Entity level disclosures related to Pale Blue Dot Advisors AB (the Manager):
Integration of sustainability-related risks into the investment decision process Please see our ESG policy here ↗
Adverse sustainability impact Principal adverse impact statement Pale Blue Dot Advisors AB (the Manager) currently does not take into consideration the principal adverse impacts of its investment decisions on sustainability factors. The current draft of the Regulatory Technical Standards includes metrics that are not applicable to the early-stage investments that we undertake.
Product level disclosures related to Pale Blue Dot I AB and Pale Blue Dot I Equity AB (jointly “the Fund”):
No sustainable investment objective The Fund is considered an Article 8-type product under the Sustainable Finance Disclosures Regulation (“SFDR”), meaning that the fund promotes, amongst other characteristics, environmental or social characteristics. All portfolio companies follow good corporate governance practices.
Environmental or social characteristics of the financial product The objective of the Pale Blue Dot fund is to invest in tech startups that create high returns for their shareholders while operating in ways that either directly or indirectly have a positive impact on the climate. The fund is specifically focusing on startups that (a) reduce or reverse the current greenhouse emissions or (b) help us brace for the impact of the crisis and prepare us for a new world. The mission of the fund is perfectly aligned to make the ESG and impact considerations an important pillar of the fund. The fund is also following recommendations set out to mitigate the risks of the climate crisis including those by the Intergovernmental Panel on Climate Change (IPCC) and the 2015 Paris Agreement.
Investment strategy The Fund will focus its investment on businesses with a positive climate impact that is closely tied to the economic success of the company. There are many sectors that are of interest, but the focus will be on ICT (Information and Communications Technology) powered solutions.
The Fund will invest in non-listed startups that directly or indirectly reduce, reverse, or mitigate the effects of climate change, or enable others to do so. The three main categories can be defined as:
1. Reduce. Companies that reduce the impact of the climate crisis, for example within energy, transportation, materials, industry, and foods.
2. Reverse. Companies that reverse the trend of climate change, for example via carbon sequestration and the financing of them.
3. Mitigate. Companies that will help us brace for a future for example rising sea levels, mass migration, food shortages, and changing weather patterns.
Proportion of investments The Fund seeks to only make investments falling within the investment strategy and plans not to allocate any capital to companies that have a predominantly negative impact on the climate. The Fund observes the development of the EU Taxonomy Regulation and applies technical screening criteria to understand whether an investment is ‘environmentally sustainable’ by considering the three principles below: 1. Substantial Contribution to at least one of the six environmental objectives¹,
2. Do no significant harm (DNSH) to the other five environmental objectives,
3. Meet minimum safeguards (e.g. OECD Guidelines on Multinational Enterprises and the UN Guiding Principles on Business and Human Rights).
In addition, the Fund will not invest, guarantee or otherwise provide financial or other support, directly or indirectly, to companies or other entities: ¹From 1st January 2022 – Phase 1 EU Taxonomy. Disclosure applicability for Climate change mitigation and Climate change adaptation objectives.
(a) whose business activity consists of illegal economic activity (i.e. any production, trade, or other activity, which is illegal under the laws or regulations applicable to the company or the relevant company or entity; or
(b) which substantially focus on:
- the production of and trade in tobacco and distilled alcoholic beverages and related products;
- the financing of the production of and trade in weapons and ammunition of any kind;
- casinos and equivalent enterprises;
- real estate
- the research, development, or technical applications relating to electronic data programs or solutions, which aim specifically at supporting any activity referred to above; internet gambling and online casinos; or pornography, or are intended to enable to illegally: enter into electronic data networks; or download electronic data.
(c) that have a predominantly negative impact on the climate.
Monitoring of environmental or social characteristics Monitoring of environmental and social characteristics is enforced through the Climate Pledge, which is a part of our term sheet.
As part of the Pledge, the companies will have set up quantitative climate KPIs that directly relate to the core problem that they are solving and these are reported to the fund and further to the LPs on a quarterly basis. Additionally, all portfolio companies are sent an extensive annual ESG measurement framework which will need to be filled out and shared with the fund. The framework includes questions such as what ESG policies are currently in place, what the carbon emissions from the company are currently as well as their current diversity numbers. The frameworks serve as an annual checkpoint to review internal progress and be prompted to continue to improve their practices. The company will also get an individual ESG score by filling out this framework.
Data sources and processing Portfolio companies report their financial performance and Impact KPIs on a quarterly basis. Impact KPIs are set individually for each invested company, as they are tied to different industries and operate under unique business models. Each investment manager in the Fund is responsible for reviewing the data and following up on the progress towards achieving ESG-related targets. ESG and the financial performance of the portfolio are reported to our investors on a quarterly basis.
Due diligence All investment decisions are based on commercial, financial, legal, and ESG due diligence, as well as estimated return and key risk components. During the DD process, all potential portfolio companies are asked to complete a detailed ESG questionnaire to give us insights into the materiality of ESG risks. We also ask all potential portfolio companies to complete a separate ESG scorecard. The scorecard is used in deciding whether there is enough alignment for the company to join the portfolio. The scorecard includes a self-assessment part that is sent to the company as part of the due diligence pack as well as an internal assessment that is filled in by the investment committee during the decision stage. The founders and the investment lead will thereafter review the scorecard six months after the investment and then annually.