POLICIES ON THE INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISION-MAKING PROCESS
The following sustainability policy was approved by the LINCE CAPITAL Board of Directors (the “Board of Directors”) on March 20, 2023. The Board of Directors is directly responsible for defining the strategy and policies to ensure compliance with established commitments and a responsible investment approach based on ESG criteria applied to managed FCRs. This Policy describes how LINCE CAPITAL integrates the FCR management function into its investment strategy.
In developing this policy, LINCE CAPITAL respects the current regulatory framework, including that provided for in the SFDR. In addition, the Board of Directors should encourage and promote the adoption of behaviors by all employees that always reflect compliance with this policy. The criteria described in this policy are applicable to LINCE CAPITAL when providing FCR management services. The Board of Directors is responsible for managing and reviewing this policy.
It should be noted that LINCE CAPITAL does not comply with the criteria set forth in Article nº3 and nº4 of the SFDR.
In the exercise of its activity, LINCE CAPITAL is guided by the following general principles:
– Proportionality: LINCE CAPITAL considers the nature, scale, and complexity of its activities when weighing and taking into account sustainability risks;
– Timeliness: LINCE CAPITAL is committed to keeping the information related to its Sustainability Policy updated;
– Integrity and truthfulness: given the importance of disclosing ESG-related information accurately and objectively, LINCE CAPITAL does not allow distortions or exaggerations and aims to approach the subject matter based on the principles of integrity and truth;
– Commitment: sustainable investment criteria represent a public commitment and responsibility that LINCE CAPITAL assumes;
– Adaptability: LINCE CAPITAL, in managing each FCR, adopts ESG Criteria in an adaptable way, taking into account the characteristics of each fund and, when possible, as described in the respective constitutive and contractual documents;
– Coherence: LINCE CAPITAL is committed to ensuring that its commercial comunications do not contradict the information disclosed in accordance with this policy. This measure aims to ensure coherence and transparency in the disclosure of ESG-related information by society;
– Publicity: LINCE CAPITAL’s Sustainability Policy is available to all its employees and members of its social bodies and is disclosed on the official website of LINCE CAPITAL.
3.Scope of Application
LINCE CAPITAL values sustainability as a relevant issue for the development of its activity and understands that this Policy is a consequence of its fiduciary duties to investors and participants. In this sense, the company intends to adopt ESG Criteria as part of its investment decisions in the future, aiming to identify investment risks and opportunities that can create long-term value for its investors and participants.
LINCE CAPITAL recognizes that the consideration of sustainable investment criteria is in line with its values and mission, especially regarding social sustainability. This ESG Policy of LINCE CAPITAL establishes the main guidelines for the integration of ESG criteria into its activity, regardless of any criteria that may already be applied or come to be applied in the individual investments of the FCR managed by it.
As a venture capital company, LINCE CAPITAL has the capacity and authority to administer and manage venture capital funds in accordance with their management regulations, as well as applicable laws and regulations. This includes making investment decisions on behalf of the funds under management, monitoring their performance, as well as complying with regulatory and reporting obligations. LINCE CAPITAL is responsible for ensuring that the funds it manages are managed in accordance with applicable laws and regulations and in compliance with their management regulations. LINCE CAPITAL, as a venture capital company (SCR), has an obligation to manage one or more funds on behalf of its participants and with a focus on their interest and market integrity. The company must take all necessary actions to properly administer the funds, following strict standards of diligence and competence, always in accordance with the investment policy established in the corresponding management regulation. LINCE CAPITAL must perform all functions permitted by law and necessary for the development of the funds’ activity.
LINCE CAPITAL, under the guidance of its Board of Directors, is the ultimate responsible for carrying out portfolio management, risk management, and administrative tasks related to the FCRs it manages, solely in the interest of those funds and their respective participants. It is imperative that these tasks be carried out in accordance with the constitutive documents of the managed FCRs, as well as with the Portuguese laws and regulations that apply. Subject to the rules described below, LINCE CAPITAL has the right to exercise all inherent rights, directly or indirectly, to the assets of the managed FCRs and thus make all investment and divestment decisions on behalf of the managed FCRs. In particular, the company is responsible for the following duties in relation to each managed FCR:
• LINCE CAPITAL is responsible for managing the portfolios of the managed FCRs, including their assets and liabilities;
• LINCE CAPITAL is responsible for managing the risk of the portfolio of the managed FCRs;
• LINCE CAPITAL is responsible for administering the managed FCRs, including accounting, record keeping, and business administration functions. These functions must be carried out in accordance with the constitutive documents of the managed FCRs and with the applicable Portuguese laws and regulations.
• The company is also responsible for calculating the net asset value of the managed FCRs, as well as for marketing and distributing the shares/units of these funds.
4.2. Responsibilities for ESG Strategy
The Board of Directors of LINCE CAPITAL is responsible for implementing the company’s sustainability strategy and ESG criteria, and is responsible for the following:
i. defining and implementing the company’s sustainability strategy;
ii. monitoring compliance with this Policy;
iii. defining specific procedures to implement this Policy;
iv. monitoring the implications of LINCE CAPITAL’s activities on sustainability;
v. collecting and transmitting relevant information regarding ESG criteria that may impact LINCE CAPITAL’s activities;
vi. disseminating best practices and promoting an internal culture that is aligned with ESG Criteria.
5. Sustainability Strategy
5.1. Procedures Relating to Negative Impacts of Investment Decisions on Sustainability Factors
LINCE CAPITAL does not comply with the criteria established in Article 4, paragraphs 3 and 4 of the SFDR. Although applying the necessary professional diligence in evaluating its investment decisions, LINCE CAPITAL does not consider the negative impacts of those decisions on sustainability factors. This position is justified by the following reasons:
- The limited scope and content of the European Non-Financial Information Directive and the lack of comparable rules outside the European Union make the information environment on issuer options in ESG-related issues fragmented and difficult to compare. Due to this lack of comprehensive, rigorous, and publicly comparable information, LINCE CAPITAL believes that there are not enough elements to consider the negative impacts of investment decisions on sustainability factors.
- LINCE CAPITAL believes that, in the absence of unified, reliable, and comparable public information on ESG matters, obtaining information requires the use of external sources, which implies high and disproportionate costs. This means that considering the negative impacts of investment decisions on sustainability factors entails excessive and unjustified costs.
- LINCE CAPITAL notes that the constitutive documents of the managed FCRs do not require care or diligence regarding the negative impacts of investment decisions on sustainability factors. This leads LINCE CAPITAL to believe that participants do not expect these impacts to be considered in investment decisions.
5.2. Negative Impacts on Remuneration Policy
LINCE CAPITAL does not include sustainability-related risks in its Remuneration Policy, as it does not manage any AIFs that promote environmental or social characteristics or seek sustainable investment objectives, as provided for in Articles 8 and 9 of the SFDR. However, if this situation changes, LINCE CAPITAL will make the necessary changes to integrate performance indicators that include sustainability factors.
LINCE CAPITAL has taken into account sustainability criteria in its Selection and Adequacy Evaluation Policy for the management, supervisory bodies and Essential Functions Holders, which is part of the Remuneration Policy. In particular, social and governance factors, such as non-discrimination in candidate selection, as well as prevention of corruption and excessive risks that may negatively impact the financial market, have been considered.
The latter aspects are accompanied by selecting candidates who meet integrity requirements, demonstrate the ability to make well-considered and judicious decisions, and are prone to fulfilling their obligations promptly and maintaining behaviors compatible with maintaining market confidence.
In addition, the provisions regarding Conflicts of Interest in the Remuneration Policy prohibit receiving or potentially receiving commissions or fees from third parties who are not clients, as well as receiving financial or other benefits unlawfully in cash, goods, or services, or receiving benefits with the intention of benefiting one client or counterparty to the detriment of another. LINCE CAPITAL recognizes that the remuneration policy is a crucial tool to align interests and must take into account sustainable investment objectives in line with the interests of participants while ensuring conditions for implementing fair and adequate remuneration to attract, retain, and motivate its executives and employees.
5.3. Funds with Environmental, Social, and Sustainable Investment Characteristics
LINCE CAPITAL currently does not offer investment fund management services that promote environmental or social characteristics (products defined in Article 8 of the SFDR) or that aim for sustainable investments (products defined in Article 9 of the SFDR). If LINCE CAPITAL decides to provide fund management services that promote these characteristics in the future, all information required under Articles 8 to 10 of the SFDR will be made available in both pre-contractual information and on its website.
The Board of Directors must review the Policy at least once a year, as well as prepare annual reports, where applicable. If LINCE CAPITAL decides to provide venture capital fund management services that promote environmental or social characteristics (products defined in Article 8 of the SFDR) or that aim for sustainable investments (products defined in Article 9 of the SFDR), it must provide all information required under Articles 8 to 10 of the SFDR in both pre-contractual information and on its website.
The latest version of the policy was approved on March 20, 2023.