VISIONARY GUIDES OF CHANGE
SFDR Statement
TRIREC Fund Management Pte. Ltd
Sustainability Risk Policy
Background/Purpose
TRIREC Fund Management PTE. LTD ("TFM"), a private company incorporated with limited liability under the laws of Singapore, is an asset manager focused on decarbonisation investments.
TFM's managed assets’ investor base mainly includes family offices and corporates who are increasingly interested in contributing to our vision for a climate conscious world where the planet and business flourish in harmony.
TFM contributes towards the transition of a decarbonised future by managing funds and investment foundations that invest in the decarbonisation space across the areas of food and agriculture, mobility, buildings, industries and energy. We look at decarbonisation technologies, focusing on the reduction and removal of greenhouse gas emissions.
Considering the above, TFM established this Sustainability Risk Policy to demonstrate alignment with Regulation (EU) 2019/2088 on sustainability‐related disclosures ("SFDR"), of the European Parliament (and its amendments) and the relevant Regulatory Technical Standards. In doing so, TFM integrates sustainability factors into the investment decision-making process.
Scope
As per Regulation (EU) 2019/2088 on sustainability‐related disclosures ("SFDR"), sustainability risk is defined as an environmental, social or governance (ESG) event or condition that, if it occurs, could cause a negative material impact on the value of the investment. Sustainability factors can be defined as environmental, social, employee matters and respect for human rights as well as anti-corruption and anti-bribery matters. Sustainability factors can present both risks and opportunities that need to be first identified, assessed and then monitored, managed and/or capitalised upon, as applicable.
This Policy is applicable to TFM's Board of Directors, Senior Management and all employees of TFM as an entity and to TFM's function as the investment manager of collective assets across TFM portfolio.
Governance oversight
TFM's commitment to sustainability risk management is supported through a solid governance structure at various hierarchical levels, defining the associated roles and responsibilities at each level.
The Board of Directors are responsible for ensuring the Sustainability Risk Policy has been followed in the investment decision-making process. TFM’s Senior Management1 approves the Sustainability Risk Policy and any amendments to it. The day-to-day management of TFM is delegated by the Senior Management to the Investment and Operations/Administrative Teams. The Head of Operations is responsible for coordinating the implementation with the investment team.
Integration of Sustainability Risk into Investment Decision-making
TFM continuously assesses, on a best effort basis and for all its asset classes, the likely impacts of Sustainability Risks on the financial return of its products. TFM integrates sustainability factors into its investment decision-making processes and investment management lifecycle. However, TFM retains the autonomy to invest or abstain even in the face of sustainability risks. As an asset manager focused on decarbonisation investments, TFM recognises that such deficiencies are inevitable in the short-term but is of the view that the positive impacts in the long-term of reduced GHG emissions will outweigh such risks, provided that their technology and business model do work as intended.
The applicability and materiality of sustainability factors and risks will vary across investment opportunities and assets. Therefore, key sustainability factors are identified, assessed and managed to ensure that the due diligence and our investment lifecycle approach are appropriately scoped, prioritised and conducted efficiently and effectively.
The identification and assessment of key sustainability factors would generally include (but may not be limited to) the assessment of potential sustainability risks and opportunities applicable and relevant to the investment and/or portfolio company.
In assessing sustainability factors and risks, TFM will consider the applicable local, national and international legislation.
Ongoing Review
TFM will review this Policy and any related website disclosures at least annually to ensure they are up to date.
No Consideration of Adverse Impacts of Investment Decisions on Sustainability Factors
(Article 4 SFDR)
TRIREC Fund Management PTE.LTD ("TFM") does not currently consider the adverse impacts of investment decisions on sustainability factors in the manner specifically defined by Article 4 of the Disclosure Regulation.
Under current Level 2 Regulations, Principal Adverse Impact reporting is not required of TFM on the basis that it employs fewer than 500 people. As such, these requirements are not considered proportionate to TFM position as an investment manager with fewer than twelve employees.
While TFM believes that long-term value is enhanced by considering sustainability risks (as defined in the Disclosure Regulation) when investing and actively improving the ESG practices of its investee companies, TFM is mindful that the rules in this area are detailed, and that reporting under the new requirements relies on the availability of a significant amount of data, predominantly at asset-level.
Remuneration Policy
Remuneration packages
TRIREC Fund Management PTE.LTD ("TFM") remuneration packages consist of fixed and variables remunerations. The variables remuneration packages avoid compensation-related conflicts of interest and prevent individuals from taking on excessive risks (including sustainability risk) to increase their own compensation. Personnel within TFM are expected to support the business in undertaking the activities in a reasonable manner through the inclusion of sustainability considerations in their roles and in their decision making process.
The remuneration packages may consist of any or all of the following:
1. annual fixed basic salary based on individual role and responsibilities, adjusted for seniority and inflation and benefits;
2. bonus salary based on individual performance, including the compliance with all policies and procedures related to the integration of
sustainability risk into investment decision making;
3. long term profit sharing of carry fee to all individuals in the firm based on seniority, functions with company and deal team; and
4. benefits such as annual leave and health and medical benefits.
The variable remunerations for TFM employees is subject to approval by the Board of Directors of TFM.
TRIREC Venture II Fund
TRIREC Venture II Investors LP Article 8 Website Disclosure
TRIREC Venture II Investors LP (the Fund) is structured as a "feeder fund" and will invest all or substantially all of its assets into TRIREC Venture II Master, a Sub-Fund of TRIREC Venture II VCC Master Fund (the Master Fund). Except where the context otherwise requires, references below to the Fund and its investment objective, techniques, policies, strategies, restrictions, risks, trading and other related activities are intended to refer equally to the Fund and/or the Master Fund and activities conducted by, and expenses and liabilities incurred through, the Fund and/or the Master Fund as appropriate.
(a) Summary
The Fund is a venture capital fund that will invest in early stage companies (e.g. pre-series A and series A) that enable decarbonisation and climate transition across the five key sectors which are a major source of greenhouse gas emissions in the world today. The Fund promotes environmental characteristics by investing in decarbonisation enablers across five sectors of economy, namely electricity and power generation, industries, mobility, buildings and food and agriculture. The investment strategy of the Fund is to invest in early stage companies that enable decarbonisation and climate transition across the five key sectors which are a major source of greenhouse gas emissions in the world today. The Fund assesses good governance of all portfolio companies as part of its due diligence process. The Fund will apply an exclusion policy and will not invest in companies whose activities or revenue are contrary to the disclosed exclusions in that policy. 100% of the Fund’s net assets will be aligned to the E/S characteristics of the Fund. The attainment of the environmental characteristics promoted by the Fund will be assessed and measured across our pre and post investment process (investment lifecycle). Data is collected directly or estimated from information provided by the portfolio companies annually. As the Fund invests in early stage companies, the development stage of the product or service also varies across companies, there is no single metric to measure the extent of enabling decarbonisation and climate transition. All of the investment team's investment decisions are made based on financial, legal, commercial, and ESG due diligence as well as estimated return and key risk components. The Fund actively engages with portfolio companies as an observer or by holding a Board seat.
(b) No sustainable investment objective
This financial product promotes environmental or social characteristics, but does not have as its objective sustainable investment.
(c) Environmental or social characteristics of the financial product
The Fund promotes investment in climate solutions by investing in decarbonisation enablers across five sectors of economy, namely electricity and power generation, industries, mobility, buildings and food and agriculture. Climate solutions are defined as technologies, services, tools, and or social and behavioural changes that directly contribute to the reduction and removalof real-economy GHG emissions or that support the expansion and scaling of such solutions.
(d) Investment strategy
The investment strategy of the Fund is to invest in early stage companies (e.g. pre-series A and series A) that enable decarbonisation and climate transition across the five key sectors which are a major source of greenhouse gas emissions in the world today. Taking reference to authoritative agencies globally such as the International Energy Agency, the Fund intends to focus on five (5) main verticals, including but not limited to the following examples of specific areas of interest:
i. Electricity & Power Generation – alternative energy sources, clean energy generation, grid modernisation and/or decentralisation, energy storage
etc.;
ii. Mobility & Transportation – new energy vehicles, energy delivery infrastructure, integration of vehicle energy storage and the grid, aerial and
maritime vessels etc.;
iii. Food & Agriculture – alternative proteins, crop protection, farm management systems, soil carbon measurements etc.;
iv. Industries – energy efficiency, waste and material recycling etc.; and
v. Buildings – advanced materials, construction processes, building management systems etc.
The investments of the Fund will be made through instruments including but not limited to, equity, preference shares, convertible bonds, warrants or hybrid instruments comprising both debt and equity elements.
The Fund assesses good governance of all portfolio companies as part of its due diligence process. The due diligence process and post-investment process considers: sound management structures, employee relations, remuneration of staff through appropriate compensation structures, and tax compliance through compliance with applicable laws through a checklist. The investment team conducts ongoing reviews for existing portfolio companies to check effective governance practices and will investigate and work to find a solution to manage any severe governance issues.
The Fund will apply the below exclusion policy and will not invest in companies:
· whose activities support illegal economic activity (i.e. any production, trade, or other activity, which is illegal under the laws or regulations
applicable to the company);
· whose revenue derive from the production of and trade in tobacco, distilled alcoholic beverages and related products;
· who are involved in financing of the production of and trade in weapons and ammunition of any kind; and
· operating casinos, gambling and equivalent enterprises.
(e) Proportion of investments
100% of the Fund’s net assets, through the Fund's investment in the Master Fund, will be aligned to the E/S characteristics of the Fund.
(f) Monitoring of environmental or social characteristics
The attainment of the environmental characteristics promoted by the Fund will be assessed and measured across our pre and post investment process (investment lifecycle).
Deal sourcing: screen against whether the portfolio companies develop or offer climate solutions across five sectors of economy, namely electricity and power generation, industries, mobility, buildings and food and agriculture.
Due diligence: assess the attainment of the environmental characteristic by reviewing data from the portfolio companies related to the three indicators described under the methodology with the ESG due diligence.
Post-investment monitoring: monitor the three indicators below as well as any key findings from the ESG due diligence process.
(g) Methodologies
The attainment of the environmental characteristics are measured by monitoring the portfolio companies against the below criteria:
1. have more than 50% revenue related to climate solutions in million of unit of currency; or
2. have positive exposure of Capex/ Opex incurred for the development of climate solutions in million unit of currency; or
3. have positive sales in climate solutions measured by year-on-year customer expansion/sales growth.
The investment team will conduct screening against the exclusion list above. The deal team will only proceed with the deal only if it passes the screening on all the criteria with sign-off obtained from the portfolio companies.
The Fund will report the performance of these sustainability indicators of the portfolio through SFDR RTS Annex IV by 30 June each year with the previous calendar year as a reference period.
(h) Data sources and processing
Revenue related to climate solutions in million unit of currency, Capex/ Opex incurred for the development of climate solutions in million unit of currency, and sales of climate solutions year-on-year across the investment period are collected directly or estimated from information provided by the portfolio companies annually. The proportion of data that are estimated is between 0% and 100%. Data and information collected will be reviewed internally by the Fund's investment team. As it is not currently possible to accurately predict the proportion of data that are collected directly, the corresponding proportion of data that are estimated is similarly not possible to currently predict resulting in a corresponding wide estimate range.
(i) Limitations to methodologies and data
As the Fund invests in early stage companies, the development stage of the product or service also varies across companies, there is no single metric to measure the extent of enabling decarbonisation and climate transition.
While the Fund catalyses the growth of the portfolio companies, the investment team studies the feasibility of measuring the reduction, prevention and sequestration of GHG emissions contributed by climate solutions through use of quantitative metrics such as avoided emissions. Progress will be discussed in the Manager's climate report and made available to stakeholders where requested.
Due to the early stage nature of the underlying portfolio companies it may mean such companies are not currently revenue generating, therefore the Manager will rely upon environmental metrics listed above. Where such companies are revenue generating, reported revenue may be insufficiently detailed to ascertain the relevant proportions or exposures.
While the data is directly provided by the portfolio companies, there is a high degree of dependency on the reliability of the data gathered from the portfolio companies and the review of the investment team. Data gathered from portfolio companies may be inconsistent, incomplete or inaccurate.
(j) Due diligence
All of the investment team's investment decisions are made based on financial, legal, commercial, and ESG due diligence as well as estimated return and key risk components. The investment team conduct a standard due diligence on investee companies, including financial, legal, governance, business and other appropriate issues. Investee company’s legal compliance and compliance to other applicable standards and practices is evaluated for each investment. This consideration includes ESG factors as well as potential future regulation and marketplace factors anticipated at that time. The deal team will provide a qualitative conclusion from the ESG due diligence to the investment committee and conduct further engagement during the post-investment stage on the ESG factors.
(k) Engagement policies
The Fund actively engages with portfolio companies as an observer or by holding a Board seat.
During the post-investment stage, if the investment team identifies any concern regarding the attainment of the environmental characteristics and exposure to sustainability risks, it will carry out one or all of the following activities:
· On-going dialogue with management teams of the portfolio company;
· Cooperation with stakeholders involved in the portfolio company to address those concerns;
· Monitoring of the mitigations of risk identified during the due diligence process; and
· Cooperation, via formal or informal meetings, with other shareholders aiming, inter alia, to enhance sustainability performance and to promote
high disclosure standards among portfolio companies.
(l) Designated reference benchmark
The Fund does not make use of a reference benchmark.
