The Sylvan Group

MAIL: james.oh@thesylvangroup.com

Approach

Sylvan ESG & Impact Policy

Introduction

The Sylvan Group (the “Sylvan”) has a mission to connect capital, business, and community to create fundamental solutions for important problems. We invest solely in companies and assets that can create value and grow by providing commercial solutions to key challenges faced by the world for a more sustainable world. Our goal is to support them to transform them as environmental and social impact contributors.

The purpose of this policy is to articulate Sylvan’s approach to investing responsibly and to the management of ESG and Impact issues in our business operations and investment processes.
This ESG and Impact Investment Policy covers all Sylvan funds, existing portfolio companies, new investments, and Sylvan’s own operations. All Sylvan staff are required to adhere to this ESG and Impact Investment Policy.

Adherence to International Standards

Sylvan adheres to the relevant international standards for responsible investment. Sylvan considers the United Nations’ six Principles for Responsible Investment (UN PRI) and is committed to their guidelines in relation to investment practices. We also endorse the ten principles of the UN Global Compact (UNGC) and the principles are integrated into our Code of Conduct.

All Sylvan’s potential investments are screened against the UN Sustainable Development Goals (UN SDGs). Once identified, the impacts are evaluated using the methodology of the Impact Measurement Project (IMP).

Lastly, as an ‘environmental and socially promoting’ investor, following article 8* under EU’s Sustainable Finance Disclosure Regulation (SFDR) proactively, we consider environmental and social characteristics in our overall investment process.

* About Article 8:Article 8 Fund under SFDR is defined as “a Fund which promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practicesSylvan adheres to the relevant international standards for responsible investment. Sylvan considers the United Nations’ six Principles for Responsible Investment (UN PRI) and is committed to their guidelines in relation to investment practices. We also endorse the ten principles of the UN Global Compact (UNGC) and the principles are integrated into our Code of Conduct.

Sylvan’s Approach to ESG and Impact

At Sylvan, ESG and Impact factors are firmly integrated within Sylvan’s own operation and across all stages of the investment lifecycle, from investment screening to due diligence, ownership, and exit.

Governance (Role & Responsibilities): We aim to maintain strong ESG and Impact governance within Sylvan’s operations and investment processes. To enable this, Sylvan established the ‘ESGI committee’, and a solid partnership with ‘Sylvan Sustainability Lab’ as well as external advisory experts.

1ESGI Committee

With the Impact Commissioner as a chairman, the committee oversees our ESGI investment process, setting the strategy and actionable directions for the ESGI principles and practices. The members of the ESGI committee include ESGI Commissioner, Head of investment group, ESGI director, and MDs with official roles at Sylvan. Specific roles within the committee include 1) ESGI policy annual updates; 2) Execution of Sylvan’s internal ESG operations; 3) ESGI investment implementation & monitoring, and; 4) other investment direction & decision making related to ESGI matters.

2Sylvan Sustainability Lab

Sylvan Sustainability Lab is our core competence with ESG and Impact related expertise at Sylvan. The team consists of professionals with ESG consulting and Impact business experiences. The team works closely with the ESGI Committee and serves a role as an advisory as well as the executor of ESGI-related matters of Sylvan.

Roles of the team may include 1) ESGI due diligence; 2) Portfolio company ESGI monitoring & management; 4) Internal/external ESGI communication, and; 3) Internal/external ESGI education & training.

Investment Theme

Sylvan takes a thematic investing approach under three main themes. The listed themes are not exhaustive and may be revisited and revised as needed.

Climate and Environmental Action
Inclusive Growth
Innovation for Sustainable Growth

ESGI Integrated Investment Process

The following process applies to all of Sylvan’s investment activities, except where otherwise noted.

1Initial Screening

Focuses on Growth Potential with Positive Environmental/Social Impact

Negative Screening : We use an ‘Exclusion List’ to define the types of projects that Sylvan does not finance, and all potential target companies are subject to the negative screening through the Exclusion List.
SDGs Alignment : The UN SDGs alignment process is used to determine if the target company creates or can create a meaningful positive impact.

2ESGI Assessment

Due Diligence for ESGI Assessment

Impact Assessment : Sylvan uses a three-step methodology for Environmental/Social Impact assessment, ‘Impact Identification’, ‘Impact Thesis’, and ‘Impact Verification’, leveraging international standards such as IMP and IRIS+.
ESG Assessment : We assess material ESG issues of the target companies through ESG Assessment Questionnaire and management interviews.

3ESGI Planning

KPI & Goal Setting : Prior to finalizing the investment decision, Sylvan develops a tangible and coherent ESGI mission and sets KPIs to be managed during the ownership. A monitoring plan is also set under an agreement.

4Investment Agreement

Consensus Build-up

Investment Agreement : Sylvan stipulates the Ethics Pledge to be signed by the CEO, articles of association, and reporting obligations to strengthen the connection between the target company’s impact creation and business model.

5Engagement and Monitoring

ESGI Management

ESGI Monitoring & Support : Sylvan monitors ESGI KPIs on a regular basis and provides support to achieve the addressed goals through periodic interviews, on-site visits, seminars, and education programs.
Reporting : The target companies will provide ESGI data on an agreed term.

6Exit

ESGI Reassessment & Partners Build-up

Before the sales of the portfolio company, Sylvan confirms the magnitude of impact and ESG operation level and looks for partners who understand the importance of ESGI realization. We will continue to build up ESG and impact the community in this market.

For detailed information, see Sylvan ESGI Integrated Investment Process.

Transparency and Reporting: Transparency is considered a top priority at Sylvan when communicating with its investors and key stakeholders. Sylvan will discuss ESG and impact considerations annually at a company level, to discuss measured activities and evolve priorities. We will proactively include ESG and Impact issues and performances in our annual reports to our limited partners and report promptly if any material issue arises.

Remuneration Policy

In accordance with the Sylvan Remuneration Policy, all identified staff and investment professionals are remunerated as employees, with a combination of fixed and variable remuneration.

Code of Conduct & Ethics

Sylvan values the virtue of corporate values and ethical business. All Sylvan employees are expected to adhere to our corporate values, and high standards of ethical business conduct as outlined in our compliance manual.

PAI Statement

Sylvan does not currently consider the principal adverse impacts of its investment decisions on sustainability factors as set out under the European Union Sustainable Finance Disclosure Regulation 2019/2088 (“SFDR”). However, Sylvan intends to comply with the relevant requirements by developing processes to gather information on the sustainability impact of its portfolio companies and by undertaking a full principal adverse impact assessment.

Approval

This ESG and Impact Investment Policy has been approved by the Sylvan ESGI Committee. This Policy shall be revisited annually for necessary updates.