Sustainability-related disclosures

To reorient capital flows towards a more sustainable economy, the EU has adopted a series of new regulations. One of them, the Sustainable Finance Disclosure Regulation (hereafter: SFDR) aims to provide greater transparency regarding the sustainability of financial products.

By 10 March 2021, funds promoted as ESG aligned are required to be classified as being Article 8 (“Light Green”) or Article 9 (“Dark Green”). Article 8 funds “promote environmental and social characteristics”, while Article 9 funds “have sustainable investment as their objective”.

Sustainability risks integration in investment decision-making process

Net positive sustainability impact is central to Norselab’s investment process. However, Norselab’s products may be exposed to sustainability risks from time to time. A sustainability risk is defined in SFDR as an environmental, social or governance event or condition that could cause an actual or a potential material negative impact on the value of investments.

The universe of sustainability events or conditions is very broad, and their relevance, materiality and impact on investments will depend on a number of factors. If they materialize, sustainability risks can reduce the value of investments held within Norselab’s portfolios and could have a material impact on the performance and returns of Norselab’s products.

Our approach to identifying and measuring impacts and risks

Norselab’s Meaningfulness Policy describes our overarching philosophy. We define impact as a significant contribution to the achievement of the focus areas set forth in the UN Sustainable Development Goals (hereafter: SDGs). The SDGs are a globally recognized roadmap for designing a future where economic growth does not compromise the safekeeping of our planet and the well-being of people and societies. They provide a comprehensive map of risk and opportunity - and thus a solid strategic prism through which we can meaningfully and successfully invest in new, growing, and established companies through Norselab’s products.

Integrity is our watchword. To ensure a solid foundation for our decisions, we seek to build the most complete picture of a company’s impacts as well as risks. To us, this entails applying multiple lenses in our assessments of companies.

In addition to the SDGs lens, we apply, to date, three other lenses when assessing companies in our investment process and measuring their impact; The Upright Project Net Impact Quantification, EU regulatory assessments, and operational assessments:

  1. SDGs: Companies’ products and services contribution are mapped to underlying targets and indicators of the SDGs.
  2. Net impact quantification: We quantify both positive and negative impacts of companies’ products to provide a net impact score.
  3. EU regulatory assessments: We screen and assess companies based on the 16 mandatory indicators defined by the SFDR, along with the criteria for EU Taxonomy.
  4. Operational assessments: We assess the operations of companies to ensure that they operate in a responsible and sustainable manner, and map potential gaps to fill.

As of today, these lenses provide satisfactory insights into a company’s impacts and risks. We are, however, constantly considering adding new data layers that could enhance our frameworks and hence our understanding of companies’ impacts from various perspectives.

Our investment process

1. Dealflow attraction & screening: Attract relevant dealflow and build a database of leads.

  • Actively communicate our approach to impact to attract relevant deal flow.
  • Identify potential impact-native companies.

2. Initial screening: First-line sorting and selecting potential spearhead cases.

  • Evaluate whether it’s potentially a case with an intrinsic tie between profit and positive impact.

3. Active case assessment: Commercial due diligence to get sufficient understanding of the case in order to propose it to the Investment committee (IC).

  • Deep dive into the company’s impact thesis.
  • Research and dialogue with the company.
  • Sharing the Meaningfulness Memo with the company.

4. Product governance committee: Pre-trade check of investment against fund mandate.

  • Ensure that impact assessments have been carried out in accordance with our Meaningfulness Policy and frameworks.
  • Verify that the company’s impacts are within our thresholds.

5. Due diligence: Uncover red flags and agree on the roadmap to follow if Norselab invests.

  • Quantification of the net impact.
  • Modeling of the impact potential in a growth scenario.
  • Operational assessments.
  • Finalized Meaningfulness Memo.

6. Investment decision: Present final Investment Memo to the IC to seek final investment decision.

  • Finalized Meaningfulness Memo shared with IC.
  • Define meaningful improvements and impact KPIs to include in the Investment Agreement.

7. Post-investment: Form a positive collaboration climate.

  • Ensure state-of-the-art reporting on sustainability.
  • Assist portfolio companies in deepening their impact, including collaboration to build sustainability strategy tailored to the business model, value chain, and product.
  • Remuneration Policy

Norselab’s remuneration policy has been reviewed and updated to meet the requirements of SFDR. The management of long-term risks including sustainability risks are reflected within the remuneration policy.

Statement on Principal Adverse Impacts of investment decisions on sustainability factors

Norselab considers the 16 mandatory indicators under investments in investee companies set out by SFDR. Please read about our Principal Adverse Impacts in our statement.

Norselab’s products and classification

Meaningful Equity I: An investment scope designed for impact

Norselab Fund I invests in industry-related, data-driven technology companies with a net positive impact on people and the planet. More specifically, this means that we invest within the following scope:

1. Industry-related companies

Resource-intensive industries where emerging technologies and novel business models are likely to provide high impact. Examples include industries such as construction, agriculture, and waste management, where the current way of functioning does not ensure efficient use of natural resources, nor economic prosperity.

2. Data-driven companies

Technology companies using data as a key element of their product offering to enable a sustainable transition. Industries such as the ones mentioned above are typically among the least digitized. As they are still not equipped to leverage the power of data, data-driven industry companies are positioned to radically increase these industries’ resource efficiency.

3. Impact-native companies

Companies whose technology and products are designed to create net positive impact for people and the planet. We choose to invest in companies that contribute to sustainability in the same way they make money. For example, a company offering waste management software that incentivizes better waste sorting is impact native. The more users they have, the more impact they create.Norselab Fund I will only consider investments in companies fulfilling all three criteria.Thanks to our investment scope, combined with our Meaningfulness Policy, the criteria in most ESG and sustainability frameworks are prerequisites for a Norselab Fund I investment.

A light green fund

We have elected to classify Norselab Fund I as an Article 8 (“Light Green”) fund. However, we emphasize that we aim for a top of the range approach to sustainable investments with superior returns. We will therefore seek to comply with the highest standards of sustainable investments, independently of our current classification.

Final remarks

As an Investment Manager focusing on investments with net positive impact on people and the planet, we warmly welcome the new sustainability related regulations. We believe that these new regulations will strengthen Norselab’s approach, as they are likely to reduce some of the noise around sustainability and define a new, more transparent and less subjective standard for ESG.