Article 8 of the Sustainable Finance Disclosure Regulation
1.1 Product Categorization and allocation
In accordance with Article 8 of the Regulation EU 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (the “SFDR Regulation”), Oraxys Environment 2 S.C.A. (the “Fund”) promotes Environmental characteristics. Through equity investments, the Fund supports the development of small and medium-sized European companies which market solutions (products/ technologies/services) that have a positive impact in one or more of the following three pillars (the “Pillars”): (i) Nature Preservation, (ii) Resource Efficiency and (iii) Health. These Pillars relate but are not limited to climate change mitigation or adaptation, water and waste management, energy efficiency, and health.
The Fund wishes in the future if possible to get compliance of its investments with the Regulation EU 2020/852 of the European Parliament and of the Council of 18 June 2020 based on the establishment of a framework to facilitate sustainable investment and amending the SFDR Regulation (the “Taxonomy Regulation”) thus making sustainable investments per stricto sensu of such Taxonomy Regulation.
1.2 Methodology and Key Performance Indicator(s)
The Fund identifies, assesses, measures and monitors the attainment of the Environmental characteristics of its contemplated and current portfolio companies through non-financial Sustainability Key Performance Indicator(s) (“KPIs”) in alignment with one or several of its Pillars. This/these KPIs touch upon among others the areas of climate change mitigation or adaptation such as for example Total amount of GHG emissions and Total Energy Savings. Specific KPI(s) is/are identified and tailored to each portfolio company.
The Fund implements a due diligence process to assess the eligibility of its contemplated portfolio company with its ESG criteria defined in Oraxys’ ESG Policy. The process includes notably screening of the contemplated portfolio company against the Fund’s Exclusion List and some required ESG practices through the implementation of a tailored ESG due diligence questionnaire. This assessment enables the Fund to score each contemplated portfolio company based on its ESG practices and to identify breaches, weaknesses, opportunities, and strength with respect to Oraxys’ ESG Policy.
1.3 Do Not Significantly Harm (“DNSH”)
The Fund’s investment strategy for promoting Environmental characteristics sets out the eligibility criteria for selecting portfolio companies and the due diligence process (including compliance with environmental and social safeguards, good governance practices and Do No Significantly Harm principle defined in Article 3b) of the Taxonomy Regulation) and defines the monitoring and reporting process for sustainability indicators, sustainability risks and principal adverse impacts.
The Fund does not designate an index as reference benchmark at this stage. However, the monitoring and evaluation framework implemented by the Fund and its ESG scoring of the contemplated and current portfolio companies provide a reference to track impact on the environment as represented by the identified KPIs. When appropriate standards will be available, the Fund will use its monitoring and impact data to transition to an index for benchmarking purposes.
2. Principal Adverse Sustainability Impact (“PASI”)
2.1 Identification and prioritization of PASI, due diligence policies and mitigants
Oraxys S.A., the Fund’s manager (the “Fund Manager”) screens all contemplated portfolio companies and monitors existing portfolio companies against the principal adverse sustainability impact indicators set out in the Regulatory Technical Standard of the SFDR Regulation. The portfolio shall be composed of 100% of companies promoting environmental characteristics including the promotion, improvement and prevention of health of the population. No investment shall knowingly be approved if it is expected or determined to do significant harm.
2.2 Engagement Policies
The Fund Manager, when deemed necessary, works with the portfolio companies to implement best practices, aiming to strengthen their ESG approach in order to reach an increased level of environmental impact. In addition, if any portfolio company breaches any of the reporting requirements, then a series of remediation measures are put in place to bring the portfolio company back into compliance with its reporting requirements as soon as practically possible.
3. Integration of Sustainability Risks
The Fund Manager integrates sustainability considerations at all stages of the investment process of the Fund. This means that the Fund Manager assesses the sustainability risks which could have an actual or potential material negative impact on the value of the portfolio company before and after investment decisions have been made. The assessment of sustainability risks and potential negative externalities is an important component of the due diligences for any contemplated and current portfolio company. The outcome of the due diligences is documented in the Portfolio Company Investment Report to be carefully reviewed and approved by the Investment Committee of the Fund and the Board of the Fund Manager.
4. Remuneration Policy and alignment with sustainability risks
The Fund Manager’s approach to remuneration is designed to support the long-term business interests of its shareholders and its Fund’s investors, to reflect the risk management approach and to deliver long-term sustainability.
The Fund Manager’s compensation approach is underpinned by a common philosophy and guiding principles and is structured to align the interests of its employees with the interests of the strategy. It is consistent with and promotes effective risk management, including (amongst other things) sustainability risks and the interests of both its portfolio companies and shareholders.