Sustainability Policy

Sustainability Policy

 

Date of application: January 2023

Purpose of the policy and scope of application

The objective of this Sustainability policy is to present Smile Invest's long-term vision and approach to integrating Sustainability into its investment activity and in portfolio companies’ business models.

This policy concerns Smile Invest as a management company and applies to all investments realized after the date of application of this policy. This document is communicated by Smile Invest to its main stakeholders, namely employees, investors, and portfolio companies.

 

1.    We are committed to linking long-term value creation and Sustainability

Smile Invest, Smart Money for Innovation Leaders, is a European investment firm with a focus on Benelux-headquartered companies. Our investors comprise approximately forty entrepreneurial families. We invest in companies that have a strong focus on core themes, such as digitalization, innovation in healthcare, and sustainability. Thanks to our open-ended evergreen structure, we have the peace of mind and flexibility to fully focus on the growth of our businesses.

As “entrepreneurs for entrepreneurs” we aim to support entrepreneurs and management teams in their development strategy. We invest in ambitious companies that embrace growth and we work closely with them to realize their ambitions.

Our diverse team, located in the Benelux, challenges, and supports companies to generate meaningful value for their customers, employees, and shareholders.

We set up partnerships with innovative growth companies driven by a compelling vision and the ambition to become a market leader. We act as an actively engaged sounding board for the management team and extend our companies with a vast network of entrepreneurs and experts.  

By engaging with our stakeholders on sustainability issues, we aim to meet today’s environmental and social challenges, such as limiting climate change, defined as a global objective by the 2015 Paris Agreement, and to improve our portfolio companies’ sustainability performance.

Our sustainability vision is embedded in our mission statement. We want to combine a positive impact on society and the economy with attractive returns for our stakeholders. 

Indeed, as an open-end, evergreen investment fund, we are ideally positioned to accompany our portfolio companies on a sustainable growth journey by giving a positive contribution to society and the economy. Contributing to societal change is core to the firm’s three investment themes: digitalization, healthcare & well-being, and sustainability.

 

2.    We integrate Sustainability at every step of our investment activities

2.1.    We assess Sustainability issues before investing

We source companies that have a positive impact on tomorrow’s society

We focus on three themes that have a profound, positive impact on tomorrow’s society: digitalization, healthcare & well-being, and sustainability. We invest in companies within these sectors that already consider stewardship on Sustainability, or that we can support in integrating Sustainability into their business practices and business models.

To complement our core focus themes we also have a formal list of excluded sectors and countries, available below.

Our formal list of excluded sectors and countries is the following: 

We do not invest in companies that directly realize a significant share of their revenue in the following sectors:

  • alcohol, fast food, palm oil,
  • fishing, fur, 
  • gambling, 
  • illicit activities, 
  • narcotics, tobacco,
  • deforestation, production of pesticides,
  • pornography, 
  • production of fossil fuels (including coal, oil), 
  • offensive weapons.

The excluded sectors listed above do not concern the upstream value chain (such as suppliers) and downstream value chain (such as clients) of the portfolio companies, but only the portfolio companies’ direct activity.

We do not invest in companies that have a physical presence and/or legal entities in countries under trade restrictions, or embargos.


We analyze the Sustainability risks and opportunities of potential investments

Sustainability analysis has become an increasingly important part of our investment process. To complete our financial analysis, we carry out a sustainability analysis which allows us to better understand the investment opportunities that we consider.

Before any investment, we perform a red flag Sustainability analysis. This initial assessment by our investment team identifies the investment opportunity’s level of exposure to Sustainability risks and opportunities, based on its sector, business model, and geographical location.

This analysis takes the form of a questionnaire that aims at identifying the Sustainability risks and opportunities of the target companies, as well as their current best practices, and areas for improvement.

For companies that are part of our Sustainability theme of investment, we assess the positive contribution of the company’s business model to the environment and society qualitatively through the questionnaire.

The questionnaire covers the main Sustainability topics, including:

Environment:

  • Environmental Management
  • Climate Change
  • Natural resources consumption
  • Biodiversity
  • Pollution & Waste

Social:

  • Employment
  • Diversity
  • Compensation and benefits
  • Labor relations
  • Training
  • Work accidents

Governance:

  • Shareholder governance
  • Operational governance
  • Sustainable purchasing
  • Taxes and litigation

If we identify red flags through this analysis, we conduct external Sustainability due diligence to further analyse the red flags. Based on the outcomes of the external Sustainability due diligence, we may refrain from investing in the target companies.

We use this due diligence exercise to define a list of priority areas to focus on during the lifetime of our investment.

 

Sustainability is at the core of our investment decisions

As sustainable business models and business practices are important criteria in our investment decisions, the results of our Sustainability analysis (i.e. Exclusion, screening, and due diligence) are systematically included in a Sustainability section in the investment note.

We discuss these results systematically in the investment committee. If an investment opportunity represents a critical risk in terms of Sustainability, we might choose not to invest. We take into account the level of risk, the level of maturity of the company on Sustainability issues, and the willingness of management to improve its Sustainability performance.

 

2.2.    We support entrepreneurs in their Sustainability journey

We define a Sustainability roadmap with our portfolio companies

We are committed to support our portfolio companies all along their growth and Sustainability journey, and to provide them with our experience and expertise, particularly on Sustainability reflexion.

We consider that the Sustainability assessment conducted pre-investment is an opportunity to start the conversation with the target company’s management on their Sustainability risks and opportunities.

Following the results, if needed on a case-by-case basis, we build a Sustainability Action plan with the management teams to guide their progress on Sustainability. This Sustainability roadmap will address different topics such as Environment, Governance, Social, and Supply Chain.

 

We assess the Sustainability progress of our portfolio companies

To support our entrepreneurs in monitoring their Sustainability performance and value creation, we have launched an annual Sustainability reporting in 2023. This comprehensive reporting questionnaire covers the main environmental, social, and governance topics.

Based on the companies’ answers to this questionnaire, our investment teams evaluate the companies’ progress, best practices, and areas of improvement on Sustainability topics and on their Sustainability Action plan, when applicable. This questionnaire is also the opportunity to assess whether Sustainability risks and opportunities identified pre-investment have evolved, and to take mitigating actions if new risks arise.

 

We actively engage with our portfolio companies 

As shareholders, we have the key opportunity to engage the highest level of the portfolio companies on Sustainability topics.

Sustainability topics are at least once a year on the agenda of the companies’ board.

To ensure the commitment and progress of our portfolio companies, a part of the variable remuneration of companies’ top management may include Sustainability criteria, for instance, based on the company’s Sustainability priorities and projects.

 

2.3. We provide information at the exit of the investment

To ensure that actions implemented with the portfolio companies have a long-term impact beyond the investment horizon, we provide Sustainability information at the time of divestment. Communicating transparently to potential new shareholders about Sustainability issues on exit is both an ethical requirement and an opportunity to highlight the value creation of our portfolio companies. 

We also commit to answer requests for information from external stakeholders transparently and comprehensively.

 

3.    As an example, we commit to Sustainability stewardship at  Smile Invest level

We are strong believers in “leading by example”. As such, we seek to conduct our business with respect for our employees, and the environment, while promoting a robust, transparent governance. 

As “entrepreneurs for entrepreneurs”, we apply to ourselves the same standards as for our portfolio companies. Based on this approach, we commit to Sustainability stewardship at Smile Invest, with clear and transparent commitment, described below.

Regarding Sustainability governance, we commit to:

  • Dedicate at least 20% of a full-time-employee from Smile Invest team to Sustainability.
  • Nominate a Partner in charge of Sustainability, to sponsor internally and externally our Sustainability vision and approach.
  • Train our employees on Sustainability topics at least once a year.
  • Review at least once a year our Sustainability Policy, including the investment process described, to review and improve our practices year-on-year.
  • Answer our investors’ requests for Sustainability information by providing them with clear, transparent, and reliable information that they may request.
  • Hold at least one Sustainability committee per year, during which the Sustainability performance and progress of our portfolio companies are reviewed, as well as market trends and evolution on Sustainability.

Regarding our employees, we commit to promote gender equality through:

  • Building and formalizing a Diversity and inclusion policy (e.g., on gender equality, disability inclusion).
  • Becoming a signatory of Level 20 initiative towards gender equality.
  • Monitoring and increasing the number of women on our teams. We aim at reaching 25% of women in investment teams by 2030.

Regarding the environment, we commit to: 

  • Assess our GHG emissions by carrying out a Carbon Footprint at least every three years.
  • Define a carbon footprint reduction objective and an associated action plan.
  • Systematically prefer train travel over plane travel, when the train travel is below 2 hours.