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”).
b-to-v S.à r.l., b-to-v Partners S.à r.l., btov Partners S.à r.l. II, btov Partners S.à r.l. IV, btov Partners S.à r.l. VI, and btov Direct Investment Manager S.à r.l. (each a “btov ManCo” and together “btov”) are alternative investment fund managers within the meaning of the Luxembourg Company Law and/or the EuVECA-Regulation and as such publish the following information on their website in light of the consideration of sustainability-related aspects in accordance with Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27th of November 2019 on sustainability disclosure requirements in the financial services sector (the “SFDR”). Unless the information is explicitly provided in relation to a specific btov ManCo or specific fund managed by any of the btov ManCos the following statements refer to the management and investment decision-making processes of all btov ManCos in general.
Sustainability Risks (Art. 3 SFDR)
btov 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. btov considers sustainability risks as part of the due diligence process prior to any investment. This also includes an assessment of sustainability risks. The results of such assessment are taken into account when the investment decision is being taken. However, btov remains free in its decision to refrain from investing or to invest despite sustainability risks in which case btov can also apply measures to reduce or mitigate any sustainability risks. At all times, btov will apply the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context.
Principal adverse sustainability impact statement (Article 4 SFDR)
Art. 4 SFDR provides for a framework aimed at achieving transparency with regard to any principal adverse impacts of investment decisions on sustainability factors as defined in the SFDR.
While btov acknowledges the importance of incorporating ESG principles into its core processes and throughout the investment, ownership, and exit phases, btov does not yet take into account any principal adverse impact of its investment decisions on sustainability factors as specified in the SFDR (except for the btov Digital Technologies II SCS, SICAR). btov believes that the information provided to them by the portfolio companies is not yet sufficient to allow them to do so.
Moreover, 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 btov.
Given that the majority of the financial products managed by btov were established before the SFDR became applicable, there are currently no corresponding agreements with their respective portfolio companies on the collection and provision of data in place. The subsequent introduction of such agreements is difficult and would impose an administrative burden on the portfolio companies. In addition, the minority interests that the financial products (will) hold in their portfolio companies may generally not be sufficient to encourage the portfolio companies to (start to) collect and provide the relevant data. Thus, it is currently not foreseeable for btov whether the information for the identification and assessment of principal adverse impacts can be obtained regularly and in full from all of its portfolio companies. If btov were to consider adverse impacts of its investment decisions on sustainability factors for all of its financial products, there would be a risk for btov that the required data could not be adequately provided.
As a consequence, btov decided to only consider adverse impacts of its investment decisions on sustainability factors at product-level for btov Digital Technologies II SCS, SICAR. If and to the extent that the legal and practical uncertainties will be resolved and an administrative practice will evolve in this regard, btov will re-evaluate considering principal adverse impacts of its investment decisions for other financial products managed by btov in due course. In the meantime, btov remains free in its decision to use part of the sustainable indicators listed in Annex I of the RTS and/or an own set of indicators.
Remuneration Disclosure (Article 5 SFDR)
As a registered AIFM within the meaning of section 2(4) of the KAGB, btov does not have a remuneration guideline (remuneration policy) in accordance with the requirements of the KAGB. The integration of sustainability risks is not considered with respect to the determination of the remuneration.
Product Disclosures, Sustainability-related Disclosures
btov Digital Technologies II SCS, SICAR
btov Digital Technologies II SCS, SICAR (the “DTF II Fund”) incorporates ESG principles within its investment processes by excluding certain sectors from the DTF II Fund’s investment scope. btov assesses those exclusions pre-investment and post-investment through a largely informal approach which is proportionate and appropriate in light of organizational structures of btov as well as its investment strategy.
btov Digital Technologies II SCS, SICAR (“DTF II Fund”) bezieht ESG-Prinzipien in seine Investitionsprozesse ein, indem er bestimmte Sektoren aus dem Investitionsbereich des DTF II Funds ausschließt. btov bewertet diese Ausschlüsse vor und nach der Investition durch einen weitgehend informellen Ansatz, der angesichts der Organisationsstrukturen von btov sowie seiner Investitionsstrategie verhältnismäßig und angemessen ist.No sustainable investment objectiveThe DTF II Fund promotes environmental or social characteristics, but does not have as its objective sustainable investment.Environmental or social characteristics of the financial productThe DTF II Fund does 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:
In addition, the DTF II takes the Principal Adverse Impact Indicators (“PAIs”) as stated in the RTS into account.
The DTF II collects all Principal Adverse Impact Indicators (“PAIs”) stated in table 1 of the RTS. Out of table 2 (“Additional climate and other environment-related indicators”) and table 3 (“Additional indicators for social and employee, respect for human rights, anti-corruption and anti-bribery matters”) the three PAIs “Investments in companies without carbon emission reduction initiatives”, “Lack of supplier code of conduct”, “Incidents of discrimination” are collected. The PAI indicators are reported on an annual basis.
The purpose of the DTF II Fund is to build, hold, manage and divest a portfolio of equity and equity-related investments in Portfolio Companies.
Thereby, the DTF II Fund focuses on technology-driven investments and invests in portfolio companies developing B2C and B2B software, products or platforms which are enabled by a digital component. The DTF II Fund targets initial investments predominately at the pre-seed and seed stage. The initial investment amounts are ranging between EUR 250k and EUR 3m. The DTF II Fund is bound by the investment restrictions mentioned in the section before which are set out in the Fund’s limited partnership agreement.
Geographically, the DTF II Fund specifically targets Europe but may also pursue individual investment opportunities outside of Europe.
btov assesses good governance practices pre- and post-investment through an informal approach which is proportionate and appropriate in light of the circumstances of each individual investment.
Proportion of investments
The DTF II Fund will invest fully in line with its investment strategy. No portion of the DTF II Fund’s capital will be allocated to other asset classes. The DTF II Fund does not make and does not intend to make sustainable investments within the meaning of Art. 2 No.17 SFDR.
Monitoring of environmental or social characteristics
btov monitors for the DTF II Fund prior to the investment as well as following the investment whether the Portfolio Company pursues any prohibited activities as described above. With respect to its post-investment monitoring, btov engages in close and informal exchange and communication with the Portfolio Companies of the DTF II Fund (i.e. bi-weekly / monthly jours fixes and quarterly board meetings), but btov does not initiate regular formal assessments or external monitoring mechanisms.
Methodologies for environmental or social characteristics
Currently, btov applies qualitative assessments with regard to environmental and/or social characteristics. btov conducts an initial assessment in the course of its due diligence. Each due diligence takes the form of a questionnaire which btov on behalf of the DTF II Fund asks their respective (potential) Portfolio Companies to complete. In addition, btov on behalf of the DTF II Fund applies quantitative measurement by tracking quantitative PAI indicators such as GHG emissions and gender pay gap.
Data sources and processing
An ESG questionnaire is completed by the (potential) Portfolio Company as part of the due diligence process. An external review or verification of the information obtained will only be carried out if misrepresentation is suspected. Moreover, in addition to the regular communication between btov and the DTF II Fund’s Portfolio Companies,
PAI’s are collected on an annual basis from each portfolio company. The Fund uses reasonable efforts to quality check and pressure test the collected data. The goal is to use objective and quantitative data. However, some metrics may rely – to a certain extent – on estimations
Limitations to methodologies and data
btov is partly reliant on the information provided by the (potential) Portfolio Companies during the due diligence process on behalf of the DTF II Fund. Moreover, in the post-investment phase, btov is reliant on the Portfolio Company’s reported data. In both cases, complete data may not always be available due to the nature of the investments. The information is verified only if and to the extent, misrepresentations are suspected. As the DTF II Fund’s investment is made for several years, btov 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.
Initially, the assessment of how the DTF II Fund’s investment in the Portfolio Company relates to the environmental or social characteristics mentioned above is carried out as part of the due diligence process using a questionnaire. Via the questionnaire, purely qualitative statements of an environmental or social nature or relating to corporate governance are requested from the portfolio companies and then taken into account in the investment decision-making process. The goal of the questionnaire is to confirm that either there are no ESG risks, or that they can be mitigated. Moreover, the questionnaire is used to assess the status regarding ESG and impact of the company and identify focus areas of improvement to be tackled after investment
Should btov on behalf of the DTF II 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 effect, provided that such efforts will always remain within the scope considered by btov 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.