Disclosure

What is the “Sustainable Finance Disclosure Reporting” (SFDR) regulation?

The Disclosure Regulation aims to provide more transparency in terms of environmental and social responsibility within financial markets, in particular through the provision of information on the sustainability of financial products (integration of risks and negative impacts in terms of sustainability ). Its objectives are to ensure alignment between commercial documents and the reality of practices, to ensure the comparability of products in these terms and to orient private investments towards more responsible investments. This regulation intervenes at the level of the entities (management companies, investment companies, financial advisers), but also at the level of the products. The publications of the companies and the pre-contractual documents of the products will be modified as a result.

The Disclosure Regulation firstly requires defining the classification of each product according to its characteristics. The definition of each of these categories:

  • Article 6: the product has no sustainability objective
  • Article 8: the communication of a product integrates environmental and social characteristics even if it is not its central point, nor the central point of the investment process. The product promotes environmental or social characteristics, or a combination of these characteristics, as long as the companies in which the investments are made apply good governance practices
  • Article 9: the product has a sustainable investment objective.

Positioning of NextStage AM funds

NextStage AM's mission is to invest sustainably and responsibly alongside talented entrepreneurs at the head of growth SMEs and ETIs, champions of their market.

Taking into account the management process implemented in our funds, we have classified the funds as follows according to article 6 and article 8. No funds have at this stage been identified as falling under article 9.

Since the products have been classified in accordance with the provisions of the Disclosure Regulation, the regulatory documentation has been updated accordingly and each investor may consult the related amended documentation:

Consideration of sustainability risks in the investment process

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 ”.

NextStage AM integrates sustainability risk management processes into its management. These processes evolve regularly through the strengthening of the 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 diversity (2020): NextStage AM supports this charter aimed at promoting parity in French private equity and in the companies supported.
  • 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
    • Area of ​​progress: the objective of NextStage AM is to commit the company to an ESG progress approach and to report on 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.

In view of the entry into force of the Energy Climate Law n ° 2019-1147, which amends the Law on energy transition for green growth and its article 173, NextStage AM reserves the right to gradually strengthen the considers the risks associated with climate change and biodiversity in its investment practices.

4. Integration of ESG in investment decisions in the listed

As part of the stock selection process, NextStage AM performs an extra-financial analysis on various ESG subjects, in particular management (quality of managers, motivation instruments, equity participation, convergence of interests with shareholders, independence of directors), HR management (remuneration policy, association with capital) and intangible capital (brands, patents, market shares, etc.).

5. Exclusion policy

In line with its commitment to responsible investment, NextStage AM has structured a list of negative impact sectors in which it prohibits all investment. This list can be accessed here.

6. Remuneration policy

NextStage AM's remuneration policy has been reviewed to strengthen consideration of sound and effective risk management, particularly around the consideration of sustainability risks. We thus aim to ensure that the remuneration structure does not encourage excessive risk-taking in terms of sustainability, and that it is linked to risk-adjusted performance, within the meaning of the Disclosure Regulation.

Statement on due diligence policies relating to taking into account the main negative impacts of investment decisions on sustainability factors

Article 4 of the Disclosure Regulation on the Disclosure of Sustainability Information in the Financial Services Sector provides for greater transparency on the negative impacts of investment decisions. NextStage AM does not currently take these impacts into account for the following reasons:
• NextStage AM is not subject to this provision, not exceeding the threshold of five hundred employees.
• The availability and quality of data are currently limited.
• The implementation of the regulatory framework on this subject is still incomplete.

Consequently, NextStage AM considers that its governance of the ESG subject, its procedures and its tools (see also the statement concerning the integration of sustainability risks) enable it to understand the impact of its investment decisions on the factors sustainability more adequately than through the elements presented in Article 4 of the Disclosure Regulation.

Depending on the evolution of the regulatory framework, the improvement, availability and quality of data, NextStage AM reserves the right to take into account in the future the negative effects of investment decisions on the factors sustainability within the meaning of article 4 of the Disclosure Regulation.

Consideration of sustainability risks in the remuneration policy

The variable component of remuneration is determined based on ESG criteria, defined precisely in the full version of the Remuneration Policy, in particular:

  • Percentage of carbon assessments carried out on portfolio companies;
  • Commitment to annual reduction of the Company's carbon footprint in relative intensity per employee;
  • Follow-up of training on the subject of ESG, etc.

The remuneration policy is available here.

documents

Downloads available: 

Commitments Parity

SISTA Charter

France Invest Charter

ESG

Due diligence policies

ESG NextStage AM Charter

Updating

Remuneration policy

Report Article 29 LEC

Voting policy: shareholder engagement policy (12.2022)

Statement on due diligence policies relating to taking into account the main negative impacts of investment decisions on sustainability factors

Opt-out policy

Publication of sustainability information

Statement on the main negative impacts of investment decisions on sustainability factors

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