Summary
The Fund has no sustainable investment objective but aims to enhance and promote the sustainability of each invested company throughout the management period and achieve progress on the product’s most important environmental, social and governance characteristics.
ESG issues are incorporated into the Fund’s investment analysis and decision-making processes. Before each investment, the performance of the 12 most material ESG issues is analyzed as part of the due diligence process. In this analysis, the improvement potential of an undertaking is crucial. There is a strong focus on active ownership and incorporation of ESG issues into ownership policies and practices. During engagement, portfolio companies are assisted where necessary, and improvement plans are developed and targets are set.
To enhance each portfolio company’s performance on the material ESG topics, data is requested through a standardized questionnaire sent annually. Additionally, any information that might contain relevant data for the ESG assessment, including other (filled-in) information requests for investors, reports or policy documents regarding the relevant matters, is requested.
As portfolio companies are still in the early or clinical stage, data is often not publicly available, incomplete or of insufficient quality. To mitigate this, the investment committee always performs an internal sanity check on the reported data.
An analysis of the most material ESG factors is conducted as part of our due diligence process, using our ESG scorecard prior to each investment. Currently, the outcomes of these scores do not hold decisive weight in the decision-making and finalization of deals. However, the overall ESG aspect is taken into account.
Active ownership by closely engaging with portfolio companies on the material ESG issues and risks identified before investment, as well as reporting back on data and actively steering on improvement through target setting.
No sustainable investment objective
This financial product promotes environmental or social characteristics but does not have a sustainable investment objective.
Environmental or social characteristics of the financial product
The Fund aims to enhance and promote the sustainability of each invested company throughout the management period and achieve progress on the product’s most important environmental, social and governance characteristics.
To successfully do this, the 12 most material topics were determined as ESG characteristics relevant to the Fund, consisting of early-stage life sciences companies.
| Environmental | Social | Governance |
| GHG emissions | Product safety | Ethical business practices |
| Energy consumption | Employee wellbeing | Risk management |
| Hazardous waste | Diversity & Inclusion | Good corporate governance |
| Employee health & safety | Data privacy & security | |
| Animal welfare |
Investment strategy
Sound Bioventures aims to build a sustainable venture capital Fund with financial returns that invest in clinical-stage therapies meeting real unmet medical needs with quality of life and health economic benefits. Sound is committed to providing a high return on investment for our stakeholders and professional support to our portfolio companies on financial and ESG matters.
ESG issues are incorporated into the Fund’s investment analysis and decision-making processes. Before each investment, an analysis of relevant ESG issues is made through an ESG scorecard as part of our due diligence process. Currently, the findings of these scores are non-decisive in decision-making and deal-closure but have as the main aim to create a more all-encompassing image of the undertaking. In this analysis, the improvement potential of an undertaking is crucial. When improvement to a required level can be realized on ESG matters, an investment falls within the strategy of the Fund. We strongly focus on active ownership and incorporate ESG issues into our ownership policies and practices. Therefore, engagement with portfolio companies on the most prominent ESG issues is conducted. During engagement, we assist our portfolio where necessary, develop improvement plans and set targets. Data is requested based on ESG Key Performance Indicators (ESG KPIs) on an annual basis to monitor progress over time.
Prior to any investment, we assess good governance practices of the investee companies by analyzing whether there are sound management structures, good employee relations, fair remuneration of staff and tax compliance. We have implemented a strategy to ensure good governance for all investments, considering it a fundamental technique for mitigating risks, and will work with management to correct any shortcomings identified prior to, and during, the investment. Our assessment considers the clinical/early stage of our assets, where generally a limited number of people work, and structures are yet to be set up.
Proportion of investments
100% of the financial products within this Fund promote environmental or social characteristics. No assets are classified as sustainable, according to the SFDR.
Monitoring of environmental or social characteristics
The manager of the Fund conducts thorough monitoring of the environmental and social aspects of every investment opportunity. This involves managing the performance of the companies through regular tracking and strategic business planning. Data on the performance of our investments on the formulated ESG KPIs that are material to the industry is requested and reported back to the Fund’s investors on an annual basis. In doing so, progress on the different topics will become clear. Data gathering and analysis are currently conducted in cooperation with external advisers. Together we are developing a standardized approach that is easy to scale and implement for future reports.
Methodologies
We aim to enhance each portfolio company’s performance on the material ESG topics. To achieve this, data on the different ESG topics are requested through a standardized questionnaire sent to the portfolio companies annually. The gathered data is analysed, and ESG strategies are formulated based on the results.
As we continuously improve and finetuning our ESG approach, we are now developing a new framework to determine the performance of investments on ESG topics. The current methodology is, therefore, prone to change for the coming reporting period.
Data sources and processing
We request data from our portfolio companies in a standardized format, covering the most material ESG topics. Additionally, we ask for any additional information that might contain relevant data for our ESG assessment. This includes other (filled-in) information requests for investors, reports or policy documents regarding the relevant matters.
The investment committee checks the data that has been collected, and close cooperation with an external consultant is established for the processing of the data. During the management phase, the investment team performs sanity checks on the reported data. In addition to this, we assist our portfolio companies in:
- Ensuring consistency of the data over time by providing last year’s data
- Advising on GHG emissions calculation- and other relevant tools
Limitations to methodologies and data
Our portfolio companies are still in the early or clinical stage, meaning their size is still small, and data is often not publicly available, incomplete or of insufficient quality. Additionally, the portfolio companies do not always have the resources to collect and report the desired data.
Reported ESG data of portfolio companies is not always checked by an external organisation as this is a time-consuming and costly process. This means some data may lack completeness and/or accuracy. To mitigate this, sound always performs an internal sanity check on the reported data.
To counter these limitations, maximum transparency about the data quality is provided on portfolio level, as well as the principles and decisions behind its reporting structure and KPI operationalization.
Due diligence
As part of our due diligence process, we conduct an analysis of the most material ESG factors using our ESG scorecard prior to each investment. Currently, the outcomes of these scores do not hold decisive weight in the decision-making and finalization of deals. However, their primary objective is to establish a comprehensive understanding of the undertaking and the improvement potential within the investment. If ESG issues are identified, and there is enough potential for improvement, the investment aligns with the strategy of the Fund.
Engagement policies
Sound Bioventures is an active owner and, for all its investee companies, aims to incorporate ESG issues into ownership policies and practices. In doing so, we aim to create sustainable fund growth while ensuring financial return for its investors. This includes close engagement with portfolio companies on the material ESG issues and risks identified before investment, as well as reporting back on data and actively steering on improvement through target setting. Additionally, we aim to assist all investee companies with our specialist knowledge and expertise where needed and required.
The periodic disclosure for Sound Bioventures Fund I, 2022, can be received upon request. Please email info@soundbioventures.com
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