At Convent Capital, we place a strong focus on sustainability and are committed to the transition to a circular economy. We invest in companies that share our values and are commitments to the highest sustainability standards. From the idea of responsible stewardship, we strive to be at the forefront of the transition to a circular economy, actively investing in companies committed to circularity. We empower our companies to transform their operations and foster a culture of innovation and collaboration.
Currently we are active with 2 investment strategies, with our first fund launched in 2011 we focus on small to medium sized companies within the Benelux that have a good track record and where we see strategic and operational opportunities to create sustainable value: organically, in new markets or via a buy-&-build strategy. With our impact fund launched in 2022 we focus on providing growth capital to innovative and sustainable companies in the agri & food markets.
As investors it is our job and responsibility to support management teams to achieve the best possible returns given the risks they take. Our view of risk and return is broad. We assume that externalities such as future scarcity, environmental pollution, or unfair business practices that are not priced into current business models can pose risks in the future and should be taken into account. It is our responsibility to identify these risks and, together with management teams, map out routes to minimize or even exclude these risks.
We believe that by focusing on these externalities and risks, we can turn those, where possible in business opportunities and competitive advantage. In our view, the growing demand for more sustainable products and services by consumers, financial markets and governments will mean that there is a great opportunity for ecological, social and economic value to converge.
When we look at environmental and social impacts of a company, these must be determined by looking at the entire chain. Although a company will not always be able to force suppliers or customers to go along with innovation or certain changes, we first want to understand the magnitude of problems and place them in relation to other industries and steps in the value chain.
It goes without saying that we do not invest in sectors that make or distribute products that are inconsistent with the equitable distribution of the world’s wealth, or at the expense of people’s mental or physical health – such as trust funds, weapons , gambling, tobacco or fast food. We are also very critical of investments in companies that use destructive processes in, for example, mining, forestry or production processes.
We believe that investing responsibly is not determined by certificates and standards, but by actively taking our own responsibility with regard to the (ESG) impact of our investments. It is certainly the case that certain certifications (such as Cradle to Cradle, ISO or Rainforest Alliance) can be very useful for our portfolio companies, because they can bring focus to the priorities and often also have marketing value. However, we do not require such certifications and are apprehensive of the strategic constraints they may create. We are therefore more or less ‘agnostic’ with regard to sustainability labels. We endorse the principles of the circular economy, cradle to cradle, blue economy. What these philosophies have in common, we have translated into tangible goals and frameworks, which we use in daily practice. Our policy is to integrate our vision of sustainable value into all steps of the investment process: analysis, selection, due diligence, portfolio management, exiting and reporting.
This means all investments made by Convent are carefully screened on sustainability factors and risks. We update these screenings annually and report on these screenings to our investors. Reporting is an essential part of sustainable value creation: it is especially important because it has a disciplining effect and supports the learning processes. Plus it helps in our discussions with management teams and setting goals and targets.
Convent Capital 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 adhere to the 10 principles of the UN Global Compact. We are committed to utilizing internationally recognized standards for ESG Due Diligence and reporting.
Convent Capital, as an investment manager, can be classified within Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (the Sustainable Finance Disclosure Regulation, in short “SFDR”) as a “financial market participant” or “AIFM”. Our current two funds can be classified as a “financial product” or “AIF”. As such, Convent Capital is required to make several disclosures in accordance with Articles 3(1), 4(1)(b), 5(1) and 10 of the Sustainable Finance Disclosure Regulation EU 2019/2088 (SFDR).
Integration of Sustainability at Convent Capital (SFDR Article 3)
Our commitment to sustainable investment has been a core principle since our inception in 2011. We are dedicated to pioneering investment strategies that strike a harmonious balance between profitability and the well-being of our planet. Our commitment to sustainability, circularity, and adherence to SFDR regulations underpins our dedication to positive societal and environmental change. We recognize that addressing externalities such as future scarcity, environmental degradation, and unethical business practices can transform risks into business opportunities and competitive advantages. We believe that the growing demand for more sustainable products and services from consumers, financial markets, and governments presents a significant opportunity for ecological, social, and economic value to converge.
When assessing the environmental and social impacts of a company, we consider the entire value chain. While a company may not always have the ability to influence suppliers or customers to innovate or make specific changes, we strive to understand the magnitude of the problems and contextualize them relative to other industries and steps in the value chain. We categorically avoid investing in sectors that produce or distribute products inconsistent with the equitable distribution of the world’s wealth or that harm people’s mental or physical health – such as trust funds, weapons, gambling, tobacco, or fast food. We are also highly critical of investments in companies that employ destructive processes in mining, forestry, or production. Additionally, we apply the Do No Significant Harm (“DNSH”) principle in accordance with the EU Taxonomy, which stipulates that an investment can only be considered sustainable if it achieves its sustainable objective without causing significant harm to other environmental or social factors.
Good governance is a crucial component of our investment strategy, serving as a lens through which we assess whether an investment company has sound management structures, healthy employee relations, fair remuneration, and responsible tax practices for our underlying investments. Our investment analysis includes an independent, external HR due diligence. We believe that responsible investing transcends certificates and standards; it requires actively taking responsibility for the Environmental, Social, Governance (“ESG”) impact of our investments. We endorse the principles of the circular economy, cradle to cradle, and the blue economy. We have translated the commonalities of these philosophies into tangible goals and frameworks that guide our daily practice. Our policy is to integrate our vision of sustainable value into every step of the investment process: analysis, selection, due diligence, portfolio management, exiting, and reporting.
Consequently, all investments made by Convent are screened for ESG factors and risks. We update these screenings annually, take appropriate actions as needed, and provide full transparency by reporting on these screenings to our investors. For our dedicated impact fund, we go even further by reporting on our impact KPIs quarterly and linking the performance of these impact KPIs to our carried interest. Convent Capital is a signatory of the UN Principles for Responsible Investment, which includes a commitment to integrating ESG into ownership policies and practices and seeking appropriate ESG disclosures from the companies we invest in. We also adhere to the 10 principles of the UN Global Compact.
Adverse Sustainability Impacts (SFDR Article 4 and Article 7)
At Convent Capital, we believe that being a responsible investor requires the thorough consideration of the potential negative effects on sustainability factors of our investment decisions. We are committed to integrating ESG factors into our investment processes. In the first phase, we evaluate all our investments on our exclusions, such as exposure to controversial weapons. During the due diligence phase, we look at the integral ESG performance of the company, such as its GHG emissions. These indicators establish a baseline measurement, enabling us to draft a clear ESG value creation roadmap to improve the company’s performance on these specific indicators. Therefore, we consider sustainability factors as value creation levers for enhancing financial return as well as contributing to society. Our typical investment companies are likely to be inherently conscious about their potential adverse impacts and strive to mitigate these where possible. However, although we generally do not expect significant adverse/negative impacts on these indicators, we conduct a general ESG-risk assessment as part of the due diligence process and monitor these risks post-investment.
For our first fund, we do not consider the Principal Adverse Impacts (“PAI”) in line with SFDR as the fund is currently closed, and the portfolio companies are not required to publish the required data, and we therefore cannot guarantee accurate and complete reporting. However, for our second fund, we do monitor and report on the PAI in accordance with SFDR on an annual basis. All investments entering the pipeline for this impact fund were screened against the fund’s exclusion criteria. These criteria include themes such as the protection of human rights and working conditions, including but not limited to forced labour, child labour, and anti-discrimination. Additionally, the criteria also focus on business integrity, encompassing legal compliance, the fight against corruption, and the promotion of fair competition. These exclusion criteria align with the ten principles of the UN Global Compact, providing a strong foundation for ethical investment decisions. The principal adverse impact indicators are reported for the reference period (please refer to the periodic disclosure report linked below). The PAIs are considered throughout the investment cycle, including the acquisition phase, portfolio management, and exit.
Remuneration (SFDR Article 5)
Convent Capital is committed to promoting sound and effective risk management, and aligning the interests of our fund managers, stakeholders, and the broader society. Our remuneration policy is in line with the market standards and European Securities and Markets Authority (ESMA)/AFM principles required for all alternative investment fund managers. Furthermore, for our second fund, we have linked our carried interest to the externally validated impact Key Performance Indicators (KPIs). This means that a portion of the remuneration of our fund managers is directly tied to the achievement of specific sustainability targets. If we do not meet these targets, the advisory board will select a charity to which we will donate the proceeds of the carried interest.
We believe this approach not only aligns our financial incentives with our sustainability objectives but also reinforces our commitment to creating long-term value for our stakeholders and contributing positively to society and the environment. This approach is in line with Article 5 of the SFDR, which requires financial market participants to disclose information on how their remuneration policies are consistent with the integration of sustainability risks.
Sustainable investment objectives of our funds (SFDR Article 10)
We are deeply committed to contributing to a more sustainable future. Our investment strategy reflects this commitment by actively seeking to invest in companies that not only demonstrate strong financial potential but also make a positive impact on society and the environment. Article 10 of the SFDR requires us to disclose information on how our funds meet specific environmental or social characteristics or have sustainable investment as their objective.
Our first fund, which could be classified as an Article 8 fund, aims to promote environmental or social characteristics. It is designed for investors who wish to invest in companies that adhere to good governance practices and meet specific environmental or social criteria. We actively screen and select companies that have strong ESG practices, and we exclude companies involved in controversial activities or sectors. This fund does not have sustainable investment as its primary objective, but it does promote environmental and social characteristics.
Our Article 9 impact fund, on the other hand, has sustainable investment as its core objective. This fund actively seeks to invest in companies that contribute to environmental sustainability or social well-being. The investments made by this fund are selected based on their potential to generate a measurable, positive social or environmental impact alongside a financial return. This fund is designed for investors who wish to make a positive impact with their investments while also seeking financial returns.
Both funds integrate ESG factors into the investment decision-making process and actively monitor and report on the ESG performance of their investments. We believe this approach aligns with the interests of our investors and contributes to a more sustainable and equitable future.
Convent Capital I (SFDR Article 8 Fund)
Convent Capital I was launched in 2011 and is currently closed, meaning that we actively manage the current investments but will not acquire new portfolio companies or is open to new investors. The fund would likely have been considered an SFDR Article 8 Fund, if regulations would have been in place around initiation as the fund has the objective actively supporting its portfolio companies in achieving the Circular Economy. As the fund is no longer adding any investments to the portfolio, we currently monitor, update and/or adjust the prior-identified ESG KPIs and risks on an annual basis. When necessary, we actively engage with companies to improve their performance. The fund is dedicated to investments within the Benelux’s small to medium-sized enterprises. These are companies with a proven track record, demonstrating potential in both strategic and operational facets to foster sustainable value. With an emphasis on Circular Economy opportunities, our involvement is beyond mere financial input; it’s a partnership advocating for a more sustainable future.
Convent Capital AgriFood Growth Fund (SFDR Article 9 Fund)
Convent Capital, through the AgriFood Growth Fund, invests to solve challenges in the agricultural and food production value chains. We invest solely in companies whose core business contributes positively to one or several sustainability factors (defined within the SFDR as environmental, social and employee matters, respect for human rights, anti-corruption, and anti-bribery matters) related to selected UN SDGs. The fund primarily focusses on environmental matters, such as climate change and biodiversity loss. 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 (“monitoring”) and eventually the divestment of our holding (“exit”). Sustainability risk assessment and follow-up is also fully integrated in this Fund.
Potential investments that are deemed to be a good portfolio fit are screened against a selection of 5 of the 17 United Nation’s Sustainable Development Goals (“SDGs”). These selected SDGs (2/12/13/14/15) are strongly related to food production and the impacts thereof to our environment. Our investment criteria is a company delivers a product or service with a meaningful (and measurable) contribution to at least one of these 5 SDGs. While our investment horizon is international, encompassing the entire OECD markets, our core remains consistent: investing in genuine impact. To show to our investors that we take the impact seriously, we have linked our full carried interest to the externally validated impact KPIs.