Sustainability-related disclosures

Mandatory disclosures under Regulation of the European Parliament and of the Council on sustainability-related disclosures in the financial services sector (EU) 2019/2088 (“SFDR”):

A.    EOS Partners GmbH / EOS Beteiligungs GmbH & Co. KG (each: “EOS”)

Date of Publication: March 2021
Date of Update: October 2024

I.    Transparency of sustainability risk¹ policies (Article 3 SFDR)

Sustainability risk management is embedded in the way EOS seeks to originate investments and make investment decisions, as well as in ongoing portfolio and asset management activities.
EOS recognizes the importance of identifying, assessing, and managing material sustainability risks as an integral part of conducting business.
EOS’ sustainability risk policy provides a comprehensive framework for integrating sustainability risk management into investment decision making.

II.   No consideration of adverse impacts of investment decisions on sustainability factors (Article 4 SFDR)

EOS does not consider principal adverse impacts of its investment decisions on sustainability factors and, hence, does not use the sustainability indicators listed in Annex I of the Regulatory Technical Standards (Delegated Regulation (EU) 2022/1288, “RTS”) to identify and assess potential adverse impacts. Given that the SFDR, the Regulation (EU) 2020/852 (“Taxonomy”) and the accompanying RTS are relatively new legislative acts, there is very little or no practical experience or practice about the application of their respective provisions. Therefore, substantial legal uncertainties would remain when applying those provisions to the strategies pursued by EOS. In addition, EOS’ portfolio companies are usually small and medium-sized enterprises, these companies generally leave a smaller environmental footprint that would not (yet) justify the significant effort associated with considering PAIs.

Moreover, SMEs are comparatively more burdened by additional data collection requirements and are thus constrained in their growth opportunities. If and to the extent that the legal uncertainties will be resolved and a practicable market and administrative practice will evolve in this regard, EOS will re-evaluate considering principal adverse impacts of its investment decisions in due course.

III.    Transparency of remuneration policies in relation to the integration of sustainability risks (Article 5 SFDR)

EOS (along with its subsidiaries and controlled affiliates, “EOS”) has established a remuneration policy (the „Policy“) applicable to all EOS entities. The Policy is developed, approved, implemented and monitored by a series of bodies within the EOS structure. The Policy applies to all employees of EOS, except for limited exemptions.

The Policy has been developed with the aim of supporting EOS’ business strategy, corporate values and long-term interests, including by facilitating the identification, assessment and management of sustainability risks when determining individual remuneration packages. The key principles of the Policy include fostering appropriate risk culture (including with respect to the management of actual and potential conflicts of interest) and compliance with applicable law and regulation.

The performance management and rewards framework envisioned by the Policy has been designed to promote effective risk management, including in particular by:

• Ensuring that assessment of performance takes full account of adherence to risk management requirements, covering all relevant types of current and future risks, including sustainability risks;
• Implementing deferral arrangements using co-investment and carried interest arrangements for senior personnel, facilitating alignment of interests between staff-members and third-party investors. If the value of the relevant underlying investment portfolio should decrease (whether arising as a result of a sustainability risk or otherwise), the value of the employee’s holdings will be reduced accordingly; and
• Providing for reduction of deferred variable remuneration awards to senior personnel in certain circumstances, such as in the event that the entity in which the relevant employee works suffers a significant failure of risk management or experiences a significant downturn in its financial performance (as determined in the sole discretion of EOS), including in connection with a sustainability risk concerning an investment.

B.    EOS Beteiligungs GmbH & Co. KG

Sustainability-related disclosures

I.    Summary

Financial product: EOS Beteiligungs GmbH & Co. KG (“EOS I”)

EOS I considers certain environmental and/or social characteristics as part of its investment decisions and monitoring processes but does not seek to make sustainable investments as defined in the SFDR.

Sustainability risks are considered at all stages of each product’s investment process, in respect of each individual investment opportunity.

The investment team is required to use a sustainability risk assessment tool as part of the investment committee paper submitted to the Investment Committee for consideration.

The sustainability risk matrix is a tool used to assess initial sustainability risks for a number of chosen areas relevant to the product in question, and to identify where additional investigation or due diligence into sustainability risks is required. This seeks to ensure sustainability risks are identified and mitigated during the investment process.

The sustainability risk matrix requires completion of due diligence questionnaires by an EOS Investment professional and requires an assessment of each deal to be conducted two times throughout the investment process: at Preliminary Investment Approval and at the Final Investment Approval. EOS is committed to ensuring compliance with its ESG standards at the level of its management and advisory entities, funds and other investment products and portfolio companies. To the extent that ESG risks should materialise, EOS shall prepare an ESG action plan, in cooperation with any such portfolio company, to ensure that full compliance with ESG objectives and standards is achieved. Where a material risk has been identified that cannot be remedied by an ESG action plan, the compliance officer, together with the investment committee, shall re-evaluate the investment and decide on appropriate action.

II.    No sustainable investment objective

This financial product promotes environmental or social characteristics, but does not have as its objective sustainable investment.

III.    Environmental or social characteristics of the financial product

EOS I does not commit to make sustainable investments within the meaning of the SFDR or with an environmental objective aligned with the Regulation (EU) 2020/852 (the “EU Taxonomy”). However, EOS I targets that all of its investments will be aligned with the environmental and social characteristics promoted by EOS I.

For this purpose, EOS I will not invest, guarantee, or otherwise provide financial or other support, directly or indirectly, to companies or other entities that generate meaningful sales out of the direct involvement in:

Tobacco, alcoholic products, weapons, ammunition, gambling, casinos, pornography, illegal activities, property holding, asset stripping, genetically modified organism (GMOs), or related sectors.

IV.    Investment strategy

EOS I intends to build, hold and manage in its own name and for its own account a portfolio of equity and equity-related majority or, on an opportunistic basis, qualified minority investments in small and medium-sized enterprises mainly in the EEA region and Switzerland.

The investment strategy guides investment decisions based on factors such as investment objectives and risk tolerance. EOS I intends to promote environmental and social characteristics by not investing, providing guarantees, or otherwise providing financial or other support, directly or indirectly, to companies or other entities that generate meaningful sales out of the direct involvement in:

Tobacco, alcoholic products, weapons, ammunition, gambling, casinos, pornography, illegal activities, property holding, asset stripping, genetically modified organism (GMOs), or related sectors.

The assessment of good governance practices of portfolio companies is incorporated in EOS I’s legal due diligence as far as good governance practices have been adopted by law.

V.    Proportion of investments

EOS I will invest 100% of its capital in investments that meet the environmental and social characteristics promoted by EOS I.

EOS I does not commit to make sustainable investments with an environmental objective aligned with the EU Taxonomy and will therefore not have a minimum share of investments in transitional and enabling activities.

VI.    Monitoring of environmental or social characteristics

In order to attain the environmental and social characteristics promoted by EOS I, EOS carefully selects its investments opportunities during the pre-investment and investments phase. EOS applies a negative screening on all potential investments to determine unsuitable investments.

During the entire investment process consisting of

• the pre-investment phase (sourcing and screening),
• the investment phase (due diligence),
• the holding phase (portfolio management, monitoring, reporting) and
• the exit phase (performance evaluation, disclosure)

EOS will apply the method described under VII to collect information and to assess its alignment with the promotion of the environmental and social characteristics. In addition, EOS uses an external auditor to certify ESG efforts.

VII.    Methodologies for environmental or social characteristics

The methodology of EOS I consists of strictly adhering to the exclusion list specified under III. EOS I will consider the exclusion list in every part of the investment process.

VIII.    Data sources and processing

Apart from its due diligence (as described below under X. in further detail), monitoring and regular communication between EOS and EOS I’s portfolio companies, EOS does not conduct further research or investigations on a regular basis, at least as long as the data reported by the portfolio does not give rise to any reasonable doubts.

IX.    Limitations to methodologies and data

In some portfolio companies EOS I will participate as a minority shareholder. The legal limitations of this position do not allow EOS I to ensure full compliance with all requirements set out by the SFDR. In particular, EOS I cannot ensure the provision of sufficient data. It also assumes that certain ESG monitoring and reporting obligations would place an economically disproportionate burden on the usually small management teams of its portfolio companies.

X.    Due diligence

The assessment of how EOS I’s potential investment in the potential portfolio company relates to the promoted environmental and social characteristics is carried out as part of the due diligence process prior to the investment. Further reviews may be conducted beyond such due diligence process and regular monitoring if, and to the extent, EOS deems it appropriate to conduct an ad hoc review in a specific case. EOS does not foresee to engage external service providers to assess the social characteristics of a potential investment.

XI.    Engagement policies

The assessment of good governance practices of portfolio companies is partially incorporated in EOS I’s legal due diligence as far as good governance practices have been adopted by law.

XII.    Designated reference benchmark

EOS does not use benchmarks when making investment decisions. Instead, EOS works with absolute values to assess the sustainability performance of its investments. This approach allows EOS to focus on the actual impact and improvements made by each portfolio company rather than comparing them to an external standard that may not fully capture the unique aspects of EOS investments.

C.    EOS Beteiligungs II GmbH & Co. KG

Sustainability-related disclosures

I.    Summary

Financial product: EOS Beteiligungs II GmbH & Co. KG (“EOS II”)
EOS II considers certain environmental and/or social characteristics as part of its investment decisions and monitoring processes but does not seek to make sustainable investments as defined in the SFDR.

Sustainability risks are considered at all stages of each product’s investment process, in respect of each individual investment opportunity.

The investment team is required to use a sustainability risk assessment tool as part of the investment committee paper submitted to the Investment Committee for consideration.

The sustainability risk matrix is a tool used to assess initial sustainability risks for a number of chosen areas relevant to the product in question, and to identify where additional investigation or due diligence into sustainability risks is required. This seeks to ensure sustainability risks are identified and mitigated during the investment process.

The sustainability risk matrix requires completion of due diligence questionnaires by an EOS Investment professional and requires an assessment of each deal to be conducted two times throughout the investment process: at Preliminary Investment Approval and at the Final Investment Approval. EOS is committed to ensuring compliance with its ESG standards at the level of its management and advisory entities, funds and other investment products and portfolio companies. To the extent that ESG risks should materialise, EOS shall prepare an ESG action plan, in cooperation with any such portfolio company, to ensure that full compliance with ESG objectives and standards is achieved. Where a material risk has been identified that cannot be remedied by an ESG action plan, the compliance officer, together with the investment committee, shall re-evaluate the investment and decide on appropriate action.

II.    No sustainable investment objective

This financial product promotes environmental or social characteristics, but does not have as its objective sustainable investment.

III.    Environmental or social characteristics of the financial product

EOS II does not commit to make sustainable investments within the meaning of the SFDR or with an environmental objective aligned with the Regulation (EU) 2020/852 (the “EU Taxonomy”). However, EOS II targets that all of its investments will be aligned with the environmental and social characteristics promoted by EOS II.

For this purpose, EOS II will not invest, guarantee, or otherwise provide financial or other support, directly or indirectly, to companies or other entities that generate meaningful sales out of the direct involvement in:

Tobacco, alcoholic products, weapons, ammunition, gambling, casinos, pornography, illegal activities, property holding, asset stripping, genetically modified organism (GMOs), or related sectors.

IV.    Investment strategy

EOS II intends to build, hold and manage in its own name and for its own account a portfolio of equity and equity-related majority or, on an opportunistic basis, qualified minority investments in small and medium-sized enterprises mainly in the EEA region and Switzerland.

The investment strategy guides investment decisions based on factors such as investment objectives and risk tolerance. EOS II intends to promote environmental and social characteristics by not investing, providing guarantees, or otherwise providing financial or other support, directly or indirectly, to companies or other entities that generate meaningful sales out of the direct involvement in:

Tobacco, alcoholic products, weapons, ammunition, gambling, casinos, pornography, illegal activities, property holding, asset stripping, genetically modified organism (GMOs), or related sectors.

The assessment of good governance practices of portfolio companies is incorporated in EOS II’s legal due diligence as far as good governance practices have been adopted by law.

V.    Proportion of investments

EOS II will invest 100% of its capital in investments that meet the environmental and social characteristics promoted by EOS II.

EOS II does not commit to make sustainable investments with an environmental objective aligned with the EU Taxonomy and will therefore not have a minimum share of investments in transitional and enabling activities.

VI.    Monitoring of environmental or social characteristics

In order to attain the environmental and social characteristics promoted by EOS II, EOS carefully selects its investments opportunities during the pre-investment and investments phase. EOS applies a negative screening on all potential investments to determine unsuitable investments.

During the entire investment process consisting of

• the pre-investment phase (sourcing and screening),
• the investment phase (due diligence),
• the holding phase (portfolio management, monitoring, reporting) and
• the exit phase (performance evaluation, disclosure)

EOS will apply the method described under VII. to collect information and to assess its alignment with the promotion of the environmental and social characteristics. In addition, EOS uses an external auditor to certify ESG efforts.

VII.    Methodologies for environmental or social characteristics

The methodology of EOS II consists of strictly adhering to the exclusion list specified under III. EOS II will consider the exclusion list in every part of the investment process.

VIII.    Data sources and processing

Apart from its due diligence (as described below under X. in further detail), monitoring and regular communication between EOS and EOS II’s portfolio companies, EOS does not conduct further research or investigations on a regular basis, at least as long as the data reported by the portfolio does not give rise to any reasonable doubts.

IX.    Limitations to methodologies and data

In some portfolio companies EOS II will participate as a minority shareholder. The legal limitations of this position do not allow EOS II to ensure full compliance with all requirements set out by the SFDR. In particular, EOS II cannot ensure the provision of sufficient data. It also assumes that certain ESG monitoring and reporting obligations would place an economically disproportionate burden on the usually small management teams of its portfolio companies.

X.    Due diligence

The assessment of how EOS II’s potential investment in the potential portfolio company relates to the promoted environmental and social characteristics is carried out as part of the due diligence process prior to the investment. Further reviews may be conducted beyond such due diligence process and regular monitoring if, and to the extent, EOS deems it appropriate to conduct an ad hoc review in a specific case. EOS does not foresee to engage external service providers to assess the social characteristics of a potential investment.

XI.    Engagement policies

The assessment of good governance practices of portfolio companies is partially incorporated in EOS II’s legal due diligence as far as good governance practices have been adopted by law.

XII.    Designated reference benchmark

EOS does not use benchmarks when making investment decisions. Instead, EOS works with absolute values to assess the sustainability performance of its investments. This approach allows EOS to focus on the actual impact and improvements made by each portfolio company rather than comparing them to an external standard that may not fully capture the unique aspects of EOS investments.

1.) “Sustainability risk“ means „an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment“ (Article 2 no. 22 SFDR).