Sustainable Finance Disclosures Regulation (SFDR) website disclosures
Publication date: 20 June 2024
Version: 1.0
Last updated: 20 June 2024
Publication URL here

PSV Hafnium Management ApS, CVR-no. 43 10 74 88 (the “Management”) manages the alternative investment fund PSV Hafnium Fund I K/S, CVR-no. 43 11 15 31 (the “Fund”).

1. BASIC INFORMATION
1.1 Integration of sustainability risks in the investment decision-making process

1.1.1 A “Sustainability Risk” is an environmental, social or governance (“ESG”) event or situation which, if it occurs, could have an actual or potential material adverse impact on the value of an investment. A “Venture” is a private company that the Fund owns or aim at owning equity in. This Sustainability Risks Integration Policy (hereafter the “Policy”) sets out how the Management integrates Sustainability Risks in its investment decision-making process. The Policy applies to the financial products managed by Management with the purpose to ensure that the Management’s financial products are protected from or can cope with Sustainability Risks.

Awareness of Sustainability Risks is built into all of Management’s investment processes, from screening and due diligence of potential Ventures to governance and monitoring such Ventures. The integration of sustainability risks follows the investment process steps (see figure 1. ‘ESG & Impact investment process’ in section 1.1.1.):

– Initial screening
– Due Diligence
– Investment documents
– Monitoring & Reporting

Management looks at the Sustainability Risks that, if they occur, could cause a negative impact on the value of the investments of the Fund. The following risks are assessed to be the Sustainability Risks the Ventures are most exposed to:

• legislative changes;
• market risks, operational risks, liquidity risks
• employee health and safety hazards;
• integrity failures of leadership;

The likelihood of these Sustainability Risks occurring is assessed to be low.

In addition, and based on the assessment of relevant Sustainability Risks, Sector and Activity specific restrictions are further included in the Fund’s investment policy and outlined below under section (d) Investment Strategy.

During the due diligence and investment phase the Management identifies the Sustainability Risks and any additional, potential Sustainability Risks.
During the holding period, Management uses the result of such due diligence to ensure that the Sustainability Risks are continuously monitored, evaluated, mitigated, and reported. This ensures that Sustainability Risks are being handled and eventually minimized in the investment decision-making processes. This process is ensured and overseen by the general partners of the Management, and Management ensures that the Venture actively works with the identified Sustainability Risks, including that these are continuously monitored and assessed throughout the Fund’s holding period. If the Fund has a significant influence on the Venture’s governance, the Management ensures that the Fund exercises such influence at the board of directors of the Ventures.

1.2 Remuneration policies

The Management does not apply a remuneration policy in relation to the integration of Sustainability Risks.

2. ADDITIONAL INFORMATION FOR FUND MANAGERS MANAGING E/S PROMOTING FUNDS

(a) Summary

English:
The Fund promotes the following environmental and/or social characteristics: 1) reduction or reverse climate change, 2) reduction of energy consumption, 3) ensure sustainable use of resources and 4) improvement of quality of life. The Fund does not have sustainable investment as its objective, but it will have a minimum proportion of 65 % sustainable investments in economic activities with an environmental objective not qualifying as environmentally sustainable under the EU Taxonomy Regulation, which do not significantly harm other sustainable objectives and follow good governance practices.

The Fund will invest in early-stage technology companies within GreenTech, HealthTech and Industry 4.0 (“Sectors”) but outside certain prohibited sectors and activities (“Prohibited Sectors & Activities”).

The investment strategy consists of three binding elements used to select the company (“Venture”): 1) the Venture is within the Sectors, 2) the Venture is not operating within any of the Prohibited Sectors and activities and 3) the Venture reaches a score of ‘medium’ or ‘higher’ in the Fund Manager’s ‘ESG and Impact’ screening. While the Manager does not take into consideration the principal adverse impact of its investment decisions for Ventures that may qualify as a sustainable investment, relevant principal adverse sustainability impact indicators are considered when performing the ‘do not significantly harm’ test.

The due diligence phase is conducted through an ESG & Impact assessment of sustainability risks. Workshops will be carried out with the Ventures. On this basis it will be assessed whether the Ventures meet the “medium” or “higher” impact criteria and qualify as sustainable investments as well as an identification of Venture-specific KPIs and indicators. Good governance is assessed during the due diligence phase based on a set of governance questions, including board oversight, employee relationships, anti-bribery & corruption, financial & process control, tax control and IT safety & security.

The methodology used to measure the attainment of the social or environmental characteristics promoted is based on an ESG questionnaire including an assessment of product and operational impact as well as workshop with the Ventures. The environmental and/or social characteristics promoted by the Fund and the proportion of sustainable investments are monitored through access to Ventures and their data as well as through potential board seats.

The primary data source is quarterly and annual reporting from Ventures. The amount of reported data is expected to increase as the Ventures mature, however, initially a large proportion of data is expected to be estimated. The responsible investment manager and general partners will validate the data and if necessary third-party consultants will take part in the process.

Due to the early stage of the Ventures, measurement practices and methodologies are associated with limitations which will be addressed through ongoing actions such as regular review of methodologies to ensure the most up-to-date approach.

Risks are managed on an ongoing basis and in dialogue with the Ventures. The Fund and Management support and exercise potential influence on Ventures through their potential board seats.

No index has been designated as a reference benchmark.

Danish:
Fonden fremmer følgende miljømæssige og/eller sociale karakteristika: 1) reduktion eller vending af klimaændringer, 2) reduktion af energiforbruget, 3) sikre bæredygtig anvendelse af ressourcer og 4) forbedring af livskvaliteten. Fonden har ikke bæredygtig investering som sit mål men den vil have en minimumsandel på 65 % bæredygtige investeringer i økonomiske aktiviteter med et miljømål, men som ikke kan kvalificeres som miljømæssigt bæredygtige i henhold til taksonomiforordningen, og som ikke gør væsentlig skade på andre bæredygtige mål og følger god ledelsespraksis.

Fonden vil investere i teknologivirksomheder i det tidligere stadie indenfor GreenTech, HealthTech og Industry 4.0 (”Sektorer”) men udenfor visse ikke-tilladte sektorer og aktiviteter (”Ikke-tilladte sektorer og aktiviteter”).

Investeringsstrategien består af tre bindende elementer, der bruges til at udvælge virksomheden (”porteføljeselskab”): 1) porteføljeselskabet er indenfor Sektorerne, 2) porteføljeselskabet opererer ikke indenfor nogen af de Ikke-tilladte sektorer og aktiviteter og 3) porteføljeselskabet når en score på ”medium” eller ”højere” i Fondsforvalterens ’ESG and Impact’ screening. Mens Fondsforvalteren ikke tager hensyn til investeringsbeslutningernes vigtigste negative indvirkninger, vil Fondsforvalteren for investeringer, som kvalificeres som bæredygtige investeringer, tage i betragtning de relevante negative bæredygtighedsindikatorer som en del af ”ikke at gøre væsentlig skade”-testen.

Due diligence-fasen gennemføres gennem en ESG & Impact-vurdering af relevante bæredygtighedsrisici. Der vil blive gennemført workshops med porteføljeselskaberne. På den baggrund vil det blive vurderet, om porteføljeselskaberne opfylder kriterierne for ”medium” eller ”højere” impact og/eller kvalificerer sig som bæredygtige investeringer, ligesom porteføljeselskabs-specifikke KPI’er og indikatorer vil blive identificeret. God ledelsespraksis vurderes under due diligence-fasen på baggrund af en række spørgsmål relateret til ledelse, herunder bestyrelsestilsyn, medarbejderforhold, antibestikkelse og korruption, økonomi- og proceskontrol, skattekontrol og it-sikkerhed.

Den metode, der anvendes til at måle opnåelsen af de sociale eller miljømæssige karakteristika, der fremmes, er baseret på et ESG-spørgeskema samt en vurdering af porteføljeselskabets produkt- og driftsmæssige impact samt workshops med de pågældende porteføljeselskaber. De miljømæssige og/eller sociale karakteristika, som fonden fremmer, og andelen af bæredygtige investeringer monitoreres gennem adgang til porteføljeselskaberne og deres data såvel som gennem potentielle bestyrelsesposter.

Den primære datakilde er den kvartalsvise og årlige rapportering fra porteføljeselskaberne. Mængden af rapporteret data forventes at stige i takt med, at porteføljeselskaberne modnes, men indledningsvis forventes en stor mængde af data at være estimeret. De ansvarlige investment manager og general partner vil validere dataen, og om nødvendigt vil tredjepartskonsulenter tage del i processen.

Grundet porteføljeselskabernes tidlige modningsstadie vil de anvendte metodikker være forbundet med begrænsninger, som vil blive adresseret løbende, herunder ved regelmæssig gennemgang af de anvendte metoder med henblik på at sikre den mest optimale og i markedet anvendte tilgang.

Risici styres løbende og ved dialog med porteføljeselskaberne. Fonden og Fondsforvalteren støtter og udøver potentiel indflydelse over porteføljeselskaberne gennem deres potentielle bestyrelsesposter.

Der er ikke angivet et indeks som referencebenchmark.

(b) No sustainable investment objective

The Fund promotes environmental or social characteristics but does not have sustainable investments as its objective. The Fund will, however, have a minimum proportion of 65 % sustainable investments in economic activities with an environmental objective that do not qualify as environmentally sustainable under the EU Taxonomy Regulation.

The sustainable investments undertaken by the Fund will be analysed against the Fund’s ‘do not significantly harm’ criteria as an integrated part of the Fund’s investment process to ensure that they do not significantly harm any of the sustainable investment objectives. The ‘do not significantly harm’ criteria only apply to those investments underlying the Fund that are considered ‘sustainable investments’.

By their nature, all the Ventures are start-ups with limited revenues and market share, hence typically falling below the threshold for “significant harm” in their industry or geography. However, we actively screen ESG risk factors already during the initial screening and investment due diligence based on a questionnaire and workshop, that covers aspects of principal adverse sustainability impact indicators (PAI) and factor the results into our investment decision. We have also applied an exclusion list of areas where we do not invest at all (see Schedule 1 – negative list)

The Fund investment policy requires a screening where PAI indicators are considered during the investment process, as well as an ongoing monitoring of potential negative impacts during the holding period. For the investment focus of the Funds, often the climate-related indicators, such as the GHG emissions of a company or its products and services are relevant. Some other PAIs might not be applicable.

The Fund intends to follow the principles set out in the UN Global Compact Initiative and Principles for Responsible Investment (PRI); however not with respect to reporting obligations.

(c) Environmental or social characteristics of the Fund

The Fund promotes one or more of the following environmental and/or social characteristics:

a) reduction or reverse climate change (E)
b) reduction of energy consumption (E)
c) ensure sustainable use of resources (E)
d) improvement of quality of life (S)

(d) Investment strategy

The Fund will invest in early-stage technology companies within GreenTech, HealthTech and Industry 4.0 (“Sectors”). The Fund aims at investing in Ventures that have the potential to significantly provide a long-term financial return without compromising a sustainable planet. The Fund is prohibited from investing in the activities listed in schedule 1 (“Prohibited Sectors & Activities”). The binding elements of the investment strategy are:

1. The Venture is within the Sectors
2. The Venture is not operating within any of the Prohibited Sectors and activities
3. The Venture reaches a score of ‘medium’ or higher in the Fund Manager’s ‘ESG and Impact’ screening.

During the due diligence phase, Management identifies governance attributes such as the effectiveness of the Venture’s management body (its composition, governance, remuneration practices and oversight of the Venture’s operation), whether the Venture’s audit, risk, and compliance controls meet best practice standards, the Venture’s overall compliance with tax, anti-money laundering, anti-bribery and environmental standards and the Venture’s commitment to employment rights. Upon the identification of such governance attributes, Management carries out a ESG (‘Operational’) & Impact (‘Product’) workshop with the Venture where certain action points and KPIs are identified.

During the holding period, Management supports the Venture through personal and team profile (incl. leadership coaching and alignment) and provides support from specialists in the Fund’s advisory network where needed. Each Venture shall quarterly report on its governance practices including the action points and KPIs identified at the investment time and throughout the holding period. The Fund will use any position as board member to influence the Venture to ensure Good Governance practices are in place throughout the holding period.

(e) Proportion of investments

As described in the ‘Integration of sustainability risks in the investment decision-making process’ (section 1.1., figure 1), and ‘investment strategy’ section (section d), 100 % of the Fund’s investments should be ethical and comply with the binding elements of the investment strategy: (pass the negative list screening-questionnaire), be running responsibly (pass the ESG responsible screening-questionnaire with at least a “medium”, Operational), and make an impact (pass the Impact score screening-questionnaire with at least a “medium”, Product). At least 65 % of the Fund’s investments will be sustainable investments which contribute to at least one of the Climate Action & Environment Sustainability objectives (CA&ES).

The sustainable investments underlying the Fund shall contribute to at least one of the following environmental objectives:

1. Climate change mitigation;
2. Climate change adaptation;
3. The sustainable use and protection of water and marine resources;
4. The transition to a circular economy;
5. Pollution prevention and control;
6. Protection and restoration of biodiversity and ecosystems.

To contribute to at least one of the environmental objectives mentioned above, the Venture that is the subject of the investment must be either a) an enabling or supporting activity that allows the scaling of other green solutions, or b) it must have unique green aspects that result in a significantly reduced environmental footprint in at least one tier in the value chain as compared to the displaced alternative solutions.

By their nature, all the Ventures are start-ups with limited revenues and market share, hence typically falling under the threshold for “significant harm” in their industry or geography. However, we actively screen ESG risk factors already during the initial screening and investment due diligence based on a questionnaire and workshop, that covers aspects of principal adverse sustainability impact indicators (PAI) and factor the results into our investment decision. We have also applied an exclusion list of areas where we do not invest at all (see Schedule 1 – negative list)

The Fund’s investment policy requires a screening where PAI indicators are considered during the investment process, as well as an ongoing monitoring of potential negative impacts during the holding period. For the investment focus of the Funds, often the climate-related indicators, such as the GHG emissions of a company or its products and services are relevant. Some other PAIs might not be applicable.

The Fund intends to follow the principles set out in the UN Global Compact Initiative and Principles for Responsible Investment (PRI); however not with respect to reporting obligations.

(f) Monitoring of environmental or social characteristics

To monitor the environmental and/or social characteristics promoted by the Fund throughout the holding period and ensure the right proportion of sustainable investments, the Fund requires access to the Ventures, including to relevant data. Such access is enforced through the legal documentation governing the Fund’s investment and shareholding in the Venture. Further, the Fund will be able to monitor the Venture through its board seats whenever the Fund holds such.

The Fund requires each Venture to annually complete a questionnaire to ensure that the Venture continues to be within the relevant Sector and is not in a Prohibited Sector/Activity. The Ventures will in addition be obligated to report on individual KPI’s that ensures that they meet the investment criteria set by the Fund, on an ongoing basis. Based on the Venture’s performance, the Fund may provide resources to support execution of the agreed KPI’s and/or ESG action plan to help the Venture.

(g) Methodologies

Please see figure 1. ‘ESG & Impact investment process’ in section 1.1.1. where the Fund’s investment process and methodology are described. The questions included in the ESG questionnaire are tailored to the specific environmental and/or social characteristics that the Venture is deemed able to help promote and the maturity of the Venture.

For Product Impact, the focus is to assess the impact of the Venture’s product by:

1. Conducting a preliminary high-level impact business case, forecasting impact potential.
2. Assess whether the Venture is positioned as a better environmental option compared to displaced alternatives.
3. Do no significant harm to other environmental objectives.
4. Assess compliance with Good Governance practices.
5. Assess contribution to at least one of the Sustainable Development Goals (SDGs).

In certain cases, the Fund uses external consultants to investigate key ESG & Impact issues/concerns related to the Venture.

For Operational Impact, the focus is on the operational impact of the Venture, examining through the lens of environmental, social and governance factors, including:

• Assess intentional ESG commitment by the Venture and its Management team
• Identify a short-list of material ESG issues (“areas of inquiries”) and make a ESG action plan to address potential risk and leverage opportunities; The Venture may use our own developed ESG Napkin & Sprint.

The Management takes the two steps above into a workshop with the Venture to collectively agree on the high-level impact business case, identify supporting SDGs, identify contributions to environmental and/or social characteristics, get clear on ESG & Impact value proposition, material ESG issues and leverage opportunities, agree on potential targets and KPIs, and not least make sure the Ventures are mature to follow the potential actions.

Based on these steps, Management will assess whether the Venture is able to meet the ‘medium’ or higher impact criteria, including if the Venture qualifies as a sustainable investment.

Based on the assessment, KPIs are identified and each KPI will be specific for the Venture taking its maturity, industry, the environmental and/or social characteristics it promotes, and the indicator used to measure the attainment of that characteristic(s) into consideration. The level of KPIs will be adjusted as the Venture develops and matures. Examples of which indicators that could be used to measure the attainment of which E/S characteristics:

Promoted characteristics Indicator Chosen KPIs to track (examples)
Enviromental Energy Consumption (if > 20 FTE’s) Percentage of Renewable Energy Consumption
Enviromental CO₂-emissions (if > 20 FTE’s) Reduction in carbon intensity per unit of production or service
Health Good health and well-being (if > 20 FTE’s) Reduction time for patients in hospital

During the holding period, the Management measures each Venture’s progress in achieving the KPIs and will together with the Venture set new KPIs throughout the holding period as the Venture matures. The Venture will become legally committed to fulfilling and reporting on the relevant KPIs.

(h) Data sources and processing

The data sources used the measure the attainment of the environmental and/or social characteristics are primarily the data directly provided by each Venture through quarterly and annual reporting. As the Fund invests in early-stage companies a large proportion of the data is expected to be estimated. It is expected that the proportion of reported data will increase as the Ventures matures. If necessary, third-party consultants and external control mechanisms will be employed to enhance the robustness of our data evaluation processes. The partner responsible for the investments case are responsible for validating the data from the Venture, together with the general partners.

(i) Limitations to methodologies and data

As the Fund invests in early-stage companies, there are limited practice and methodologies for how to best measure impact and the attainment of the environmental and/or social characteristics promoted by the Fund. As such, the Fund has implemented its own developed ESG & Impact process to measure the impact of the Ventures.

The methodologies referred to in (g) methodologies and data sources referred to in (h) Data sources and processing above only provide a snapshot as projections into the future will always carry uncertainty.

Ongoing actions will be taken to address such limitations: The Fund will regularly review the methodologies and data used to assess the attainment of the environmental and/or social characteristics to ensure the most up-to-date approach possible. When severe limitations are identified, actions will be taken to overcome them.

(j) Due Diligence

The Fund look at Sustainability Risk using the ‘ESG & Impact investment process’ in section 1.1.1. and the section (g) methodologies where the Fund’s investment process and methodologies are described.

During the due diligence phase, the partner responsible for the investment case, do the ESG & Impact assessment as part of the overall investment summary.

The partner responsible for the investment case does the ‘Impact Business Case’ and the ‘ESG Assessment’ in a workshop with the Venture to collectively agree: on the high-level impact business case, identified supporting SDGs, identified contributions to a sustainable objective, get clear on ESG & Impact value proposition, material ESG issues and leverage opportunities, agree on potential targets and KPIs, and not least make sure the Ventures are mature to follow the potential actions.

Based on the results of the workshop, the partner responsible for the investments case will either take additional actions, which could include additional ESG risk reviews internally or by external experts, or finalize the ESG & Impact assessment, including recommendations for improvements, as part of the due diligence. All general partners of the Fund are a part of the process and give input to the assessment.

Based on these steps, Management will assess whether the Venture is able to meet the ‘medium’ or ‘higher’ impact criteria, and identify if the Venture will be a sustainable investment that complies with at least one of the Climate Action & Environment Sustainability objectives (CA&ES) (“GreenTech”).

Based on the assessment, KPIs are identified and each KPI will be specific for the Venture taking its maturity, industry, the environmental and/or social characteristics it promotes, and the indicator used to measure the attainment of that characteristic(s) into consideration.

We assess good governance during the due diligence phase based on a set of governance questions, including board oversight, employee relationships, anti-bribery & corruption, financial & process control, tax control and IT safety & security. Based on the results of the test, we decide if the bar for good governance is met and set targets to (further) improve good governance standards during our holding period.

(k) Engagement policies

The Management ensures on an ongoing basis and in close dialogue with the Ventures that risks are managed properly. In such cases, the Fund may apply appropriate mitigation measures, including but not limited to e.g. implementing new processes and offering training for the Ventures to support their capacity to control, mitigate and/or reduce such risks.

As an active investor, the Fund helps Ventures mature on their impact and ESG journey, e.g. assistance in developing relevant policies, codes of conduct, processes, reporting, calculating impact, and life cycle assessment (LCAs). Where the Fund has a significant influence on the Venture’s structure and governance it will exercise such influence via the board of directors of the Venture ensuring that ESG, impacts, and risks are on the board agenda and are a continued focus of the Venture.

In the unexpected event of an impact or ESG incident, the Fund will always engage in dialogue with the Venture and ask them to mitigate in dialogue with the affected stakeholders.

(l) Designated reference benchmark

Given that there is no relevant benchmark index for early-stage businesses, an index has not been designated as a reference benchmark.

SCHEDULE 1 – NEGATIVE LIST
Negative list The Fund shall not invest, guarantee or otherwise provide financial or other support, directly or indirectly, to companies or other entities, which have:

(i) activities being illegal in the jurisdiction where such activities take place;

(ii) activities or persons (physical or legal) that are subject to or is managed or otherwise affiliated with persons that are subject to restrictive measures (sanctions) imposed by the United Nations, the European Union or Denmark from time to time;

(iii) the cloning of human beings for reproductive purposes;

(iv) manufacture, sale and/or storage of UN defined unconventional weapons; however the fund may invest in defence technology companies;

(v) activities within pornography; or which can be associated with prostitution;

(vi) fishing activities and/or fishing gear such as bottom trawling, beam trawling, spinning rods and dredges etc., which levels out the sea floor, disrupts the biodiversity and risks bycatching other species; and/or

(vii) activities within fossil raw materials including fossil fueled power plants as well as activities which have drilling, investigations, extractions, refining and sale of crude oil, natural gas and thermal coal or storage of fossil fuels and the underlying infrastructure (pipelines etc.) as its purpose.

(viii) economic activity involving a significant negative impact on primary forest cover;

(ix) economic activity involving a significant negative impact on biodiversity;

(x) economic activity involving a significant negative impact on ecosystem services;

(xi) economic activity resulting in significant pollution of land, water, or air;

(xii) economic activity resulting in significant land degradation;

(xiii) economic activity resulting in significant resource depletion;

(xiv) economic activity involving products categorised as tobacco by the Danish Health Authority;

(xv) activities within artic drilling in relation to the extraction of fossil fuels;

(xvi) activities involving highly polluting extraction methods, such as the extraction of oil from tar sand;

(xvii) activities involving exploitation of disadvantaged social groups, for instance through the use of deceptive or exploitative subscription services;

(xviii) activities enabling illegal access to electronic data networks or illegal downloading of electronic data;
(xix) activities within gambling;

(xx) illegal activities.

Furthermore, the Fund will not make any investments in a company that, to the best of our knowledge, at the time of investment:

(xxi) counteracts the transition to an economy based on renewable energy resources;

(xxii) as the primary business has activities that are based on the use of fossil fuels or fossil fuel related activities;

(xxiii) violates human rights conventions.

(xxiv) exploits disadvantaged social groups, e.g., using deceptive or exploitative subscription services; or

(xxv) has activities which are primarily of a speculative nature, including speculation related to tax matters, counteracts the transition to an economy based on renewable energy resources, engages in activities in which 90% or more of the primary business activities are based on the use of coal or coal related activities, engages in activities which has a substantial negative impact on the local society, people or the environment, engages in activities which violates human rights conventions, or is domiciled in a jurisdiction subject to trade embargoes imposed by the United Nations or the European Union from time to time.

In addition, the Fund will not invest in a company that, to the best of our knowledge, knowingly engage, directly or indirectly, in aggressive tax planning as defined by the EU and OECD which e.g. means doing any of the following:

(xxvi) abuse of double taxation treaties, where holding companies which do not have sufficient substance in line with the OECD Principal Purpose Test, are used for the sole purpose of reducing or avoiding withholding tax,
(xxvii) use of transfer pricing planning where risk and income are systematically shifted to low-tax countries

(xxviii) use of financial instruments for aggressive tax planning

(xxix) use of hybrid companies for aggressive tax planning

(xxx) use of highly leveraged acquisition structures in jurisdictions without general interest limitation rules in line with OECD/US principles with the aim of reducing taxable income, not in line with international market standards.

We refrain from investing in companies that engage in tax evasion of any kind.

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