WF World Fund Management GmbH („World Fund“) takes into account sustainability risks in its investment decision process. Sustainability risks are environmental, social or governance events or conditions that, if they occur, could cause an actual or a potential material negative impact on the value of the investments. As part of its standard procedure, World Fund conducts a due diligence prior to investing. Such due diligence includes a checklist relating to environmental, social or governance aspects. This is also providing a basis for assessing potential sustainability risks. The outcome of the due diligence, including any information on sustainability risks revealed, guides World Fund’s investment decisions. In its free discretion, World Fund may decide to make an investment even if sustainability risks have been determined. In such case, World Fund may in its sole discretion decide to apply appropriate mitigation measures. At all times, World Fund will apply the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context. World Fund does not have a remuneration guideline in accordance with the requirements of the AIFMD. The integration of sustainability risks is not considered with respect to World Fund’s remuneration.
PRINCIPAL ADVERSE SUSTAINABILITY IMPACTS STATEMENT
World Fund takes into account principal adverse impacts of investment decisions on sustainability factors, i.e. environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters. World Fund invests in highly innovative portfolio companies with growth potential and a positive environmental impact, that is, a significant contribution towards reducing GHG emissions within the next twenty years. Prior to each investment in a portfolio company, World Fund conducts an assessment of its innovative product’s or service’s climate performance potential. This assessment quantifies the GHG emissions reduction potential and evaluates principal adverse sustainability impacts.
Zusammenfassung (German Summary)
World Fund berücksichtigt in seinen Investitionsentscheidungen potenzielle nachteilige Auswirkungen auf Nachhaltigkeitsfaktoren, insbesondere auf Umwelt-, Sozial- und Arbeitnehmerbelange, Achtung der Menschenrechte, Korruptions- und Bestechungsbekämpfung. World Fund investiert in hochinnovative Portfoliounternehmen mit Wachstumspotenzial sowie positiver Nachhaltigkeitswirkung, d.h. einem signifikanten Beitrag zur Reduzierung der Treibhausgasemissionen innerhalb der nächsten zwanzig Jahre. Vor jeder Investition in ein Portfoliounternehmen führt World Fund eine Bewertung des Klimawirkungspotenzials des innovativen Produkts oder der Dienstleistung durch. Diese Bewertung quantifiziert das Potenzial zur Reduzierung der THG-Emissionen und evaluiert potenziell nachteilige Auswirkungen auf die Nachhaltigkeit des Produkts bzw. der Dienstleistung
Description of principal adverse sustainability impacts
Principal adverse sustainability impacts are environmental, such as towards greenhouse gas emissions, biodiversity, water use, waste, ocean health, animal welfare, as well as social and employee matters, such as respect for human rights, exploitation of workers, suppliers, and vulnerable communities, or corruption and bribery.
Description of policies to identify and prioritise principal adverse sustainability impacts
Prior to each investment, as part of the commercial due diligence, World Fund conducts an assessment of the climate performance potential of the portfolio company’s innovative product or service. This assessment quantifies the GHG emissions reduction potential as well as risks for achieving that impact and includes a risk analysis that evaluates principal adverse sustainability impacts. The risk analysis concerning adverse impacts is a defined set of criteria, including the indicators set forth in Annex 1 of the RTS, evaluated by potential harm and probability for harm, both on a scale from 1-3, low to high. The results of this assessment are taken into account when taking investment decisions.
In its free discretion, World Fund may decide to make an investment even if the risk of potential adverse impacts have been determined. In such case, World Fund may apply appropriate mitigation measures including but not limited to offering training for portfolio companies to support their capacity to control, mitigate and/or reduce such adverse impacts.
References to international standards
The criteria and metrics analyzed in the risk analysis of adverse sustainability impacts are based on the IRIS set of widely adopted standard metrics put forward by the Global Impact Investing Network (GIIN). World Fund is not a member of international bodies or organizations or obliged under national or international conventions or standards to adhere to further specific requirements relating to ESG compliance.
Update as of June 28, 2023 regarding PAI Indicators for 2022
In accordance with Art. 4 (3) of the Commission's Delegated Regulation (EU) 2022/1288, we hereby provide the relevant PAI (Principal Adverse Impact) indicators for the portfolio companies of the World Fund for the year 2022. If you require any further information or have additional inquiries regarding our PAI indicators or investment process, please feel free to let us know.
WF World Fund I GmbH & Co. KG (the “Fund”) is managed by World Fund. The Fund pursues a venture capital strategy and has sustainable investments as its objective. Sustainable investment means an investment in an economic activity that contributes to an environmental or social objective as defined in Art.2 no. 17 SFDR. Impact objectives are set forth for each portfolio company prior to the Fund’s investment. World Fund takes into consideration negative adverse impacts of the Fund’s investments.
Zusammenfassung (German Summary)
WF World Fund I GmbH & Co. KG (der "Fonds") wird von World Fund verwaltet. Der Fonds verfolgt eine Wagniskapitalstrategie und hat nachhaltige Investitionen zum Ziel. Eine nachhaltige Investition ist eine Investition in eine wirtschaftliche Aktivität, die zu einem ökologischen oder sozialen Ziel im Sinne von Art. 2 Nr. 17 SFDR beiträgt. Die Wirkungsziele in Bezug auf die Nachhaltigkeit werden für jedes Portfoliounternehmen vor der Investition festgelegt. World Fund berücksichtigt nachteilige Auswirkungen der Investitionen des Fonds.
No significant harm to the sustainable investment objective
The Fund’s investments aim to generate significant positive outcomes for the planet, in particular, they aim to avoid significant harm. Portfolio companies will be encouraged to operate in line with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights.
In order to exclude possible adverse effects, World Fund conducts, as part of the commercial due diligence prior to each investment, an assessment of the climate performance potential of the portfolio company’s innovative product or service. This assessment quantifies the GHG emissions reduction potential and contains a risk analysis that evaluates principal adverse sustainability impacts. The risk analysis concerning adverse impacts is a defined set of criteria, including the indicators set forth in Annex 1 of the RTS, evaluated by potential harm and probability for harm, both on a scale from 1-3, low to high. The results of this assessment are taken into account when taking investment decisions. The Fund’s risk management processes take into account such sustainability risks by way of identifying, mitigating or offsetting such risks early and effectively. For that purpose, a set of related criteria has been integrated in the pre-investment Due Diligence risk analysis as well as in the post-investment monitoring and support processes.
Sustainable investment objective of the financial product
World Fund is a climate tech venture capital fund supporting startups that have a measurable positive environmental impact while building a scalable profitable business. More specifically, the Fund’s investments contribute to climate change mitigation by significantly reducing GHG emissions. Further, World Fund wants to contribute to building a regenerative economy characterized by abundant renewable energy, cradle-to-cradle material use, intelligent efficient systems, corporate accountability, and climate equity.
The Fund invests in multi-stage, from early (Seed) to growth (Series B) stage, climate tech companies focusing on energy, food, agriculture & land use, industry & manufacturing, transport, or building, that have the potential to significantly reduce GHG emissions over the next two decades. The targeted geography is Europe, with the potential to also invest outside of Europe.The strategy, in particular the focus on GHG emissions reduction potential and do-no-harm with regards other environmental objectives, is implemented across every step in the investment process, from the investment hypothesis and sourcing, up to the commercial DD. Further, World Fund has a scientific advisory board that it closely works with regards to assessing the climate performance as part of the commercial DD. Alongside the potential for emissions reduction, the Fund has key criteria to make an investment decision based on the startup’s chances to achieve this potential. These criteria are the startup’s team, solution and technology, market and competition, sales and marketing, business model, and if applicable traction. Further, the strategy is reflected in the post-investment period. The climate performance KPIs decided upon during the climate performance assessment, are reported and monitored, as well as eventually tied into the impact-influenced carried interest of the fund. Adverse Environmental effects, Social impacts and Governance issues are being addressed as part of an ESG checklist during the Due Diligence and as part of the ongoing management of the portfolio company as long as World Fund remains an investor.
Proportion of investments
The Fund will only invest in line with its investment strategy as outlined above.
Monitoring of sustainable investment objective
World Fund continuously monitors the impact objectives of the Fund. Relevant environmental metrics as well as their calculations are decided at the time of investment on a portfolio company level. These metrics are monthly reported by the portfolio company and yearly reported in an unaudited impact report by World Fund to the Fund’s Limited Partners. The reported data includes impact goals with target values per portfolio company in line with the Fund’s impact methodology, which is used to calculate an overall impact goal of the Fund at a given time, which in turn will influence the carried interest mechanism of the Fund. Further, the assessment for climate performance potential is updated on a regular basis to reflect the best evidence at any point in time and ensure an impact-aligned strategy.
To quantify the potential for GHG emissions reduction of a startup’s product or service, World Fund assesses on a technology-level granularity the technology’s impact over time on the GHG emissions projections of tangent markets (“top-down”) and, if applicable, their impact on the acceleration of a low-GHG market. These calculations are based on the best scientific evidence, in joint work with the World Fund’s advisory board. They include data such as market projections, standard technology adaptation curves, as well as performance metrics of status-quo technologies and the technology implemented by the startup. This methodology defines an impact baseline. The impact KPIs to calculate impact carry are then defined by using this baseline, as well as other metrics, if applicable.
Data sources and processing
To conduct the assessment of climate performance the primary resources are peer reviewed studies, ideally meta studies, as well as models based on these. The quality and applicability of this data is ensured by World Fund’s scientific advisory board that supports as part of the assessments. World Fund also has access to several tools that provide peer-reviewed emission projection scenarios as well as the most widely used LCA databases for performance calculations. For the assessment, but also throughout the holding period of a portfolio company, the portfolio company itself provides World Fund with current business data. The target market of a portfolio company is monitored. In case of significant changes in the market landscape or the market’s emissions intensity, this allows World Fund to update the climate performance assessment. The assessment data is stored in World Fund’s data warehouse.
Limitations to methodologies and data
World Fund is a pioneer and thought leader in the space of assessing, forecasting, and managing evidence-based climate performance for venture investments. However, while the current methodology allows to identify an order of magnitude for impact potential, the general validity of projections far into the future is low. Further, the resulting impact baseline is measured against a contrafactual baselines. Therefore, the actual impact will never be uniquely identifiable and correctly predictable. World Fund will assess the actual impact of the portfolio companies on an annual basis.
Climate performance assessment: an analysis of the order of magnitude of emissions reduction potential of a technology, as well as a do-no-harm analysis of other social, governance and environmental objectives and adverse sustainability impacts. An ESG, commercial, and legal (3rd party) due diligence is conducted as per industry standard procedures. Tech and financial due diligences are potentially performed depending on the company
Should World Fund on behalf of the Fund determine any potential issues relating the environmental or social characteristics of a portfolio company, it will engage the portfolio company’s manager in discussions with a view to resolving, reducing or mitigating such effects, provided that such efforts will always remain within a scope considered by World Fund in its absolute discretion to be proportionate in light of the size and strategic importance of the respective investment in the portfolio companies and shall take into account the respective bargaining positions and transactional context.
Attainment of the sustainable investment objective
World Fund strives to reduce GHG emissions and increase sinks in line with the objectives of the Paris Agreement. Its investments have a focus on sustainable activities and improving their climate impact year after year. Following this mission to support the transition to a global regenerative economy that operates within the planetary boundaries, World Fund will not invest in companies that are not part of the solution to the climate crisis. World Fund makes investment decisions guided by a rigid evidence-based methodology to assess the climate and environmental impact of all our investments. This methodology is publicly outlined in this article. Besides the potential to reduce GHG emissions, the assessment for climate performance weighs other factors such as biodiversity, water use, ocean health, as well as social and humanitarian factors. World Fund aims to be a collaborative proactive stakeholder within the climate tech investment ecosystem, which means publicly sharing impact data, requiring impact data from co-investors and dealflow, and working with leading experts in the field to advance the impact measurement and management practices and push towards a standard. Further, World Fund has built and continually extends their scientific advisory board for involvement across all operations to ensure high climate performance of the Fund’s portfolio.