Website statement – Financial Product
Website product disclosure for financial products referred to in Article 9(1), (2) and (3) of Regulation (EU) 2019/2088
For financial products referred to in Article 9(1), (2) or (3) of Regulation (EU) 2019/2088, financial market participants shall publish the information referred to in Article 10(1) of that Regulation and Articles 46 to 57 in the order and made up of the following sections titled:
A. Summary
The goal of the Fund is to actively scout promising greentech and turn this into successful ventures, aimed at tackling the world’s climate and circularity challenges. The fund aims to actively invest in early-stage ventures based on inventions that actively contribute to the reduction of greenhouse gases, virgin materials, waste and pollution. In doing so, the sustainable objective of the fund is to contribute to tackling climate change and creating a circular economy.
B. No significant harm to the sustainable investment objective (DNSH)
The Fund assesses all investments on (potential) material negative impact (in as far as the Fund can reasonably foresee this), based on:
- A standard list of possible negative environmental and social impacts:
The Fund assesses if the investment does not have substantial negative impact based on the Fund’s ESG checklist including the SFDR Principle Adverse Impact indicators and good governance practices aligned with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. - Trade-offs in terms of negative impact on any of the Fund’s sustainability indicators:
The Fund assesses if the investment has a substantial positive contribution to one or more of the focus sustainability indicators of the Fund (net zero, circularity and toxicity-free). The Fund will also assess if the investment does not have a significant negative impact on one or more of the (other) sustainability indicators. If the investment does have an unacceptable negative impact on any sustainability indicator, the Fund will not proceed with the investment. Since the potential investments are very early stage, this will be based on a qualitative expert opinion of the fund manager.
Both assessments are done before investing, during the due diligence phase, and are based on a qualitative assessment of the fund manager and will identify the major risks involved with the investment.
The Fund will re-assess the Portfolio Companies on these two points on an annual basis. In the situation where Portfolio Companies do cause an unacceptable negative impact, the Fund 1) engages with the management team to define a plan of action and timeline in which the company needs to comply with the Fund guidelines and 2) sets up proactive engagement with bi-annual assessment of the venture. In the scenario the company fails to comply even after the engagement period the Fund will proceed as a shareholder and will propose necessary changes in the management team or, in the most extreme cases, proceed to divest.
C. The sustainable investment objective of the financial product
The goal of the Fund is to actively scout promising greentech and turn this into successful ventures, aimed at tackling the world’s climate and circularity challenges. The fund aims to actively invest in early-stage ventures based on greentech inventions that actively contribute to the reduction of greenhouse gases, reduce the use of virgin materials and reduce pollution. In doing so, the sustainable objective of the fund is to contribute to tackling climate change and creating a circular economy.
D. Investment strategy
The fund invests in early-stage greentech ventures (the Portfolio Companies) based on inventions which aim to contribute to tackling climate change and creating a circular economy. The inventions are sourced by BigCircle Ventures at universities, research institutes and corporates, and subsequently turned into new ventures, which are founded by BigCircle Ventures in Europe (and in a later stage also in the US). The Fund aims to invest in 30 of such ventures via a convertible loan and follow-on equity investments in a selection of those 30 ventures.
In the sourcing phase the Fund screens the inventions and then further assesses during due diligence if they have a potential positive impact on tackling climate change and creating a circular economy while having a solution that is potentially scalable. This is done based on the binding elements in the Fund’s investment strategy as described in the next section. The Fund will ex-ante indicate qualitatively the identified potential contribution of the portfolio companies on the different sustainability indicators and their identified potential to encounter significantly lower scaling barriers.
During the investment period the Fund will (re)assess annually whether the innovation is still expected to deliver the foreseen positive impact and sufficiently manages to limit its possible negative impact. Based on these insights the Fund proceeds to actively engage selected Portfolio Companies (as described in the relevant sections).
E. Proportion of investments.
All are sustainable investments with an environmental objective, not taxonomy-aligned.
Due to the very early-stage nature of the Portfolio Companies, these companies have limited impacts, and thus limited insights into impact data. As most Portfolio Companies develop innovative solutions not all activities will be eligible for the EU Taxonomy yet and thus criteria to align are not available. This early-stage nature of the companies and the unavailability of criteria and/or data makes it difficult to determine the substantial contribution to one or more of the environmental objectives and guarantee compliance to the TSCs. The fund can therefore not guarantee alignment with the EU Taxonomy at this moment and can only declare a commitment to 0% alignment. The fund will continue to work towards a situation where the fund and its portfolio companies publish data on eligibility and alignment.
F. Monitoring the sustainable investment objective.
In the sourcing phase the Fund screens the inventions and then further assesses during due diligence if they have a potential positive impact on tackling climate change and creating a circular economy while having a solution that is potentially scalable. This is done based on assessing the investment on the binding elements in the Fund’s investment strategy as described in the next section. The Fund will indicate qualitatively the portfolio companies’ foreseen impact on the different sustainability indicators.
During the investment period the Fund will (re)assess annually whether the investment is still expected to deliver the foreseen positive impact and sufficiently manages to limit its possible negative impact. Based on these insights the Fund proceeds to actively engage selected Portfolio Companies to take action if necessary.
G. Methodology
The Fund uses a set of sustainability indicators (on Net Zero, Circularity, Toxicity-free) combined with a set of acceleration indicators to provide transparency on how investments contribute to its main sustainability objectives. The three (sets of) sustainability indicators include, but are not limited to the following indicators:
Net zero – the reduction of greenhouse gases:
- GHG emissions avoided
- GHG removed
Circularity – the reduction of virgin (raw) materials and waste:
- Virgin (non-bio) materials mining avoided
- Freshwater resources depletion avoided
- Waste reduced
Toxicity-free – the reduction of pollution:
- Novel entities release avoided
- Novel entities removed
Ex-ante the investment the Fund applies a two-step assessment of investments. In the first step, it assesses if the investment has the potential to make a substantial positive contribution to one or more of the sustainability indicators mentioned above (positive impact). The Fund will also assess if the investment is likely to have a significant negative impact on one or more of the other sustainability indicators mentioned above. If an unacceptable significant negative impact on the other sustainability indicator(s) is expected, the Fund will not proceed with the investment. Since the potential investments are at a very early stage, this will be based on a qualitative expert opinion of the fund manager.
In the second step the Fund assesses how likely it is that the innovation offers additional impact, as compared to a scenario in which the innovation would not be brought to the market. In such a scenario, it is expected that other solutions will eventually achieve the same level of positive impact (on the sustainability indicators mentioned above), albeit at a significantly lower pace, caused by barriers to scaling those solutions. If the investment has significantly lower barriers to scaling, then it can achieve the envisioned level of impact faster and hence offer additional impact in the meantime. The Fund assesses if the innovation has the potential to encounter significantly lower scaling barriers by using the following set of acceleration indicators:
- Investment need reduced
- Unit costs reduced
- Skilled labour need reduced
This assessment will be based on a qualitative expert opinion of the fund manager. In case the assessment does not indicate significantly lower scaling barriers, then the Fund will not proceed with the investment.
During the investment period the Fund assess qualitatively to what extent the investments realise the expected sustainable investment objectives on an annual basis.
This set of sustainability and acceleration indicators will be further developed over time when the Fund matures and gains new insights. The Fund does not use a reference benchmark to score the above indicators.
H. Data sources and processing.
The data used to achieve the sustainable investment objective is of qualitative nature. It is data based on a periodic review of its impact potential and any trade-offs or sustainability / adverse impact risks to the Operating Partner.
Data quality is ensured through formal progress reports and informal continuous contact between the Operating Partner and the Portfolio Company which allows the Fund to have reliable insight in the organisation and achievements of the Portfolio Company.
On a periodic basis the Fund will report on each Portfolio company in its portfolio including a compiled report of the overall progress of the portfolio in achieving its sustainability objectives.
Since the achievement of sustainability objectives is forward looking, due to the fact that the Portfolio Companies are at a very early stage, all data is estimated.
I. Data limitations and methodologies.
The limitation of the methodology used is that the data is an estimation based on potential impact in the future. There is a high risk that the estimation will not materialise. The venture has a potential to fail or the technology ends up being developed for a different application.
Despite the qualitative nature and early-stage development of the innovation, the impact focus of the investment is not expected to differ in such a way that the application will not be in the focus area of impact. However, the extent to which the impact is effectively realised may vary in the end.
During the investment period, the investment must provide data on the rate and direction of development of the innovation and the feasibility of achieving the foreseen impact. In the unfortunate case that the foreseen impact is not feasible at all and the investment cannot meet the fund’s impact objectives, the fund reserves the right to engage or even divest.
J. Due diligence
During the due diligence process, the Fund assesses whether the investment makes a substantial positive contribution to one or more of the sustainability indicators. The Fund will also evaluate whether the investment has a significant negative impact on any of the other indicators. If the investment has an unacceptable significant negative impact on other indicator(s), the Fund will not proceed with the investment. Given that potential investments are at a very early stage, this assessment will be based on the qualitative expert opinion of the fund manager.
The internal control is organised through an internal dialogue between the investment manager and the management board of the fund which makes the investment decision. Part of the dialogue is if the Due Diligence on impact is followed accordingly.
K. Engagement policy
The Fund will re-assess the Portfolio Companies on the extent of achieving the sustainability objectives and if the Portfolio Companies do cause an unacceptable negative impact. The latter PAIs are included. In the case that the Portfolio company does not comply the Fund 1) engages with the management team to define a plan of action and timeline in which the company needs to comply with the Fund guidelines and 2) sets up proactive engagement with bi-annual assessment of the venture. In the scenario the company fails to comply even after the engagement period the Fund will proceed as a shareholder and will propose necessary changes in the management team or, in the most extreme cases, proceed to divest.
L. Attainment of the sustainable investment objective.
The Fund has a Net Zero objective by investing in innovations that reduce or avoid the emissions of greenhouse gases (GHG). Since its investments are very early-stage innovations, the actual reduction of GHG emissions is not expected during the fund’s investment period but after the investment period (>10+ years) after successful commercial implementation of the technologies. Therefore there is no practical need to use a benchmark to measure the GHG emissions. The Fund qualitatively reports the potential impact on GHG emission reduction or avoidance.