Disclosure

Sustainability risks are defined by the Disclosure Regulation on the Disclosure of Sustainability Information in the Financial Services Industry as "an event or situation in the environmental, social or governance field which, if occurs, could have a material adverse effect, actual or potential, on the value of the investment ”.

NexStage AM integrates sustainability risk management processes into its management. These processes evolve regularly through the strengthening of governance of ESG subjects, procedures and associated tools.

The current modalities for integrating sustainability risks into NextStage AM's activities are as follows: 

1. Governance

Among the seven partners of NextStage AM, two are in charge of supervising ESG issues. They cover the ESG subject in the various governance bodies, and in the daily investment activity of NextStage AM.

2. Participation in ESG initiatives

NextStage AM actively participates in several French and international initiatives directly linked to ESG. By participating in these initiatives, NextStage AM affirms its commitment to environmental, social and governance issues, and strengthens dialogue and the sharing of best practices between investors.

• Principles for Responsible Investing (signature in 2012): any new investment made in the unlisted portfolio undertakes to comply with ESG clauses. Minority or majority, NextStage AM appears as a reference shareholder with its investments and draws up an annual inventory of progress in terms of ESG of its investments, via a questionnaire drawn up internally and submitted to companies.
• Charter of investor commitments for growth (2014): this charter commits the signatories to economic, social and human, environmental and good governance issues.
• Patience capital entrepreneur-investor charter (2017): the signing of this charter was an opportunity for NextStage AM to deepen its ESG integration procedure in its unlisted activities. The objectives are multiple:
  • Implement NextStage AM's ESG policy and apply best practices;
  • Adopt ESG integration as a management and value creation tool;
  • Generate trust with NextStage AM stakeholders and companies;
  • Engage NextStage AM and its companies in a process of continuous improvement;
  • Meet the expectations of investors and future business buyers.
• SISTA Charter for greater diversity and equality in entrepreneurship (2019): with this signature, NextStage AM is committed to accelerating the financing of women entrepreneurs.
• Signature of the France Invest charter on gender diversity (2020): NexStage AM supports this charter aimed at promoting gender equality in French private equity and in the companies it supports.
• Participation in the ESG Commission of France Invest: created in 2013, the ESG Commission brings together member structures that work to integrate extra-financial issues into the practices of management companies and into the practices of the companies they support.

3. Integration of the ESG at the different stages of the investment in the unlisted: 

NextStage AM integrates an ESG approach as part of its investment activities in the unlisted, at the different stages of the investment cycle:

• Acquisition phase
  • Preliminary checks: NextStage AM begins a preliminary analysis of the investment opportunity upstream of any contact with the teams of entrepreneurs concerned. The objective is to verify the regulatory compliance of the investment, and also to know the key ESG issues inherent in the sector of activity and the geographical location of the target company, then, thirdly, to estimate whether these issues are known to the target.
  • ESG due diligence: once the preliminary analysis has been successfully carried out, each investment opportunity is subject to a detailed analysis via ESG due diligence aimed at establishing the compatibility of said opportunity with the investment criteria (including ESG criteria). The objective of ESG due diligence is to identify the ESG risks and opportunities inherent in the company, assess its level of ESG maturity, understand the room for progress and the means to be implemented in order to progress. This review is carried out, as far as possible, by an external advisor as part of the various audits launched prior to the validation of an investment opportunity.
  • Closing: the purpose of this step is to contract out compliance with the regulations for the commitment made by the company in its ESG progress approach. Depending on the vehicles managed, this commitment is formalized by the insertion of an ESG clause as well as an ethics clause in the shareholders' agreement, and can be supplemented by the definition of a roadmap, and the structuring part of the management package based on respect for and improvement of the company's ESG practices.
• Support phase
  • Line of progress: NextStage AM's objective is to engage the company in an ESG progress process and to take into account the effects of such an approach by establishing annual reporting including ESG criteria (see below).
  • Reporting: NextStage AM initiates the management of the company into the annual ESG reporting and makes the management aware of the 17 themes of the Sustainable Development Goals (themes used in the questionnaire).
  • ESG agenda for the Board: NextStage AM is systematically involved in advancing the action plan and puts ESG topics on the agenda of at least one Supervisory Board or Board of Directors of the company per year.
  • Knowledge sharing: NextStage AM sets up intra-portfolio initiatives, such as training on ESG topics for companies, or meetings with all the entrepreneurs in the portfolio to share ESG best practices.
• Disposal phase
  • Vendor ESG due diligence: during the sale, NextStage AM reviews the progress made on ESG issues during the support period.