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

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)