Sustainability-related disclosures under the SFDR

Summa Equity AB (“Summa”) makes the following disclosures in accordance with Articles 3(1), 4(1)(a) and 5(1) of the Sustainable Finance Disclosure Regulation (2019/2088) (“SFDR”). Links to further information on our approach and impact assessments are provided.

Summa Equity AB

Summa invests to solve global challenges. We invest solely in companies whose core business contributes positively to one or several sustainability factors. To enable this, sustainability factors are integrated as tools for value creation in all stages of the investment lifecycle, from finding suitable investments (“sourcing”), to screening and evaluation (“due diligence”) through the ownership period and eventually the sale of the company (“exit”). Sustainability risk assessment and follow-up is integrated across all funds managed by Summa.

"Sustainability factors" is defined within the SFDR as environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters. Summa will in addition consider other sustainability factors where material (e.g. data security, privacy issues etc.).

Assessing and integrating sustainability risks

Sustainability risk means an environmental, social, or governance event or condition, that, if it occurs, could potentially or actually cause a negative material impact on the value of the investments made for the account of a fund and thus on the value of the interests issued by such fund. Sustainability risks are initially assessed alongside other types of risk as part of a rigorous process of due diligence, involving e.g. interviews with management, industry research, review of performance history, environmental and HR data and organizational and strategic evaluations We typically work with external consultants and experts when we carry out these assessments. Different environmental, social and governance issues are prioritized in the due diligence depending on materiality to the business, materiality to the broader set of stakeholders and the level of impact.

The output from the due diligence processes, including information on material sustainability risks, form part of the investment material sent to the Investment Committee (IC), which is the committee responsible for screening and evaluation of potential investments prior to making an investment recommendation to the Board of Directors. Similar to concerns about the level of financial returns, a determination that there are material adverse impacts or sustainability risks that cannot be solved or mitigated will result in a decision not to invest.

The investment may proceed if we are confident that the risks are at an acceptable level and that they can be mitigated or solved over time, provided that the company demonstrates suitable characteristics in terms of positive impact on the SDGs, as well as having the potential for strong financial returns. Once an investment has been made, Summa monitors sustainability risks on a regular basis.

Code of Conduct

All Summa Equity employees (“Summates”) are expected to adhere to our corporate values, and high standards of ethical business conduct as outlined in our Code of Conduct. Summates are Radically Honest, Authentic, Responsible, Entrepreneurial and Respectful.

Remuneration policy

In accordance with the Summa Remuneration Policy, all identified staff and Investment Professionals are remunerated as employees, with a combination of fixed and variable remuneration.

For Summa, sustainability risks and opportunities are naturally integrated in the investment process for all funds, since Summa’s investment thesis is based on using sustainability factors as a screening tool and, following an investment, using the same as value creation levers.

The policy seeks to ensure that the identified staff and Investment Professionals are encouraged to consider the long-term effects of their decisions, and avoid taking short-term risks in order to achieve personal gain. This is, amongst others, achieved by ensuring that the performance assessment for the variable remuneration is based on a longer period. Considering the number of checks and steps implemented to deter identified staff and Investment Professionals from excessive risk taking described in the policy, the prudent balance between fixed and variable remuneration and the fact that sustainability risks are naturally integrated in Summa’s business, ensures the promotion of sound and effective risk management with respect to sustainability risks.

Statement on principal adverse impacts of investment decisions on sustainability factors

Policies on due diligence and the identification and prioritization of principal adverse sustainability impacts and indicators

Summa considers principal adverse impacts of its investment decisions on sustainability factors. Issues are prioritized according to materiality to the individual investee company and the portfolio as a whole. This is first done during Due Diligence (pre-investment), and then reevaluated regularly during the ownership phase. Targets are typically set for the portfolio as a whole, and for individual companies in dialogue between management, the board of directors and Summa deal teams.

Principal adverse sustainability impacts

The portfolio wide principal adverse impacts are emissions of greenhouse gases (“GHG”) and supply chain biodiversity impact, while certain individual investments also generate significant amounts of waste and/or use substantial amounts of fuel and energy.

The most prominent adverse impact from our current portfolio is GHG emission, particularly from Scope 3 in our Resource Efficiency investments. While our estimates conclude that the potential GHG avoided from the relevant activities are far larger - 630k tons CO2e potential avoided emissions from recycling, waste management and energy efficiency services vs. 341k tons CO2e emitted portfolio wide in 2019 - Summa’s position is that the negative impact cannot be “netted” against the positive impact. The adverse impacts must be managed effectively and reduced over time. Summa is actively working on strategies to manage these impacts effectively and reduce them over time, e.g. by engaging with the portfolio companies’ management on sustainability matters, by setting relevant targets for such companies and by monitoring the adverse impacts over time. This will further strengthen the overall impact position of the companies in our portfolio.

Please also see our annual report for further information.

Engagement policy

Summa has adopted an Engagement Policy which outlines the principles for Summa’s shareholder engagement and describes how Summa integrates shareholder engagement in its investment strategy, to ensure effective, responsible, and sustainable shareholder engagement. The Engagement Policy sets out that Summa shall integrate ESG into ownership policies and practices (including appropriate ESG disclosures) in the portfolio companies. Summa will generally be an active owner, meaning that Summa may exercise its voting rights in the best interest of the funds, and take an active role in the strategic development of the portfolio companies.

In order to influence the portfolio companies and promote better corporate governance, risk management, performance or disclosure standards, Summa will generally cooperate and communicate with other shareholders.

Summa has also adopted a conflict of interest policy for the purpose of taking all reasonable steps to prevent and manage conflicts of interest.

Adherence to business conduct codes and internationally recognized standards

Paris Agreement and negative climate impact

Compliance with the Paris agreement means that we need to limit global average temperature to below 2 degrees Celsius above pre-industrial levels.

Our long-term goal is to align our portfolio with the more ambitious target of limiting global average temperature to below 1.5 degrees Celsius above pre-industrial levels, a so-called 1.5 degree scenario. A 1.5 degree scenario would require that we halve global emissions by 2030.

In order to align with a 1.5-degree scenario, we have so far done the following:

1. Implemented comprehensive tracking of carbon emissions throughout our portfolio, according to standards set by the Greenhouse Gas Protocol track Scopes 1, 2 & 3. Our companies are required to submit data on their operations to a third-party for analysis.
2. We review environmental performance results with each portfolio company on at least an annual basis. These follow-up conversations involve advice on how to reduce negative impact, where we make use of outside consultants.
3. Where emissions are a material adverse effect of the businesses we invest in, we encourage them to dedicate time and resources to mitigate this.
4. We have set an initial portfolio target of reducing emission intensity (emission per EUR of revenue) by 50% over the next ten years.
5. We voluntarily contribute to a responsibly managed reforestation project to mitigate direct emissions from our portfolio (Scopes 1 and 2).

We are continuously evaluating further appropriate steps to align more closely with a 1.5-degree scenario.

Adherence to international standards for risk integration and due diligence

Summa Equity is a signatory of the Principles for Responsible Investment. Among the principles is a commitment to integrate ESG into ownership policies and practices, as well as to seek appropriate ESG disclosures from the companies we invest in. Respect for established human rights is integrated in our policies, and we monitor that this is also integrated into the polices of our investees. We seek to adhere to the 10 principles of the UN Global Compact. The four themes (Human Rights, Labor, Environment and Anti-Corruption) are integrated into our Code of Conduct. We are committed to utilizing internationally recognized standards for ESG Due Diligence.

Assurance & certification

We have started an application process to become a certified B Corporation. B Corporations are expected to meet the highest standards of verified social & environmental performance, transparency and accountability.

We have also contributed to the development of the SDG Impact Standards for Private Equity through feedback rounds, and participation in their pilot project to test the standards. We will engage with the verification process to become assured against the Standards, once the process is established.

Fund-specific disclosures

Summa’s fund specific SFDR disclosures are published on the investor portal together with the other information relating to such funds.