance with the UNPRI principles. Each year Procuritas submit information and data to the UNPRI which assesses Procuritas’ adherence to the principles. The assessment made during the due diligence process is comprehensive and covers a broad range of sustainability topics. Procuritas has ensured that all mandatory principal adverse sustainability impact indicators and the two additional ones (please see section ‘Description of policies…’, above) are incorporated into the due diligence process. In addition, additional indicators might be added on a case-by-case basis whenever considered material. Data is collected directly from the company being subject to the sustainability due diligence. 

Procuritas has not yet set any fund-level goals aiming to align with the Paris Agreement. However, one focus area moving forward will be climate change mitigation and setting goals that contribute to the overall objectives of the Paris Agreement. In 2023, Procuritas committed to the Science Based Targets initiative (SBTi) and developed and submitted targets in accordance with the SBTi financial sector standard. These targets are expected to be approved in the first half of 2024. To date, Procuritas gathers, monitors, and reports on climate-related adverse impact indicators, disclosing this information as part of the company’s sustainability report. While a forward-looking climate scenario has not been utilized, climate change mitigation and adaptation remain focus areas assessed during sustainability due diligence conducted by external experts. 

Historical comparison

Overall, while there have been some positive changes in social and employee-related indicators, there has been a significant increase in greenhouse gas emissions and carbon intensity from 2022 to 2023.  

Greenhouse Gas Emissions, Carbon Footprint and GHG Intensity: Across all scopes, there has been a significant increase in emissions from 2022 to 2023. For example, total GHG emissions rose from 956 tCO2e in 2022 to 8.970 tCO2e in 2023. The carbon footprint and GHG intensity of investee companies have also increased from 2022 to 2023. The reason for this is because we acquired a company during 2023 that is now included in the emissions reporting, and we also increased our investment in one of the existing portfolio companies. Additionally, the quality of data has improved, and the calculations now cover more categories of scope 3 emissions than in 2022.  

Exposure to Fossil Fuel Sector and Non-renewable Energy: While exposure to companies in the fossil fuel sector remains unchanged at 0%, the share of non-renewable energy consumption and production has decreased significantly from 59% in 2022 to 27.2% in 2023. This indicates a positive trend in reducing reliance on non-renewable energy sources. 

Biodiversity, Water, and Waste: There are no activities negatively affecting biodiversity-sensitive areas, emissions to water, or hazardous waste and radioactive waste ratio reported in either 2022 or 2023. There have been no significant changes in these areas over the two years. 

Social and Employee Matters: There are improvements in several social and employee-related indicators from 2022 to 2023. For example, the lack of processes and compliance mechanisms to monitor compliance with UN Global Compact principles and OECD Guidelines for Multinational Enterprises has decreased from 33% to 30.8%. The unadjusted gender pay gap remains unchanged at 2%, and there is a slight improvement in board gender diversity.