IPF Fund allocates at least 80% of their investments directly into healthcare. The remaining 20% is channeled into companies whose core operations aren’t healthcare-focused, yet they engage with the healthcare sector in meaningful ways. Regardless of the sectoral focus, the fund is committed to maintaining a 80% sustainable investment approach with a social objective.

 

This impact is assessed based on the following criteria:

• Patients’ lives,
• Healthcare spending,
• Development of new treatments/diagnosis, targeting unmet clinical need.

 

For each investee companies, relevant quantitative and/or qualitative measures will be used to monitor and assess the positive impact. Below are some examples of measures which can be present:

 

1. Impact on patient lives (as applicable)

• Number of patients having received treatment from the company (in clinical trials sponsored by the company and trials sponsored by others using products from the company) to date.
• Number of patients whose life/health is/could be improved per year by the company’s products (target patient population).

 

2. Impact on health spending (as applicable)

• € saved per patient or hospital per year
• Any additional reduction in administrative tasks (e.g. increase in payment collection, decrease in man hour spent on admin tasks, etc.)
• % reduction in hospital visits or time / length of hospital stay / hospitalisation rate / negative care outcomes (e.g. false diagnosis, complications, prescription errors, etc.).

 

3. Efforts in finding new treatments/diagnosis, targeting clinical unmet need (as applicable)
   • Improvement in treatment / diagnostic development

• Number of treatments / tests / indications supported by the company’s products.
• (Potential) reduction in treatment/diagnostic test development cost and/or acceleration of treatment/diagnostic test development cycle.
• Any other improvement in product development (through for example more data points collected, better patient monitoring, etc.).
  • Improvement in care continuum
• Any improvement to patient care continuum (e.g. decrease in drop-outs, increase in patient reported outcomes, increase in adherence, increase in patient data recording and availability, etc.)
  • Treatments/diagnosis targeting clinical unmet need

Cumulated € spent on R&D on treatments/diagnosis targeting clinical unmet need (no existing cure or diagnostics) over the last calendar year.

 

6.2.   Promotion of Sustainable and Responsible practices

The crucial role of gender equality as driver of development progress, recognizing that the potential of women had not been fully realized, owing to, inter alia, persistent social, economic and political inequalities.

Gender inequalities are still deep-rooted in every society. Women suffer from lack of access to decent work and face occupational segregation and gender wage gaps. In many situations, they are denied access to basic education and health care and are victims of violence and discrimination. They are under-represented in political and economic decision-making processes.

Attract and maintain talents

Workers are increasingly sensitive to the finality of their work as well as how their job is done. Finding ways to attract and maintain talent within the healthcare industry is a challenge. Developing new talent strategies, finding competitive advantages to address skills and talent shortages and increasing employees’ engagement may be considered as a top priority of our portfolio companies’ strategies.

 

Promote diversity and inclusion

An inclusive and diverse workforce is a major asset that enables companies to be more efficient and valuable.

We engage portfolio companies to promote inclusive and diverse work environments.

 

Ensure workers’ health, safety and well-being

IPF strongly believes in employees’ strong value. We encourage Portfolio Companies to set safe and healthy place of work for employees as a top priority.

Well-being integrates mental health (mind) and physical health (body) resulting in more holistic approaches to disease prevention and health promotion.

Strong Governance and Business Ethics

IPF believes that understanding governance risks and opportunities in decision-making is critical, as poor corporate governance practices have stood at the core of some of the biggest corporate scandals. Implementing appropriate governance practices and Business Code of Conduct is considered a key pillar of IPF investment review.

 

Data Privacy and Safety

Data privacy and security is crucial to ensure good business behaviors, avoid fraud risks and be careful with sensitive information.

 

IPF: High standards of business ethics

IPF aims at having strong internal processes for an effective, accountable, and inclusive organization. This means preventing potential ethical and anti-corruption issues, setting transparent and participatory governing bodies, and ensuring data protection.

We guarantee fast and lean decision-making processes as well as empowerment through our governance system.

6.3.   Statement on principal adverse impacts of investment decisions on sustainability factors

The Company has integrated in its investment process the consideration of any PAI alongside the relevant financial risks and relevant Sustainability Risks.

Pursuant to Article 4 of the Disclosure Regulation, financial market participants publish on their website for information on taking account or not of the main PAI in terms of sustainability resulting from its decisions of investment.

These external sustainability factors focus on the climate, more broadly environmental issues. Are also concerned the factors in the social domain, with in particular the rights of employees, respect for human rights and the fight against corruption.

IPF is committed to taking into account the negative impacts in sustainability issues resulting from its investment decisions.

Following the publication of the ESMA RTS of 2 February 2021, IPF will implement the monitoring of the 14 mandatory indicators to the main negative impacts on the factors of durability detailed in Section 14 below.

However, it is worth mentioning that IPF mainly invests in small and medium entities, with standard office activity and located in Europe. Their PAI are not expected to be significant.

Please refer to the full statement on the principal adverse impacts of investment decisions on sustainability factors for more information.

6.4.   Sustainability Risk exposure assessment

It is important to differentiate the Sustainability Risk from the Principle Adverse Impact.
Sustainability Risk relates to the potential financial impact on the investments, while Principle Adverse Impact reflects the negative impacts investments may have on society (societal impact).

A Sustainability Risk can represent a risk in itself, but could also have an impact on other types of risks, such as market, liquidity, credit or operational risks.

To this end, IPF integrates Sustainability Risks in its investment decisions by identifying those risks as early as possible and taking appropriate measures to mitigate their impact on investments. The identification and assessment of such risks are performed by the Investment Team and the Risk Manager during the due diligence phase.

The below sustainability risks criteria shall be taken into account when investing :

• Transition risks, resulting from the effects of the implementation of a low-carbon economic model (e.g. regulatory and legal risks, technological risks, reputational risks and risk of market opportunities),
• Physical risks, resulting from damages caused by extreme climatic and meteorological phenomena. These can be acute (due to natural events) or chronic (linked to rising temperatures and long-term geographic changes) and include for example heat waves, cold waves, drought, tropical cyclones, fires and floods,
• Social risks and those related to fundamental human rights, negatively impacting workers and the communities around them (e.g. forced labor and slavery, child labor, respect for indigenous peoples and their cultural heritage, property rights, discrimination, freedom of association, personal health and safety, decent working conditions, remuneration and social protection, right to privacy),
• Governance risks and other ethical risks (e.g. sanctions and embargoes, terrorism, corruption and influence peddling, appropriation of resources, tax evasion, data).

 

6.5.   Exclusion criteria

IPF has implemented a direct exclusion policy, which lists so called negative screening criteria related to Sustainability Risks which would lead to IPF excluding such companies as potential investments.

Exclusion criteria applied in the screening phase of potential investments are the following:

• Illegal economic activity (i.e. any production, trade or other activity, which is illegal under the laws or regulations applicable to the company, including without limitation, human cloning for reproduction purposes)
• Production or trade of tobacco or distilled alcoholic beverages and related products
• Financing the production of or trade of weapons (including chemical or bacteriological ones) or ammunition of any kind
• Casinos or equivalent enterprises
• Providing products or services causing severe environmental damage
• Using children or forced labour
• Research, development or technical applications relating to electronic data programs or solutions, which:
  • (i) aim specifically at: internet gambling and online casinos, pornography or
  • (ii) are intended to enable to illegally enter into electronic data networks or download electronic data
• Proliferation financing activity and dual-use items
  • “Proliferation financing” refers to: the act of providing funds or financial services which are used, in whole or in part, for the manufacture, acquisition, possession, development, export, trans-shipment, brokering, transport, transfer, stockpiling or use of nuclear, chemical or biological weapons and their means of delivery and related materials (including both technologies and dual use goods used for non-legitimate purposes), in contravention of national laws or, where applicable, international obligations.
  • “Dual-use items” refer to goods, technology and software that can be used for both civil and military purposes.
• If providing support to the financing of the research, development or technical applications relating to (i) human cell cloning for research or therapeutic purposes, or (ii) genetically modified organisms (GMOs), the screened company will have to ensure the appropriate control of legal, regulatory and ethical issues linked to such activities

 

7.      INTEGRATING THE DISCLOSURE REGULATION INTO THE INVESTMENT PROCESS

It is important to note that as a lender, the Company has no direct involvement in strategic and operational plans and activities of its Portfolio Companies.

Prior to any new investment, the Company will focus on:

• The Sustainable Investment objectives and on other Sustainable and Responsible practices ;
• The assessment of the Sustainability Risk exposure;
• The detection and assessment of Principal Adverse Impacts.

The Company will use specific practices to integrate the above ESG considerations during all phases of its Investment Process:

7.1.   Screening

At the screening stage, IPF solely focuses on the S factor: Life Science and Health companies which by essence have social impact. IPF only flags/excludes companies which do not meet its Sustainable Investment objectives (SDG #3): a. impact on patients’ lives, b. impact on health spending, c. efforts in finding new treatments/diagnosis, targeting clinical unmet need. This identification is performed based on the information collected from the screened companies.

IPF digital health and clinical stage biotech companies have low direct impact on climate, as they have standard office activity. Therefore, E factor is not investigated at this stage, unless the company is a manufacturer. E and G factors are investigated during the due diligence phase.

7.2.   Due diligence and structuring

The identification of the Sustainable Investment Objectives and the Sustainability Risks are part of the due diligence phase. During this phase, IPF focuses on:

• The identification of the SDG #3: a. impact on patients’ lives, b. impact on health spending, c. efforts in finding new treatments/diagnosis targeting clinical unmet need, and excludes investment opportunities that cannot provide one or more such objectives;
• The identification and assessment of Sustainability Risks;
• The compliance with the exclusion criteria list, including systematic checks on potential bio-ethical issues, aggressive or inflated drug pricing strategies, good governance, and tax compliance; and
• The detection and assessment of PAI.

Environment factor will be further analysed for digital health companies and manufacturers, as they may have significant environmental footprints, through the completion of the PAI.

Any material exposure or impact revealed during the due diligence phase is investigated, particularly in relation to how it is managed by the target company. This includes both legacy historical issues and future potential risks. Common approaches include:

• Completion by the target company of the ESG questionnaire issued by IPF, to assess its involvement on ESG matters (SDGs #5, #8 and #16) and related reporting processes;
• Understanding management’s approach and sensitivity to ESG matters (SDGs #5, #8 and #16);
• Identifying opportunities to improve the company’s ESG value through the establishment of financial incentives;
• Documenting ESG reporting and incentivization schemes as part of the loan documentation.

During the structuring phase, IPF shall agree on qualitative ESG objectives with the target company (eg: ESG Committee to be implemented by the company) and quantitative ESG objectives related to SDG 3 (eg: target number of patients treated). IPF will design incentives to encourage the target company to reach the pre-agreed qualitative and quantitative objectives. If these objectives are met, the company will benefit from margin ratchets on its loan interest rate. This process is renewed every year and during the term of the loan – new Life Sciences and Health Impact objectives are agreed for the year to come.

7.3.   Portfolio Management and exit

IPF will assess the achievements of the portfolio companies against the Sustainable Investment Objectives defined during the investment phase. Monitoring will be conducted at least annually and may involve meetings with the portfolio companies, collecting internal data, and reviewing any public sustainability reporting.

IPF monitors its portfolio companies through a range of impact indicators corresponding to each Sustainable Investment Objective. These indicators enable IPF to assess both impact and operational performance across its portfolio. They include measures related to:

• Impact on Patient Lives, assessing access to care, patient outcomes, healthcare quality and satisfaction, and health equity;
• Efforts in Finding New Treatments or Improving Existing Treatments, assessing innovation, research and development activities, and progress in clinical development;
• Impact on Health Spending, assessing operational efficiency and contribution to healthcare system performance.

In addition to the Sustainable Investment Objectives, IPF will monitor indicators related to the selected SDGs considered as most relevant for the portfolio companies and where IPF concentrates its efforts: SDG #5 (Gender Equality), SDG #8 (Decent Work and Economic Growth), and SDG #16 (Peace, Justice and Strong Institutions).

Once the investment has been made, depending on the level of ESG processes already in place within the Portfolio Company, IPF may engage with management to discuss how ESG matters are being managed and prioritized. While some Portfolio Companies may already have mature ESG frameworks, others may still be developing their approach. Measures that can be agreed upon as part of the investment documentation with the Portfolio Company include:

• Drafting or enhancing an ESG policy;
• Assigning ESG resources and responsibilities, and establishing processes to implement them;
• Requesting the Portfolio Company’s board to report on ESG performance;
• Organizing meetings with the Portfolio Company to review ESG progress and objectives.

IPF will review ESG performance annually throughout the investment period. The results may inform the application of margin ratchets and will contribute to the overall assessment of the Portfolio Company’s sustainable performance A Sustainability Risk can be a stand-alone risk, but it can also amplify other risk types — including market, liquidity, credit and operational risks.at exit.

 

8.      DOCUMENTATION AND REPORTING

8.1.   Deal submission sheet

The deal submission sheet, summarizes a new investment opportunity in a standardized format and is submitted to the Portfolio Management Committee (“PMC”) prior to a PMC meeting, whose purpose is to decide whether to proceed with the opportunity and approve pitching the proposed high-level terms to the company, or alternatively not to pursue the investment. The document presents the key characteristics of the transaction, and includes environmental, social, governance, and healthcare impact considerations as part of the assessment criteria. The details and purpose of the deal submission sheet are further detailed in the Investment Process.

8.2.   The investment memorandum

The investment memorandum is issued for each new investment and sent to the PMC before the Approval In Principle and Final Stage Approval meetings. The  the following information is included in the investment memorandum:

• Confirmation that the Sustainable Investment objectives of the Fund are met;
• Description and assessment of the Sustainability Risk exposure;
• Confirmation that no Principle Adverse Impact have been noticed.

The details and purpose of the investment memorandum are further detailed in the Investment Process.

8.3.   The investment agreement

IPF will clarify its expectations of how ESG matters should be managed when negotiating and finalising the investment agreement with the target Portfolio Company. This can be done in the form of ongoing representations, covenants and other reporting requirements.

IPF will include in the legal loan documentation financials incentive mechanisms, e.g. a margin ratchet (effectively a reduction in interest costs) at the maturity of the loan, upon achievement of specific ESG improvements identified in the due diligence and structuring phase.

8.4.   The risk management process

The ESG risk has been defined as an Operational Risk, and as such is under scope of the risk management review performed by the IPF Risk Manager. The results of work performed will be disclosed in the annual risk management report communicated to the Board.

8.5.   The annual reporting to investors

Every year IPF will report to investors the following information:

• Information on the methodology used to assess, measure and monitor the sustainability of the investments. IPF will explain its strategy for achieving its Sustainable Investment objective;
• The sources of data used, their quality and the way in which this data is collected and processed;
• The ESG assessment criteria;
• The indicators that precisely measure the achievement of the Sustainable Investment objective;
• The achievement of the Sustainable Investment objective and the positive impact of the fund;
• The historical comparison of indicators from the previous report;
• The explanation of methodological limitations if any.

IPF has not designated any index as a reference benchmark.

 

9.      ESG COMMITTEE

IPF has implemented an ESG Committee composed of Edouard Guillet and Luis Pinto Barreiros (Portfolio Management function) and Claire Lorenzi (Compliance Officer and Risk Manager of the Company).

The ESG Committee assists the Board in

(a)       Outlining the general strategy relating to ESG matters,

(b)       Developing, implementing and monitoring initiatives and policies based on that strategy,

(c)        Overseeing communications with employees, investors, stakeholders and portfolio companies with respect to ESG matters, and

(d)       Monitoring and assessing developments relating to, and improving the Company’s understanding of ESG matters;

(e)       Identifying and prioritizing principal adverse sustainability impacts and indicators;

(f)        Describing the principal adverse sustainability impacts and any actions in relation thereto taken or, where relevant, planned;

The Committee meets during the Conducting Officers meeting, or as deemed necessary or appropriate.

 

10.      TRANSPARENCY OF SUSTAINABILITY RISK POLICIES

IPF applies the Disclosure Regulation, which includes the integration of sustainability risks into investment decisions, the consideration of adverse sustainability impacts and the disclosure of ESG and sustainability‐related information.

The relevant disclosures under the Disclosure Regulation will be made

1. on IPF website,
2. pursuant to the investor disclosure requirements.

The Disclosure Regulation requires IPF to disclose, for its managed funds, the way Sustainability Risks are integrated into investment decisions and the results of the assessment of the likely Sustainability Risks’ impacts on returns of the relevant funds, or if not deemed relevant, the reasons why.

 

11.      OTHER COMMITMENTS TO ESG

IPF is a signatory of the UN-sponsored Principles for Responsible Investment (PRI) and thereby publicly demonstrate its commitment to including ESG factors in investment decision making and portfolio management.

The PRI is an international network of investors committed to integrating ESG factors into their investment practices. The PRI provides a framework that encourages investors to adopt responsible investment principles, aiming to contribute to a more sustainable global financial system.

The six principles of the PRI are:

1. Incorporate ESG issues into investment analysis and decision-making processes.
2. Be active owners and incorporate ESG issues into ownership policies and practices.
3. Seek appropriate disclosure on ESG issues by the entities in which we invest.
4. Promote acceptance and implementation of the Principles within the investment industry.
5. Work together to enhance effectiveness in implementing the Principles.
6. Report on activities and progress towards implementing the Principles.

As a signatory to the PRI since 2021, IPF is committed to these principles and actively integrates them into the investment processes and business strategy. Each year, the PRI conducts an annual assessment of all its members to evaluate their performance in implementing the principles. This assessment covers various aspects, including governance, strategy, policy development, integration of ESG considerations, and engagement activities. The evaluation results are intended to provide transparency, identify areas for improvement, and highlight leadership in responsible investment practices.

 

12.      REMUNERATION POLICY

The determination of the variable remuneration and benefits includes an assessment of the performance of the team under the ESG Policy. The assessment of the performance under the ESG Policy is discretionary, and shall be based on how the team member:

• integrates sustainability risks into the sourcing process,
• integrates sustainability risks when introducing investment opportunity to the Portfolio Management Committee,
• monitors and collects in due time ESG information from the portfolio companies, as foreseen in the loan documentation
• promotes the principles set out in the ESG Policy in the management of the portfolio, thereby reducing sustainability risks for IPF and contributing to the IPF Funds’ sustainability objectives.

IPF will reward it’s investment team members based on their integration of sustainability risks into the investment process and included in the legal documentation for each new deal. This process is further described in the Remuneration Policy.

 

13.      Appendix – The exclusion criteria and PAI

IPF applies additional vigilance to potential risks of negative impacts. Therefore, IPF applies filters to investment targets to either exclude activities linked to regulatory bans, or activities banned in our by-laws.

Principal adverse impact is generally understood to mean the negative impact, caused by an investment decision or investment advice, on these factors.

IPF aims to manage the risk connected to potential adverse sustainability impact from our investments: general screening criteria, surveillance of norms breaches. In addition, we monitor and evaluate a range of PAI indicators.