SFDR
SFDR Information - Sustainability-related disclosures pursuant to Regulation (EU) 2019/2088 (“SFDR”)
Date of publication: December 2024
I) Sustainability risks
TT49 Management GmbH (“TT49”, LEI: 391200WOR1Z5XAR7JG85) 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. TT49 considers sustainability risks as part of its 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, TT49 remains free in its decision to refrain from investing or to invest despite sustainability risks in which case TT49 can also apply measures to reduce or mitigate any sustainability risks. At all times, TT49 will apply the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context.
II) No consideration of adverse impacts of investment decisions on sustainability factors
TT49 does not consider any adverse impacts of its investment decisions on sustainability factors and hence does not use the sustainability indicators listed in Annex I of the Delegated Regulation (EU) 2022/1288 (as amended from time to time, “RTS”) to identify and assess potential adverse impacts as required by Art. 4 SFDR. Sustainability factors are environmental, social and employee concerns, respect for human rights and the fight against corruption and bribery.
Given that the SFDR, the Regulation (EU) 2020/852 (“EU Taxonomy”) and the accompanying RTS, which determine the sustainability indicators to be used and provide details on mandatory processes to obtain the respective data at portfolio company level, are relatively new legislative acts, there is – as of now – only little practical experience with regard to the application of their respective provisions. Therefore, substantial legal uncertainties would remain when applying those provisions to the strategies pursued by TT49. Moreover, the burden associated with considering adverse impacts on sustainability factors by using sustainability indicators is disproportionate in light of the very limited relevance that such impacts could have in the context of TT49’s investment strategy: TT49 pursues an active venture capital strategy and invests in portfolio companies which, at the time of the partnership’s initial investment, are innovative companies with high growth potential in their pre-seed and occasionally seed stages. TT49’s focus lies on science-based, especially deep tech-based start-ups which may cover a vast variety of technologies and verticals, e.g. quantum, space, agri-, clean-, media- and prop-tech, artificial intelligence, blockchain, cybersecurity, energy, robotics, semiconductor, photonic, logistics, manufacturing and materials. Such early-stage companies are unlikely to cause severe adverse impacts on sustainability factors and, as a result, TT49’s investment decisions are expected to hardly ever have an impact on sustainability factors. Furthermore, the consideration of principal adverse impacts will largely depend on the availability of the relevant data from the underlying portfolio companies. Especially on early-stage companies, the collection and provision of such data might put an undue burden. Given that the Fund will only hold minority interests in the portfolio companies which are generally not sufficient to encourage the companies to collect and report the relevant data, it is currently not foreseeable for TT49 whether the information for the identification and assessment of principal adverse impacts can be obtained from all portfolio companies on a regular basis as required by Art. 4 SFDR.
If and to the extent that the legal uncertainties will be resolved, a practicable market and administrative practice will evolve and data availability can be ensured, TT49 will re-evaluate considering principal adverse impacts of its investment decisions in due course, at the latest by the end of 2025. In the meantime, TT49 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.
III) Remuneration disclosure
As a registered alternative investment fund manager within the meaning of section 2 (4) of the German Investment Code (Kapitalanlagegesetzbuch, “KAGB”), does not have and does not need to have a remuneration guideline or policy in accordance with the requirements of the KAGB.
IV) Sustainability-related disclosures
Financial product: TT49 Fund I GmbH & Co. KG (the “Fund” / der “Fonds”)
LEI: [in process]
Summary
The Fund considers certain environmental and/or social characteristics as part of its investment decisions and monitoring processes but does not seek to make sustainable investments as defined in the SFDR. The consideration of environmental and/or social characteristics is carried out both before and after an investment. The Fund incorporates inclusion (positive screening) as well as exclusion (negative screening) aspects during the decision-making process. The Fund’s investments contribute to several UN Sustainable Development Goals. For this purpose, information is initially and regularly obtained from the investee by means of qualitative queries. The actions and decisions described in the following section are each made by TT49 for and on behalf of the Fund.
Zusammenfassung
Der Fonds berücksichtigt bestimmte ökologische und/oder soziale Merkmale im Rahmen seiner Investitionsentscheidungen und Monitoring-Prozesse, strebt aber keine nachhaltigen Investitionen im Sinne der SFDR an. Die Berücksichtigung von Umwelt- und/oder Sozialmerkmalen erfolgt sowohl vor als auch nach einer Investition. Der Fonds berücksichtigt sowohl Aspekte der Inklusion (positives Screening) als auch des Ausschlusses (negatives Screening) während des Entscheidungsprozesses. Die Investitionen des Fonds leisten zudem einen Beitrag zu mehreren UN-Zielen für nachhaltige Entwicklung bei. Zu diesem Zweck werden zunächst und regelmäßig Informationen von den Investees durch qualitative Abfragen eingeholt. Die in diesem Abschnitt beschriebenen Handlungen und Entscheidungen erfolgen jeweils durch TT49 für den Fonds.
No sustainable investment objective
The Fund promotes environmental or social characteristics, but does not have as its objective sustainable investment.
Environmental or social characteristics of the financial product
The Fund promotes environmental and/or social characteristics by excluding certain environmentally and/or socially relevant sectors from the Fund’s investment scope (i.e., by implementing certain investment exclusions in the decision-making process, cf. below). Further, the Fund contributes to several UN Sustainable Development Goals (“SDGs”), e.g. SDG 2, SDG 7, SDG 11 and SDG 12.
For example: As the Fund promotes inter alia tech solutions for the agricultural sector it supports the conversion of agriculture to a resource-efficient and sustainable food production system and may also help to increase productivity and production. Thereby, the Fund actively contributes to Target 2.4[1] of SDG 2. With regard to another focus business arena of the Fund, the energy sector, the Fund promotes the development and improvement of high-efficient clean energy solutions and thereby contributes to Target 7.3[2] of SDG 7. Moreover, the Fund also intends to invest in clean-tech based technologies and the development of enhanced materials which contributes to Target 11.6[3] of SDG 11 as well as Target 12.2[4] of SDG 12.
Investment strategy
The purpose of the Fund is to build, hold and manage (including, but not limited to, to divest) a portfolio of equity and equity-related investments in portfolio companies. The Fund shall, in principle, pursue a long term investment strategy. TT49 shall ensure that funds equal to 100% of the total capital commitments drawn down and applied towards investments are invested in portfolio companies which, at the time of the Fund’s initial investment, are innovative companies with high growth potential in their early, especially pre-seed and seed stages which pursue science-based, especially deep tech-based start-ups which may cover a vast variety of technologies and verticals, e.g. quantum, space, agri-, clean-, media- and prop-tech, artificial intelligence, blockchain, cybersecurity, energy, robotics, semiconductor, photonic, logistics, manufacturing and materials.
The Fund’s investment strategy is implemented in the investment process on a continuous basis: Every investment opportunity will be tested against the Fund’s investment strategy, in particular its investment exclusions, as part of the due diligence prior to any investment made by the Fund. After an investment, i.e., during the holding period, the Fund will monitor its portfolio companies on a regular basis and provide support if and where considered relevant.
Further, the Fund is bound by the investment restrictions and limitations set out in the Fund’s limited partnership agreement and shall procure that such requirements, restrictions and limitations are complied with at all times. In particular, the Fund will screen each investment opportunity against the following investment exclusions and no investments will be made in the area of such exclusions. The Fund shall not:
i) perform or engage itself in research and innovation activities considered as illegal in Germany or according to the legislation applicable to the Investee;
ii) invest, guarantee or otherwise provide financial or other support, directly or indirectly, to companies or other entities
(1) that are Excluded Final Recipients (as defined in the limited partnership agreement of the Fund);
(2) performing research and innovation activities considered as illegal according to the legislation applicable in the country of the company or entity;
(3) performing the activities excluded as referred to in Article 19 of the Regulation EU (no) 1291/2013 of the European Parliament and of the Council:
(aa) research activity aiming at human cloning for reproductive purposes;
(bb) research activity intended to modify the genetic heritage of human beings which could make such changes heritable (excluding research relating to cancer treatment of the gonads);
(cc) research activities intended to create human embryos solely for the purpose of research or for the purpose of stem cell procurement, including by means of somatic cell nuclear transfer;
(4) whose business activity consists of an illegal economic activity (i.e. any activity which is illegal under the laws or regulations applicable to the company or entity), including, without limitation, human cloning for reproductive purposes;
iii) invest, guarantee or otherwise provide financial or other support, directly or indirectly, to companies or other entities which substantially focus on:
(1) the production of and trade in tobacco and distilled alcoholic beverages and related products;
(2) the financing, production of and/or trade in weapons and ammunition of any kind and financing of these activities, it being understood that this restriction does not apply to the extent such activities are part of or accessory to explicit European Union policies;
(3) casinos and equivalent enterprises; or
(4) the research, development or technical applications relating to electronic data programs or solutions, which
(aa) aim specifically at
- supporting any activity referred to under (1) to (4) of this paragraph (iii),
- internet gambling and online casinos; or
- pornography; or which
(bb) are intended to enable to illegally
- enter into electronic data networks, or
- download electronic data;
(5) fossil fuel-based energy production and related activities, as follows:
(aa) coal mining, processing, transport and storage;
(bb) oil exploration & production, refining, transport, distribution and storage;
(cc) natural gas exploration & production, liquefaction, regasification, transport, distribution and storage;
(dd) electric power generation exceeding the Emissions Performance Standard (i.e. 250 grams of CO2 per kWh of electricity), applicable to fossil fuel-fired power and cogeneration plants, geothermal and hydropower plants with large reservoirs;
(6) energy-intensive and/or high CO2-emitting industries, as follows:
(aa) manufacture of other inorganic basic chemicals (NACE 20.13);
(bb) manufacture of other organic basic chemicals (NACE 20.14);
(cc) manufacture of fertilisers and nitrogen compounds (NACE 20.15);
(dd) manufacture of plastics in primary forms (NACE 20.16);
(ee) manufacture of cement (NACE 23.51);
(ff) manufacture of basic iron and steel and of ferro-alloys (NACE 24.10);
(gg) manufacture of tubes, pipes, hollow profiles and related fittings, of steel (NACE 24.20);
(hh) manufacture of other products of first processing of steel (NACE 24.30, incl. 24.31-24.34);
(ii) aluminium production (NACE 24.42);
(jj) manufacture of conventionally fuelled aircraft and related machinery (sub-activity of NACE 30.30);
(kk) conventionally fuelled air transport and, airports and services activities incidental to conventionally fuelled air transportation (sub-activities of NACE 51.10, 51.21 and 51.23).
Notwithstanding the above, investments in sectors mentioned in section (6) items (aa) – (kk) including, shall be allowed if TT49 confirms that the investment either (x) qualifies as environmentally sustainable investments as defined in the EU Taxonomy, or (y) is eligible under EIF’s Climate Action & Environmental Sustainability (CA&ES) objectives in accordance with the latest criteria as published in the EIF’s website.
In addition, when providing support to the financing of research, development or technical applications relating to (x) human cloning for research or therapeutic purposes or (y) genetically modified organisms (“GMOs”), the Fund shall ensure the appropriate control of legal, regulatory and ethical issues linked to such human cloning for research or therapeutical purposes and/or GMOs.
Good governance practices are assessed through an informal process as appropriate in light of the circumstances of each individual case as part of the due diligence prior to any investment. Such practices include, in particular, sound management structures, employee relations, remuneration of staff and tax compliance at investee level. Moreover, the Fund will conduct regular monitoring of the good governance practices at investee level during the holding period. If the Fund becomes aware of severe governance issues, it will investigate them and work with all parties involved to find an appropriate solution.
Proportion of investments
The Fund will invest fully in line with its investment strategy and investment restrictions, i.e., will only make investments which are aligned with its environmental and/or social characteristics. The Fund does not make and does not intend to make sustainable investments within the meaning of Art. 2 No. 17 SFDR or environmentally sustainable investments within the meaning of Art. 3 the EU Taxonomy; hence, no portion of its investments will be aligned with the EU Taxonomy.
Monitoring of environmental or social characteristics
The Fund has an increased awareness on the impact of environmental or social characteristics on risk management and thus on the value potential of investments. Accordingly, the Fund undertakes to monitor (compliance with) its environmental and/or social characteristics on an ongoing basis. Prior to making an investment, the Fund assesses the attainment of its environmental and/or social characteristics with respect to every investee. The Fund uses the sustainability indicators ‘No investments in the area of investment exclusions’ as well as various SDG targets, a.o. Target 2.4, Target 7.3, Target 11.6 and Target 12.2. and collects respective data at investee level in order to assess and monitor the initial and ongoing compliance with such characteristics. During the holding period, the Fund consults with investees on an ad-hoc basis and will conduct further checks to identify potential issues with such characteristics. External monitoring mechanisms are not in place.
Methodologies for environmental or social characteristics
The Fund applies qualitative assessments regarding its environmental and/or social characteristics. The Fund conducts an initial assessment of such characteristics during its due diligence process prior to any investment. Thereby, the investment exclusions, the direct or indirect contribution towards the SDGs and good governance practices are identified and evaluated. Based on the results of such assessment, the Fund identifies whether the environmental and/or social characteristics promoted by the Fund are met before making an investment.
During the holding period, the so conducted assessment forms the basis to measure and monitor if the characteristics are continuously being met. By using the sustainability indicator ‘No investments in the area of exclusions’ and the respective SDG targets, the Fund assesses and ensures the investees’ ongoing compliance with its investment exclusions. Hence, the Fund measures and evaluates the attainment of its environmental and/or social characteristics on an ongoing basis.
Data sources and processing
In order to attain each of the environmental and/or social characteristics promoted by the Fund, the Fund obtains the relevant data from its investees through an informal process during the due diligence conducted prior to each investment. Moreover, during the holding period, the Fund consults with the investees on an ad-hoc basis if any ESG-related controversies become apparent. Hence, data is obtained only from the investees and no (portion of) data is estimated or supplemented by information publicly available. Further, purely qualitative statements of an environmental or social nature or relating to corporate governance are requested from the investees and then taken into account in the investment decision-making and monitoring processes. An internal or external review or verification of the information obtained will be conducted if misrepresentations are suspected.
Limitations to methodologies and data
The data collected exclusively from the investees through the informal process conducted by the Fund is internally or externally verified only if and to the extent misrepresentations are suspected. Thus, it cannot be ruled out completely that false information may remain undetected in certain cases. Further limitations, in particular regarding the accuracy of the data and reliability of the data sources used, are currently not foreseeable. As the Fund’s investments are made for several years, the Fund considers it a priority to establish and maintain a trustful working relationship with its investees in order to ensure compliance with the environmental and/or social characteristics promoted by the Fund.
Due diligence
In order to attain the aforementioned environmental and/or social characteristics, the Fund carefully selects its investees during the investment decision-making process. The Fund conducts a due diligence on every (potential) investee. As part of this due diligence, the Fund carefully reviews how a (potential) investment relates to the environmental and/or social characteristics promoted by the Fund. The Fund incorporates inclusion (positive screening with respect to the contribution towards the SDGs) and exclusion (negative screening with respect to its investment exclusions) as well as good governance aspects during the decision-making process. This assessment is conducted through an informal process as part of every due diligence and, where required based on the inherent ESG risk of an investee, through an enhanced analysis. An internal or external review or verification of the information obtained will only be conducted if misrepresentations are suspected.
Engagement policies
Engagement is, in general, not part of the environmental or social investment strategy of the Fund. However, should the Fund determine any potential issues relating to the environmental and/or social characteristics promoted by the Fund or other ESG-related controversies in its investees, the Fund may step in and work together with the investees in order to resolve, reduce or mitigate any adverse effects. Yet, it remains at the sole discretion of the Fund to determine which efforts are appropriate and proportionate considering the size and strategic importance of the respective investee as well as the transactional context.
Designated reference benchmark
No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by the Fund.
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[1] Target 2.4: “By 2030, ensure sustainable food production systems and implement resilient agricultural practices that increase productivity and production, that help maintain ecosystems, that strengthen capacity for adaptation to climate change, extreme weather, drought, flooding and other disasters and that progressively improve land and soil quality.” The Targets and respective Indicators can be found on the UN SDGs Website:
https://sdgs.un.org/goals/goal2#targets_and_indicators.
[2] Target 7.3: “By 2030, double the global rate of improvement in energy efficiency.” The Targets and respective Indicators can be found on the UN SDGs Website:
https://sdgs.un.org/goals/goal7#targets_and_indicators.
[3] Target 11.6: “By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management.” The Targets and respective Indicators can be found on the UN SDGs Website:
https://sdgs.un.org/goals/goal11#targets_and_indicators.
[4] Target 11.6: “By 2030, achieve the sustainable management and efficient use of natural resources.” The Targets and respective Indicators can be found on the UN SDGs Website: https://sdgs.un.org/goals/goal12#targets_and_indicators.