1. Sustainable Finance Disclosure Regulation
Inference Partners Limited and Inference Partners Kft (together “Inference Partners”) are supportive of the Regulation (EU) 2019/2088 of the European Parliament and of the European Council of 27 November 2019 on sustainability disclosure requirements in the financial services sector (the “SFDR”).
2. Integration of sustainability risks in the investment decision process
Inference Partner integrates sustainability risks in its investment decision making process. Sustainability risk is defined as an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investment. An assessment is performed on the sustainability risks that are specified as adverse sustainable impact factors presented in the Final Report on draft Regulatory Technical Standards issued by the ESAs Joint Committee on 2 February 2021 (“Final Report”). This sustainability risk assessment is a mandatory part of Inference Partners' pre-investment due diligence process that must be completed prior to any final investment decision. If a pre-investment due diligence identifies one or more actual or potentially material risk, the identified risks are required to be presented to Inference Partners' investment committee. The investment team is required to work with the management of the target company to understand and, if possible, mitigate the highlighted risks before the execution of an investment.
3. Principal adverse sustainability impacts statement
Inference Partners considers principal adverse impacts of its investment decisions on sustainability factors. The present statement is the consolidated principal adverse sustainability impacts statement of Inference Partners.
3.2 Description of principal adverse sustainability impacts
Sustainability factors mean environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters. Inference Partners considers indicators falling into two categories: (i) Climate and other environment-related indicators, and (ii) Social and employee, respect for human rights, anti-corruption and anti-bribery matters.
Specifically, the following indicators are considered with respect to each target company and on a portfolio level (as per Annex I of the Final Report):
Climate and other environment related indicators:
- GHG emissions
- Carbon footprint
- GHG intensity of investee companies
- Exposure to companies active in the fossil fuel sector
- Share of non-renewable energy consumption and production
- Energy consumption intensity per high impact climate sector
- Activities negatively affecting biodiversity-sensitive areas
- Emissions to water
- Hazardous waste ratio
- Non-recycled waste ratio
Social and employee, respect for human rights, anti-corruption and anti-bribery matters:
- Violations of UN Global Compact principles and Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises
- Lack of processes and compliance mechanisms to monitor compliance with UN Global Compact principles and OECD Guidelines for Multinational Enterprises
- Unadjusted gender pay gap
- Board gender diversity
- Exposure to controversial weapons
- Whistleblower protection policy
- Lack of anti-corruption and anti-bribery policies
3.3 Description of policies to identify and prioritize principal adverse sustainability impacts
Inference Partners has developed policies on the identification and prioritization of principal adverse sustainability impacts and indicators. Inference Partners' policies have been designed with the firm’s investment activities in mind. Inference Partners' investment strategy is to make early-stage equity investments to acquire minority stakes in private infrastructure software startups. These high growth early-stage technology companies have inherently less ESG risk compared to those in many other industries, such as agriculture, energy, manufacturing, power, and transportation. Nevertheless, the growth of these companies’ activities might lead to an increase in some of the adverse sustainability indicators as specified above. In those cases only a relative adverse impact mitigation strategy can be pursued. Each principal adverse sustainability impact is considered individually, with a specifically required mitigation strategy defined in each case. For principal adverse sustainability impacts that are likely to be severe, are not linked to the companies’ operations and are avoidable by implementing good business practices, a “prevent/do not tolerate” strategy will be put in place. For principal adverse sustainability impacts that are intrinsically linked to a target or portfolio company’s economic activities, a minimization/mitigation or relative minimization/mitigation strategy will be pursued.
Each principal adverse sustainability impact will be assessed during the pre-investment due diligence phase. As an active investor, we also use our influence as a shareholder and typically a member of the board of directors of our portfolio companies to monitor, measure and report on each adverse sustainability impact on a regular basis. This approach will allow Inference Partners to aggregate and track adverse sustainability impacts both on a portfolio level, as well as individually per portfolio company and initiate actions for mitigation as appropriate.
3.4 Remuneration policy
Inference Partners has adopted a remuneration policy that aims to encourage responsible business conduct and seeks to avoid conflicts of interest in the relationships with clients. The senior management of Inference Partners review the salaries on a yearly basis ensuring that employees are paid fairly for comparable work across the board and any variance is due to legitimate job-related factors.