Investment Policy
It is important to acknowledge upfront the limitations to our responsible investment policy. In particular:
– Sapiens Funds operates nominee entities that make investments under instruction from individual investors or external parties. As Sapiens Funds does not control these investment decisions, we do not enforce their compliance with our Responsible Investment Policy. This policy will apply to all funds controlled and managed by Sapiens Funds. We reserve the right, however, to refuse to administer investments through Sapiens Funds nominee entities on the basis of ESG considerations.
– Sapiens Funds investments are predominantly minority stakes in illiquid, early-stage ventures. We do not control the management and governance decisions of these ventures and it is common for their businesses to pivot and evolve over time. This means that our screening and exclusion decisions are applied at the time of making an investment and we may not be able to liquidate positions that after the time of investment subsequently become subject to one of our exclusions.
We will not invest in ventures with significant involvement in the following activities:
– Fossil fuel exploration and extraction
– Alcohol
– Tobacco
– Gambling
– Military weapons
– Civilian firearms
– Nuclear fission
– Adult entertainment
We will also avoid investments that have contravened the ten principles of the UN Global Compact relating to Human Rights, Labour, Anti-Corruption and the Environment.
It is possible that we may make investments that develop technologies related to these activities, however, we will only do so if they are developing solutions that reduce the harm of these activities. For example, a venture that develops technology to reduce the environmental impact of fossil fuel exploration and extraction would not be excluded from consideration.
In addition to excluding ventures in the above fields, we will actively consider ESG issues in our investment selection and due diligence processes to adequately consider the risks presented by ESG issues. In doing so, we will consider the nonfinancial impact of ventures in our investment decisions, favouring investments that demonstrate ability to deliver tangible, measurable positive impact.
We will develop, maintain and incorporate standard terms for the investments we lead requiring the consideration of ESG issues by the board of ventures in which we invest. We will encourage these terms inclusion in all investments we make, whether we lead or not, but acknowledge we may not be able to require them in the investments we do not lead.
We will exercise our governance and voting rights with consideration of ESG issues and to encourage high governance standards. We will engage actively and regularly with the ventures in which we invest on ESG issues to ensure monitoring of potential issues or breaches of ESG standards and to encourage the pursuit of best practices.
We will focus our engagement efforts taking into account (1) the significance of any breach or deviation from best practice, (2) strength of grounds upon which to believe a breach or deviation from best practice has or may occur, (3) the significance of our holding in the venture, (4) our ability to collaborate with other investors or engage directly with the venture, (5) the potential effectiveness of engagement, and (6) the resources required to engage.
The standard terms referenced in Principle 2 with respect to requiring board consideration of ESG issues will include provision for reporting and communication on ESG issues with shareholders. We will periodically query ventures in which we invest regarding compliance with such terms and their initiatives to integrate ESG considerations into their business.
Where ventures attract our engagement on ESG issues in accordance with Principle 2, we will monitor their progress on an ongoing basis until such time as we are satisfied with progress made in response to engagement. Where ventures have not responded to engagement, or we consider engagement is unlikely to be effective, we may consider whether exclusion from future investment or divestment is an appropriate response.