At Cardumen Capital, we use the term ‘ESG’ to describe a comprehensive set of environmental, social and governance matters impacting both our fund and our portfolio.
We put these concerns at the core of our operations.
1. Environment: considering the environmental impact; targeting both measuring but most importantly reducing the impact across all scopes (at fund and portfolio level).
2. Social: integrating diverse and inclusive practices across all areas of the business; building a strong culture and being a conscientious employer; designing and building products with consideration of the ethical and human implications on the end-user and society
3. Governance: being on top of and aligned to the latest laws, regulations and compliance standards; having appropriate governance structures in place, according to the company’s stage; writing out a code of conduct; instilling a strong culture of trust and responsibility around data.
Applying ESG principles is not only based on a comprehensive set of considerations specific to us as an investor and the startups we invest in; we also think through how ESG applies to the entire investment process from sourcing and screening to due diligence, portfolio management and exit. We note hereby that each fund will have a specific set of procedures based on their classification according to the SFDR regulation. As a result, the level of granularity of the following will depend on the fund’s scope of investment.
Exclusion list: There are certain business models and sectors we do not invest in, which include companies engaged in the production or trade:
· of products or services deemed illegal under host country laws or regulations or international conventions and agreements.
· produce / trade in tobacco (and other addictive substances), weapons / munition, pesticides / herbicides subject to international phase outs / bans, sex work, pornography, gambling or casinos, as well as companies where more than five percent of total sales come from the distribution of these products.
· produce / are involved in theproduction of fossil fuels, including unconventional extraction of fossil fuels, such as oil sands and deep-sea drilling in particularly sensitive areas.
We will also exclude companies who / whose:
· founder / member of the senior team is involved or has in the past been involved in cases of harassment, discrimination, or bullying.
· do not comply with international standards and conventions regarding human rights, the environment, anti-corruption or labour laws.
. product / service / business model is rooted in / reliant on exploitative tactics, either of a certain demographic or an at-risk group.
Sourcing: We are committed to ensuring accessibility and diversity as core principles in the sourcing and pipeline management of ourdeals. Concretely, we have put in place two mechanisms and steps to make our funnel easier to access and to counteract any lack of diversity that early in the investment process:
· Open application process: to counteract the need for ‘warm introduction’, we have installed a “Connect” button in our website so entrepreneurs can submit to us directly
· Insiders program we leverage key individuals from the ecosystem to ensure that those entrepreneurs that are unaware of us, can still reach us and our resources via our entrepreneurs’ network
Due diligence of investments: In the process of screening and conducting due diligence on potential investment targets, ESG considerations play an important role. We are keen to understand the attitude of the founders. The information we collect will be duly documented in our investment memos and play an important role in our investment process. We are using several tools in particular at this stage to probe the startups and founding team’s thinking around
· ESG due diligence checklist (comprehensive DD questions)
· ESG term sheet clause
· ESG commitments post-investment: we will ask the founder team to commit to ESG policies and procedures post-investment with regular milestone reporting
Post-investment portfolio support: Once we have committed to invest in a company, ESG considerations will further guide our portfolio management with a focus on both risk mitigation and value creation.
ESG does not only apply to how we invest and helpour portfolio companies flourish and grow but it is also part and parcel of howwe internally manage our fund. We aim at applying the same ESG considerations and the same standards we measure our portfolio with to ourselves; being in a strong position when it comes to ESG ourselves not only makes our demands to portfolio companies more believable, it also strengthens our (economic and structural) position as a VC firm.
· ESG responsibility: while every member of our (investment) team is concerned with and thinks along lines of ESG when making decisions and supporting portfolio companies, we have assigned the overall responsibility for ESG to Enrique Burguillos. Our approach to ESG will be discussed regularly in our partner meetings (at least once a year).
· Hiring and working environment: we are committed to hiring a diverse team and providing an inclusive working environment.
· Good governance: all our decision making in both the advisory / oversight board and the investment committee is committed to good governance principles; across these bodies, we track a range of diversity metrics.
· ESG report: We will publish a public ESG report every year including both our own internal ESG metrics and assessments as well as an overview of our portfolio’s.