Riverside Europe Fund VII CIV, SCSp - SFDR Website Disclosure

a) Summary

This website disclosure relates to Riverside Europe Fund VII CIV, SCSp (the “Fund”). Riverside Europe Partners S.à r.l. acts as the alternative investment fund manager (the “AIFM”) of the Fund. The Fund seeks to invest in small and medium sized private companies that are headquartered in the EEA.

The Fund promotes environmental and social characteristics by considering (i) climate change, (ii) gender diversity of board members, (iii) build-up of ESG governance and (iv) contribution to UN Sustainable Development Goals without having a sustainable investment objective. All investments by the Fund shall promote these environmental and social characteristics.

The Fund promotes these characteristics by assessing certain key performance indicators of portfolio companies that relate to the promoted characteristics (e.g. GHG emissions or number of female board members) pre-investment. These key performance indicators will also be used post-investment to measure the respective progress of the portfolio companies on environmental or social expectations that the Fund communicates to portfolio companies. Necessary data on portfolio companies is gathered by the AIFM and by third party service providers.

The Fund’s investment process regularly contains two due diligences that cover ESG assessments. One due diligence is carried out by the AIFM, the other one is carried out by a third party service provider.

The Fund is limited by the data that the portfolio companies are able to provide and that the Fund is able to collect. The Fund cannot give any assurance as to the accuracy of the data used to measure how the Fund’s social and environmental characteristics are met.

Please refer to the sections below for detailed information.

b) No sustainable investment objective

The 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 intends to promote environmental as well as social characteristics by considering the following Environmental, Social, Governance & Value (“ESG”) aspects:

  • Climate change;
  • Gender diversity of board members;
  • Build-up of ESG governance;
  • Contribution to UN Sustainable Development Goals (SDGs).

d) Investment strategy

The Fund will seek to realize long-term capital appreciation primarily through the purchase of a broad and varied portfolio of controlling private equity investments in small to medium-sized portfolio companies that are organized, have their principal operations or maintain their headquarters in any of the member states of the European Union, the United Kingdom, Norway and Switzerland, which generally have up to €30 million of EBITDA. The Fund will seek to leverage its acquisition of portfolio companies using third-party debt at the portfolio company level. On a selective and limited basis, the Fund may invest in debt securities of portfolio companies and acquire minority equity positions, including minority equity positions in public companies where the intent is to gain control of the public company. After acquiring a portfolio company, the Fund will attempt to grow the portfolio company, both organically and through add-on acquisitions.

The AIFM assesses the good governance practices of the portfolio companies in its due diligence process. The process assesses the status quo and possible improvements for the following aspects that are, among others, considered before an investment into a portfolio company is made:

  • Employees health & Safety management;
  • Diversity;
  • Gender Pay Gap;
  • Working conditions;
  • Fair pay/Human rights;
  • Business ethics integration.

e) Proportion of investments with environmental or social characteristics

The Fund intends to apply the environmental or social characteristics outlined above to each of the Fund’s investments.

f) Monitoring of environmental or social characteristics

The Fund will monitor the environmental or social characteristics promoted as follows.

Prior to making an investment the AIFM analyses the status of the portfolio company with respect to the individual ESG-related key performance indicators (KPIs) set out below. After an investment, the Fund tracks the portfolio company’s performance with such KPIs that the portfolio company must report against on a regular basis:

  • Scope 1 and scope 2 GHG emissions;
  • Number of female board members;
  • Minimum number of internal ESG staff;
  • Relevant UN Sustainable Development Goals.

With respect to the above indicators the AIFM sets the following expectations (expected to be achieved for all portfolio companies during the holding period):

  • Net-zero GHG emissions, Scope 1 and 2;
  • At least one female external (outside of Riverside) board member;
  • A minimum of 0.5 full time equivalent (FTE) as internal ESG staff at the portfolio company;
  • Identifying the relevant UN Sustainable Development Goals (SDGs) that the portfolio company believes it can contribute to.

g) Methodologies for environmental or social characteristics

The methodologies that the AIFM will use to measure how the environmental and social characteristics promoted are met are described in section (f) above.

h) Data sources and processing

The Fund uses quantitative and qualitative data to assess the attainment of additional environmental and social characteristics in the investment process. The investment process regularly contains two due diligences – one carried out by a third party service provider and another one carried out by the AIFM. The third party service provider’s assessment relies on qualitative data and, where available also quantitative data and, while the AIFM’s assessment relies on qualitative data only. During the holding period, the AIFM also relies on quantitative data. The AIFM’s data derives from a proprietary ESG assessment tool (“ESG Index”)[1] that rates portfolio companies across approximately 80 quantitative and 30 qualitative ESG data points such as energy consumption, employee turnover and satisfaction, diversity statistics, pay equity and governance practices. For each investment the deal team has to score the relevant business using the proprietary ESG Index. This score is a qualitative assessment that covers key elements of relevant environmental, social, governance and value matters at the portfolio company. For example, on environmental matters the score includes an assessment of the practise to measure the portfolio company’s carbon footprint. On social aspects, the score includes an assessment of the employee training program that the portfolio company offers. The Fund also uses information on portfolio companies provided under the sustainability accounting standards (established by the Sustainability Accounting Standards Board of the IFRS, SASB) in the investment process and during the holding period.

The Fund does not expect to estimate any data to measure the attainment of the environmental and social characteristics.

i) Limitations to methodologies and data

As the primary data source for measuring the attainment of the environmental and social characteristics is the portfolio companies, the Fund is limited by the data that the portfolio companies are able to provide and that the Fund is able to collect. The Fund will seek to ensure that it collects sufficient data to monitor the portfolio companies’ ESG Index Score (as defined below).

The Fund cannot give any assurance as to the accuracy of the data used to measure how the Fund’s social and environmental characteristics are met.

These limitations are not considered to materially affect how the promoted environmental and social characteristics are met as the Fund is regularly able to collect the necessary data.

j) Due diligence

The Fund’s investment process regularly contains two due diligences – one carried out by a third party service provider and another one carried out by the AIFM. The due diligences contain an ESG assessment that covers the following aspects:

  • Identifying material ESG issues based on the SABS to identify red flags;
  • Conducting an initial impact assessment;
  • Creating an ESG score from the ESG Index (“ESG Index Score”, formerly referred to as “ESG&V Index Score”).

Beyond that, the due diligence process covers the following aspects to assess good governance of the portfolio companies.

  • Employees health & Safety management;
  • Diversity;
  • Gender pay gap;
  • Working conditions;
  • Fair pay/Human rights;
  • Business ethics integration.

k) Engagement policies

The AIFM informs the management teams of the portfolio companies of its expectations regarding such ESG KPIs at the beginning of the ownership. Because the Fund will not control each of its portfolio companies it cannot guarantee that these targets will be reached in each case by the relevant portfolio companies

l) Designated Reference Benchmark

There is no designated reference benchmark for the Fund.

December 2023

 

[1]       Formerly referred to as “ESG&V Index” (V for Values). While the ESG Index still includes the Value criteria, for simplicity reasons the name was changed to ESG Index.

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