Sustainability risk integration

Policy: Sustainability risk is an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment of the fund and therefore the fund itself. 

 

No Such Ventures as a manager of an alternative investment fund (also “fund”) implements a Sustainability Risk Policy — identifying, assessing, controlling, and reporting on environmental, social, and governance (ESG) risks — to enhance transparency with stakeholders and to recognize the importance of identifying potential sustainability risks, whether material or likely to be material, in our investment decision-making processes.  

 

Objective: The objective of our sustainability risk policy is to safeguard our investments, stakeholders, and the communities within which our investee companies operate, from the negative impacts of sustainability risks. Our goal is to ensure that each investment No Such Ventures makes is not just financially viable, but also promotes positive long-term environmental and social characteristics whilst actively identifying potential sustainability risks which materially influence the overall viability of the financial product. By considering ESG factors in our investment decisions, No Such Ventures strives to contribute to the UN Sustainable Development Goals and responsible investment, thereby creating long-term value for our investors, stakeholders, and society at large.

 

Scope: This sustainability risk policy is applicable to all the investment activities at No Such Ventures. No Such Ventures employs an iterative process for the early detection of sustainability risks, continuing throughout the investment duration. The iterative sustainability risk assessment includes a four-phase risk management process: 1) identification, 2) assessment, 3) managed, and 4) reporting and monitoring of risks.

 

1. Identify

 

No Such Ventures operates under a deal-by-deal investment model, which means that there is no pre-established disclosure of the fund's structure before each investment. This is because each new investment constitutes a distinct financial product, and as such, it requires specific disclosures tailored to that product. As a result, No Such Ventures manages multiple financial products, each of which represents a unique financial investment in a particular company.

 

At the initiation stage at the product-level, (when the fund is analyzing the potential investee for the first time), managers from the fund perform a negative screening to exclude companies in sectors which we don’t invest in. No Such Ventures calls this our exclusion policy. The policy have some overlap with the the PAIs at the product level but serves a different function than the PAIs at the product level (see more information “Statement about not reporting on the PAIs”). No Such Ventures exclusion policy entails:

• Exposure to the fossil fuel sector

• Gaming

• Web3

• Weaponry

• Negatively affecting biodiversity

If any of the potential investee companies violate or are involved in activities as mentioned in the exclusion policy per financial product, they are excluded from the investment process. 

 

Next, the companies that pass the initiation stage are analyzed more in-depth through an official ‘assessment’ (see next phase). ESG risk evaluations and assessments are performed during the due diligence stage.

​

2. Assessment 

 

When the potential investee has passed the initiation stage (meaning the companies passes the exclusion policy of the fund), the potential investee is analyzed by managers from the fund on the potential sustainability risks, of the potential investee, using the Sustainability Accounting Standards Board (“SASB”) materiality assessment framework. 

 

SASB have identified the subset of sustainability risks most relevant to financial performance in each of 77 industries. In particular, the SASB material map (see link) outlines “the sustainability-related risks and opportunities that are most likely to affect cash flows, access to finance and cost of capital vary by industry. Industry-based disclosure reduces costs and minimizes noise by surfacing the most relevant information for managers. The Sustainable Industry Classification System® (SICS®) was designed to group companies based on shared sustainability-related risks and opportunities to enhance comparability for manager decision-making”. 

 

During the due diligence phase of the potential investee, managers from the fund use the SASB materiality map to identify and analyze the different material risks associated with the industry and sector matching the potential investees operating activities. managers from the fund then make a score from High (High risk), Medium (Medium risk), Low (Low risk) using the information available from the potential investee. Where the sustainability risk assessment leads to the conclusion that there are no sustainability risks deemed to be relevant to the financial product, the reasons are explained.  Where the assessment leads to the conclusion that those risks are relevant, the extent to which those sustainability risks might impact the performance of the financial product are disclosed either in qualitative or quantitative terms. 

 

The scores (findings) of the different sustainability risks, relative to the SASB materiality map, are then presented internally with the other managers from the fund to conclude whether the potential investee should be excluded from the investment process or not. The managers from the fund make a decision based on the thorough analysis and scoring of the SASB material ESG risks presented in the investment proposal.

 

3. ​Managed 

 

If the potential investee passes the “assess” phase, an investment is made. The investment is then controlled by the fund, throughout the investment lifecycle, on the identified sustainability risks. No Such Ventures uses the following strategies to avoid and mitigate sustainability risks:

 

• Active ownership: As a manager, actively engage with the companies in the portfolio to advocate for improved sustainability practices. This could involve voting on shareholder resolutions related to sustainability or meeting with company management to discuss their sustainability strategies.

• Monitoring: Monitor and reassess the sustainability risks in the portfolio. This involves keeping up to date with the latest sustainability research, policy developments, and company disclosures.

• Sustainability risk reporting: Yearly report on the sustainability risks in the portfolio to stakeholders. This can help to ensure transparency and accountability in how sustainability risks are being managed.

 

4. Report

 

This policy extends to all stakeholders involved in our investment process, including our employees, managers, and investee companies. It is our viewpoint that every entity involved in the investment chain has a role to play in promoting sustainability and mitigating ESG risks. As such, No Such Ventures is committed to providing the necessary resources and support to ensure adherence to this policy. The performance of the sustainability risks are reported annually to the respective financial products and shareholders.

 

Annually, we conduct performance reviews to meticulously assess the ongoing developments of our investments. Similarly, we continually monitor and evaluate the operational conduct of the investment professionals working at the fund with particular emphasis on fostering an environment conducive to sustainable risk management according to the SASB materiality assessment. It is pertinent to note that this evaluation process does not encompass salary implications. It is, however, noteworthy that any prospective salary increments will be subject to scrutiny to ascertain their alignment with sustained proficiency in risk management endeavors.

 

5. Remuneration policy

 

Each employee of No Such Ventures receives a compensation plan that is based on their job, experience, and skills and is in accordance with the labor market and cost of living in their area. The total compensation is made up of both fixed (salary and benefits) and variable compensation. The compliance with all rules and procedures, including those pertaining to the future impact of sustainability risks on the investment decision-making process, is taken into account when determining the variable compensation for the relevant managers. This is assessed for each manager at the end of the year through yearly performance reviews.

​

​

Statement about not reporting on the PAIs at the entity level 

 

Policy: No Such Ventures PAI policy.

 

Scope: Sustainability factors are environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters.

 

In compliance with the provisions of article 4 sub 1 (b) of the SFDR, No Such Ventures affirms that it does not take into account the negative effects of investment decisions on sustainability factors (principle adverse impact indicators (PAIs)), as outlined in article 4 sub 1 (a) of the Disclosure Regulation. Consequently, the company does not provide the aforementioned disclosures as stated in article 4 sub 1 (a) of the SFDR. 

 

Given No Such Ventures operates under a deal-by-deal investment model, these financial products may vary in terms of whether they fall under Article 6 or Article 8 of the relevant regulations. Hence, the No Such Ventures approach to PAIs is not conducted on an entity level, primarily due to the presence of Article 6 financial products. For the Article 8 financial products we consider PAIs at the product level. To ensure consistency in our methodology and conformity with the procedure for implementing PAIs across all financial products at the entity level, we refrain from considering PAIs. Furthermore, we choose not to implement PAIs across every product due to the insufficient data accessibility concerning the underlying assets. The disclosure requirements set out in article 4 sub 1 (a) of the SFDR, along with the associated administrative burden, would not be proportionate. The introduction of the CSRD holds the potential to enhance data availability and may enable us to enhance our reporting capabilities in this regard.