Entity Level
What is the SFDR?
The Sustainable Finance Disclosure Regulation (SFDR) was set out in “Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector”. The “Regulation lays down harmonized rules for financial market participants and financial advisers on transparency with regard to the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes and the provision of sustainability‐related information with respect to financial products.”
1. Summary
Satgana Fund I is classified as an Article 9 fund under the SFDR. This means our fund has sustainable investments as its primary objective. We are committed to exclusively investing in early-stage ventures that have a positive impact on environmental objectives, while also ensuring that our investments do not significantly harm any other environmental or social objectives.
To ensure that our investments do not significantly harm other sustainable objectives, we perform rigorous due diligence pre-investment and commit to continuously monitoring the impact of our investments post-investment. This includes evaluating the potential negative impacts of our investments on environmental, social, and governance (ESG) factors, as well as ensuring compliance with international standards and principles.
In summary, the sustainable investment objective of Satgana Fund I and the associated environmental KPIS are:
1. Primary objective: Climate Change Mitigation
Environmental KPIs monitored and tracked: tonnes of GHG emissions avoided, reduced or mitigated
2. Second objective: Transition to a Circular Economy
Environmental KPIs monitored and tracked: a) tonnes of waste reduced, and as a result b) tonnes of GHG emissions avoided
3. Third objective: Climate Change AdaptationEnvironmental KPIs monitored and tracked: number of people positively impacted and/or number of hectares covered
2. Sustainable Investment Objective
Satgana’s sustainable investment objective is to contribute to the development and scaling of sustainable economic activities as defined by the EU Taxonomy and the Sustainable Development Goals (SDGs). More specifically, the fund has chosen to deploy its raised capital towards early-stage ventures developing and scaling solutions corresponding to the definition of Climate Change Mitigation as outlined in the EU Taxonomy. As a result the reduction and avoidance of Greenhouse Gas (GHG) emissions, stands as the fund’s primary sustainable investment objective. However, following this primary focus, investments may also qualify under the sustainability objectives Transition to a Circular Economy and Climate Change Adaptation as defined by the Taxonomy. The rationale for deciding to pursue three sustainability objectives rather than solely focusing on one is to have the ability to capitalize on a broad range of impactful Climate Tech solutions, thereby diversifying the portfolio across climate verticals, risk profiles, as well as regions.
In addition to considering the definitions of sustainable economic activities provided by the EU Taxonomy, we also integrate the SDGs into our investment framework to ensure a comprehensive approach to sustainability. We have identified 7 SDGs that complement the EU Taxonomy and combined represent the fund’s sustainability objective:
1. SDG 13 Climate Action
2. SDG 12 Responsible Consumption and Production
3. SDG 11 Sustainable Cities and Communities
4. SDG 15 Life on Land
5. SDG 16 Life Below Water
6. SDG 7 Affordable and Clean Energy
7. SDG 6 Clean Water and Sanitation
3. Do No Significant Harm, including Principal Adverse Impacts
Satgana Fund I is committed to ensuring that its investments do not cause significant harm to any environmental or social objectives while pursuing its respective sustainability objectives. To uphold this commitment, we take the following measures at the investment stage and throughout the lifetime of the investment:
1. Due Diligence and Screening:
We conduct thorough due diligence to identify and mitigate any potential negative impacts on environmental or social objectives before making an investment. This includes:
- Satgana’s Exclusion List (see below)
- Ensure compliance with Minimum Safeguards
- Considering the venture’s potential Principal Adverse Impacts, both those mentioned in the SFDR and beyond
- An ESG & Impact Questionnaire sent to founders (currently under strengthening)
- An Impact Scorecard used by the team to assess the intentionality of the team, the target market, the measurability and management of the solution, potential downside risks (Especially important from a DNSH perspective), the interlock of the business model, and the additionality of the solution.
- While not aligning with the EU Taxonomy, we use it as a framework to map the positive contribution of interesting ventures
- Assessing Good Governance aspects
2. Ongoing Monitoring post-investment:
We continuously monitor our portfolio companies to ensure compliance with our sustainability criteria and promptly address any emerging material issues by:
- Scheduling regular calls with our founders to check in on material topics
- Collecting mandatory and voluntary principal adverse impacts on an annual basis in accordance with the SFDR Art 9 requirements
- Supporting on Good Governance aspects
- Offering founder’s single materiality assessment workshops to identify material short-term and long-term risks
When relevant we include ESG clauses in our investment contracts to enforce adherence to environmental and social standards. We are also working on an escalation process to address any ESG-related concerns that arise, ensuring timely and effective resolution.
Combined, these safeguards help us maintain our commitment to sustainable investing while protecting broader environmental and social objectives. This work is a continuous process to ensure that we always adhere to best practices and the highest standards as we and our investments continue to grow in size and impact.
Directing explicit attention to the Principal Adverse Impacts laid out by the SFDR. Satgana Fund I collects and monitors data on all mandatory PAI indicators plus two additional indicators on an annual basis:
- Environmental PAI : Breakdown of energy consumption by non-renewable sources of energy
- Social PAI : Number of days lost to injuries, accidents, fatalities, or illness.
To this end, the services of Atlas Metrics, a software and platform provider specialized on ESG and SFDR reporting was employed to collect the relevant start-up data for 2023. All portfolio companies were onboarded onto the platform in January 2024 where they reported on the PAI metrics directly onto the platform with the support of the Satgana team. Once all the data had been collected, the Atlas Metrics platform conducted the calculations necessary, according to Annex I of the regulation, to aggregate this data to the fund level.
4. Investment Strategy
The investment strategy of Satgana includes three key parameters; the selection criteria, the exclusion criteria, and post-investment support.
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At selected stages in the Fund’s due diligence and portfolio management process, investee companies are monitored against:
- Geographical scope & country risks
- Venture Due Diligence based on Satgana’s “Four Pillars of Evaluation”
1. Team
2. Fit
3. Impact (see Satgana’s 6 Impact pillars below)
4. Commercial Viability
- Assessment of the venture’s positive contribution using the EU Taxonomy, the SDGs, or Satgana’s ToC
- Identification of targeted SDGs
- The founder’s answers to our ESG and Impact Questionnaire
- Broad assessment of Investee's PAI monitoring capacity
- Compliance with the Minimum Safeguards
- Good Governance Practices
- Impact Scorecard encompassing Satgana’s 6 Impact pillars
1. Intentionality of the team
2. Significance of the Market
3. Measurability and management of environmental KPIs
4. Potential Downside Risks (relating to the DNSH consideration)
5. Interlock of the Business Model
6. Additionality of the Solution
These different screening steps are carried out at different stages of the investment process. The negative screening (exclusion criteria) is the first barrier to entering the pipeline followed by increasingly positive screening techniques such as the ESG and Impact questionnaire to founders followed by the Impact Scorecard used by members of the Investment Team. For an investment to be pursued, all members of the Investment Team must agree that the financial, commercial, and impact aspects of the business are in line with the sustainable investment objective of the fund while not causing any significant harm to other environmental and/or social objectives.
Exclusion Criteria:
The fund strictly excludes investments in:
- production of or trade in weapons or ammunitions;
- gambling, casinos and equivalent enterprises;
- businesses or project involving nuclear power generation and coal-fired power generation;
- production or trade in alcoholic beverages (excluding beer and wine);
- production or trade in tobacco;
- production, distribution and/or promotion of adult entertainment products or pornography, including but not limited to videos, magazines, audio recordings or website;
- more generally any target that does not fit the criteria entailed in the Investment Objectives;
- New constructions of electric and thermal coal-fired power plants and modernization of such
- operating and decommissioned stations with or without long-term carbon capture and storage;
- Nuclear projects;
- Hydro-electric projects with a capacity above 20 MW,
- Biofuel projects (biodiesel and ethanol), certain biomass and organic waste projects (e.g. from production of palm oil) unless it can be demonstrated that these projects meet the aspects of sustainable development after a detailed study and that they apply robust environmental and social safeguards (e.g. no threat to food security, to deforestation, forest degradation, wetland drainage through an indirect land use change);
- Industrial gas projects (HFC, N2O, PFC, SF6) only if they are related to carbon market activities. Oil production entailing major local pollution problems;
- Certain types of mining activities in which waste handling involves special risk;
- Unlawful logging and other particularly damaging logging;
- Unlawful fishing and other particularly damaging fishing activities;
- Dam projects which may cause serious environmental damage;
- Projects and activities with severe and irreversible consequences for particularly valuable and/or protected areas;
- Mining and power companies that derive more than 30% of income from thermal coal or base more than 30% of their operations on thermal coal; and
- Companies that have more than 30% of income from oil exploration or base more than 30% of their operations on oil exploration.
Post-investment support:
The fund engages with investee companies to improve their sustainability practices and regularly reviews their performance against the fund's objectives. Examples of these engagements and the type of support offered include:
- Satgana hosts a workshop for all new founders focused on Impact and SFDR, aiding their preparation for SFDR reporting. Following the workshop, mandatory and voluntary PAIs are shared with founders to optimize their readiness for reporting.
- Mandatory and voluntary principal adverse impacts are collected annually in accordance with the Article 9 SFDR requirements.
- Founders have the option to conduct a single materiality assessment with the Satgana team to identify both short-term and long-term material risks to the business.
- Satgana offers support in implementing good governance practices by providing templates and guidance on this topic
5. Proportion of Investments
Satgana commits to investing 100% of its raised capital in companies with an environmental sustainability objective falling within the scope of the fund’s investment thesis.
6. Monitoring of Sustainable Investment Objective
As part of the work revolving around Satgana Fund I, we diligently monitor and collect environmental KPIs from all our portfolio companies to assess Satgana’s realized impact over the fund’s lifetime. The fund continuously monitors the sustainability performance of its investments using the following methods:
Monitoring the Environmental Key Performance Indicators (KPIs) of our portfolio companies:
to date these metrics include
- tonnes of CO2e sequestered, avoided, or mitigated following our climate mitigation objective
- tonnes of food waste, plastic waste, e-waste avoided → tonnes of CO2e avoided following our transition to a circular economy focus
- number of people positively impacted and number of hectares covered following our climate adaptation focus
A majority of our portfolio companies' environmental KPIs can be translated into CO2e emissions with the exception of ventures working on climate change adaption. However, given our choice to focus on a broader range of Climate Tech, not only pure mitigation technologies, we prefer tracking the direct environmental KPI (plastic waste, e-waste, food-waste etc) as well. We collect these metrics annually but check in on the progress made on a bi-annual basis.
Regular Reporting: In accordance with the SFDR Article 9 requirements, the fund publishes an annual Periodic Report to its LPs on the sustainability performance, both the positive contributions and the principal adverse impacts, of its portfolio.
Monitoring and Collecting Data on the Principal Adverse Impacts of our investments in accordance with the SFDR Article 9 requirements.
7. Methodologies for Assessing Impact
Satgana conducts thorough due diligence on all potential investments to ensure they align with the fund's sustainability objectives. This includes:
- Screening against the exclusion list
- Ensuring compliance with Minimum Safeguards
- An ESG & Impact Sustainability Questionnaire
- Asking impact-related questions outside of the standard questionnaire if needed
- An Impact Scorecard used by the team
Given the early stage nature of the companies Satgana invests in we primarily adhere to a qualitative methodology when assessing the environmental impact of a venture, on top of our negative screening and assessing the overall fit with our investment thesis. Central to this methodology is 6 Impact Pillars defined by the team and evaluated on a regular basis.
1. Intentionality of the Team
2. The Targeted Market
3. The Measurability and Management of the Solution
4. Downside Risks Interlock
5. Additionality
For the time being, we have chosen not to establish quantitative impact targets or thresholds, either at the startup level (e.g., investing in ventures with the potential to remove 100Mt of CO2 annually by 2050) or at the fund level. The rationale behind this decision is that we believe that attempting in-depth impact and climate modeling at the early stage we invest in is unlikely to yield meaningful or accurate results. This as early-stage impact modeling depends on highly speculative assumptions, which are subject to significant error margins and that early-stage ventures are likely to pivot more than once in their early days, making initial quantitative targets less relevant and reliable. However, while we do not set quantitative targets per se, we closely monitor and track the trajectory of each company, both financially and non-financially, to ensure the maximization of the intended impact.
8. Engagement Policies
The fund actively engages with investee companies to encourage and support improvements in their sustainability practices. Engagement activities include:
- Scheduling regular meetings with founders to discuss material aspects of the business, including impact-related topics
- Hosting a mandatory workshop for all new founders focused on Impact and SFDR to optimally prepare them for the SFDR reporting exercise.
- Collecting Principal Adverse Impacts on an annual basis in accordance with SFDR requirements.
- Offering founders the option to conduct a single materiality assessment with the Satgana team to identify both short-term and long-term material risks to the business and its stakeholders
- Offering support and templates on implementing good governance policies
9. Remuneration Policy
Satgana maintains a remuneration policy that is overseen by a Compensation Committee with oversight from the Board of Directors. The policies are structured so as to promote appropriate and effective risk management, and to avoid the encouragement of excessive risk-taking, including that of sustainability risks. In addition, the Compensation Committee is charged with ensuring good governance practices and upholding an impeccable record on human rights and relevant social issues (as it pertains to compensation) at all levels of the firm.
Contact Information
For more information about our sustainability-related disclosures, please contact:
Email: desiree@satgana.com