Sustainability-Related Disclosures

Transparency of Sustainability Risk Policies (2019/2088 –3-1)

2bX Urban Fund Management GmbH (“2bX Management”, LEI:  529900DAXJXRRFJUGS70) considers sustainability risks as part of its investment decision-making process. Sustainability risks are environmental, social or governance events or conditions, the occurrence of which could have an actual or potential material adverse effect on the value of the investment. 2bX Management considers sustainability risks as part of its due diligence process prior to any investment. This also includes an assessment of sustainability risks. Such assessment is being conducted through an informal process as appropriate in light of the circumstances of the individual case. The results of such assessment are taken into account when the investment decision is being taken. However, 2bX Management remains free in its decision to refrain from investing or to invest despite sustainability risks in which case 2bX Management can also apply measures to reduce or mitigate any sustainability risks. At all times, 2bX Management will apply the principle of proportionality taking due account of the strategic relevance of an investment as well as its transactional context.

Transparency of Adverse Sustainability Impacts (2019/2088 – 4-1-b)

While 2bX considers adverse impacts of its investment decisions on sustainability factors, we do not report on them. Sustainability factors are environmental, social, and employee concerns, respect for human rights, and the fight against corruption and bribery. Given that the Sustainable Finance Disclosure Regulation (EU 2019/2088) (EU 2022/ 1288) (“SFDR”) and the accompanying Regulatory Technical Standards (“RTS”) are new legislative acts, there is very little or no practical experience or practice concerning the application of their respective provisions. Therefore, substantial legal uncertainties would remain when applying those provisions to the strategies pursued by 2bX. Moreover, the burden associated with reporting adverse impacts on sustainability factors (particularly if sustainability indicators are used) is disproportionate in light of the minimal relevance that such impacts could have in the context of 2bX’s investment strategy: 2bX pursues an active venture capital strategy and invests in young start-ups in UrbanTech. As a result, 2bx’s investment decisions will hardly ever impact sustainability factors. If and to the extent that the legal uncertainties will be resolved and a practicable market and administrative practice will evolve in this regard, 2bX will re-evaluate reporting the principal adverse impacts of its investment decisions in due course.

Transparency of Remuneration Policies in Relation to the Integration of Sustainability Risks (2019/2088 – 5)

As a registered alternative investment fund manager within the meaning of section 2 (4) of the German Investment Code (Kapitalanlagegesetzbuch, “KAGB”), 2bX Management does not have, and does not need to have, a remuneration guideline or policy in accordance with the requirements of the KAGB. Sustainability risks are not considered with respect to the determination of the remuneration.

SFDR Statement (2022/1288)

Summary

The Fund considers certain environmental and/or social characteristics as part of its investment decisions and monitoring processes but does not seek to make sustainable investments as defined in the SFDR. The consideration of environmental and/or social characteristics is carried out both before and after an investment. For this purpose, information is initially and regularly obtained from the portfolio companies by means of qualitative queries. The Fund incorporates exclusion (negative screening) aspects during the decision-making process. The actions and decisions described in the following section are each made by 2bX Management for and on behalf of the Fund.

No Sustainable Investment Objective

The Fund promotes environmental or social characteristics but does not have as its objective sustainable investment.

Environmental or Social Characteristics of the Financial Product

The environmental and/or social characteristics promoted by the Fund are its investment exclusions (see section ‘Investment strategy’ below).

Investment Strategy

The purpose of the Fund is to build, hold and manage (including to divest) a portfolio of equity and equity-related investments in growth-oriented seed and early-stage Portfolio Companies with a focus on early-stage companies with focus on PropTech/ConTech/CleanTech/UrbanTech business models primarily in Europe. The Fund shall, in principle, pursue a long term and sustainable investment strategy.

The Fund’s ESG approach (i.e., its investment exclusions) comprises part of its investment strategy, which is consistently applied for every portfolio company investment. The Fund shall not invest, guarantee or otherwise provide financial or other support, directly or indirectly, to companies, including Portfolio Companies:

• which 2bX Management is aware is involved in illegal activities;
• which is engaged in property holding (other than in an ancillary, non-commercial capacity);
• which is engaged in the manufacturing, distribution or sale of arms or ammunitions (other than for game hunting purposes);

• which is engaged in the manufacturing, processing, distribution or sale of tobacco products or hard spirits (other than the distribution in an ancillary capacity through retailers such as supermarkets or restaurants);
• which is engaged in human cloning or genetically modified organisms; or
• which is directly linked to gambling.

Good governance practices are assessed through an informal process as appropriate in light of the circumstances of each individual case as part of every due diligence process prior to any investment made by the Fund. Such practices include, in particular, sound management structures, employee relations, remuneration of staff and tax compliance within the portfolio companies. Moreover, the Fund will conduct regular monitoring of the good governance practices in its portfolio companies during the holding period. If the Fund becomes aware of severe governance issues, it will investigate them and work with all parties involved to find an appropriate solution during the term of the Fund.

Proportion of Investments

The Fund invests fully in line with its investment strategy and investment restrictions. The Fund does not intend to make any investments which are not aligned with its environmental or social characteristics (i.e., its investment exclusions). The Fund does not make and does not intend to make sustainable investments within the meaning of Art. 2(17) SFDR or environmentally sustainable investments within the meaning of Art. 2 Taxonomy

Monitoring of Environmental or Social Characteristics

The Fund has an increased awareness of the impact of sustainability risks on risk management and thus on the value potential of investments. In order to monitor its environmental or social characteristics (i.e., its investment exclusions), the Fund consults with its portfolio companies on an ad-hoc basis and will carry out further checks if there are indications of potential issues with the Fund’s exclusion criteria. External monitoring mechanisms are not provided. There are currently no sustainability indicators used to measure the attainment of each of the environmental or social characteristics promoted by the Fund that could be monitored.

Methodologies for Environmental or Social Characteristics

Currently the Fund applies qualitative assessments with regard to environmental or social characteristics (i.e., its investment exclusions). The Fund conducts its initial assessment in the course of its due diligence. The Fund’s due diligence is conducted through an informal process as appropriate in light of the circumstances of each individual case.

Data Sources and Processing

In order to attain each of the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions), a checklist is completed by the (potential) portfolio companies. The results of the checklist are considered in the investment decision. Data is obtained only from the (potential) portfolio companies. An external review or verification of the information obtained will only be carried out if misrepresentations are suspected.

Limitations to Methodologies and Data

The information collected from the (potential) portfolio companies through an informal process as appropriate in light of the circumstances of each individual case as part of the due diligence on behalf of the Fund is externally verified only if and to the extent misrepresentations are suspected. Thus, it cannot be ruled out completely that false information may remain undetected in certain cases. As the Fund’s investments are made for several years, the Fund considers it a priority to establish and maintain a trustful working relationship with the Fund’s portfolio companies in order to ensure compliance with the environmental or social characteristics promoted by the Fund (i.e., its investment exclusions).

Due Diligence

An initial assessment of how an investment relates to the aforementioned characteristics is carried out as part of the due diligence process through an informal process as appropriate in light of the circumstances of each individual case. As a rule, purely qualitative statements of an environmental or social nature or relating to corporate governance are requested from the portfolio companies and then taken into account in the investment decision-making process. Internal and external reviews or verifications of the information obtained will only be carried out if misrepresentations are suspected.

Engagement Policies

Engagement is not part of the environmental or social investment strategy of the Fund. However, the Fund may include risk mitigation measures where appropriate.

Designated Reference Benchmark

No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by the Fund.

Date of Publication

This document was last updated on March 7, 2024 to incorporate amendments and additions from the 2022/1288 SFDR update. If you have any questions, please do not hesitate to contact us at ESG@ace-alternatives.com or kl@2bx.vc.