Website Disclosure for Financial Products with a Environmental and/or social characteristics

Content

a. Summary
b. No sustainable investment objective
c. Environmental or social characteristics of the financial product
d. Investment strategy
e. Proportion of investments
f. Monitoring of environmental or social characteristics
g. Methodologies
h. Data sources and processing
i. Limitations to methodologies and data
j. Due diligence
k. Engagement policies
l. Designated reference benchmark

As referred to in Article 8(1) of Regulation (EU) 2019/2088 and Article 6 of Regulation (EU) 2020/852

Product name
Procuritas Capital Investors VII

Legal entity identifier
Procuritas Capital Investors VII (E) AB, Swedish Reg. No. 559325-9111
Procuritas Capital Investors VII (D) AB, Swedish Reg. No. 559325-9103
Procuritas Capital Investors VII Co-Investment AB, Swedish Reg. No. 559366-4138 

Sustainable investment means an investment in an economic activity that contributes to an environmental or social objective, provided that the investment does not significantly harm any environmental or social objective and that the investee companies follow good governance practices. 

The EU Taxonomy is a classification system, establishing a list of environmentally sustainable economic activities. For the time being, it does not include a list of socially sustainable economic activities. Sustainable investments with an environmental objective might be aligned with the Taxonomy or not. 

a. Summary

b. No sustainable investment objective:

this financial product promotes environmental or social characteristics but does not have as its objective sustainable investment.

c. Environmental or social characteristics of the financial product:

Procuritas Capital Investors VII (the “Fund”) is a fund which promotes environmental and social characteristics but does not commit to making any sustainable investments. The Fund will allocate all of its investments in assets aligned with environmental and social characteristic that do not qualify as sustainable investment. The Fund will promote the following environmental and social characteristics:

• The Fund excludes investments that conflict with list of industries contained under “Exclusions” in Procuritas’ Responsible Investment and Stewardship Policy.
• The Fund applies its Sustainability Risks policy when making investment decisions concerning this product.
• The Fund excludes investments that are exposed to (unmanageable) sustainability risks .
• The Fund takes principal adverse impacts on sustainability factors into account.
• The Fund excludes investments that are exposed to (unmanageable) principal adverse impacts.
• The Fund positively screens for investments with high potential to improve their ESG performance. 
• The Fund supports investments in improving their ESG performance.

d. Investment strategy:

The Fund’s investment strategy follows a clearly defined investment criteria in which investment opportunities are assessed against. Procuritas believes that it is essential to make impactful improvements to management and operations quickly after an acquisition is completed. Procuritas employ a responsible approach to sustainability through a pro-active effort to invest in and improve every portfolio company’s environmental, social and governance (ESG) impact. Procuritas believes that this approach helps to identify new business opportunities, increases a portfolio company’s competitiveness and value.

e. Proportion of investments:

The Fund will seek to allocate all of its investments in assets aligned with environmental and social characteristics that do not qualify as sustainable investments.

f. Monitoring of environmental or social characteristics:

the environmental and social characteristics are monitored continuously at the outset and throughout the ownership of the portfolio company. Procuritas proactively engages and collects indicators on the portfolio companies in order to monitor whether the portfolio companies uphold the environmental and social characteristics of the Fund.

g. Methodologies:

The methodology used to measure the attainment of the social or environmental characteristics, involves reporting requirements and board membership on each portfolio company. All portfolio companies in the Fund will have appointed board members from the Procuritas investment team. Companies are also required to report on ESG indicators via a digital data collection portal to measure baseline and year-on-year performance.

h. Data sources and processing:

The data used is obtained directly from the portfolio companies via a digital data collection portal.

i. Limitations to methodologies and data:

Data accuracy is a material limitation when portfolio companies are self-reporting. To ensure that these limitations are addressed, the data submitted through the digital portal is reviewed by members of the Procuritas deal team.

j. Due diligence:

An ESG due diligence is conducted prior to any acquisition. The due diligence identifies potential ESG issues and analyses to what extent the target company is mitigating the ESG risks or addressing the opportunities in its business.

k. Engagement policies:

The Fund seeks to engage directly with portfolio companies through board representation. A responsible investment approach, stewardship, and active guidance and monitoring of portfolio companies’ performance within environmental, social and governance (ESG) areas are important measures in achieving Procuritas’ objectives.

l. Designated reference benchmark:

No index has been designated as a reference benchmark to meet the characteristics.

b. No sustainable investment objective

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

c. Environmental or social characteristics of the financial product

The Fund will promote the following environmental or social characteristics:

• The Fund excludes investments that conflict with list of industries contained under “Exclusions” in Procuritas’ Responsible Investment and Stewardship Policy. This policy outlines industries/activities that have potentially negative environmental or social characteristics. More information about how exclusions are applied is available at Procuritas ESG policy.
• The Fund takes sustainability risks into account:
  • The Fund applies its Sustainability Risks policy when making investment decisions concerning this product. By applying its Sustainability Risks policy, it attempts to understand and manage or mitigate Environmental and Social risks to the assets in this product. More information about how the Sustainability Risks is considered when facing its portfolio is available at Sustainability Risk Policy.
• The Fund excludes investments that are exposed to (unmanageable) sustainability risks.
• The Fund takes principal adverse impacts on sustainability factors into account.
• The Fund takes principal adverse impacts on sustainability factors into account.
• The Fund excludes investments that are exposed to (unmanageable) principal adverse impacts.
• The Fund positively screens for investments with high potential to improve their ESG performance.
• The Fund supports investments in improving their ESG performance. Procuritas will provide each of the companies with the appropriate governance and management structures the companies required to facilitate the next stage of growth. The Fund will also require portfolio companies to conduct materiality assessments and provide them with the necessary tooling to start their ESG journey.

d. Investment strategy

Procuritas has clearly defined investment criteria against which investment opportunities are assessed. Procuritas will focus on growing and operationally improving companies with the following key characteristics:

• Prospects for accelerated future growth through organic growth and bolt-on acquisitions
• Opportunity to invest in the digitalisation of the business
• Niche market leaders
• Active in established, stable markets with solid underpinning fundamentals
• Fast and clear path to shareholder value
• EVs of between €25 million and €100 million

The above criteria have been applied since the first Procuritas Fund. Procuritas will not invest in real estate assets or venture investments. It will further not invest in assets that are operating in any of the industries contained under “Exclusions” in Procuritas’ Responsible Investment and Stewardship Policy.

Procuritas believes that it is essential to make impactful improvements to management and operations quickly after an acquisition is completed. The following initial actions lay the foundations for and facilitate rapid growth through digitalisation of portfolio companies and a buy-and-build strategy, namely:

• Priority: Prior to making an investment Procuritas work with management to develop a Value Creation Plan; a common plan with management to achieve transformative growth and to professionalise the business during the holding period. This plan is then refined during the 100-day plan.
• People: Introducing expertise into board discussions – Procuritas normally add an external chairperson to the board as well as external board members, and assigns high quality management in place for the positions where it deemed fit.
• Platform: Procuritas invest in each business to ensure it has the systems to allow for optimum reporting, processes and procedures.
• Planet: Procuritas employ a responsible approach to sustainability through a pro-active effort to invest in and improve every portfolio company’s environmental, social and governance (ESG) impact. Procuritas believes that this approach helps to identify new business opportunities, increases a portfolio company’s competitiveness and value. It ensures that the company is beneficial to society and minimizes the environmental impact. Procuritas is a signatory of the internationally recognised Principles for Responsible Investment (UNPRI) to demonstrate its commitment to promote a more sustainable financial system and has policies and processes in place to ensure a structured approach to responsible investments.

This strategy is applied at every stage in the investment process from the pre-investment phase, through ownership and to the exit phase.

Procuritas assesses good governance by installing representatives on the board of each portfolio company. Ultimately, the board takes responsibility for ESG concerns and ensures that reasonable internal reporting procedures exist to detect ESG incidents. Where there is exposure to countries with a high incidence of corruption, or that are under sanctions, extra resources are spent assessing the associated risks.  Furthermore, the fund requires all portfolio companies to implement a code of conduct and a whistle-blower function.

e. Proportion of investments

The Fund will allocate all its assets to category 1B, investments that promote social or environmental characteristics but do not qualify as sustainable investments.

#1 Aligned with E/S characteristics includes the investments of the financial product used to attain the environmental or social characteristics promoted by the financial product. 

#1B Other E/S characteristics covers investments aligned with the environmental or social characteristics that do not qualify as sustainable investments. 

What investments are included under “#2 Other”, what is their purpose and are there any minimum environmental or social safeguards? 

Not applicable. 

How will sustainable investments contribute to a sustainable investment objective and not significantly harm any other sustainable investment objective? 

Not applicable. 

The Fund may make investments that qualify as “sustainable investments” that may or may not be aligned with the EU Taxonomy, but the Fund is not committed to making sustainable investments, with or without any minimum EU Taxonomy alignment.

f. Monitoring of environmental or social characteristics

To monitor the attainment of the environmental and social characteristics listed under section c), the Fund monitors these indicators at the pre-investment and ownership phase as follows.

Characteristic:

• The Fund excludes investments that conflict with list of industries contained under “Exclusions” in Procuritas’ Responsible Investment and Stewardship Policy.

Method:

• From the onset, the Fund will not invest in companies operating in industries listed under “Exclusions” in Procuritas’ Responsible Investment and Stewardship Policy. This policy outlines industries/activities that have potentially negative environmental or social characteristics.

Characteristic:

• The Fund applies its Sustainability Risks policy when making investment decisions concerning this product.

Method:

• In accordance with the Sustainability Risks policy, the Fund seeks to satisfy certain ESG criteria while conducting the due diligence at the initial investment appraisal. The investment decision takes into consideration certain sustainability risks including (but not limited to) the following:
  • Environmental risks such as non-compliance with environmental legislations by portfolio companies and contamination risks (where applicable) on operations of portfolio companies;
  • Social risks such as impact of non-compliance with working conditions laws and regulations by portfolio companies; and
  • Governance risks such as inadequate management oversight of portfolio companies.

Characteristic:

• The Fund excludes investments that are exposed to (unmanageable) sustainability risks. 

Method:

• Investment opportunities that pose unmanageable sustainability risk will be rejected at the initial investment appraisal phase. Procuritas also takes a robust and pro-active approach to integrate Sustainability Risks into its the firm monitors and reports on investments throughout the investment cycle and commits to reporting on such risks to investors.

Characteristic:

• The Fund takes principal adverse impacts on sustainability factors into account.

Method:

• The Fund considers principal adverse impacts of investment decisions on environmental, social and employee matters, respect for human rights, anti‐corruption, and anti‐bribery matters (“Sustainability Factors”). Every investment opportunity Procuritas reviews will be subject to a high-level ESG analysis to determine the most material ESG themes and risks. These themes consider principal adverse impacts. If the characteristics of the investment opportunity warrant further scrutiny, Procuritas will engage a third party to perform enhanced ESG due diligence.
• More information on these principal adverse impacts, Procuritas policies to identify and prioritise them, and engagement policies to address them can be found in the Principal Adverse Impact Statement located in the ‘Sustainability-related disclosures’ section of the website.

Characteristic:

• The Fund excludes investments that are exposed to (unmanageable) principal adverse impacts.

Method:

• When considering principal adverse impacts, investment opportunities that pose unmanageable risk will be rejected at the initial investment appraisal phase. Procuritas proactively engages with its portfolio companies regarding principal adverse impacts on sustainability factors. Through these engagements, portfolio companies measure and report relevant information on the context of the principal adverse impacts affecting their businesses. This allows Procuritas to make a decision to what could be considered unmanageable exposure.

Characteristic:

• The Fund positively screens for investments with high potential to improve their ESG performance 

Method:

• The Fund evaluates value creation opportunities related to ESG when considering investment opportunities. This could include companies that have shared core values in relation to ESG but have yet to implement these values into actual business operations.

Characteristic:

• The Fund supports investments in improving their ESG performance. 

Method:

• All portfolio companies shall, based on their material sustainability aspects, identify and work to implement a set of relevant initiatives to improve on the company’s ESG performance (e.g., to reduce carbon footprint, improve employee satisfaction, increase gender diversity) and define related KPIs with targets to monitor the progress and development of the initiatives. The Fund will support the company in defining a clear ambition and improve ESG performance throughout the Fund’s ownership period.

g. Methodologies

The methodology used to measure the attainment of the social or environmental characteristics, involves reporting requirements and board membership on each portfolio company.

All portfolio companies in the Fund shall in every board meeting give an ESG update. This measure allows the Fund to measure the attainment of the social and environmental characteristics with the correct level of transparency. It also ensures that any unmanageable ESG risks or incidents are identified and mitigated against in a timely manner.

Companies are required to report annually via a digital data collection portal. Companies are prompted to log on to the portal and asked to fill-out a questionnaire with specific KPIs across environmental, social and governance topics. These KPIs will be used to measure baseline and year-on-year performance of the portfolio companies. The platform also aggregates this data so that ESG performance can be assessed for the Fund on a wholistic scale. This allows Procuritas to track ESG improvements made by the companies and flag any investments that are exposed to (unmanageable) principal adverse impacts.

h. Data sources and processing

Please describe what data sources were used to attain each of the environmental or social characteristics.

The data used is obtained directly from the portfolio companies via a digital data collection portal . In the absence of data, an informed estimate will be made using industry benchmarks and reported alongside appropriate disclaimers.

How is data processed?

Data is submitted by companies onto the digital portal. The data is hosted on the platform and is downloaded onto the Procuritas server and further analysed by the Procuritas team.

What measures are taken to ensure data quality?

The fund provides written guidance on how to report data to the portfolio companies and a personal walk-through of the various KPIs. When data has been submitted, the reasonableness will be reviewed by team members at Procuritas.

What proportion of data is estimated?

The fund relies on self-reported data from the portfolio companies, the proportion of estimates varies significantly between portfolio companies depending on nature of operations and processes in place to track relevant data. Over time we strive to put in place processes that improve data accuracy.

i. Limitations to methodologies and data

The Fund will always seek to obtain accurate and reliable information however, data accuracy is a material limitation when portfolio companies are self-reporting. To ensure that these limitations are addressed, the data submitted through the digital portal is reviewed by members of the Procuritas deal team. This helps to correct any irregularities in the data accuracy once the portfolio company has submitted its data.

j. Due diligence

Informed by the Sustainability Risks Policy, an ESG due diligence is conducted on any investment prior to acquisition. The due diligence identifies potential ESG issues and analyses to what extent the target company is mitigating the ESG risks or addressing the opportunities in its business.

Prior to acquisition, all companies are subject to internal or external ESG due diligence and the conclusion of this analysis shall be included in the Investment Memorandum used to inform the Investment Committee discussion and ultimately the Fund Board’s investment decision.

k. Engagement policies

The Fund seeks to engage directly with portfolio companies as part of its investment strategy. A responsible investment approach, stewardship, and active guidance and monitoring of portfolio companies’ performance within environmental, social and governance (ESG) areas are important measures in achieving Procuritas’ objectives. Procuritas believes that by engaging directly with portfolio companies it allows them to mitigate risks, identify new business opportunities, increase the portfolio company’s competitiveness and value. It also ensures that the company is beneficial to society and the environment at large. As a commitment to the investors, staff, and the communities in which Procuritas and its portfolio companies operates, Procuritas has therefore adopted this Responsible Investment and Stewardship policy.

In relation to sustainability-related concerns, it is the responsibility of portfolio companies to report on any ESG concerns and ensure that reasonable internal reporting procedures exist to detect ESG incidents. Where there is exposure to countries with a high incidence of corruption, or that are under sanctions, extra resources are spent assessing the associated risks. Procuritas also monitors the attainment of any third-party certifications by portfolio companies (such as ISO and various environmental-management certificates). 

l. Designated reference benchmark

No index has been designated as a reference benchmark to meet the characteristics.