Statement on the integration of sustainability risks
ESG risks are defined as environmental, social or governance events or conditions that, if they occur, could cause an actual or potential material negative impact on the value of an investment. To ensure long-term value creation, Re:food considers ESG risks’ eventual impact on potential investments and monitors ESG risks for existing portfolio companies on a regular basis.
Regarding the ESG risk process for new investments, Re:food considers four aspects when identifying, assessing, and ranking potential investments from an ESG risk and mitigation perspective in the due diligence process: Risks, Probability, Consequences and Mitigation Strategy. ESG risks are assessed based on a qualitative assessment identifying potential risk of adverse impact related to each of the Re:food circle components. Each adverse risk is assessed based on its probability and long-term environmental and social consequences, along with a qualitative assessment of existing or future mitigation plans.
Adverse sustainability impacts statement
Re:food considers Principal Adverse Impacts (PAI) for all its investments, defined as the negative impacts which an investment has on environmental matters, respect for human rights, social and employee matters, and anti-corruption. PAI data will be collected from the portfolio companies, and PAI reports will be included in Re:food’s annual report, beginning in 2023.
The 2023 Principal Adverse Impact Statement (PAIS) describes how Re:food considered principal adverse impacts of our investment decisions on sustainability factors, as per Article 4 of SFDR.
Summary of website disclosures on the promotion of environmental or social characteristics and of sustainable investments
No significant harm
In order to ensure that investments are not causing significant harm to any of the sustainable investment objectives, Re:food collects data on Principal Adverse Impact (PAI) indicators from its portfolio companies. The first year for which data will be collected is 2022. As of September 2022, Re:food has also begun collecting qualitative data on PAI indicators prior to investment in a company, in order to avoid investing in a company that is causing significant harm. Re:food also assesses the positive impacts and potential adverse impacts of potential investments in relation to the Re:food circle, as described in Food is Solvable. Governance practices of potential investments are assessed during the due diligence process with reference to the OECD Guidelines for Multinational Practices.
Sustainable investment objective
The objective of Gullspång Re:food II Invest AB (Re:food) is to invest in companies that will contribute to a more sustainable food system, address climate change, and promote healthy diets. Re:food has identified four thematic areas that it believes are essential to these objectives and that are of the utmost importance for building long-term value creation. These thematic areas are: Sustainable Proteins & Fats, Sustainable Supply Chains, Healthy Diets, and Healthy Soils. Re:food believes that these thematic areas correspond to a number of sustainable objectives, including: reducing greenhouse gas emissions, reducing the impact of food production on biodiversity, improving the efficient use of water and land, contributing to a circular economy, more efficient use of raw materials, reducing the production of waste, and achieving social health objectives through increased access to healthy foods, personalized nutrition, and addressing malnutrition and undernutrition.
Investment strategy and proportion of investments
Re:food pursues a venture capital investment strategy and makes equity investments in early stage privately traded companies that it believes will have a significant or transformative positive impact on our food system in one of the four thematic areas stated above. Investments are made based on their alignment with one of the four thematic areas, the segments in each theme that Re:food has chosen to prioritize, and the company’s financial potential. Re:food aims to invest 100% of its capital in sustainable investments, and has not set target allocations to each theme or to environmental vs. social objectives. The majority of Re:food’s investments will be direct, but the fund will also occasionally invest in other venture capital funds investing at an earlier stage but with the same sustainable food system focus. Therefore, some percentage of the fund’s exposure to sustainable investments will be indirect.
Monitoring, methodologies, data sources and processing, and limitations
Monitoring of the sustainable investment objectives is performed through active ownership practices and collection of ESG data on PAI indicators as well as other qualitative and quantitative indicators that Re:food and the company agree are relevant to the company’s sustainability and impact. On a regular basis Re:food assesses the growth of each portfolio company and its alignment with its stated strategy and mission at the time of investment, and incorporates any sustainability information published by the company and the PAI indicators into an analysis of whether the company is still helping to achieve the sustainable investment objective. Data on PAI indicators is collected directly from portfolio companies using a third-party platform called SustainLab, which assists with data quality assessment and processing of data. Some proportion of the data will be estimated, and the assessment will depend on both qualitative and quantitative data. Comparability may be limited due to the differences between companies in terms of industry and stage. Despite these limitations, Re:food believes that the attainment of the sustainable objective will not be affected because the investment strategy, screening, and due diligence that Re:food uses to select investments is robust and will eliminate from consideration any companies that would not help achieve one of the sustainable objectives. Additionally, due to Re:food’s active ownership practices, the fund has a high degree of transparency into the operations of its portfolio companies which enables ongoing and timely monitoring.
Due diligence and engagement
Re:food’s due diligence process for potential new investments includes a consideration of the company’s exposure to excluded industries and activities, its sustainability policies and practices, and its performance related to PAI indicators for which it already collects data. In addition, Re:food engages in dialogue with the company to understand its mission related to sustainable objectives, its own sustainability goals, and its positive impact and potential adverse impacts on the areas of the Re:food circle, as well as any potential mitigations for the potential adverse impacts. Information from the company is supplemented by desktop research and dialogue with experts where necessary. This sustainability due diligence is incorporated along with financial, commercial, legal, governance and other due diligence areas deemed relevant. Following investment, Re:food is an active owner and an engaged long-term minority shareholder. In this capacity, Re:food engages its portfolio companies in ESG progress and integration, and ensures that they operate in a financially, environmentally, and socially responsible manner, including remaining in compliance with international conventions, the UN Global Compact, and the national legislation of the countries where they operate, as well as with the Fund’s investors’ criteria.
Attainment of the sustainable investment objective
Post-investment, Re:food supports its portfolio companies with growing their operations in order to increase their positive impacts on our food system and thereby achieve the Fund’s sustainable investment objective. Re:food also works with its portfolio companies to support them in implementing internal sustainability policies and initiatives. One of the Fund’s ambitions is to contribute to a reduction of global carbon emissions; hence portfolio companies will be evaluated in accordance with their performance within this area. No designated EU Climate Transition benchmark or EU Paris-aligned Benchmark has been chosen as a reference benchmark. Data regarding CO2 emissions will be collected from the portfolio companies on an entity level on an annual basis, and calculations will be made in accordance with the TCFD guidelines for asset managers as well as the Sustainable Finance Disclosure Regulation. Through this methodology, the objective will be measured successfully, having the same potential of attainment as would a reference benchmark have been chosen.