On this page investors are informed on sustainability related matters, as required under the regulation on sustainability-related disclosures in the financial services sector (EU/2019/2088) (hereinafter ‘SFDR’). These disclosures set out the environmental and social characteristics promoted by Synthesis Capital as required by Article 8 of the SFDR.
No sustainable investment objective
Synthesis Capital (“Synthesis”) promotes certain environmental or social characteristics for purposes of Article 8 of the SFDR, but does not have as its objective sustainable investment.
Environmental or social characteristics of the financial product
Synthesis Capital promotes certain environmental or social characteristics as all investments are made within the Synthesis Capital investment strategy, and by integrating ESG assessment and engagement throughout the entire investment cycle.
Synthesis Capital believes that effective ESG standards are important elements of the overall business strategy of investee companies and can ultimately drive stronger returns on investments.
Synthesis Capital’s investment strategy targets investments in the food sector, and specifically in companies that are developing solutions to transform the global food system, with a focus on transitioning away from livestock production and towards alternative proteins as a more sustainable and efficient method of feeding the growing global population. Synthesis’s investment focus is primarily on seed to series C stage food technology companies that directly or indirectly replace animal products across the supply chain. Within this thematic focus, Synthesis aims to identify and invest in the best and most impactful opportunities, which will present potential for both strong financial returns and positive environmental (and broader sustainability) impact. All investments made by Synthesis Capital fall within this investment strategy.
At Synthesis, we believe that ESG considerations are important to maximising value and upside for the companies that we invest in, in addition to mitigating risk. As such, as part of the investment process, Synthesis assesses a range of environmental, social, and governance (ESG) issues which Synthesis believes are material for the investment strategy. A central part of Synthesis Capital’s ESG approach is to assess governance practices. Synthesis’s policy to assess good governance includes an assessment of the quality of management, which will contribute to the company’s ability to manage long-term risks, and an assessment of the remuneration of employees, including option pools.
Proportion of investments
Synthesis Capital seeks to only make investments falling within the investment strategy, and therefore will only make investments which are aligned with environmental and social characteristics.
Monitoring of environmental or social characteristics
Synthesis Capital reviews any potential ESG issues on a quarterly basis as part of its standard quarterly reporting process. In addition, each company is required to report on progress against Synthesis’s ESG framework once per year. Company-level ESG focus areas are regularly updated in consultation with the portfolio companies to reflect changes in the company’s processes, products or business strategy.
Methodologies for environmental or social characteristics
Synthesis Capital aims to integrate ESG throughout the entire investment process, from high-level initial screening of opportunities within our thematic focus and investment strategy, to our in-depth due diligence work pre-investment, to our ongoing engagement with portfolio companies. Synthesis’s approach to integrate the assessment of ESG factors throughout the investment process is summarised below:
1. Due diligence: Assessing ESG risks & opportunities
- High-level ESG assessment included in initial screening of deal flow
- Proprietary scorecard evaluation framework to assess and compare opportunities at the full DD stage
- Key ESG risks and potential positive impact areas identified for the business
- Opportunities are selected where ESG potential and high growth potential go hand-in-hand
2. Investment decision-making: Setting ESG metrics & targets
- Identify priority actions to manage ESG risks and impact opportunities
- Engage with the company to agree a realistic and value-focused ESG plan
- Set standardised core metrics, and overlay individualised metrics
- Set targets to benchmark performance
- Include a streamlined summary of ESG assessment and targets in the Investment Committee paper
3. Portfolio management: Adding value throughout the holding period
- Engage on ESG factors to manage risk and create additional value as the company grows
- Utilise strength of relationship with founder/management and clear articulation of ESG value-add to exert influence
- Monitor progress against focus areas developed through the evaluation framework assessment
4. Evaluating & reporting impact: Ensuring progress is being made
- Company-level assessment: report against key metrics and reassess ESG progress in deciding future capital allocations for follow-on funding
- Assess causes of poor performance, and act to address these
- Organisation-level assessment: evaluate impact of our portfolio and ourselves as an investor
Data sources and processing
Synthesis Capital’s primary source of data is information provided directly by companies during the due diligence process, and from portfolio companies.
Limitations to methodologies and data
Synthesis Capital invests primarily in early stage start-up companies, and therefore there may be limitations on the quality of data that can be provided by companies. In some cases, companies may not be able to provide the required data to fully calculate the quantum of ESG metrics. Nevertheless, it will be clear from the business strategy and ongoing technical and operating progress of the investee companies that they are continuing to promote positive environmental or social outcomes.
Synthesis Capital has established a framework for reviewing ESG practices as part of the due diligence process, which is considered as essential to every due diligence process prior to making an investment, as well as to monitoring ESG practices post-investment. Accordingly, Synthesis Capital has in place an ESG Policy detailing how Synthesis’s investment analysis and decision-making incorporates ESG principles. Synthesis Capital’s full ESG policy is available on request and is focused on the following core areas:
- Material ESG issues for the sector and investment focus
- Building value through ESG
- The Investment Advisor's approach including: overarching objectives, oversight and governance, firm level approach, portfolio level approach, collaboration, reporting, revisions
- DDQ framework for assessing ESG
Synthesis Capital considers that value creation stems from active engagement with portfolio companies, including company support, board leadership, and governance. Synthesis monitors the strategy, financial and non-financial performance of portfolio companies in accordance with its investment strategy, as well as monitoring the activities of its investments for alignment with Synthesis’s ESG policy on an ongoing basis.
Designated reference benchmark
Synthesis Capital does not use a designated reference benchmark.
Synthesis’s remuneration policy consists of a combination of fixed remuneration and variable remuneration. Variable remuneration for relevant staff takes into account compliance with all of Synthesis’s policies and procedures, including those relating to ESG and risk management and the integration of sustainability risks.
Guernsey Green Fund Designation
Synthesis Capital Fund I LP has been designated as a Guernsey Green Fund by the GFSC using Route 2 as described in the Guernsey Green Fund Rules, 2018 (the "GGF Rules") (GFSC reference number 2736874). The Fund will apply the following green criteria categories as set forth in the GGF Rules: 4.1, 4.3 and 9.2. All of the Fund’s Investments will be measured, in accordance with the Investment Advisor’s ESG policy and due diligence framework, to ensure a net positive environmental outcome (including GHG emissions reductions).
UN PRI Membership
Synthesis Capital is a member of the UN Principles for Responsible Investment (PRI). As a signatory to the PRI, Synthesis is committed to upholding the six principles that govern responsible investment across the world, and reports its annual progress to PRI.
Principal Adverse Impacts
Synthesis does not currently consider the adverse impacts of investment decisions on sustainability factors in the manner specifically defined by Article 4 of the Disclosure Regulation.
While Synthesis believes that long-term value is enhanced by considering sustainability risks (as defined in the Disclosure Regulation) when investing and actively improving the ESG practices of its investee companies, Synthesis is mindful that the rules in this area are detailed, and that reporting under the new requirements relies on the availability of a significant amount of data. These requirements are not considered proportionate to Synthesis’ position as a new investment manager with fewer than ten employees.