Approach to Responsible investments, ESG and sustainability risks

1. General

Lifeline Ventures (LLV Fund Management Oy) primarily invests in early-stage companies, typically at angel and seed stages.

We manage ESG issues through several approaches. On the environmental side, a key way to promote sustainability is by investing in businesses whose products or services have a clear carbon reduction potential. As an industry-agnostic investor, we take relevant environmental factors within each sector into account from the due diligence phase onwards. From a social perspective, we monitor diversity across various aspects within our portfolio companies. The portfolio companies are expected to consider diversity in their recruitment and management processes and to regularly assess employee well-being. On the governance side, we promote and support the implementation of strong governance practices throughout our portfolio.

2. Responsible investment and ESG implementation

ESG factors may present both risks and opportunities for the portfolio companies of our funds. Success in any of these investments may be impacted not only by financial performance but also by other performance criteria.

We are committed to continuously improving our ESG policies and procedures to create a positive impact for the funds and their portfolio companies. ESG and sustainability risks are included in the investment decision-making process, from the due diligence onwards. This includes appropriate consideration of environmental, social and governance factors.

It is also acknowledged that both the investors in our funds and co-investors in the portfolio companies may have their own requirements and approaches to responsible investment. These may include expectations in relation to responsible investment factors in the investment process, ownership practises, and reporting.

2.1 Deal sourcing

Investments are selected carefully in accordance with the investment policies and principles agreed with the investors. We do not invest, and will not invest, in companies focusing on any of the following: tobacco, fossil fuels, coal-related activities, pornography, controversial weapons (including anti-personnel mines, cluster munitions, chemical and biological weapons), child or forced labour, illegal drugs, animal or human cloning, or the gambling industry.

Businesses that address environmental, social, and governance challenges may offer attractive investment opportunities, and we may pursue investments in such companies. However, no specific allocation target has been set for this category. Conversely, companies that do not address ESG risks and opportunities may be less likely to meet customer expectations and may therefore represent less attractive investment opportunities.

2.2 Due diligence

A standard due diligence process is conducted for the target companies, including legal, financial, governance and commercial aspects as well as ESG topics. The investee company’s legal compliance and compliance with other applicable standards and practices are assessed for each investment, usually by external advisors. Key material findings from the due diligence are included in the investment documentation prepared to support investment decisions. Based on the due diligence findings, investments may be excluded, including those that involve significant sustainability risks.

2.3 Active ownership

Investments are primarily made in early-stage startups. Portfolio work begins with topics such as ensuring product-market-fit, a profitable business model, good corporate governance and a successful go-to-market strategy. As the portfolio companies mature, additional emphasis is placed on corporate responsibility and enhanced governance. In case an ESG risk materialises, we take an active role to ensure that appropriate actions are implemented by the portfolio company. Investors are kept informed about such incidents in the portfolio.

We encourage mature portfolio companies to develop a corporate responsibility policy that supports long term value creation, and to adopt a corporate governance policy and a Code of Conduct aligned with their values. All new portfolio companies are expected to adopt a diversity enhancing recruitment policy and to monitor their employee wellbeing on a regular basis. Companies in the pre-seed stage are expected to put basic corporate governance principles into action within 12 months of our investment. Basic governance principles expected are such as timely financial reporting and audits conducted by a renowned auditor, valid D&O insurance, solid board practices, proper employment contracts and an up-to-date cap table and trade register.

We will use reasonable efforts to develop our climate strategy and to implement a board-level climate strategy for portfolio companies of relevant size, taking into account, as appropriate, the guidelines of the Venture Climate Alliance Portfolio Alignment Framework. In general, requirements and expectations may vary with respect to any ESG aspects depending, e.g., on the sector, maturity, geography and business model of each portfolio company. However, certain core ESG expectations remain consistent across all portfolio companies.

2.4 Monitoring and reporting

Financial and non-financial performance of portfolio companies is monitored regularly, including ESG matters. The status of funds and underlying investments is reported to investors in compliance with investor agreements, Invest Europe/IPEV guidelines, applicable legislation, accounting regulations, and other statutory requirements.

ESG and corporate responsibility topics, including risk management, are expected to be addressed annually in each portfolio company’s board meetings, typically in connection with the financial statements. The detailed agenda is based on the company’s relevant ESG topics.

Corporate responsibility and ESG topics within the portfolio are evaluated and summarised annually. Information on ESG matters is collected annually from portfolio companies, with requirements increasing in line with company size. Based on this assessment, necessary actions are agreed upon, including potential updates to this policy document and the ESG evaluation template, as approved annually by the board of directors.

Investors are informed about ESG matters related to fund investments in the annual ESG report and, when necessary, through quarterly reports. Investors will be informed on any material changes to the ESG Policy, its implementation across the portfolio, and relevant portfolio company highlights and progress in the annual report, during the annual meeting or upon request.

Possible ESG incidents are reported to investors without delay. ESG matters will be included on the agenda of each annual meeting.

3. ESG in our own operations

3.1 Environment

Efforts are made to minimise any environmental impact of internal operations. This is pursued through small daily choices, such as extensive use of video conferencing instead of travelling to face-to-face meetings, preference for digital documentation formats, and active sorting and recycling of office waste.

3.2 Social

Applicable labour, safety, and health regulations are followed, and valid licenses and permits for the operations are maintained. Employees have competitive occupational health coverage and insurance.

Each new recruitment is seen as an opportunity to diversify and gain new knowledge within the team. Equal opportunities for all individuals are actively promoted and fair play among managers, employees, and stakeholders is pursued. We proactively contribute towards employee satisfaction and long-term engagement, in full compliance with applicable laws and regulations.

We are committed to protecting the personal data of our employees, job applicants, investors and other stakeholders in full compliance with applicable data protection legislation, including the GDPR. We maintain clear internal policies governing the processing of personal data, define roles and responsibilities (including a designated Data Protection Officer), and ensure that data is processed only for legitimate and defined purposes. Appropriate technical and organizational safeguards are implemented to protect personal data against unauthorized access, loss, or misuse. Personal data is retained only as long as necessary and is not transferred outside the EU/EEA without appropriate safeguards.

Investments are made primarily in early-stage companies, which account for a significant share of job creation. Therefore, these investments play an important role in supporting job creation, particularly in Finland. In addition, through our investments and business development work, we encourage innovation, promote economic growth, and enhance the global competitiveness of our investee companies.

Startups are considered a future cornerstone of the Finnish economy. Therefore, we have an active role in promoting the startup ecosystem and the venture capital industry in Finland by being active in relevant networks such as the Finnish Startup Community, Slush and the Finnish Venture Capital Association (FVCA).

3.3 Corporate governance

Business is conducted in accordance with good ethical principles, industry best practices, and the principles agreed with the investors. As a fully authorized AIFM supervised by the Finnish Financial Supervisory Authority (FIN-FSA), we comply with all applicable regulations. We maintain policies and practices covering internal controls, compliance, risk management, internal audit, and the management of conflict-of-interest situations. These processes are implemented in cooperation with external partners and are continuously reviewed and improved. Transparent communication practices are followed in investor relations.

Lifeline Ventures is a member of the Finnish Venture Capital Association (FVCA) and follows the Professional Standards and Code of Conduct of Invest Europe. Due consideration is also given to other non-binding Invest Europe and national associations’ guidelines and recommendations such as the Openness and Transparency Recommendations of FVCA.

We are a signatory of the UN Responsible investment (UNPRI). We promote compliance with the UN Global Compact (e.g. respect for human rights) and the International Labour Organization (ILO) labour conventions and support the Organisation for Economic Co-operation and Development (“OECD”) Principles of Corporate Governance.