Information Concerning HCapital's Sustainability Policies
In compliance with the obligations set out in EU Regulation 2088/2019, of November 27, 2019, regarding the disclosure of information related to sustainability in the financial services sector, HCapital Partners – SCR, S.A. (“HCapital” or “Company”) discloses on this page information on how it treats, within its policies, the issues of Sustainability and Environmental, Social and Governance (“ESG”) risks.
Policies on the incorporation of sustainability risk in investment decisions
HCapital’s Internal Regulation establishes the governing and organizational rules that ensure the alignment of the Company’s activity, as a private equity company, with the applicable laws and regulations and with the interests of its investors, promoting a culture of best practices and value creation. Among others, HCapital’s Internal Regulation settles the general rules and principles for the government and functioning of the Company in what concerns investment and divestment activities, subcontracting, asset valuation, portfolio companies monitoring, procedures for anti-money laundering and counter-terrorism finance, risk management and mitigation of situations that may originate conflicts of interest and sustainability.
Regarding the Investment / Divestment Process, an ESG criteria analysis phase is included, which involves:
- Environmental criteria: metrics related to emissions of carbon dioxide and other polluting gases, resources’ consumption and pollution production, among others.
- Social criteria: metrics related to health and safety policies, diversity policies and workplace conditions, as well as metrics related to gender equality.
- Governance criteria: metrics related to codes of conduct and ethics, anti-corruption policies, remuneration policies, among others.
In 2021, an ESG Practices Action Plan was drawn, which will enter into its implementation phase during the year. In addition, tools are being created that will give rise to ESG-dedicated Due Diligence processes to be applied in future HCapital’s investments.
HCapital manages / advises the management of three funds, which are described in greater detail below. In common, they have in their investment policy a list of excluded sectors, namely referring to companies engaged in illegal activities, financing the production or trade in arms or ammunition of any kind, production and commercialization of tobacco, alcoholic beverages and related products, gambling activities, casinos or similar enterprises, among others.
HCapital New Ideas FCR
Venture capital fund registered in Portugal. It invests in young and innovative Portuguese Small and Medium Enterprises (“SMEs”), with proven business models and a high growth potential. It is a dedicated fund specialized in the areas of (i) energy, (ii) smart territories and mobility, (iii) industrial processes’ innovation, and (iv) data and connectivity.
Upon its incorporation, HCapital New Ideas Fund FCR did not include ESG criteria in its investment analysis. HCapital will initiate its work requesting information from the fund’s investees regarding their ESG practices in the context of its ESG Practices Action Plan.
HCapital II FCR
Private equity fund registered in Portugal. It invests in mature Iberian SMEs, with a differentiated business profile, oriented towards international markets and with a high growth potential. The fund invests in expansion and buyout / replacement capital operations, taking both minority and majority equity stakes, through robust governance models supported by experienced executive teams.
The target companies of the HCapital II FCR are selected by the fund’s management team in accordance with its Regulations, with particular consideration given to sustainability and energy efficiency criteria.
Private equity fund registered in Luxembourg. It invested in mature Iberian SMEs, with a differentiated business profile, oriented towards international markets and with a high growth potential. The fund used to invest in expansion and buyout / replacement capital operations, taking both minority and majority equity stakes, through robust governance models supported by experienced executive teams. HCapital SCA-SICAR ended its investment period in 2019.
Upon its incorporation, HCapital SCA-SICAR did not include ESG criteria in its investment analysis. HCapital will initiate its work requesting information from the fund’s investees regarding their ESG practices in the context of its ESG Practices Action Plan.
Negative sustainability impacts at HCapital’s level
HCapital’s understanding is that, in pursuing its activities as a private equity company, the main negative impacts in terms of sustainability are related to the investments and divestments made in the context of the investment programs of the funds under its management / advice. Nevertheless, the Company’s own daily business practices have an impact on the environment as well, which it must also take into account in its sustainability and ESG policy, looking for ways to reduce or avoid it.
HCapital is the management company of two funds registered in Portugal and supervised by the Portuguese Securities Market Commission (“CMVM”), namely HCapital II, FCR and HCapital New Ideas, FCR. Additionally, HCapital advises the management of HCapital SCA-SICAR, a private capital fund based in Luxembourg and supervised by the Commission de Surveillance du Secteur Financier (“CSSF”). These three funds include companies in the services, energy, technology, industrial processes and mobility sectors, among others. This means that most of the negative impacts caused are related to:
- Greenhouse gas emissions resulting from the activity of these companies, such as carbon dioxide.
- Energy consumption, which, when derived from fossil-fuel sources, is associated with several negative impacts, such as the loss of biodiversity, the production of polluting gases or even the reduction of atmospheric quality.
- Consumption of resources / production factors, such as water and raw materials, among others.
With this in mind, HCapital has been committed to progressively reduce its impact on sustainability, having chosen to address the impact on its investments practice in the first place. In 2020, HCapital signed the United Nations Principles for Responsible Investment (UNPRI), and has since been incorporating international best practices in terms of ESG into its activity, namely:
- In terms of the analysis and decision-making processes concerning its investment / divestment activity and in its internal management as well.
- The management of its portfolio companies, identifying in a quantified way the main objectives to be achieved in each and exercising a continuous monitoring of its implementation.
- In general, participating in initiatives together with the PRI Secretariat and other professional investors to promote the adoption and development of ESG practices in the business community.
HCapital is also aware that it may promote a positive impact on society, not only at the environmental level, but also through the implementation of its Social Responsibility Program (SRP), which aims at benefiting the least favoured generations and young people. The SRP was created by the Company at its inception and, since then, 1% of HCapital’s income has been donated to organizations with proven track record in the referred areas, financing specific projects with direct impact on the community. In addition to the financial contribution referred to above, HCapital’s Management Team also actively engages in specific field work actions with the supported institutions. Since 2015, HCapital has supported a total of 25 institutions.
HCapital’s current remuneration policy does not objectively address sustainability risks, however, this will be one of the areas to be tackled in the context of the Company’s ESG Practices Action Plan.