Approach to Responsible investments, ESG and sustainability risks
Lifeline Ventures is investing in very early stage (angel and seed stage) companies consisting most often the founder team. Therefore, our main environmental sustainability goal is to increase the share of Climate Tech investments in which the companies aim for significant carbon emissions reductions. Our previous investments in this sector include Solar Food, P2X Solutions and Sulapac. Furthermore, we pay attention to diversity in all its form in all our portfolio companies. We do this by ensuring that diversity is considered in recruitment and management.
1. Responsible Investment and ESG Implementation
We acknowledge that ESG factors may both pose risks and present opportunities to our funds’ portfolio companies. Success in any of our investments may be impacted not only by their financial performance but also by other performance criteria.
We also acknowledge that both the investors in our funds and co-investors in our 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 processes, ownership processes, and reporting.
We have integrated consideration of responsible investment risks and opportunities into our investment process, and we are committed to the further development of ESG policies and procedures in a manner that has a positive impact on us, our funds and our funds’ portfolio companies. We are committed to ensure that in our due diligence and monitoring for each investment of our funds, ESG and sustainability risks are a part of our investment decision procedure, including appropriate consideration of environmental, social (including health and safety, employees, human rights, consumer and community issues) and governance issues.
We select investments carefully in accordance with the investment policies and principles agreed with our investors. Lifeline Ventures will not and hasn’t made any investments in companies focusing on any of the following: tobacco, fossil fuels, pornography, controversial weapons (anti-personnel mines, cluster munitions, chemical weapons and biological weapons), animal or human cloning, or gambling industry.
ESG issues, especially environmental and social issues, are global trends that provide lucrative investment opportunities. We continue to make sustainable investments even though we do not set a defined metrics on the portion of these investments in our portfolio. On the other hand, companies that do not consider ESG risks and opportunities can fail to meet their customer expectations and are therefore uninteresting investment opportunities for us.
We conduct a standard due diligence on the target companies, including the legal, financial, governance and commercial aspects as well as ESG topics. Investee company’s legal compliance and compliance to other applicable standards and practices is evaluated for each investment usually by external advisors. A summary of due diligence, including any material findings, is included in the investment documentation for our investment decisions. Based on the due diligence findings we may exclude investing in businesses, including such that contain significant sustainability risks.
We invest in startup companies in their early stages. Our requirements and coaching start from the product-market-fit, profitable business model, good corporate governance and successful go-to-market, and then extends with further emphasis on corporate responsibility and enhanced governance as the company matures. Regardless of the maturity we expect that ESG considerations are on the board’s agenda at least once a year, usually same time with the annual financials. In case of any ESG risk materialises, we take an active role in ensuring that the company management takes relevant actions. At the same time we keep our investors updated on the actions taken.
We require each portfolio company to work on its own corporate responsibility policy which best serves value creation in that company, and to adopt a corporate governance policy which advances good governance and a Code of Conduct based on the company’s values.
Requirements and expectations may vary with respect to other ESG aspects depending e.g. on the sector, maturity, geography and business model of the portfolio company in question. However, certain ESG expectations are the same
Monitoring and Reporting
We monitor financial and non-financial performance of our portfolio companies, including ESG issues. We report the status of our funds and underlying investments to our investors in compliance with agreements with investors, Invest Europe/IPEV guidelines, applicable legislation, accounting regulations, and other statutory requirements.
We expect the risk management and corporate responsibility issues to be a yearly theme in each portfolio company’s board meetings, and the corporate responsibility reporting to be covered once a year in the board simultaneously with the financial statements. Detailed agenda is based on company’s relevant ESG topics.
We evaluate and summarize our portfolio companies’ corporate responsibility and ESG topics annually and agree on required actions, including necessary amendments to this document and our ESG evaluation template, once a year in the board of directors. .
We will update the investors of our funds as to ESG matters relating to our funds’ investments in the annual meetings and in quarterly reports when needed.
2. ESG in Our Own Operations
We aim to minimize any burden to the environment caused by our own activities. We do this by small daily choices, such as, we extensively use video conferencing instead of travelling to face-to-face meetings, we use and encourage the use of digital documentation format. We actively sort and recycle office waste.
We invest in startup companies in their early stages. Majority of all new jobs are created in these new companies. Our investments strongly contribute to the job creation especially in Finland. In addition, through our investments and business development work, we encourage innovation, promote economic growth, and enhance global competitiveness of our investee companies. We follow applicable labour, safety and health regulations and have valid licenses and permits for our operations. We aim to diversify and gain new knowledge in our team in every new recruitment.
We believe that startups will become the new cornerstone in the Finnish economy. Therefore, we take an active role in promoting the startup ecosystem and venture capital industry in Finland through being active in relevant networks such as the Finnish Startup Community, Startup event Slush and the Finnish Venture Capital Association (FVCA).
We conduct our business by good ethical principles and follow the industry best practices, as well as the principles agreed with our investors. We follow transparent communications practices towards our investors.
We strive to promote equal opportunities for all individuals. We strive for fair play among all managers, employees and stakeholders. We aim to proactively contribute to the satisfaction and the long-term engagement of our employees.
Lifeline Ventures is a member of the Finnish Venture Capital Association (FVCA). We follow 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 UN Responsible investment (UNPRI) signatories. We promote compliance with the UN Global Compact (e.g. respect for human rights). Lifeline Ventures is also supportive of the Organisation for Economic Co-operation and Development (“OECD”) Principles of Corporate Governance.
3. Sustainability Risks as an Integral Part of Investment Decisions
We are committed to ensure that in our due diligence and monitoring for each investment of our funds, sustainability factors are a part of our investment decision procedure, including appropriate consideration of environmental, social and governance issues. We select investments and make investment decisions with due diligence and always in accordance with the investment policies and principles agreed with our investors in the partnership agreements of our funds.
Sustainability Risks and Factors
Environmental risks considered include adverse effects of climate change, emissions, energy usage, neglected energy efficiency, materials usage, neglected resource efficiency including recycling, as well as effects of loss of biodiversity.
Social risks considered include health and safety issues, employee satisfaction, diversity and inclusion, human rights, consumer and community issues.
Governance risks considered include legal compliance, applicable industry practices, cybersecurity, business ethics, transparency, and general governance practices.
We take sustainability risks into account in all stages of our investment process; we mitigate the risks by starting the sustainability evaluation already during due diligence and taking any surfaced findings into closer investigation, and by requiring investee companies in creating and adopting their own sustainability policies. We actively control the sustainability risks by monitoring also non-financial performance of our portfolio companies, including sustainability factors, parallel to the financial performance. We then report the status of our funds and underlying investments to our investors in compliance with agreements with investors.
We expect the sustainability issues and risk management to be a yearly theme in each portfolio company’s board meetings, and the related reporting to be covered once a year in the board simultaneously with the financial statements, including topics such as employee safety and health, equal opportunities, and fair play.