IPF Funds labelled as Article 9 as per the Disclosure Regulation will invest in companies which can also demonstrate a direct positive impact on at least one of the following:

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

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.

 

5.2.   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.

5.3.   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.

5.4.   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).

 

5.5.   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

 

6.      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:

6.1.    Selection

The Company will screen potential investments considering its Sustainable Investment objective. This could prompt further investigation during due diligence phase and/or lead to abandoning the investment entirely.

 

6.2.    Due diligence and structuring

During this phase, the Company will identify and assess the Sustainability Risk exposure and the potential Principal Adverse impact of the target company. Any material exposure or impact revealed during the due diligence phase will be investigated, in particular as to how they are managed by the target company. This process typically involves investigating legacy historical issues and future potential issues.

Common approaches include:

• completion by the target company of the ESG questionnaire issued by the Company, to assess the involvement of target companies on ESG matters and/or related reporting processes in place;
• understanding management’s approach and sensitivity to ESG matters in general;
• identifying opportunities to increase company ESG value. To do so, the Company will start looking at potential incentives that could be implemented to incentivise the creation of an ESG value plan by the target company;

During this phase, the Company may agree with the target company to apply incentives. Incentives will correspond to interest margin ratchet on cash interest applied at the maturity of the loan, following the achievement by the Portfolio Company of ESG targets for the duration of the loan. The ESG targets will be defined and agreed together with the target company during the structuring phase.

 

6.3.   Portfolio Management and exit

The Company will monitor on an annual basis the ESG performance of the Portfolio Company. The Company will assess the achievements against the ESG targets.

Monitoring can involve scheduled meetings with Portfolio Companies, collecting internal data from the Portfolio Companies and reviewing any public (sustainability) reporting.

Once the investment has been made, depending on the level of ESG principles in place within the Portfolio Company, the Company may have deeper conversations with management about how ESG issues are being prioritised and managed.

While some Portfolio Companies will be more advanced at managing ESG issues and proper processes and policies in place, others might be at the early stages of developing their approach. The Company will review ESG reports and regularly discuss progress, plans and objectives, with the Portfolio Company’s management teams as appropriate.

Measures that can be agreed upon as part of the investment agreement with the Portfolio Company include:

• drafting an ESG policy;
• assigning resources and responsibilities, and setting up processes to implement the policy;
• requesting the Portfolio Company’s board to report on ESG performance;
• organising meetings with the Portfolio Company to discuss progress on ESG topics.

 

7.      DOCUMENTATION AND REPORTING

 

7.1.   The investment memorandum

The investment memorandum issued for each new investment will include the following information:

• 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.

 

7.2.  The investment agreement

The Company 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.

The Company 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.

 

7.3.   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 Risk Manager of the Company. Therefore, the results of work performed will be disclosed in the annual Risk Management Report communicated to the Board of Directors of the Company.

 

7.4.   The Annual Reporting to Investors

Every year the Company will report to Investors the following information:

• Information on the methodology used to assess, measure and monitor the sustainability of the investments. The Company 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 second report;
• The explanation of methodological limitations if any.

The Company has not designated any index as a reference benchmark.

 

8.      ESG COMMITTEE

The Company has implemented an ESG Committee composed of members of the Investment Committee and Claire Lorenzi (Compliance Officer and Risk Manager of the Company).

The ESG Committee assists the Board of Directors 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 shall meet, at a minimum, once a year or as deemed necessary or appropriate.

 

9.      INTEGRATING ESG FACTORS INTO THE SERVICE PROVIDERS RELATIONSHIPS

The Company may use specific practices to integrate ESG considerations into due diligence of Service Providers.

To this effect it will:

• include principles-related requirements in Requests For Proposals (RFPs);
• align service providers mandates, monitoring procedures, performance indicators and incentive structures accordingly;
• communicate ESG expectations to service providers;
• revisit relationships with service providers that fail to meet ESG expectations.

 

10.      TRANSPARENCY OF SUSTAINABILITY RISK POLICIES

The Company is applying 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 the Company’s website,
2. pursuant to the investor disclosure requirements.

The Disclosure Regulation requires the Company to disclose, for its managed funds, the manner in which 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 Partners is a signatory of the UN-sponsored Principles for Responsible Investment (UNPRI) and thereby publicly demonstrate its commitment to including ESG factors in investment decision making and portfolio management.

 

12.       REMUNERATION POLICY

IPF will reward investment team members based on their integration of sustainability risks into the investment process, reviewed during the due diligence phase 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.