– Transparency of adverse sustainability impacts at entity level and due diligence process and monitoring of ESG characteristics:
At Aurica Capital we are specialized in the Spanish middle market, investing in leading companies with competitive advantages over their competitors. To do this, we follow a common investment approach together with a specific criteria and investments typology that allow us to manage possible adverse impacts related to sustainability and ESG factors.
In addition, aspects related to governance and compliance with current legislation are analyzed and included in the Due Diligence carried out in our usual asset evaluation process. Furthermore, social and environmental aspects are included in specific Due Diligence of labor, technical, administrative and, where appropriate, environmental nature for those investments in which it is considered that the company may have a significant impact in this regard.
Although Aurica Capital makes a reasonable effort to mitigate possible adverse impacts related to ESG factors, the process of monitoring such impacts is currently under development.
- Transparency of remuneration policies in relation to the integration of sustainability risks:
Aurica Capital has a remuneration policy aligned with risk management, encouraging diversification in two areas:
- Sectorial: investing in companies from different industries within the portfolio.
- Geographic: promoting entry into new countries.
Furthermore, the remuneration of our professionals is aligned with Aurica Capital‘s long-term strategic objectives, which include ESG aspects.
Teams accountable for the implementation and monitoring of ESG factors in the investees and in the Asset Manager have a 15% of their variable remuneration subject to the correct implementation of a ESG indicators system, as well as to the satisfactory achievement of ESG objectives at both levels, Asset Manager and portfolio. Additionally, Aurica Capital encourages its professionals to include ESG criteria in decision-making investment, monitoring and divestment of investee companies in order to maintain sustainable growth.
The alignment of different stakeholders’ interests through a robust Remuneration Policy is essential for Aurica Capital, to mitigate potential conflicts of interest when decision-making takes place.
- Sustainable investment objectives:
Although Aurica Capital integrates ESG aspects into its Responsible Investment Policy, the definition of sustainable investment objectives is currently under development.
- Environmental or social characteristics promoted by the financial products:
Since the fund was established, investments in real estate, financial and defense sectors and those other sectors that are legally prohibited from investment by venture capital entities are explicitly excluded.
Furthermore, Aurica Capital does not invest in companies that carry out projects in which the existence of any of the following circumstances is proven:
- Exploitative or harmful forms of child labor or forced labor.
- Activity linked to pornography and / or prostitution.
- Production or trade of any product or development of any activity considered illegal according to the laws and regulations of the country where the project is located.
- Production and trade of substances that are prohibited or in the process of being phased out.
- Trade with wild fauna and flora regulated by the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).
- Use of drift nets of more than 2.5 km. of length.
- Manufacture or trade in products containing loose asbestos fibers.
- Cross-border trade of products or waste, unless it complies with the provisions of the Basel Convention and the regulations related to this Convention.
- Power generation using nuclear fuel and / or production, storage, treatment and trade of radioactive products, including radioactive waste.
- Production or trade in arms and ammunition.
- Destruction of areas considered of High Conservation Value.
In addition to the statement included the Responsible Investment Policy, Aurica Capital currently considers ESG aspects throughout the investment life cycle, integrating these aspects in the different stages of its investment strategy:
- Origination and screening of investments.
- Investment analysis.
- Due Diligence.
- Investment agreement.
- Investment monitoring.
- Governance and decision-making process (transversal to the entire investment cycle).
- Proportions of investments:
Aurica Capital ensures the integration of ESG aspects in its investments through the Responsible Investment Policy. Additionally, thanks to its minority but significant stakes in its portfolio (between 20% and 49%), Aurica Capital ensures that the development of the business, both at Asset Manager level itself and of its investees, is aligned with ESG criteria.
- Methodology, data sources and processing, including their limitations:
Although Aurica Capital has robust management tools, currently ESG methodologies, data sources and processing, including their limitations, are under development.
Since its constitution, Aurica Capital has maintained an investment strategy in the capital of Spanish companies through minority but significant stakes (between 20% and 49%), with a hands-on approach in managing the assets of the portfolio.
Therefore, Aurica Capital has presence on the Board of Directors and on the Management Committee of its investees. Additionally, there is a common model of Partners’ Agreement where, among others, a set of reserved matters are agreed both at the General Shareholders’ Meeting and at the Board of Directors, where Aurica Capital has the right of veto.
Aurica Capital develops a very proactive monitoring of its investees. In this sense, all the companies in the portfolio must report on a monthly basis a set of relevant business and financial management indicators, which allows us to be involved in the day-to-day management and maintain a high level of engagement with them.