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SFC Capital (SFC) ESG Integration Statement

Introduction

As long-term investors on behalf of our stakeholders, accounting for environmental, social, and governance (ESG) risks and opportunities helps us provide sustainable value to our clients and community.

This document details our firm-wide commitment to integrate ESG information into all our investment activities, and outlines the foundation, ownership and oversight mechanisms that underpin our approach. ESG integration is the practice of incorporating ESG information into investment decisions with the objective of improving the long-term financial outcomes of our portfolios, consistent with our investors’ objectives. We are doing this across all our active portfolios, seeking to enhance long-term value for our investors and investees. This Statement applies to all of SFC’s investment divisions and investment teams, and is reviewed at least annually to reflect changes within our business. As a venture capital firm, we recognise our responsibility to facilitate a resilient entrepreneurial network. We aspire to be an industry leader in how we incorporate sustainability into our investment research and management, our sustainable growth solutions, and the operations of our own business.

The UN PRI
SFC follows the UN Principles for Responsible Investment (the “Principles”). These cover six high-level principles which SFC is fully incorporating in its investment processes and decisions:

  1. We will incorporate ESG issues into investment analysis and decision-making processes.
  2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
  3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
  4. We will promote acceptance and implementation of the Principles within the investment industry.
  5. We will work together to enhance our effectiveness in implementing the Principles.
  6. We will each report on our activities and progress towards implementing the Principles.

Applying ESG Principles to Decision Making
ESG principles are applied in three ways to SFC’s portfolio:
  • Negative screening
  • Thematic investing/Positive screening
  • ESG obligations
  • Due Diligence scoring

Negative Screening
SFC will not invest in companies in which the core business is based on/provides/promotes:

  1. the use of fossil fuels and/or involves the use of cheap labor and/or cruelty towards animals and/or people;
  2. military infrastructure, such as military housing;
  3. alcohol, gambling, and pornography.

Thematic investing/Positive Screening
SFC Capital will prioritise and offer an increased amount of time and attention to businesses that bring practical solutions to the environment, society and governance.

Positive screening will be employed to increase our exposure to these investment themes, subject to existing concentration limits.

  1. Renewable energy, such as solar, wind and geothermal generation, and directly related businesses including companies that supply renewable energy.
  2. Enabling the transition to a lower carbon world, such as grid stabilisation, electric vehicles, traffic congestion reduction and the substitution of coal by gas.
  3. Infrastructure with social benefits, such as healthcare, clean water and education.
  4. Recycling, pollution reduction and waste management solutions.
  5. Services and products enabling greater inclusion and diversity.
  6. Other not mentioned above that are considered to have a positive impact from an ESG point of view.

ESG Obligations and Due Diligence Scoring
Where appropriate and practically possible, SFC will include ESG compliance into our investment terms.
Investment terms shall include covenants or repeated representations to ensure that investees comply with their stated ESG objectives and to encourage them to improve their standards over time.

These could include:
  1. obligations to comply with environmental standards and regulations;
  2. obligations to adopt net zero policies;
  3. obligations to reduce pollution over and above statutory minimums, including light and noise pollution;
  4. obligations to adopt or continue social policies such as living wages, non-discrimination, employee diversification and minority board representation;
  5. obligations to adopt or continue good governance policies such as independent directors, whistleblowing, complaints procedures and internal audit functions.

Due Diligence Scoring
SFC will incorporate market-accepted ESG scoring methodologies into our due diligence.


Portfolio Management
As the very first investor in businesses, we will include into our mission the introduction of the ESG concept and guidance, as we already do with corporate governance and performance monitoring. As soon as reasonably possible, we will introduce an ESG check in our quarterly reporting and encourage portfolio companies to submit an annual ESG report via a simple questionnaire. We will promote ESG good practices as part of our post-investment support.


ESG Reporting and Scoring
Where appropriate, investees will be asked to complete annual post-investment ESG questionnaires. These will cover quantifiable ESG metrics/KPIs where appropriate – such as Health and Safety records, ethnic diversity, gender pay gap, and confirmation of the investees’ overall ESG policies and procedures.

ESG performance and credentials will be monitored regularly for each investment in the annual monitoring process. If investees' ESG scores deteriorate, SFC will contact their management teams and help to determine a strategy to improve their performance.


Re-investing
SFC will not reinvest in companies that have not introduced ways to comply with ESG good practices or that do not pass the positive and negative screenings. As soon as reasonably possible, we will include in our re-investment strategy and Due Diligence a scoring check on ESG compliance.


ESG in SFC Operations
SFC will encourage sustainability in the workplace through a range of initiatives, including these set out below:
  1. Carbon neutral pledge
    We achieve this by offsetting our carbon emissions (predominantly international travel, IT and office space) wherever possible. It is our preference to reduce our carbon emissions, rather than offsetting them. This can be achieved through energy efficiency, reduced travel (see below) and green procurement. Offsetting, therefore, should be primarily aimed at unavoidable emissions.
  2. Business travel
    We promote healthier journeys to work and seek to reduce environmental pollution caused by travel through, for example, replacing international business travel by video conferencing whenever possible.
  3. Diversity and equal opportunities
    SFC is an equal opportunities employer. We do not discriminate by gender, sexual orientation or race and actively promote diversity. We have a highly multinational team from a variety of social backgrounds.
  4. Corporate Governance
    • Anti-bribery and tax evasion
    • Personal trading policy
    • Employee Handbook (incl. policies on whistleblowing and diversity and equal opportunities)
    • Compliance manual (incl. gifts policy)




Where SFC Invests

116
B2B software
54
Fin Tech
41
Med Tech
35
B2C Tech
45
Green
46
Consumer
Products
30
Hardware
& Robotics
10
Other
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DISCLAIMER:
SFC Capital Ltd (SFC) is an appointed representative of SFC Capital Partners Ltd which is authorised and regulated by the Financial Conduct Authority (‘FCA’) in the United Kingdom (FRN 736284). This website is intended for professional investors only; any reproduction of this information, in whole, or part, is prohibited. The content is for information purposes only and should not be used or considered as an offer or solicitation to purchase or sell any securities.

Investment in early-stage companies involves risks such as illiquidity, lack of dividends, loss of investment and dilution. Investment in SEIS/EIS eligible companies should be considered as part of a diversified portfolio. The availability of tax relief depends on individual circumstances and may change in the future. The availability of tax relief depends on the company invested in maintaining its SEIS/EIS qualifying status. There is no assurance that the investment objectives of any investment opportunity will be achieved or that the strategies and methods described herein will be successful. The investment products cited herein may place capital at risk and therefore investors may not get back the full amount invested. Past performance is not necessarily a guide to future performance and the value of an investment may go down as well as up. Investors may not get back the full amount invested. Companies’ pitches for investment are not offers to the public and investments can only be made by members of SFC Capital. SFC Capital takes no responsibility for this information or for any recommendations or opinions made by the companies. Neither SFC Capital nor any of its employees provide any financial or tax advice in relation to the investments and investors are recommended to seek independent financial and tax advice before committing. This website is not directed at or intended for publication or distribution to any person (natural or legal) in any jurisdiction where doing so would result in contravention of any applicable laws or regulations. No warranties or representations of any kind are expressed or implied herein. This material is confidential and is the property of SFC Capital.

© SFC Capital - 2024