The European Union has implemented a series of legal measures, primarily the Sustainable Finance Disclosures Regulation (SFDR) (Regulation (EU) 2019/2088) passed by the European Parliament and the Council on November 27, 2019. The SFDR requires firms managing investment funds and other collective investment schemes to provide transparency regarding the integration of sustainability considerations into their investment processes concerning the managed schemes. Subsequently, the SFDR was supplemented and amended by (i) the Taxonomy Regulation (Regulation (EU) 2020/852) of the European Parliament and the Council on June 18, 2020, and (ii) the Regulatory Technical Standards (RTS) (Regulation (EU) 2022/1288) issued by the Commission on April 6, 2022.
Biovance Capital Partners, Sociedade de Capital de Risco, S.A. (hereinafter referred to as "Biovance") is an impact and environmental, social, and corporate governance (ESG) investment organization. It invests in technologies that have the potential to impact the lives of patients globally.
Integration of ESG requirements at the Entity (Biovance Capital Partners) and Product (Biovance Capital Fund I) level will be framed under SFDR requirements, SFDR Regulatory Technical Standards reporting requirements, and European Sustainability Reporting Standards & Global Reporting Initiative (GRI) Standards. The Fund will incorporate an established governance framework for ESG implementation and reporting, and practice active ownership of ESG issues with the Portfolio Companies and stakeholders. Biovance’s Sustainability Policy (hereinafter referred to as "Policy") aims to comply with SFDR (Regulation (EU) 2019/2088), supplemented and amended as described above. Through this Policy, Biovance seeks to invest with consideration of ESG criteria. The Policy applies to the Entity and the Funds managed by it
According to Article 2(22) of the SFDR, sustainability risk is an ESG event or condition that may cause a significant negative impact on the value of the investment.
Biovance seeks to incorporate these risks into its decision-making process, particularly concerning the funds under its management.
Integration of Sustainability Risks into Investment Decision-Making Processes
This investment decision-making process aligns with Biovance’s broader policies and procedures concerning the integration of sustainability and ESG risks in its decision-making across its funds. Further details can be found in the Policy, to be made available on Biovance’s website.
Before making any investment decisions on behalf of its managed funds, Biovance conducts an analysis to identify material risks associated with each proposed investment, including relevant sustainability risks. These risks are included in the comprehensive investment proposal submitted to the investment committee.
The investment committee assesses the identified risks along with other relevant factors outlined in the proposal and either approves or declines the investment proposal. External and internal subject matter experts are engaged to evaluate sustainability risks, utilizing both private information obtained from company management and publicly available data. If significant issues are detected, the investment committee may request further due diligence to address these concerns before proceeding with the investment. In cases where identified material issues cannot be adequately mitigated, the investment may be rejected.
The investment commitment diligently documents all material sustainability risks identified to ensure appropriate monitoring and, when applicable, to foster value creation in the portfolio companies' ESG performance throughout the ownership period.
Sustainability risks are considered throughout all stages of the investment process for all funds managed by Biovance:
Sustainability risks, including the sector in which companies operate, are considered during the research process for new investment opportunities.
After the initial analysis based on external elements, additional information is collected, including data provided by the target entity, to conduct a more detailed analysis of sustainability risks.
During the due diligence process, sustainability risks are taken into account, and whenever identified, mitigation measures are proposed.
During the decision-making phase, all risks, including sustainability risks, are considered, and the
operational and financial impacts are estimated. Necessary mitigation measures are defined and
Throughout the investment period, regular monitoring of the portfolio includes sustainability indicators and appropriate mitigation measures when required.
Biovance is committed to implementing ESG policies comprehensively, since the inception of its fund management activities. This approach will also extend to the investee companies of the managed funds. Throughout the Fund investment lifecycle, Biovance will engage with the investee companies in order to collect the required data to demonstrate ESG compliance and to support their environmental, social and good governance practices integration. In order to operationalize the framework of the fund in accordance with SFDR, the following aspects at entity and product level will be implemented in the first 12 months of the fund:
Entity level - Biovance Capital Partners
- Incorporate responsible investment principles within the investment strategy, seamlessly integrating them into operational procedures throughout Biovance's governance framework and organizational culture;
- Internal ESG Policy clearly defining ESG incorporation into investment decision and portfolio management processes;
- Analyze and evaluate Biovance’s contribution to the Sustainable Development Goals (hereinafter "SDGs"), and include and identify the SDGs in investment documents made available to the Investment Committee and subsequently considered in investment decision meetings by the Board;
- Define measurable sustainability goals and targets, approved by the Board of Directors, in accordance with the global strategic plan;
- Analyze sustainability risks and ESG materiality in order to identify relevant ESG topics (e.g., diversity and inclusion, human rights, product safety, resource use and efficiency) to the sectors (biotech, life sciences) that Biovance considers critical for its investment strategy to be included in ESG due diligence and reporting processes;
- Develop a framework of decision-making tools regarding ESG integration within the investment lifecycles, namely an ESG Due Diligence Checklist to be applied in all potential investee companies. These tools will be progressively adapted and updated according to the portfolio characteristics. After the application of this initial screening, the review of ESG topics during the due diligence process and following investments will be strengthened and ESG factors will be incorporated in the investment recommendations;
- ESG aspects deemed as relevant will be integrated in the value creation process (e.g.: at investment strategy, risk management, remuneration policy, among others). This process will have engagement and oversight of the Biovance management team;
- ESG matters will be reported at company's and Fund's website and annual report, according to SFDR reporting requirements, namely Annex I of SFDR Delegated Regulation (Article 4 Entity level requirements);
- Provide training and workshops for the entire Biovance team.
Product level - Biovance Capital Fund I
- What investment strategy the Fund follows;
- What is the asset allocation planned for the Fund;
- Alignment of the investments with the EU Taxonomy;
- Whether a specific index as a reference benchmark was developed to determine social and environmental characteristics contribution.
For all Investee Companies
- Support our investee companies in establishing ESG policies and implementing best practices;
- Analyze the contribution of our investee companies to SDGs;
- Collect and evaluate ESG KPIs for all portfolio companies, defined on a case-by-case basis depending on the sector and investment stage;
- Include specific clauses regarding compliance with ESG metrics in all Shareholders' Agreements;
- Implement a systematic ESG risk assessment process; should risks be detected in any investment decision process, the investment team will validate these risks and assess the best way to mitigate them prior to the investment decision. Refusal of investment is a possibility if these risks cannot be eliminated or reduced to their minimum threshold. Labour and working conditions, and health and safety, are ESG factors that will be used as investment exclusion criteria.
This systematic process will be put in place so that ESG factors will be considered during the due
diligence phase leveraging compliance, sustainability and ethical business guidelines.
Annually, Biovance conducts ESG Reporting, defining targets and challenges for the future years.
Non-Consideration of Negative Impacts of Investment Decisions on Sustainability Factors
Pursuant to Article 4(1)(b) of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector and in accordance with Article 12 of Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022, specifying the technical standards to be observed in the disclosure of information provided for in the SFDR, Biovance hereby states that it does not take into consideration the adverse impacts of its investment decisions on sustainability factors.
Biovance justifies its decision by considering both the size, sector, and scale of its activities and the limiting factors it faces, primarily upstream of the investment decision:
- At present, there is limited public information regarding the markets in which the managed fund operates, especially concerning ESG criteria. Specifically, publicly available information on sustainability matters is not always sufficiently precise, unified and comparable to allow a rigorous assessment of the adverse impacts of its investment decisions on sustainability factors;
- The companies in which the investments are typically made are seed and early-stage ventures, specifically startups, small and medium-sized enterprises which, due to their size and limited technical and human resources, are not yet able to adequately provide the information required for sustainability-related disclosures;
- Biovance’s investment scope is limited to sectors and geographic areas that, in Biovance’s opinion, entails limited adverse impacts on sustainability. The companies in which the managed fund will invest are very unlikely to have established ESG procedures due to being in an early stage of development.