IMPACT INVESTMENT POLICY
Oceans, covering 71% of our planet, are a critical life-support system for life on earth, providing at least 50% of our
oxygen, climate stability, food for 3bn people and livelihoods for hundreds of millions. But the oceans face threats at an
unprecedented scale, with existential repercussions for species, ecosystems, human health and quality of life.
Ocean 14 Capital Ltd (“O14C”) has established a growth-stage private equity impact fund (Ocean 14 Capital Fund 1 SCSp, (the “Partnership”)) which aims to make a tangible contribution to averting the crisis in our oceans.
The fund intends to invest the Partnership in companies that can generate positive environmental impact that contributes
to United Nations Sustainable Development Goal (“UN SDG”) 14, “Life below water”, including to improve ocean health, ensure sustainable food sources and scale climate change mitigation solutions and will seek new technologies and to optimise industries that are responding to changing consumer behaviour, value chain pressure and technological advances.
O14C focuses on contributing to the following targets within UN SDG 14:
• 14.1: Reduce marine pollution.
• 14.2: Protect and restore ecosystems.
• 14.3: Reduce ocean acidification.
• 14.4: End overfishing.
To deliver impact and financial returns, The fund impact assessment process is fully integrated with the investment process over the lifecycle of underlying portfolio companies.
SFDR
As a European Union-domiciled fund, the Partnership complies with the EU’s Sustainable Finance Disclosure Regulation (“SFDR”). As the Partnership has sustainable investment as its objective, it is classified as an “Article 9” fund under SFDR. This entails a number of requirements relating to the nature of the Partnership’s investments, its due diligence processes and the information that will be provided to investors on a pre-contractual and ongoing basis.
As an Article 9 fund, the majority of the Partnership’s investments will be “sustainable investments” as defined by SFDR being, in summary, investments that contribute to an environmental or social objective, and that do no significant harm to any environmental or social objective.
Principal adverse impacts O14C takes into account relevant principal adverse impacts (“PAI”) on sustainability factors in its investment process. It identifies and integrates considering sustainability risks and relevant PAIs of investment decisions on sustainability factors into its advice which is in turn included in the investment decision-making process.
The investment objective of the Partnership is to generate positive environmental impact that contributes to UN SDG 14 “Life below water”, including to improve ocean health, ensure sustainable food sources and scale climate change mitigation solutions. However, there is a risk that one or more portfolio companies could cause direct or indirect negative environmental and/or social effects, where the impacts of their activities across the spectrum of sustainability risks is insufficiently managed or mitigated, including for example where the Partnership is a minority investor in a portfolio
company and is not able to effect change or veto changes to the agreed impact policy.
Sustainability factors include environmental, social and employee matters, respect for human rights, and anti-corruption and anti-bribery matters. PAIs may expose an investment to sustainability risks. O14C considers PAIs on sustainability factors and is committed to rigorous due diligence to identify PAIs and any downside sustainability risk early, to ensuring
alongside the fund manager and the portfolio manager that consideration of PAIs is factored into decision-making
throughout the investment process, and that PAIs are addressed and, where possible, resolved or mitigated.
The fund intends to invest the Partnership in five sector verticals (aquaculture, fisheries, alternatives to fish protein, marine
flora and circular plastics), which are distinct from each other and may include a diverse range of portfolio companies.
Therefore, a standardized set of PAIs will not be applied but, through detailed due diligence of target portfolio companies, relevant PAIs will be identified and prioritised (based on stakeholder concern and potential impact on the business) PAIs for each target portfolio company on a case-by-case basis. Detailed PAI reporting will be provided in respect of the Partnership as required by SFDR.
Integration of sustainability risks and opportunities in the Partnership’s investment process O14C has a detailed methodology for identifying and integrating impact and sustainability risks into its investment process. A sustainability risk is an environmental, social or governance event or condition that, if it occurs, could cause
an actual or a potential material negative impact on the value of the investment.
O14C’s detailed “O14C Impact Process” includes requirements for all key steps of the investment lifecycle:
• Pipeline Development:
• We positively screen our pipeline for relevance for positive UN SDG 14 ocean impact, while actively
considering implications for other UN SDGs, and negatively screening those opportunities where
sustainability risks cannot be adequately mitigated.
• Due diligence:
• Our DD process is designed to ensure that the fund invest in companies with the potential for measurable positive impact on ocean health within the time horizon of our investment.
• “Positive Impact” for the Partnership may include direct and indirect impact on positive drivers (e.g. actions that remove marine pollutants), and direct or indirect impact on negative drivers (e.g. actions
which reduce the absolute or relative impact of marine pollution sources).
• We assess ESG performance of prospective investments using the B-Impact Framework, and our
internal impact team develops a quantitative and qualitative understanding of impact, using an LCA lens, prior to an investment decision. We engage additional experts as required.
• Our proprietary opportunity screening tool scores potential investment opportunities, and requires that all investments are reviewed from the perspective not only of impact opportunity, but downside
sustainability risks.
• Before our investment is made, an Impact Action Plan (IAP) is developed, describing key impact goals, strategies to achieve them, and KPIs and targets for measuring progress towards them, and agreed with the company’s management. Impact Action Plans include mitigation measures for any Principal Adverse
Impacts that have been identified.
• We engage members of our Advisory Board to validate our decisions.
• Impact is at the heart of O14C and no investment is finalized unless the complete team is satisfied that
it will deliver the appropriate level of impact. Our Impact Committee, which meets before the
Investment Committee prior to each investment process stage gate, has a veto right over investments,
if it considers that sustainability opportunities and risks have not been sufficiently addressed.
• Portfolio enhancement:
• The Impact Action Plan includes reporting requirements for portfolio companies to report on impact/ESG/sustainability related metrics and mitigation activities.
• We monitor progress at least quarterly and actively engage with portfolio companies to enhance value
creation and impact. Key sustainability risks and associated mitigation activities are monitored as part
of this engagement process.
• If impact targets are not being met, or sustainability risks are not being managed, O14C on behalf of the Partnership (as an active minority investor) will seek to support the company to improve its performance. If the company is not willing or able to improve its performance, O14C will consider a range of options including the fund's divestment.
• Regular impact reporting will be provided to investors on portfolio company and fund performance,
with updates on a quarterly basis, and impact reports on an annual basis.
• Our impact assessment process will be internally audited on a regular basis, and the impact of each portfolio company will be reviewed by an independent third party at least annually.
• Thirty percent (30%) of the carried interest is subject to the aggregate impact performance of the portfolio companies. Performance of each portfolio company is measured against impact targets that are agreed with the limited partner’s advising committee (LPAC) of the Partnership. If the impact targets are not met in whole or in part, the 30% of carried interest that is tied to impact will be forfeited in whole or in part and will be donated to ocean causes.
• Exit:
• We design exit strategies to maximise ongoing positive impact. In particular, we seek out buyers that understand and value the impact contribution offered by our portfolio companies, seeking optimum valuations, and similar impact stewardship post divestment.
Our impact process builds on the principles and foundations of existing impact investing standards:
• O14C will become a signatory of the UN Principle for Responsible Investment;
• We seek to understand the five dimensions of impact of companies the fund invest in, as espoused by the Impact
Management Project;
• Portfolio companies will be encouraged to use the UN SDG Action Manager, an evaluation tool based on the B
Impact Assessment, on an annual basis, and apply the Ten Principles of the UN Global Compact, or equivalent
standards;
• We use recognised metrics such as those developed by SASB, GRI and IRIS+ in order to enable transparency and
critical mass of common indicators, wherever possible; and
• We will seek to build a common impact platform for other ocean funds to share metrics and best practice for
the value of all blue economy stakeholders.
This policy and the processes it describes will be reviewed at least annually by O14C.