Positron’s Sustainabile Finance Disclosures

Following the adoption of the 2015 Paris Agreement on climate change and the United Nations 2030 Agenda for Sustainable Development, the European Commission has developed the Regulation (EU) 2019/2088 of 27 November 2019 on sustainability-related disclosures in the financial services sector (“SFDR”). In connection with the SFDR also Taxonomy Regulation (“TR”), EU 2020/852, was developed which defines further criteria and definitions for ESG investments.

The SFDR aims to improve transparency in the field of sustainability. It requires financial market participants and financial advisers to integrate sustainability risks, consider adverse sustainability impacts, the promotion of environmental or social characteristics, and sustainable investments, and to make pre‐contractual and ongoing disclosures in this respect to end investors. In doing so, it aims to:

  • Reorient capital flows towards sustainable investment in order to achieve sustainable and inclusive growth;

  •  Improve the assessment and management of relevant financial risks stemming from climate change, resource depletion, environmental degradation and social issues;

  • Foster transparency and long-termism in financial and economic activity.

You can find Positron’s SFDR statement and periodic disclosures pursuant to the SFDR below:

What is Positron required to do under the SFDR?

Positron Ventures B.V., as manager of the investment fund (Positron), has to transparently communicate several sustainability-related disclosures on its website, directly accessible to potential investors. These disclosures on a manager level include:

  • Positron’s consideration of sustainability risks in investments; i.e. how are sustainability risks taken into account in Positron’s decision to invest or divest in specific companies?

  • Positron’s policy regarding principal adverse impacts of investment decisions on sustainability factors and the due diligence policies with respect to those impacts, i.e. how does Positron take the possible negative impact of investment decisions on people or planet into account (i.e. sustainability in the broadest sense)?;

  • Positron’s integration of sustainability goals in its remuneration policies; i.e. how does Positron’s sustainability performance affect the compensation its management or other team members receive?

Positron is further required to disclose information on a product level (i.e. in respect of the investments it manages), depending on the SFDR classification of its investments. The investment strategies and objectives of the funds managed by Positron are such that they can be considered of funds being either:

  •  promoting environmental and/or social characteristics (“Article 8” products); or

  •  having sustainable investment as its objective (“Article 9” products).

The fund documentation relating to such fund(s), both pre-contractual as well as ongoing in e.g. the annual reports, should reflect the relevant SFDR information on a product-level. Positron will publish all of the above on its website, in the information about its investment products (data room and prospectuses) and in the annual reports.

How does Positron enact the SFDR?

Positron’s mission is to help and fund European scientist-entrepreneurs who are pursuing moonshots for (planetary) health. Positron does this by aggregating investments of private investors and investing this capital into impact venture capital, which in turn invest in tech startups and scaleups, e.g. companies that are bringing planetary positive technologies to the market.

Positron only invests in private companies, and its investment process is focused on selecting the best impact companies. In order to do so, Positron has developed a positive selection investment strategy. For each investment, Positron does both a ‘general diligence’ which focuses on the expected financial return and risks, as well as an ‘impact diligence’ which focuses on the expected climate impact as well as risks. The impact diligence is based on a proprietary ‘6T Scorecard’, which assesses the extent to which a company has structured its strategy, policies, team monitoring and reporting in a way that will increase the likelihood that the fund will achieve substantial positive impact and mitigate climate change.

A company must score a minimum of a 3.0 (on a range of 1 to 5, where 1 is defined as “no indication that the company does anything on this point”, 3 is defined as “company’s impact approach on specific point is sufficient according to Positron” and a 5 is defined as “best practice seen in the global impact investing market”) on the 6T Scorecard in order for Positron to be allowed to invest in. If a fund meets that minimum threshold, the insights from the 6T Scorecard, general diligence and ESG analysis, are combined, based on which Positron decides whether or not to invest in the company.

How does Positron integrate sustainability risks in its decision to invest or divest in specific underlying funds? (Article 3 SFDR)

Sustainability Risks are defined as environmental, social, or governance (ESG) events or conditions that, if they occur, could cause an actual or a potential material negative impact on the value of the investment. Positron assesses sustainability risks in the ‘ESG Analysis’, which is part of the due diligence of each investment and the outcome of which is integrated in the investment decision. This ESG Analysis is done with a proprietary framework, based on elements from the Invest Europe ESG framework.

Positron assesses the sustainability risks of an investment fund it invests in, on two levels:

  • sustainability risks related to the fund’s investment activities, e.g. sustainability risks that can impact a portfolio company’s performance. An example of an environmental risk could be a company that pollutes local water with its activities, which could lead to governmental fines and reputational damage;

  •  sustainability risks related to the fund manager, e.g. sustainability risks that affect the ability of the fund manager to manage the portfolio well. An example of a social risk could be the absence or low quality of Diversity, Equity and Inclusion (DEI) policies, which could lead to the fund missing out on talent and lower quality decision making.

For sustainability risks related to the fund’s investment activities, Positron assesses the quality with which a company identifies, assesses and evaluates ESG factors associated with specific investments. The SFDR classification and the PAI statement, to the extent that these are available, of the underlying fund are also assessed.

In the analysis, Positron looks at the breadth of ESG factors for each potential investment, the quality of the process with which ESG factors are identified prior to investment and monitored post-investment, and the quality of ESG analyses that a company has done for the current or previous portfolio companies.

For sustainability risks related to the fund manager, Positron assesses the existence, quality and implementation of the fund manager’s ESG policies for its own organisation. Positron assesses a range of ESG specific aspects, including the company’s environmental policy, greenhouse gas emissions, supplier policies, employee policies (e.g. pay equity, employee health, anti-discrimination, diversity and inclusion), code of conduct and board independence.

Both types of sustainability risks are assessed prior to making the investment decision. For each potential material risk identified, Positron defines mitigants, e.g. a factor that can mitigate the risk, and assesses whether this mitigant is sufficient to manage the relevant sustainability risk(s). The conclusions of these analyses are presented to and discussed in the Investment Committee, who is responsible for deciding whether risks are sufficiently managed.

For investments made so far, Positron believes there is a low to minimal risk of sustainability risks having a material impact on the financial performance of Positron fund I.

How does Positron consider principal adverse impacts of investment decisions on sustainability factors? (Article 4 SFDR)

Principal adverse impacts (PAI) are defined as negative, material, or potentially material effects on sustainability factors that result from, worsen, or are directly related to investment decisions. Sustainability factors are defined as environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters. In April 2022, the Regulatory Technical Standard (RTS) of the SFDR was adopted by the European Commission, which includes Annex 1, a list of PAI indicators which a fund must take into account to determine that an investment Does Not Significant Harm (DNSH) sustainability factors.

The SFDR prescribes that fund managers must state whether they take PAI indicators into account on an entity level. Positron does not consider PAI indicators on an entity level, for three reasons. Firstly, most of the companies Positron invest in are small and early stage companies, which do not have enough or good enough data available to take PAI indicators into account. Secondly, Positron may also commit funds outside of Europe, who do not adhere to the EU SFDR and as such will not use the (full) set of PAI indicators when making investment decisions.

On a product level, Positron will include PAIs when making investment decisions, albeit on a high and mostly qualitative level. Specifically, Positron does an ‘ESG Analysis’ of the companies prior to investing. More information on this ESG Analysis can be found in the pre-contractual disclosures of Positron products.

While Positron does not expect PAI indicator data to be available at the time of making the investment decision for its products, Positron does expect PAI data to become increasingly available during their lifetime. Positron will use this available PAI data when it becomes available and will then reconsider if it is feasible to take PAI’s into account at entity level for its investment decisions. Positron will analyse this information, and in case Positron concludes that PAI’s are sufficiently managed, but there is room for improvement, it will enter into dialogue with the companies to discuss these observations.

How does Positron’s sustainability performance affect the compensation its management or other team members receive? (Article 5 SFDR)

Remuneration at Positron aims at effective risk management. It takes into account careful and diligent decision making and lacks any form of incentives for its employees in excessive risk taking for both business and sustainability. Remuneration is also aligned with the long-term interest of the entity.

Positron remuneration is based on a fixed monthly salary and benefits for all employees and a participation the carried interest of the fund, which is based on pro rata salary of the total salary pool in any given year. These incentive schemes should drive behavior and decision making that is aligned with the genuine interests of investors and is grounded in sustainability principles.

Positron’s remuneration policy and salary house are reviewed at least yearly by the Management Board (and its Advisory Board)  to comply with the values and mission of the entity and the laws and legislation of its jurisdiction.