SFDR

Sustainability-related disclosures pursuant to Regulation (EU) 2019/2088 (“SFDR”)

‍Date of publication: March 2021
Date of update: June 2023; reclassification of La Famiglia Fonds III GmbH & Co. KG, implementation of recent legislative developments, and editorial amendments and clarifications

I. Sustainability risks
‍La Famiglia GmbH (“La Famiglia”, LEI: 391200PQNCEPUTL78486) considers sustainability risks as part of its investment decision-making process. Sustainability risks are environmental, social or governance events or conditions, the occurrence of which could have an actual or potential material adverse effect on the value of the investment. La Famiglia considers sustainability risks as part of its due diligence process prior to any investment. This also includes an assessment of sustainability risks. Such assessment is being conducted through an informal process as appropriate in light of the circumstances of the individual case. The results of such assessment are taken into account when the investment decision is being taken. However, La Famiglia remains free in its decision to refrain from investing or to invest despite sustainability risks in which case La Famiglia can also apply measures to reduce or mitigate any sustainability risks. At all times, La Famiglia will apply the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context. 

II. No consideration of adverse impacts of investment decisions on sustainability factors
‍La Famiglia does not consider any adverse impacts of its investment decisions on sustainability factors and, hence, does not use the indicators listed in Annex I of the Delegated Regulation (EU) 2022/1288 (as amended from time to time, “RTS”) to identify and assess potential adverse impacts. Sustainability factors are environmental, social and employee concerns, respect for human rights and the fight against corruption and bribery. Given that the SFDR, the Regulation (EU) 2020/852 (“Taxonomy”) and the accompanying RTS are relatively new legislative acts, there is very little practical experience or practice with regard to the application of their respective provisions. Therefore, substantial legal uncertainties would remain when applying those provisions to the strategies pursued by La Famiglia. Furthermore, for La Famiglia it is at current stage not foreseeable whether the information required to comply with the corresponding disclosure obligation can be obtained regularly and in full from all portfolio companies. Moreover, the Fund will only hold minority interests in its portfolio companies. Such minority interests are, however, generally not sufficient to encourage the Fund’s portfolio companies to collect and provide the relevant data. If and to the extent that the legal uncertainties will be resolved and a practicable market and administrative practice will evolve in this regard, La Famiglia will re-evaluate considering principal adverse impacts of its investment decisions in due course.

III. Remuneration disclosures
‍As a registered alternative investment fund manager within the meaning of section 2 (4) of the German Investment Code (Kapitalanlagegesetzbuch, “KAGB”) and a manager of a qualifying venture capital fund as defined in article 3 (b) of Regulation (EU) No. 345/2013 (“EuVECA-Regulation”), La Famiglia does not have and does not need to have a remuneration guideline or policy in accordance with the requirements of the KAGB or the EuVECA Regulation.

IV. Sustainability-related disclosures
‍Financial product: La Famiglia Fonds III GmbH & Co. KG (the “Fund” / der “Fonds”)
LEI: 391200LOFSQ7AM1ELY39

Summary
The Fund 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. The consideration of environmental and/or social characteristics is carried out both before and after an investment. For this purpose, information is initially and regularly obtained from the portfolio companies by means of qualitative queries. The Fund incorporates exclusion (negative screening) aspects during the decision-making process. Thereby the Fund considers several ESG themes to be the key to responsible investing. The actions and decisions described in the following section are each made by La Famiglia for and on behalf of the Fund.

Zusammenfassung
Der Fonds berücksichtigt bestimmte ökologische und/oder soziale Merkmale im Rahmen seiner Investitionsentscheidungen und Monitoring-Prozesse, strebt aber keine nachhaltigen Investitionen im Sinne der SFDR an. Die Berücksichtigung von Umwelt- und/oder Sozialmerkmalen erfolgt sowohl vor als auch nach einer Investition. Zu diesem Zweck werden zunächst und regelmäßig Informationen von den Portfoliounternehmen durch qualitative Abfragen eingeholt. Der Fonds bezieht Exklusionsaspekte (negatives Screening) in seinen Entscheidungsprozess ein. Dabei betrachtet der Fonds mehrere ESG-Themen als Schlüssel für verantwortungsvolles Investieren. Die in diesem Abschnitt beschriebenen Handlungen und Entscheidungen erfolgen jeweils durch La Famiglia für den Fonds.

No sustainable investment objective
The Fund promotes environmental or social characteristics, but does not have as its objective sustainable investment.

Environmental or social characteristics of the financial product
The Fund promotes environmental and/or social characteristics by implementing certain investment exclusions (see section ‘Investment strategy’) during the decision-making process.

Investment strategy
The purpose of the Fund is to build, hold and manage (including to divest) a portfolio of equity and equity-related investments in portfolio companies. The investment objective of the Fund is to realize a risk-adjusted return on capital in-vested through long-term value appreciation of investments in portfolio companies. The portfolio shall be diversified with respect to investments in companies doing business in various industry segments. The Fund will primarily make early-stage in-vestments (seed and start-up investments) in innovative small and medium-sized enterprises with high growth potential in various industry segments.The Fund is bound by the investment restrictions and limitations set out in the Fund’s limited partnership agreement and shall procure that such requirements, restrictions and limitations are complied with at all times. In particular, the Fund will screen each investment opportunity against its investment exclusions and no investments will be made in the area of such exclusions.The Fund shall not invest, guarantee or otherwise provide financial or other support, directly or indirectly, to companies, including portfolio companies, or other entities whose business activity consists of:

a) Any illegal economic activities for example any production, trade or other activity, which is illegal under the laws or regulations of the home jurisdiction for such production, trade or activity (provided that human cloning for reproduction purposes is considered an illegal economic activity in the context of these investment restrictions);
b) Any production or trade of (i) weapons or ammunition (whereas, for the avoidance of doubt, technologies with a dual-use character which may also be used in the defense industry shall not be excluded); (ii) tobacco and distilled alcoholic beverages and related products (production and trade of significant volumes); (iii) significant volumes of hazardous chemicals (this also refers to the storage or transportation of those chemicals and includes gasoline, kerosene, and other petroleum products), or commercial scale usage of hazardous chemicals;
c) Any investments:
- that impinge on the lands owned, or claimed under adjudication, by Indigenous Peoples, without full documented consent of such peoples;
- any production or exploration of arctic offshore oil and gas or shale gas in Europe or non-conventional prospection;
- in commercial logging operations for use in primary tropical moist forest;any products involving testing on animals;
- in operating fur farm or trading/manufacturing fur products;
- in any controversial forms of gambling: operation of casinos, production of devices or other equipment for casinos or betting offices or other equipment for casinos or betting offices or companies that generate turnover via online betting;
- in any cryptocurrencies, that are intended to be used for online gambling or any other illegal online transactions, for example in dark nets;
- in any research, development or technical application relating to electronic data programs or solutions: (A) which aim specifically at supporting any activities referred to internet gambling/ online casinos; or pornography (this also includes electronic clouds and servers that could potentially be used for the storage or distribution of pornographic material); or (B) which are intended to enable to illegally enter into electronic data networks; or download electronic data;
d) Any kind of research, development or technical applications related to human germline gene editing under any circumstances in any jurisdiction or except to the extent that appropriate legal, regulatory and ethical allowances/documents are in place (based on applicable local regulation, and prohibiting any research, development or technical applications in Israel, China, Japan, Russia, Ukraine or Mexico), somatic gene editing. The Fund shall apply best efforts to ensure the appropriate control of legal, regulatory and ethical issues linked to such somatic gene editing.

Good governance practices are assessed through an informal process as appropriate in light of the circumstances of each individual case. Such practices include, in particular, sound management structures, employee relations, remuneration of staff and tax compliance within the portfolio companies. Moreover, the Fund will conduct regular monitoring of the good governance practices in its portfolio companies during the holding period. If the Fund becomes aware of severe governance issues, it will investigate them and work with all parties involved to find an appropriate solution.

Proportion of investments
The Fund will invest fully in line with its investment strategy and investment restrictions, i.e., will only make investments which are aligned with its environmental or social characteristics (i.e., its investment exclusions). The Fund does not make and does not intend to make sustainable investments within the meaning of Art. 2 no. 17 SFDR or environmentally sustainable investments within the meaning of Art. 3 Taxonomy; hence, no portion of its investments will be aligned with the Taxonomy.

Monitoring of environmental or social characteristics
The Fund has an increased awareness on the impact of environmental or social characteristics on risk management and thus on the value potential of investments. In order to monitor the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions), the Fund consults with the portfolio companies in regular intervals and will carry out further checks in order to identify potential issues with such characteristics. Therefore, the Fund monitors compliance with its environmental or social characteristics (i.e., its investment exclusions) on an ongoing basis. External monitoring mechanisms are not in place.

Methodologies for environmental or social characteristics
The Fund applies qualitative assessments with regard to its environmental or social characteristics (i.e., its investment exclusions).The Fund conducts an initial assessment of the promoted environmental or social characteristics in the course of its due diligence. Based on the results of such assessment the Fund identifies pre-investment whether the environmental or social characteristics promoted by the Fund are met. During the holding period, the so conducted assessment forms the basis to measure and monitor if the characteristics are continuously being met.

Data sources and processing
In order to attain each of the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions), the Fund obtains the relevant data from its (potential) portfolio companies through an informal process in the course of the due diligence conducted prior to each investment. During the holding period, the Fund relies on publicly available date to continuously check the compliance with the investment exclusions. An internal or external review or verification of the information obtained will be carried out if misrepresentations are suspected. Generally, none of the data shall be estimated.

Limitations to methodologies and data
The information collected from the (potential) portfolio through the informal process carried out by the Fund is internally or externally verified only if and to the extent misrepresentations are suspected. Thus, it cannot be ruled out completely that false information may remain undetected in certain cases. As the Fund’s investments are made for several years, the Fund considers it a priority to establish and maintain a trustful working relationship with its portfolio companies in order to ensure compliance with the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions). Further limitations, in particular with regard to the accuracy of the data and reliability of the data sources used, are not apparent at this time.

Due diligence
An initial assessment of how an investment relates to the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions) is carried out as part of the due diligence process and, where required based on the inherent ESG risk of the portfolio company, through an enhanced analysis. As a rule, purely qualitative statements of an environmental or social nature or relating to corporate governance are requested from the portfolio companies and then taken into account in the investment decision-making process. An internal or external review or verification of the information obtained will only be carried out if misrepresentations are suspected.

Engagement policies
Engagement is not part of the environmental or social investment strategy of the Fund.

Designated reference benchmark
No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by the Fund.