1. Sustainability Risks
Blockchain Founders Capital Management GmbH (“BFC”) considers sustainability risks as part of its investment decision-making process. Sustainability risks are environmental, social, or governance events or conditions, the occurrence of which could have an actual or potential material adverse effect on the value of the investment.
BFC considers sustainability risks as part of the due diligence process before any investment. This also includes an assessment of sustainability risks. Such assessment is being done through an informal process as appropriate in light of the circumstances of the individual case. The results of such assessment are considered when the investment decision is being taken.
However, BFC remains free in its decision to refrain from investing or to invest despite sustainability risks, in which case BFC can also apply measures to reduce or mitigate any sustainability risks. At all times, BFC will apply the principle of proportionality, taking due account the strategic relevance of an investment and its transactional context.
2. No Consideration of Sustainability Adverse Impacts
BFC does not consider the adverse impacts of its investment decisions on sustainability factors and does not use sustainability indicators. Sustainability factors are environmental, social, and employee concerns, respect for human rights, and the fight against corruption and bribery. Given that the Sustainable Finance Disclosure Regulation (EU 2019/2088) ("SFDR") and the accompanying Regulatory Technical Standards ("RTS") are new legislative acts, there is very little or no practical experience or practice concerning the application of their respective provisions. Therefore, substantial legal uncertainties would remain when applying those provisions to the strategies pursued by BFC. Moreover, the burden associated with considering adverse impacts on sustainability factors (particularly if sustainability indicators are used) is disproportionate in light of the minimal relevance that such impacts could have in the context of BFC's investment strategy: BFC pursues an active venture capital strategy and invests in young start-ups in the digital economy. As a result, BFC’s investment decisions will hardly ever impact sustainability factors. If and to the extent that the legal uncertainties will be resolved and a practicable market and administrative practice will evolve in this regard, BFC will re-evaluate considering the principal adverse impacts of its investment decisions in due course.
3. Remuneration Disclosure
As a registered alternative investment fund manager within the meaning of section 2 (4) of the KAGB, BFC does not have, and does not need to have, a remuneration guideline or policy under the requirements of the KAGB. Sustainability risks are not considered concerning the determination of remuneration.
4. Sustainability-related Disclosures
The following disclosures relate to Blockchain Founders Capital III GmbH & Co. KG (“Fund”).
The Fund considers certain environmental and social characteristics as part of its investment decisions but does not seek to make sustainable investments as defined in the SFDR. The consideration of environmental and social characteristics is carried out both before and after the investments. For this purpose, information is initially and regularly obtained from the portfolio companies using qualitative queries. The Fund incorporates investment exclusions (negative screening) aspects during the decision-making process. The actions and decisions described in the following section are each made by BFC for and on behalf of the Fund.
No sustainable investment objective
The Fund promotes environmental or social characteristics but does not have sustainable investment as its objective.
Environmental or social characteristics of the financial product
This financial product promotes environmental and/or social characteristics by implementing certain investment exclusions. The Fund does not invest, guarantee or otherwise provide financial or other support, directly or indirectly, to companies, including portfolio companies, or other entities whose business activity consists of:
• Any illegal economic activity (i.e., any production, trade, or other activity which is illegal under the laws or regulations applicable to the Fund or the relevant portfolio company);
• The production of, and trade in, tobacco, distilled alcoholic beverages, and related products;
• The financing and production of, and trade in, weapons and ammunition of any kind;
• The research, development, or technical applications relating to electronic data programs or solutions, which are intended to enable to either illegally enter into electronic data networks or download electronic data.
The Fund will conduct investments in portfolio companies from all sectors with innovation capacity and growth potential, including entities active in the distributed ledger, blockchain, or similar sectors. As such, investments are expected to be spread across various economic activities. The Fund intends to make its initial investments primarily in the pre-seed and seed stages.
The Fund’s ESG approach (i.e., its investment exclusions) comprises part of its investment strategy, which is consistently applied for every portfolio company investment. Good governance practices are monitored through an informal process as appropriate in light of the circumstances of each individual case as part of every due diligence.
Proportion of investments
The Fund invests fully in line with its investment strategy and investment restrictions. The Fund does not intend to make any investments that are not aligned with its environmental or social characteristics (i.e., its investment exclusions).
Monitoring of environmental or social characteristics
The Fund has increased awareness of the impact of sustainability risks on risk management and, thus, on the value potential of investments. The Fund consults with the companies on an ad-hoc basis and will carry out further checks if there are indications of potential issues with the Fund’s exclusion criteria. Therefore, the Fund monitors compliance with the ESG requirements on an ongoing basis. External monitoring mechanisms are not provided.
Currently, the Fund applies qualitative assessments concerning environmental or social characteristics. The Fund conducts its initial assessment in the course of its due diligence. The Fund’s due diligence is conducted through an informal process as appropriate in light of the circumstances of each individual case that the Fund asks its portfolio companies to complete.
Data sources and processing
Information is obtained from the respective portfolio companies. An external review or verification of the information obtained will only be carried out if misrepresentations are suspected.
Limitations to methodologies and data
The information collected from the portfolio companies as part of the due diligence on behalf of the Fund is externally verified only if, and to the extent, misrepresentations are suspected. Thus, it cannot be ruled out completely that false information may remain undetected in certain cases. As the Fund’s investment is made for several years, the Fund considers it a priority to establish and maintain a trustful working relationship with the Fund’s portfolio companies to ensure compliance with the restrictions described in this section.
An initial assessment of how an investment relates to the aforementioned characteristics is carried out as part of the due diligence process through an informal process as appropriate in light of the circumstances of each individual case. As a rule, purely qualitative statements of an ecological or social nature or relating to corporate governance are requested from the portfolio companies and then taken into account in the investment decision-making process.
The Fund decides at its sole discretion whether or not to make an investment based on principal adverse impacts on sustainability factors and may include risk mitigation measures where appropriate.