SFDR Disclosures

Transparency of sustainability risk policies (SFDR Art. 3)

Commitment to ESG

Wellington Partners is convinced that responsible investment not only creates a closer alignment of objectives among investors, investee companies and society at large, but also leads to enhanced and more sustainable financial returns in the long run. Understanding ESG risks and opportunities can be critical when assessing a company’s value and addressing ESG risks systematically after investment can act as an important lever to add value to Wellington Partners’ portfolio.

Since Wellington Partners makes investments in the life science sector – one of the most regulated industries with high ethical standards – many important ESG issues have always been an integral part of Wellington Partners’ investment considerations. Nevertheless, Wellington Partners is committed to further broaden its perspective on ESG in line with stronger societal demands. Therefore, with the support of independent and external ESG advisors, Wellington Partners has established a customized ESG framework and respective processes.

ESG Framework & Processes

In order to evaluate the ESG compliance of investment targets during the due diligence process, Wellington Partners applies a customized ESG rating tool that allows us to engage with the investee companies’ management to identify and evaluate relevant ESG risks and opportunities. This tool also allows us to define specific ESG targets and performance indicators and to track the progress over time. An appraisal of the prospective portfolio company’s ESG status will be incorporated into Wellington Partners’ internal investment documentation and will be discussed as part of the approval process. Wellington Partners will seek firm commitments from the investment targets to track and report on applicable ESG performance indicators, which will be monitored during the holding period and regularly assessed and discussed at board level. Wellington Partners will periodically report on the status and progress of ESG implementation in its portfolio against pre-defined KPIs. The periodic ESG report will become part of internal discussions on portfolio progress and will be shared with interested LPs. The described ESG Framework and respective processes as well as roles and responsibilities on the integration of sustainability risks in the investment decision-making process are outlined in detail within Wellington Partners’ ESG Policy.

ESG at Wellington Partners

Wellington Partners’ ESG activities are coordinated by an internal ESG team, which is supported by independent and external ESG consultants. The ESG team is responsible for developing the ESG Policy, establishing analytical ESG frameworks and processes, and leading internal advocacy. Since each investment manager is responsible for ensuring that ESG criteria are integrated into an investment decision and followed through by the portfolio company, the ESG team will organize regular trainings for the investment team to stay informed on current regulatory requirements, investor expectations, market developments and internal sustainability commitments. All team members at Wellington Partners have signed up and adhere to the firm’s compliance regulation, which comprises several separate policies adopted by Wellington Partners according to its commitment to responsible investment and compliance management.

Transparency of adverse sustainability impacts at entity level (SFDR Art. 4)

Statement on principal adverse impacts of investment decisions on sustainability factors

Summary

Wellington Partners considers principal adverse impacts (PAIs) of its investment decisions on sustainability factors. The present statement is the consolidated statement on principal adverse impacts on sustainability factors of Wellington Partners. This statement on principal adverse impacts on sustainability factors covers the reference period from 1 January to 31 December 2023. The adverse sustainability indicators applicable to investments in investee companies as defined by Table 1 (and where relevant Table 2 and 3) of Annex I of the Delegated Regulation 2022/1218 is reported here (see tables below).

However, it should be noted that the database for the present PAI statement is only based on data from Wellington Partners’ Fund VI investee companies since the respective regulations had not entered into force and/or been applicable at the time of Wellington Partners’ Fund IV and Fund V investments. Wellington Partners will try to collect data for Fund IV and Fund V in the near future in order to be able to provide a “consolidated” statement at entity level already for 2024.

Statement on principal adverse impacts of investment decisions on sustainability factors:

 

 

CLIMATE AND OTHER ENVIRONMENT-RELATED INDICATORS
Adverse sustainability indicator

Metric

 Metric Unit Impact  2023 Explanation Actions taken, and actions planned and targets set for the next reference period
Greenhouse gas emissions 1. GHG emissions Scope 1 GHG emissions tCO2e 0 Scope 1 emissions are direct emissions from owned or controlled sources.
Since our investee companies are start-up companies and do not own any buildings and/or vehicles, the impact of Scope 1 GHG emissions is 0.		 In the impact year 2023, GHG metrics have been collected through the use of a dedicated questionnaire created with the aim of monitoring specific indicators that are key for Wellington Partners, both for reporting purposes and strong commitment towards implementing sustainable practices within our portfolio. The aim of our active engagement with investee companies is to establish decarbonization initiatives in order to achieve a notable decrease in both carbon footprint and GHG intensity.
Scope 2 GHG emissions tCO2e 1.9 Scope 2 emissions are indirect emissions from the generation of purchased energy.
Scope 3 GHG emissions tCO2e 21.9 Scope 3 emissions are all indirect emissions (not included in Scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.
Total GHG emissions tCO2e 23.8 Wellington Partners requires all its investee companies to calculate their carbon footprint according to the GHG protocol. The GHG Protocol establishes comprehensive global standardized frameworks to measure and manage greenhouse gas (GHG) emissions from private and public sector operations, value chains and mitigation actions.
2. Carbon footprint Carbon footprint tCO2e / million € invested 0
3. GHG intensity of investee companies GHG intensity of investee companies tCO2e / million € of revenue 14.2 Wellington Partners requires all its investee companies to calculate their carbon footprint according to the GHG protocol. The GHG Protocol establishes comprehensive global standardized frameworks to measure and manage greenhouse gas (GHG) emissions from private and public sector operations, value chains and mitigation actions.
4. Exposure to companies active in the fossil fuel sector Share of investments in companies active in the fossil fuel sector % 0% As fossil fuel-based energy production and related activities is part of Wellington Partners’s exclusion policy, the share of investments in investee companies sctive in the fossil fuel sector will always be 0%.
5. Share of non-renewable energy consumption and production Share of non-renewable energy consumption and non-renewable energy production of investee companies from non-renewable energy sources compared to renewable energy sources, expressed as a percentage of total energy sources % 68% In 2023, our investee companies used more non-renewable energy sources than renewable energy sources.
6. Energy consumption intensity per high impact climate sector Energy consumption in GWh per million EUR of revenue of investee companies, per high impact climate sector GWh / million € of revenue (per sector) N/A Since Wellington Partners has not generated any revenue from sales of WPLS-VI investee companies in 2023, a calculation is not possible.
Biodiversity 7. Activities negatively affecting biodiversity-sensitive areas Share of investments in investee companies with sites/operations located in or near to biodiversity-sensitive areas where activities of those investee companies negatively affect those areas % 0% Currently, none of Wellington Partners’s investee companies have sites/operations located in or near to biodiversity-sensitive areas. Wellington Partners has incorporated a climate and biodiversity risk assessment, aligned with the TCFD, in its investment process. This assessment is an integral part of our pre-investment evaluation for new deals and remains an ongoing process throughout the holding period, ensuring a continuous monitoring of these risks.
Water 8. Emissions to water Tonnes of emissions to water generated by investee companies per million EUR invested, expressed as a weighted average # tonnes / million € invested 0 No emissions to water have been generated by our investee companies in 2023. Companies within our portfolio have to report on their emissions to water annually. The tonnes of emissions to water will be monitored, and potential actions to mitigate this adverse indicator will be analysed in the coming years.
Waste 9. Hazardous waste and radioactive waste ratio Tonnes of hazardous waste and radioactive waste generated by investee companies per million EUR invested, expressed as a weighted average # tonnes / million € invested 0 No hazardous waste and/or radioactive waste has been generated by our investee companies in 2023. Companies within our portfolio have to report on their hazardous waste and radioactive waste ration annually. The tonnes of hazardous waste and radioactive waste will be monitored, and potential actions to mitigate this adverse indicator will be analysed in the coming years.
Additional mandatory voluntary PAI Indicators
Emissions 4. Investments in companies without carbon emission reduction initiatives Share of investments in investee companies without carbon emission reduction initiatives aimed at aligning with the Paris Agreement % 100% Currently, none of Wellington Partners’s investee companies have any written carbon emission reduction initiatives. Wellington Partners encourages its investee companies to adopt and implement carbon emission reduction policies. These efforts are aimed at raising awareness and supporting the companies in monitoring and reducing their carbon footprint.

 

Additional indicators for social and employee, human rights, anti-corruption and anti-bribery matters:

 

INDICATORS FOR SOCIAL AND EMPLOYEE, RESPECT FOR HUMAN RIGHTS, ANTI-CORRUPTION AND ANTI-BRIBERY MATTERS
Adverse sustainability indicator

Metric

 Metric Unit Impact  2023 Explanation Actions taken, and actions planned and targets set for the next reference period
Social and employee matters 10. Violations of UN Global Compact principles and Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises Share of investments in investee companies that have been involved in violations of the UNGC principles or OECD Guidelines for Multinational Enterprises % 0% Wellington Partners acts in accordance with the International Labor Organization (ILO) standards, United Nations Guiding Principles (UNGPs), United Nations Global Compact (UNGC) Principles and the Organization for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, and is guided by these international standards to assess the behavior of its investee companies. Wellington Partners  will continue to closely monitor these indicators.
11. Lack of processes and compliance mechanisms to monitor compliance with UN Global Compact principles and OECD Guidelines for Multinational Enterprises Share of investments in investee companies without policies to monitor compliance with the UNGC principles or OECD Guidelines for Multinational Enterprises or grievance/complaints handling mechanisms to address violations of the UNGC principles or OECD Guidelines for Multinational Enterprises % 72% In 2023, almost  3 out of 4 of our investee companies had no written policies to monitor compliance with the UNGC principles or OECD Guidelines for Multinational Enterprises or grievance/complaints handling mechanisms to address violations of the UNGC principles or OECD Guidelines for Multinational Enterprises. Wellington Partners’s investee companies are early-stage and, for reasons of efficiency, we are monitoring compliance with these regulations for the time being. In the longer term, however, the companies will develop their own policies.
12. Unadjusted gender pay gap Average unadjusted gender pay gap of investee companies % 9%  The unadjusted gender pay gap is defined as the difference between the average gross hourly earnings of men and women expressed as a percentage of the average gross hourly earnings of men. Wellington Partners  has been monitoring various diversity KPIs, including the unadjusted gender pay gap. Wellington Partners aims to have at least 40% women in the board of its investee companies by the end of 2030.
In 2024, an active collaboration between the ESG team and the investment team is expected to enhance awareness and support initiatives in this area.
13. Board gender diversity Average ratio of female to male board members in investee companies, expressed as a percentage of all board members % 19% Board is defined as the administrative, management or supervisory body of a company. Wellington Partners has been monitoring several diversity KPIs, including gender diversity within the workforce, top management, and board levels. Wellington Partners aims to have at least 40% women in  the board of its investee companies by the end of 2030. In 2024, an active collaboration between the ESG team and the investment team is expected to enhance awareness and support initiatives in this area.
14. Exposure to controversial weapons (anti-personnel mines, cluster munitions, chemical weapons and biological weapons) Share of investments in investee companies involved in the manufacture or selling of controversial weapons % 0% As exposure to controversial weapons is part of Wellington Partners’s exclusion policy, the share of investments in investee companies involved in the manufacture or selling of controversial weapons will always be 0%. Wellington Partners applies exclusionary rules to ensure that funds managed will not invest in the following businesses or activities:
– Production or trade in any product or activity deemed illegal under applicable local and national laws or regulations;
– Businesses for which the main source of income and/or main activity is derived from:
– Manufacturing or dealing with arms;
– Manufacture of tobacco products;
– Human cloning;
– Gambling;
– Pornography;
– Coal burning or extraction.
Moreover, some additional sectors may be excluded from the investment strategy of a specific fund (ex: distilled alcohol and related products).
Additional mandatory voluntary PAI Indicators
Social and employee matters 15. Lack of anti-corruption and anti-bribery policies Share of investments in entities without policies on anti-corruption and anti-bribery consistent with the United Nations Convention against Corruption % 40% Wellington Partners  decided to monitor this additional indicator as the existence of anti-corruption and anti-bribery policies in our investee companies is in line with our Responsible Investment policy. Wellington Partners  will continue to monitor this indicator. In the coming years, several ESG initiatives will be organised to raise awareness at our portfolio companies about the importance of anti-corruption measures implementation.

 

Description of policies to identify and prioritize principal adverse impacts of investment decisions on sustainability factors

Wellington Partners’ ESG Policy describes all relevant ESG-related processes including on the identification and prioritization of principal adverse impacts on sustainability factors. Certain PAIs have been prioritized and are part of Wellington Partners’ exclusion criteria, such as the “exposure to controversial weapons”. The governing body of Wellington Partners has approved this policy on 27 May 2021 and the last updated version is dated 31 January 2023. The responsibility for the implementation of this policy is integrated within organizational strategies and allocated on management level as well as within the dedicated ESG team and each investment manager. The two additional indicators were selected based on their relevance for and expected data availability at the portfolio companies and potential future targets. The current status on data availability with regards to all (14+2) indicators is assessed as part of the ESG due diligence. Furthermore, the probability of occurrence and the severity of those principal adverse impacts is estimated and their potentially irremediable character is assessed. In case any significant risks or severe negative impacts with irremediable character are identified, Wellington Partners will not invest in such a target. As Wellington Partners invests in early and growth stage companies, the data to assess the PAIs might not be fully available at the time of acquisition, which could lead to a minor margin of error in the assessment of the PAIs at the time of acquisition. However, any data gaps will be filled during the holding period by obtaining the information directly from investee companies and the initial assessment of the PAIs will be revised respectively. Initial data sources used include documentation received from the potential target during the due diligence process (e.g. through the data room) and through interviews with the management of the potential targets. Additional documentation and relevant data points will be collected from the investee companies during the holding period and will be monitored on a yearly basis.

Engagement Policies

Wellington Partners engages with its portfolio companies in order to support the collection and reporting of principal adverse impacts on sustainability factors. Wellington Partners’ engagement policy generally covers all (14+2) indicators as shown in the tables above, and the development of the principle adverse impacts with the investee companies will be monitored over the periods reported on. Where possible, Wellington Partners will encourage its portfolio companies to reduce their principal adverse impacts on sustainability factors through adequate improvement measures. However, due to its minority holdings, the level of engagement might be limited. In these cases, Wellington Partners will undertake its best efforts to promote the consideration of PAI improvements.

Reference to international standards

To undermine its commitment to avoiding adverse sustainability impacts, Wellington Partners is a signatory of the UN Principles for Responsible Investment and its ESG due diligence approach is generally aligned with the Ten Principles of the UN Global Compact (UNGC). To measure the adherence to the UN Global Compact principles, the following PAIs are used:

  • Violations of UN Global Compact principles and Organization for Economic Cooperation     and Development (OECD) Guidelines for Multinational Enterprises
  • Lack of processes and compliance mechanisms to monitor compliance with UN Global        Compact principles and OECD Guidelines for Multinational Enterprises

Adherence with the ten principles of the UNGC along the topics of human rights, labor, environment and anti-corruption is assessed as part of the ESG due diligence in the acquisition phase and is monitored on a yearly basis as part of regular ESG reviews. Relevant data is collected directly from the potential targets and investee companies. By addressing these topics already in the due diligence phase, the principal adverse impacts of potential targets are forecasted to the extent possible for the holding phase.

Wellington Partners takes a pragmatic approach to assess climate-related risks which are considered on a high level as part of the ESG due diligence. Comprehensive forward-looking climate scenarios are not used.

Historical comparison

As this statement refers to the first reference period, no historical comparison is possible at this stage. The historical comparison will be provided starting from 2024.

Transparency of remuneration policies in relation to the integration of sustainability risks (SFDR Art. 5)

Wellington Partners’ compensation policies are structured to incentivize investment managers to promote sustainable growth within investments. Consequently, the remuneration model includes a variable component that qualitatively takes into account compliance with the firm’s sustainability principles, such as successful internal training on these principles, the application of ESG processes and methodologies in the investment process, and the regular monitoring and communication of ESG measures.

Furthermore, the compensation model of Wellington Partners’ includes a carried interest component which, among others, reflects the sustainability performance of investments.

Product-level disclosure (SFDR Art. 8)

Summary

The information described below applies to Wellington Partners Life Sciences VI GmbH & Co. KG (“WPLS-VI”). WPLS-VI promotes environmental or social characteristics but does not have as its objective sustainable investments. ESG is an essential part of the investment strategy and is integrated along the whole investment process. ESG-related exclusion criteria are applied, ESG topics are assessed during the due diligence, considered as part of the investment decision and monitored during the holding phase. A proprietary ESG rating tool is applied for the initial assessment as well as the regular monitoring process. Wellington Partners engages with investee companies to support the improvement of their ESG performance to the extent possible.

No sustainable investment objective

WPLS-VI promotes environmental or social characteristics but does not have as its objective sustainable investments.

Environmental or social characteristics of the financial product

To ensure that all investee companies are aligned with its ESG values, WPLS-VI does not invest in companies:

  • whose primary activities involve exploration for oil and/or gas;
  • that are involved in production, storage, transport or trade of significant volumes of hazardous chemicals, or commercial scale usage of hazardous chemicals;
  • whose business activity, having made due inquiries, consists of
  • any economic activity, which is illegal under applicable laws or regulations including, human cloning for reproduction purposes;
  • the production of and trade in tobacco and distilled alcoholic beverages;
  • production of and trade in weapons and ammunition of any kind;
  • casinos;
  • the research, development or technical applications relating to electronic data programs, which:
    • aim at supporting any activity referred to under (i) to (iv), internet gambling and online casinos, or pornography;
    • are intended to enable to illegally enter into electronic data networks or download electronic data;
  • fossil fuel-based energy production and related activities; and
  • energy-intensive and/or high CO2-emitting industries (unless environmentally sustainable).
  • that are headquartered or based in any country included in the list of Non-Cooperative Countries and Territories (NCCT) maintained by the Financial Action Task Force (FATF) or which undertakes a substantial amount of its business in such a country.

In addition:

  • when providing support to the financing of the research, development or technical applications relating to (i) human cloning for research or therapeutic purposes or (ii) genetically modified organisms (“GMOs”), the appropriate control of legal, regulatory and ethical issues linked to such human cloning for research or therapeutic purposes and/or GMOs will be taken; and
  • any animal experimentation shall be carried out in accordance with EU- and/or US regulations and portfolio companies shall follow the “three R-principles” (replacement, reduction, refinement) industry standard.

Furthermore, WPLS-VI considers the following ESG topics as part of its ESG due diligence assessment of any potential investments:

Environment Social Governance
  • Climate protection and mitigation (e.g. reducing greenhouse gas emissions);
  • Climate change resilient business models and raising awareness;
  • Transition to a circular economy (e.g. limiting production of waste, improving recycling);
  • Responsible handling of hazardous materials;
  • Avoidance and reduction of environmental pollution (to air, land and water);
  • Responsible use and protection of water and maritime resources;
  • Protection of biodiversity and healthy ecosystems;
  • Sustainable resource management.
  • Employment safety and health protection;
  • Appropriate remuneration and fair working conditions;
  • Diversity, equal opportunity, training and development opportunities;
  • Compliance with labor standards (no child labor, forced labor or discrimination);
  • Adequate product safety incl. health protection;
  • Customer welfare;
  • Safety and wellbeing of clinical trial participants;
  • Replace, reduce and refine animal testing (3Rs principle);
  • Fair preliminary market access strategy;
  • Ethical Marketing, fair selling practices and product labelling;
  • Access & affordability (fair pricing policies);
  • Business ethics and sound ethical mission and values;
  • Board independence, quality and diversity;
  • Adherence to prevailing principles of ethics in biomedical research;
  • Anti-bribery and -corruption measures;
  • Data protection and privacy;
  • Transparent information disclosure;
  • Independent and qualified clinical oversight;
  • Quality assurance and internal controls;
  • Facilitation of whistle blowing.

In case any severe risks are identified with regards to any of the above listed ESG topics, this might lead to a negative investment decision. Where relevant, improvement measures are defined which will be monitored during the holding phase.

Investment strategy

With WPLS-VI, Wellington Partners focuses on the development of innovative therapeutics, medical technology, diagnostics and digital health products addressing high unmet medical needs and will selectively consider opportunities in the field of industrial biotechnology. The above-mentioned investment exclusions, i.e. the understanding of ESG risks and opportunities of investment targets in detail during due diligence and systematically monitoring and addressing ESG compliance after the initial investment, is a standard component of Wellington Partners’ investment strategy. The integration of ESG considerations along the whole investment process is described in Wellington Partners’ ESG Policy and includes an assessment of environmental, social and governance aspects of the investee companies as part of Wellington Partners’ ESG due diligence as well as during annual ESG updates. The ESG assessment includes the assessment of good governance practices with respect to sound management structures, employee relations and remuneration of staff. In addition, a legal due diligence is conducted which also covers tax compliance topics. If any tax related risks are identified, a detailed tax due diligence is conducted to ensure tax compliance.

Proportion of investments

The consideration of environmental and social characteristics is an integral part of Wellington Partners’ investment strategy. Therefore, 100% of investments within the WPLS-VI fund are aligned with the fund’s ESG policy and all investments are direct investments. While the focus is not to set specific environmental or social characteristics, all portfolio companies are assessed with regards to a large set of sustainability criteria (see table above) and the improvement of their overall ESG performance is actively supported through respective recommendations and monitoring of their implementation.

Monitoring of environmental or social characteristics

The consideration of environmental and social characteristics is carried out both before and after the investments. Wellington Partners incorporates the above-mentioned exclusion (negative screening) aspects during its decision-making process. All ESG topics are initially assessed during the due diligence phase. After the investment, the ESG status is monitored during the holding period and information is regularly obtained from the portfolio companies using a proprietary rating tool.

Methodologies for environmental or social characteristics

In order to evaluate the ESG compliance of investment targets during the due diligence process, Wellington Partners uses a customized rating tool. The rating tool follows the recommendations for financial advisors by Principles for Responsible Investment and Invest Europe and reflects healthcare-specific sustainability issues, such as access to medicine and patient safety as provided by the Sustainability Accounting Standards Board.

An appraisal of the prospective portfolio company’s ESG status is incorporated into Wellington Partners’ internal investment documentation and discussed as part of the approval process.

With the ESG rating tool, each ESG aspect is assessed on a scale from 0-4 and an overall ESG score is calculated for each portfolio company which is tracked during the holding period. The rating tool is adapted to the context of early-stage companies and structured along essential business model components. In addition, relevant KPIs (based on the PAIs) are collected and monitored on a yearly basis.

Data sources and processing

The main data sources regarding ESG data are internal documents and information provided by the portfolio companies. These are complemented by public information, e.g. from their website or press releases. To ensure data quality and due to a common lack of documentation in early-stage companies, interviews are held with the company’s management as part of the ESG due diligence and regular update process. Furthermore, a four-eye principle is applied in the sourcing and processing of the data. The information collected within these processes then serves as input into Wellington Partners’ rating tool.

Relevant ESG data is processed and aggregated through the ESG rating tool and serves as a basis to prepare periodic reports. In case of data gaps, relevant data will be estimated or indicated as not available. Wellington Partners will periodically report on the status and progress of ESG implementation in its portfolio against pre-defined KPIs. The periodic ESG report will become part of Wellington Partners’ internal discussion on portfolio progress and will be shared with interested LPs.

Limitations to methodologies and data

The information collected via the due diligence process for the fund is 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. Furthermore, due to the early stage of the portfolio companies, data availability and quality may be limited. However, Wellington Partners applies reasonable effort to improve data availability and quality through active engagement with the portfolio companies to increase their awareness of ESG topics and related data.

Due diligence

An ESG Due Diligence is conducted for all potential targets before acquisition by the investment team. Wellington Partners’ proprietary ESG rating tool is applied as described under the above section “Methodologies for environmental or social characteristics”. The 4-eye-principle is applied as internal control during the due diligence to ensure adequate quality of the results which are considered during the investment decision. As a final control, the summary of the ESG due diligence results is part of the overall investment documentation and is discussed by the investment committee during the investment decision.

Engagement policies

The ESG rating tool will allow Wellington Partners to engage with the investee companies’ management to define specific ESG targets. Wellington Partners seeks firm commitments from the investment targets to track and report on applicable ESG performance indicators, which will be monitored during the holding period and regularly assessed and discussed at board level. In case any sustainability-related controversies or incidents are identified in investee companies, a clear reporting procedure has been established as part of Wellington Partners’ ESG policy, which defines the content to be disclosed to investors as soon as practicable after becoming aware of any such event.

Designated reference benchmark

No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by WPLS-VI.