Disclosures on the integration of sustainability risks and on the consideration of principal adverse impacts
Pursuant to the Sustainable Finance Disclosure Regulations (SFDR), Chrysalix Netherlands B.V. (Chrysalix) is required to make certain disclosures to investors on how Chrysalix integrates sustainability considerations into its investment decisions. The SFDR aims to increase transparency of sustainability-related disclosures and to increase comparability of disclosures for end investors. Chrysalix supports these objectives. In the below statement, we disclose information on (i) the integration of sustainability risks in the investment decision process (article 3(1) SFDR), (ii) the consideration of principal adverse impacts of investment decisions on sustainability factors (article 4(1)(b) SFDR) and (iii) consistency of our remuneration policy with the integration of sustainability risks (article 5(1) SFDR).
A sustainability risk in this context means “an environmental, social or governance (ESG) event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investment”.
Chrysalix is an early-stage venture capital firm managing investments in impactful, high growth potential companies. Applying a best-of-class approach, Chrysalix integrates sustainability risks in the investment decision-making process and has developed a sustainable investing policy. The sustainable investing policy ensures that Chrysalix invests in a sustainable and responsible manner and manages ESG risks on a structural basis.
Chrysalix’s sustainable investing policy includes ESG risk and impact considerations in all stages of the investment process and portfolio management.
In the initial stage, investments undergo a positive and negative screening process, consisting of a questionnaire based on an ESG exclusion list and other impact considerations setting out criteria which the investments need to meet in order to qualify for investment and certain criteria on the basis of which potential investments will be excluded.. Subsequently, Chrysalix performs an impact assessment on the companies. Chrysalix needs to be convinced that an investment will materially contribute towards carbon neutrality of a given industry and seeks to define whether such impact will be direct, indirect and the relative contribution to such industry. While measuring impact is challenging, especially for early-stage companies and enabling technologies, Chrysalix needs to be convinced on the positive impact of a potential investment. In the later stages of due diligence, Chrysalix identifies ESG specific risks of investee companies and develops an ESG action plan which will be monitored following an investment as part of our portfolio management.
A sustainability factor in this context means “environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters.
The consideration of principal adverse impacts (PAI) of Chrysalix’ investment decisions on sustainability factors depends on the availability of relevant information provided by investee companies. For early-stage technology companies, the required information and data on such sustainability factors are often not readily available or of sufficient quality and reliability. Also given the current small size of Chrysalix’ organization, the administrative burden of gathering and assessing such required information and data would not be proportional at this moment.
For this reason, Chrysalix does not consider all PAI of investment decisions on sustainability factors at this point. Chrysalix’ intention is to expand its approach on these matters and gradually increase the consideration of PAI of investment decisions on sustainability factors over time. However, Chrysalix does currently has not set a specific timeframe for considering such PAI.
Chrysalix has designed and implemented a sound remuneration policy that ensures that the firm fulfils its fiduciary duty, identifies and manages any conflicts of interest, promotes sound and effective risk management and does not encourage risk taking which is inconsistent with the risk profile of Chrysalix or its funds.
In relation to remuneration for staff, Chrysalix takes into account compliance with all policies and procedures, including the sustainable investing policy.