1. ESG Policy
ESG risks consideration Objectives
ESG risks are those linked to the management of intangible assets which can damage the society (human capital, reputation, commitment to society, etc.) or to the existence of externalities which damage the planet (emission of greenhouse gases and other toxic particles, water consumption, destruction of biodiversity, etc.) with a potential negative impact on the underlying assets embedded in the funds under management.
We understand that investee companies often have limited resources, a lack of ESG expertise, rapidly evolving business models, high growth rates, aggressive hiring, limited governance and compliance processes, and increased vulnerability to negative reputational impacts. ESG risks are highly diverse and company specific. However, the management company, without prejudice to the identification of other factors, will assess the following sustainability risks related to environmental, social and governance issues:
a) Environmental:
• Cost increases due to CO2 emission taxes (or similar)
• Excessive expenditure on energy supply and waste management • Reputational risk, litigation risk and potential regulatory sanctions due to non compliance with the regulations,
standards and practices related to energy consumption, CO2 emissions, and waste management of the country where the company to be invested is domiciled
b) Social:
• Low product quality, production delays or low productivity of employees resulting from poor management and/or lack of training and involvement of the workforce
• High employee turnover due to lack of job satisfaction, low pay, lack of professional development, poor work environment, lack of equality/discrimination and lack of work-life balance
• Costs and penalties derived from bad practices in occupational health and safety • Loss of growth opportunities, market share or pricing power due to reputational damage inherent to bad labor practices in the supply chain
• Loss of revenue due to reputational damage and potential costs arising from litigation due to poor data security and
protection management
c) Governance:
• Risks related to the composition and structure of the Board of Directors that may result in difficulties for the correct
supervision function
• Risks associated with practices that indicate a lack of corporate ethics (responsible use of artificial intelligence, transparency in the collection and use of data, social impact of the
technologies developed etc.)
• Costs associated with bribery and corruption practices
• Risks associated with a lack of alignment of interests between the management team and other stakeholders
For each specific investment, and after considering ESG risks, the fund will define whether the issuer’s ESG risk is high, moderate, or low.
In the case of high ESG risk classification, the fund will have to comply with the following aspects, for the holding to be approved:
• The Fund will have to define the engagement of the company to avoid or mitigate the potential and existing risks respectively
• The significant ESG risks will have to be considered within the Company’s business model • The Fund will have to explain the reasons for investing in the Company
In the case of moderate ESG risk classification, the fund will have to define the engagement of the company to avoid or mitigate the potential and existing risks respectively and will have to explain the reasons for investing in the Company.
In the case of low ESG risk classification, the fund will have to explain those risks and explain the reasons for investing in the Company.
Sustainability-related Disclosure at Plug and Play The European Parliament and Council have published a regulation which aims to regulate Sustainability-related disclosures in the financial services sector – Regulation 2019/2088 (SFDR). The purpose of this regulation is to improve transparency and give greater clarity to investments that take sustainability into account in their investment decisions with the goal of protecting end investors.
2. Transparency of ESG risks policies
Plug and Play integrates sustainability risks in its decision-making process by carrying out an in depth analysis of all aspects concerning ESG (Environment, Social and Governance) for all its investments. These aspects are assessed from the first analysis carried out for each investment, with the aim of identifying not only any risk areas, but also the areas where a positive impact is already being seen and those where impact could be enhanced.
3. Transparency of remuneration policies in relation to the integration of ESG risks
Plug and Play remuneration policy is consistent with the sustainability policies and risks (environmental, social, and corporate governance) of the Entity, in accordance with the provisions of European SFDR Regulation.
4.Transparency of Principle Adverse Impacts
The Principle Adverse Impacts (PAI) refers to the significant negative impacts on the environment or society that could occur because of the investment in a particular economic activity.
Consistent with Plug and Play commitment to the objectives of transparency pursued by European SFDR Regulation, we have chosen not to report the principle adverse impacts at this time. We do not currently have a procedure for the analysis of reliable and available information that allows us to rigorously quantify the foreseeable and real impact of investment decisions on environmental and social issues.
Over the coming months, we will closely follow the recommendations of the regulators, as well as the improvement of the information available, to continue working to improve our analysis and assessment processes, and to be able to consider the adverse impacts, in accordance with European SFDR Regulation.
