Definitions and glossary of terms
- “DNSH” : Principle of Do No Significant Harm under SFDR 2019/2088
- “ESG Factor” : Under SFDR 2019/2088 Art.2 (24) ‘sustainability factors’ mean environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters. These are further identified in Section 2.3 of this document.
- “ESG Investment” : Sustainable investment under SFDR 2019/2088 means an investment in an economic activity that contributes to an environmental objective, as measured, for example, by key resource efficiency indicators on the use of energy, renewable energy, raw materials, water and land, on the production of waste, and greenhouse gas emissions, or on its impact on biodiversity and the circular economy, or an investment in an economic activity that contributes to a social objective, in particular an investment that contributes to tackling inequality or that fosters social cohesion, social integration and labour relations, or an investment in human capital or economically or socially disadvantaged communities, provided that such investments do not significantly harm any of those objectives and that the investee companies follow good governance practices, in particular with respect to sound management structures, employee relations, remuneration of staff and tax compliance.
- “ESG or Sustainability Risk” : An ESG or Sustainability Risk means under SFDR 2019/2088 (14) an environmental, social or governance event or condition that, if it occurs, could cause a negative material impact on the value of the investment, as specified in sectoral legislation, in particular in Directives 2009/65/EC, 2009/138/EC, 2011/61/EU, 2013/36/EU, 2014/65/EU, (EU) 2016/97, (EU) 2016/2341, or delegated acts and regulatory technical standards adopted pursuant to them.
- “PASI” : Principal Adverse Sustainability Impacts whether material or likely to be material, of investment decisions on ESG Factors.
- “SFDR” : Regulation 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector
1. Introduction
1.1 Background
Oraxys was created as a Private Equity specialist in the “clean tech” thematic for profitable Small and Mid-sized Enterprises. Moreover, Oraxys has a long-standing belief (i) that material1 Environmental, Social and Governance (ESG) Factors which have a positive impact for people and the planet are an important driver of long-term investment returns from both an opportunity and a risk-mitigation perspective and (ii) that the ability to identify, assess and manage ESG considerations can provide sustainability and a positive ethical impact on investment and corporate performance, local communities and society at large.
In this respect, Oraxys created in 2008 a first fund specialized in sustainability alongside with investors for whom the positive environmental impact of their portfolio is an important consideration in conjunction with investment performance. Further to the success of this first fund and building up on its learning curve, Oraxys incorporated a second fund (together with the first fund, the “Oraxys’ funds”) to support companies focused on environment-friendly products or services taking into account the current context and the norms which significantly evolved since 2008. ESG criteria are integrated throughout all stages of Oraxys’ investment process.
In this respect, it is noted that Oraxys’ strategy for its second fund which promotes Environmental characteristics is in alignment with Article 8 of the SFDR regulation.
1.2 Mission statement
Oraxys’ mission is to support the development of companies which market environment-friendly products or services in connection with one of Oraxys’ three environmental impact’s pillars: nature preservation, resource efficiency and health.
Oraxys notes that the targeted companies are growing, profitable, and are competing as challengers with established and often larger groups. At the stage of development of these companies, their leaders are pragmatic and primarily focused on developing their technical and marketing competitive advantage. Oraxys understands the challenge for such companies to implement an ESG policy, but nevertheless encourages their leaders to consider ESG Factors and their impacts on the business. Oraxys’ ambition is therefore as far as possible to play a role of mentor/guide for the targeted companies to monitor and manage ESG Factors.
2. Environmental, Social and Governance Policy
2.1 Objectives and scope
This policy shall serve as a guideline for Oraxys to ensure that ESG risks and opportunities are considered throughout its investment and divestment processes as well as through the investment lifecycle.
Oraxys will use the guiding principles of this policy to continuously support its portfolio companies to improve their own ESG practices and policies.
2.2 Guiding principles
Before considering any relationship and/or investment, Oraxys analyses to which extent the following principles are met by all parties:
- Complying with applicable laws and regulations, including environmental and social legislation, and align with good international industry practices;
- Respecting human rights, taking care of prohibition of slavery and child labour;
- Acting with ethics at all times respecting the applicable cultures as much as possible;
- Acting with integrity, transparency, accountability and probity in the management structures, policies and processes;
- Non-discriminating (whether on grounds of gender, race, age or disability) in the recruitment process at all levels of the organisation (employees, boards, committees, etc.);
- Promoting businesses with a positive impact on nature preservation, resource efficiency and health;
- Being accessible to, and engaging with, relevant stakeholders either directly or through representatives, as appropriate;
- Acting responsibly with respect to the environment.
2.3 Environmental, Social and Governance Standards
Oraxys takes into consideration ESG Factors in its investment and monitoring strategies.
Oraxys’ major investment criteria is the environmental impact of the targeted company’s products or services in connection with nature preservation, resource efficiency and health.
In addition, Oraxys examines the activity of each targeted company to evaluate if it contributes to one or several Sustainable Development Goals (SDGs) of the United Nations and the related targets.
Environmental
1. To check the environmental impact of the products or services of the targeted companies/portfolio companies in connection with:
- Nature preservation
Example of targeted impacts:
CO2 Management2
Ecotoxicity Reduction (alternative : Benignity of Components)
Biodegradability Increase
Soil and Water Conservation - Resource Efficiency
Example of targeted impacts:
Energy Efficiency
Materials Optimization
Storage Optimization
Infrastructure Efficiency - Health
Example of targeted impacts:
Public Health
Hygiene Increase
Sustainable Living Promotion
Noise and Air Control
2. To check that there is no substantial negative impact3 in the same scope where these companies operate i.e. the adequacy between the activity of these companies and the criteria of sustainability will be checked. For the avoidance of doubt, Oraxys seeks to avoid, and where it is not possible, minimize adverse impacts and enhance positive impacts on the environment.
Social
- To check the preservation of human rights, especially ensuring there is no exploitation of child labor or slavery
- To check that there is no discriminatory employment policies
- To check the health and safety guidelines
- To check the evolution of employment in the portfolio companies
Corporate Governance
- To check good management practices and control structures
- To appoint a recognized and independent audit firm as auditor of the annual accounts
- To check the Politically Exposed Person’s status of the main shareholders and directors of the board
- To check and discuss the remuneration of the leadership team members at board level every year
- To check that the structure of the organizational relationships and the procedures align the interests among the shareholders and/or among the managers
No index has been designated as reference benchmark. However, the standardized approach mentioned above and the alignment with the SDGs provide a reference point for meeting Oraxys ESG characteristics and objectives.
2.4 Exclusion List
Oraxys exclusion policy includes companies that are involved in design, development, production (including exploration and extraction), maintenance, marketing and/or trade of the following list of activities:
- Any product or activity subject to national or international phase-out or prohibition regulations or to an international ban
- Gambling
- Adult entertainment
- Weapons and munitions
- Fossil fuels (coal, oil & gas)
- Terrorism
- Illegal narcotics
- Tobacco
- Money laundering
- Human trafficking, slavery and child labour
Oraxys also excludes from its investment scope companies that develop, produce or sell key and dedicated components, or offer essential services, for the use of the activities mentioned above.
The exclusion list above does not encompass companies which activity is to restore, clean up or limit negative environmental externalities of the activities mentioned above (such as e.g. waste water and sludge treatment of oil & gas plants, etc.).
Finally, Oraxys will not partner with companies which have links with countries identified, based on the international standards, as Tax heaven, Offshore, Corruption, High Money Laundering or Fraud risk countries.
2.5 Approval and Review
Oraxys ESG policy is reviewed by the ESG Committee and the Investment Committee of each of Oraxys’ funds and is approved by Oraxys’ Board of Directors.
Oraxys is committed to reviewing, and as the case may be, updating its ESG policy annually to address evolutions in the firm’s profile, growth and investment strategy, external best practices, business drivers and relevant regional/global legislation.
3. Roles, Responsibilities and oversight
The overall responsibility for the determination of Oraxys’ ESG policy and its implementation lies within Oraxys’ Board of Directors and the Investment Committee of each Oraxys’ fund.
Oraxys’ ESG Committee, whose role and responsibilities are further detailed in Appendix I, shall regularly review Oraxys’ ESG strategy and achievements and make recommendations to the Board of Directors in order to support it in its supervisory role on ESG matters. The ESG Committee is supported by an ESG Referent appointed among Oraxys’ Financial Team Members, whose role and responsibilities are further detailed in Appendix II.
The ESG Referent works in close coordination with the other Financial Team Members and with the Industrial Team Partners, and may be supported by external consultants as the case may be, in order to coordinate and monitor Oraxys’ ESG initiatives and interact with stakeholders of Oraxys on ESG related matters.
Oraxys’ Board of Directors is responsible for approving Oraxys’ ESG policy and monitoring compliance with this policy.
Oraxys’ Team is responsible for the day-to-day implementation of Oraxys’ ESG policy across the investment lifecycle and for inspiring the portfolio companies to improve their own ESG practices and policies.
When and if deemed necessary by Oraxys’ Board of Directors, Oraxys shall appoint an external ESG advisor to assess compliance of ESG practices with its guidelines.
Prior to investing, a recognized external ESG advisor will conduct an assessments of one or several of the ESG criteria in the targeted companies to support Oraxys’ Team in its analysis. In addition, the Investment Committee may from time to time request that a follow-up ESG audit be implemented.
| Oraxys Team | ESG Advisor | ESG Referent | ESG Committee | Investment Committee of each fund | |
| At Oraxys S.A. level |
|
|
|
||
| At Fund and targeted / portfolio companies level |
|
|
|
|
4. ESG Management Process
4.1 Overview: ESG throughout the investment cycle
Early integration of ESG Factors is set-up in the investment process (from the initial deal sourcing to the investment management phase) to ensure that material ESG matters are properly prioritised in risk management and in the value creation of Oraxys’ funds.
4.2 Initial Deal Sourcing and Screening
ESG policy and criteria are taken into account in the deal sourcing and screening stage.
Oraxys assesses whether the activities of the targeted companies are in line with this ESG Policy, notably that they: (i) do not violate the exclusion list and (ii) do not make significant harm to any other ESG Factors.
4.3 Initial evaluation and ESG Risk categorization
Oraxys conducts a preliminary assessment and rating of the main ESG‐related risks and opportunities of the targeted companies. This initial evaluation and ESG Risks categorization is made to identify “red flags”, breaches, priority KPIs and key competitive advantages.
A matrix is set-up with 3 levels of risk based on international good practices:
- Category A: with potential significant adverse social and/or environmental impacts that are diverse, irreversible, or unprecedented; Category A is not investable by Oraxys’ funds
- Category B: with potential limited adverse social or environmental impacts that are few in number, generally site specific, largely reversible and readily addressed through mitigation measures
- Category C: with minimal or no impacts
Materiality maps to assess the risks are also set-up based on international good practices.
4.4 Term sheet
The term sheet of each investment proposal mentions a reference to the ESG policy of Oraxys and the fact that an ESG due diligence will be carried out before completing the investment.
4.5 ESG Due Diligence
Oraxys appoints recognized independent consulting firms to perform an external ESG due diligence prior to investing in a targeted portfolio company. The main conclusions drawn from such an ESG due diligence are presented to the Investment Committee of the relevant fund.
If material ESG issues or risks are identified during the investment process or the management process, Oraxys prioritises those which are most material to determine on a case-by-case basis whether further assessment is required. In such a case Oraxys may seek independent analysis and expert advice from specialist external consultant(s), for instance environmental expert(s), if required.
Oraxys then considers whether the ESG risks or weaknesses identified can be addressed and managed or not, in which case the investment opportunity is rejected on this ground. In cases where material ESG risks/weaknesses are identified and deemed acceptable, a plan is agreed between Oraxys and the management of the targeted company to remedy the selected issues and for ESG improvements, with actions required, timeframe, proposed responsibilities and costs involved.
4.6 Documentation
ESG considerations are included in Oraxys investment documents:
- ESG due diligence reports
- ESG principles and objectives included in the shareholders’ agreement negotiated with the shareholders of each portfolio company
- ESG Investment Company Report made before investing in each portfolio company
- ESG reporting made every year by each portfolio company
- ESG Divestment Company Report made after divesting from each portfolio company
- ESG Annual Report made every year for the investors of each fund
Such investment documents are reviewed by the relevant Investment Committee. The ESG Annual Reports are reviewed by the Board of Directors of Oraxys.
4.7 Investment Monitoring and Management
When an Oraxys’ fund is a shareholder of a portfolio company, Oraxys commits to make its best efforts to having the following monitoring actions with the leadership team of each portfolio company:
- To review their ESG policy, or as the case may be to help them to draft an ESG policy
- To ensure that ESG considerations are regularly raised and discussed at least annually
- To identify, set-up and follow-up annually 1 or 2 KPIs, specific to each portfolio company, where a link can be made between Environmental characteristics and competitive advantage or growth or value creation of the related portfolio company
When an Oraxys’ Fund is a shareholder of a portfolio company, Oraxys commits to making its best efforts to having the following management actions with the leadership team of each portfolio company:
- To support on an ongoing basis the timely implementation of ESG measures by each portfolio company (e.g. through dedicated workshops and practice sharing with other portfolio companies)
- To meet at least annually with the leadership team of each portfolio company to assess progress made and to update as necessary the ESG action plan
- To ensure as a board member of each portfolio company that ESG considerations are regularly raised and discussed, and action plans approved at least annually
4.8 Divestment Management
The evolution of the ESG policy and parameters throughout the investment period allows Oraxys to draft an ESG Divestment Company Report for each portfolio company it sells.
5. Monitoring and Reporting
5.1 Overview
Oraxys commits to producing reports to its ESG Committee, Investment Committees and its Board of Directors relating to its investment activities and progress made towards implementing its ESG policy and criteria.
5.2 Fund ESG monitoring
Oraxys produces a report on each Oraxys’ fund (i) to monitor the evolution of the ESG performance of the Oraxys’ fund depending on the new portfolio company(ies) and (ii) to follow-up the customised KPIs of the portfolio companies.
5.3 Fund ESG reporting
5.3.1 Periodic Reporting to the Investment Committee of each Oraxys’ fund and to Oraxys Board of Directors
- ESG Investment Company Report: each binding decision to invest in a new company must be approved on the basis of an ESG acquisition report
- ESG portfolio company reporting: ESG reporting and data is provided by each portfolio company annually. This report includes at least 1 or 2 KPIs (cf. section 4.7 above)
- ESG Divestment Company Report: After selling the shares of a portfolio company, Oraxys Team produces an ESG Divestment Company Report
The above reports will be summarized in an ESG Annual Report for each Oraxys’ fund giving a global picture of the ESG status and progresses of Oraxys and its portfolio companies.
Information contained in the ESG reports are mainly based on the data provided by the portfolio companies, but may also include data provided by external advisors, auditors or any other sources.
5.3.2 Periodic Reporting to the investors
Oraxys will communicate the ESG Annual Report to the investors of the concerned Oraxys’ fund. Such report will provide the investors with:
- A description of Oraxys’ ESG strategy and organizational structure set up to implement it
- Confirmation that the fund is managed in accordance with the ESG policy agreed at fund inception date
- Information on any material changes to the ESG risks and opportunities for the fund’s portfolio
- Information on any action plan to address ESG risks and opportunities for the fund’s portfolio
- Relevant KPIs and their evolution for Oraxys and its portfolio companies
6. Effective date and review
This ESG policy is up-to-date as at 25 January 2024 and will be reviewed annually.
- “Material” ESG Factors are defined as those factors that Oraxys in its sole discretion determines to have, or to have the potential to have, a direct substantial impact on an organization’s ability to create, preserve, or increase economic value, as well as environmental and social value for itself and its stakeholders.
- CO2 management refers to activities aimed at mitigating and/or adapting to climate change.
- In alignment with the DNSH principle.
APPENDIX I
ESG COMMITTEE
ROLE & RESPONSIBILITIES
Composition of the ESG Committee
Oraxys’ Environmental (“E”), Social (“S”) and Governance (“G”) (“ESG”) committee (the “ESG Committee”) shall be composed of (i) the CEO, (ii) the ESG Referent, (iii) one of the Industrial Team Members and (iv) the Legal and Compliance Director of Oraxys.
The CEO and the Legal and Compliance Director of Oraxys are permanent members. The ESG Referent and the Industrial Team Members shall be appointed (and eventually removed) by the Board of Directors of Oraxys.
Meetings and quorums of the ESG Committee
The ESG Committee shall meet at least annually and on a case by case basis when needed.
The quorum for a meeting of the ESG Committee to be validly held is 2/3 of its members.
The majority for decisions of the ESG Committee to be taken is 2/3 of the attendees of the meeting.
Role and Responsibilities of the ESG Committee
- to ensure that ESG strategy and progress are reported adequately to the investors of Oraxys’ funds, and in particular to review the ESG Annual Report before submission for approval to the Board of Directors,
- to regularly review and make recommendations to the Board of Directors on Oraxys’ ESG policies and strategy to ensure that Oraxys’ ESG strategy and objectives are fulfilled,
- to make recommendations to the Board of Directors on the management of ESG risks and incidents,
- at Oraxys’ level, to carry out ESG risk assessments and develop appropriate strategies to address ESG risks and their potential impacts,
- to advice on regular ESG and/or Climate change mitigation trainings.
The ESG Committee may use the services of internal and/or external experts on a case by case basis.
APPENDIX II
ESG REFERENT
ROLE & RESPONSIBILITIES
Appointment and reporting
The Oraxys’ Environmental (“E”), Social (“S”) and Governance (“G”) (“ESG”) referent (the “ESG Referent”) is responsible for developing and overseeing Oraxys’ ESG policies, procedures and practices.
The ESG Referent shall be appointed (and eventually removed) by the Board of Directors of Oraxys and chosen among Oraxys’ Financial Team Members.
As appropriate, the ESG Referent works in close coordination with any of the other Financial Team Members and Industrial Team Members, and may be supported by external consultants as the case may be.
The ESG Referent reports to the ESG Committee and/or to Oraxys’ Board of Directors (the “Board”) as appropriate.
Roles and Responsibilities
to coordinate and monitor Oraxys’ ESG initiatives
- to interact with stakeholders of Oraxys on ESG related matters
- to drive the education, communication, promotion, training, and implementation of the ESG policy across Oraxys in order to increase ESG awareness and engagement across Oraxys
- to take part in assessing, monitoring and reporting ESG risks and ESG incidents to the ESG committee and the Board of Directors,
- to supervise drafting of the ESG Annual Report
- to represent Oraxys in external ESG communications and events