Introduction

IKAV is an international, independent asset management group with strong local presence in the markets it invests in. Established in Germany in 2010, IKAV now comprises 12 offices across the EU and USA.

IKAV Group remains committed to and driven by the key principles upon which the company was founded, namely, to execute investments that both reduce global poverty and increase wealth across societies. In this spirit, ESG themes have been a consideration from the inception of the company, always to the extent they serve our primary responsibility to our investors and our principal goals.

As a responsible investor, we are committed to contributing to a long-term build-out of sustainable, partially renewable energy assets to support a transition to a lower carbon economy. Consequently, we develop and operate renewable energy assets and furthermore support the efforts of asset owners to improve the CO2 footprint of existing conventional energy assets by making use of our in-house engineering expertise.

Since inception, IKAV Group has focused on having technical experts in centres of competence in the fields of renewable energy and energy efficiency, expanding more recently into conventional energy assets, ready to fulfil our mission to become the leading investment manager in assets that require a high degree of engineering expertise.

Beyond striving to ensure our investments have a positive impact on communities, we are acting as engaged corporate citizens, while at the same time generating long-term value for our investors in a transparent and responsible way.

In 2021 IKAV Group became a signatory of the United Nations-backed Principles for Responsible Investment (“PRI”). As a responsible investor, IKAV originates, develops, builds, finances, and operates renewable and transition energy assets. Furthermore, we deploy our in-house engineering expertise to reduce the CO2 footprint of conventional energy assets.

This ESG Policy outlines our approach to ESG and demonstrates that ESG is a part of how we operate. It contains IKAV Group’s approach on the integration of ESG factors into investment decisions and the subsequent asset management process.

This ESG Policy is published on the company website www.ikav.com. IKAV Group’s sustainable finance disclosure requirements (SFDR) are also published on the website.

About IKAV Group

IKAV Group comprises IKAV General Partner S.à.r.l., IKAV SICAV-FIS SCA, ecoprime GmbH and affiliated companies such as IKAV France, IKAV Energy Spain, ecoprime Spain and ecoprime Italy, IKAV Inc, IKAV Energy Inc.

IKAV General Partner S.à.r.l. is the legal entity representing various sub-funds of IKAV SICAV-FIS SCA (“the fund”) that are registered under Luxembourg law, and which is regulated by the Luxembourg financial authority CSSF. Please also refer to Section 8 in relation to the regulatory treatment of the sub-funds.

Ecoprime GmbH acts as an investment advisor (“Investment Advisor”) and asset manager to the fund and for third parties and operates through the above-mentioned local affiliates.

Our Responsible Investment Approach

IKAV Group is a fully integrated asset manager with the goal to secure the energy supply of today, while taking the steps to transform the energy supply of tomorrow. Our purpose as an organization is to ensure the energy transition happens in a way and timeframe which ensures that communities benefit from low energy costs. Low energy costs allow for the creation of wealth and education and therefore the reduction of poverty. In particular, wealthy societies allow for innovation and solutions which benefit citizens worldwide and ultimately secure a sustainable path for our planet. These goals ensure we are aligned with all our stakeholders, in particular our investors and our employees and make us good citizens within our communities.

It is IKAV’s belief that a long-term sustainable path depends on a general wealth creation and hence sustainability goes beyond a ticking the box exercise and is deeply rooted in our investment philosophy. It means actively engaging with our stakeholders and acting on behalf of them with their interests in mind. IKAV holds a fiduciary responsibility to investors and shareholders while at the same time taking care to provide a fulfilling and safe working environment for our employees.

We have adopted a prudent approach based on stringent risk management. Our investments are directed towards a long-term buy and hold strategy, yielding solid long-term returns. This is reflected in the asset classes we invest in.

Positive Screening

We invest in energy infrastructure assets (renewable and conventional energy) with the objective of contributing to a reliable and low-cost energy supply. Technological innovation will enable a transition to a lower use of resources and as such to an on average lower carbon economy. As such, when looking for new investments, IKAV considers every form of energy supply as long as we are fit to operate and maintain such an energy asset and such investment contributes to low-energy costs for communities and hence poverty reduction.

All considered investments go through a rigorous selection process and are screened by our investment team who have long-standing professional expertise and in-depth market knowledge through our local market presence. These capabilities allow us to create and maximize value for our investors in a sustainable and responsible way.

Active monitoring of specific selected sustainability indicators (“positive screening”) may be used to assist IKAV in identifying assets and companies which are characterized by sustainable economic development activities or processes.

Negative Screening

We take our responsibilities towards our investors very seriously and as such, we screen our potential investments following a two-pronged approach. Alongside the positive screening mentioned above, we screen all potential investments against exclusion criteria and negative criteria. In doing so, IKAV can eliminate companies that fail to meet certain ESG criteria.

Each sub-fund has its own relevant negative screening criteria and is subject to periodic review and amendment by each of the individual sub-funds together with the Investment Advisor. From time-to-time this may result in amendments based on new developments and research in the field of sustainable investments, the development of new technologies, social trends, or adverse implication for the overall wealth of communities.

Our Commitments as a Responsible Investor

Societal Contribution to Reliable Energy Infrastructure

Through our investments we contribute to the provision of reliable energy infrastructure to growing societies. We invest in renewable energy assets such as photovoltaic, concentrated solar power, wind, geothermal energy, and hydropower to support the regional transition to a low carbon economy. Beyond this, we invest in selected conventional energy assets to sustain a reliable energy supply during the transitional phase to a low carbon economy. With our unique engineering expertise, we seek to establish better practices in the operation of these assets. IKAV also pursues investments in energy efficiency as well as carbon capture projects and the development of social infrastructure.

Transparency and Integrity

We embrace transparency towards our investors and empower transparent communication among our employees. We have adopted a range of channels through which we regularly provide information on asset performance, material risks and opportunities and capital expenditures on operations and maintenance of our assets.

We advocate open communication within the Group. We believe that feedback from others is important and support our employees to voice their opinions. We stand by our values. We believe that all our individual actions must be transparent and with no conflicts to our company, our investors, or our clients. We maintain and operate effective administrative and organizational arrangements with a view to taking all possible steps to prevent conflicts of interest. Should a conflict arise, IKAV management will strive for the fair treatment of all parties involved and ensure that the interests of our investors remain our priority. This commitment is formalized in our Conflicts of Interest Policy.

Compliance

We are committed to complying with the laws and regulations of the different countries that we are active in, and we maintain the highest ethical standards. We endeavour to act as a responsible investor that our stakeholders can trust, and we see great value in maintaining respectful relationships with those whom we work. Any deviation to the applicable regulations or standards constitutes a clear breach and is reported and responded to with immediate effect.

Risk Management

In compliance with regulatory requirements on alternative investment funds, we have set up suitable risk management systems for our fund and related service entities. These systems enable us to recognize, measure, manage and monitor the risks associated with the investment positions (including our operational asset management and monitoring) and their contribution to the overall risk profile of the investment portfolio in an appropriate manner. These are formalized in our Risk Management Policy.

Health, Safety and Environment

IKAV Group strives to provide a rewarding and safe working environment to all employees and affiliated companies.

High standards of health, safety and environmental activities are a priority to keep employees, communities, and our environment, which may be otherwise affected by our investment activities, safe. This means providing fair and safe working conditions for our workforce, namely our employees, clients, contractors and any other third party working for IKAV Group, at our workplace and on site, as well as prudent and reliable operational processes.

Safety is everyone’s responsibility. Each of our employees paying attention to safety matters will make our workplace and environment safer for everyone. Our team members are empowered to act at any time: stop work if conditions are considered unsafe, use protective equipment when required or recommended, report any accident, injury, illness, or unsafe conditions immediately. Teams are encouraged to listen to each other and familiarize themselves with the applicable emergency procedures. This commitment is formalized in our local Health and Safety Policies and in compliance with local applicable legislation.

Employee Well-Being

IKAV believes all people deserve to be treated with respect and work in an environment based on equal opportunities that is free from harassment.  We believe that a commitment to the principles of respect, loyalty and fairness contributes to a healthy working environment and corporate culture which taps into the broader potential of our team members. We strive to provide a space in which each team member achieves both their personal goals as well as those of the Group. 

We believe that our culture is vital for a company’s success and hence in our investors’ interests.  We work to provide ample development opportunities for employees, flexible workplace policies and a respectful work environment. We are driven by a common purpose:  to work hard, be better, have fun, and make the world a better place together. Our task at IKAV is to identify potential, seek it out and unleash it to accomplish the greatest good for the greatest number. Our corporate culture cannot exist without our employees and investors. Together, the possibilities are endless.  

Execution at IKAV includes awareness of the larger vision, clarity of purpose, excellence, perseverance, accountability, and the solidarity of teamwork.  This requires constant evaluation: of self, of the team, of processes, and of resources. Proper evaluation leads to perpetual improvements. Each team member agrees to uphold the IKAV Group policies and will be evaluated based on merit versus the agreed targets and objectives.

These commitments are formalized in our Code of Conduct applicable to the IKAV Group as well as all business partners.

Governance

Companies and individuals are required to adhere and contribute to a strong governance framework, which is essential for the management and success of our business and investments. IKAV Group has a governance framework which includes among others this ESG Policy, anti-money laundering, anti-corruption and a risk management policy. These policies and required training for employees are reviewed regularly.

Please also refer to Section 6 - Roles and Responsibilities which sets out the governance structure we have established in relation to ESG.

ESG within the Investment Process

The assessment of ESG risks and opportunities is integrated in IKAV Group’s Risk Management Policy and addressed throughout the investment process (see diagram below). It is part of our fiduciary responsibility towards investors and allows us to identify risks as well as opportunities in order to deliver risk-adjusted returns over time. ESG analysis is integrated into as many levels of the investment process as possible.

IKAV’s integration of ESG factors into our investment process, is anchored in both in our founding principles to generate wealth while reducing worldwide poverty as well as our commitment to the United Nations supported Principles for Responsible Investment (“PRI”) of which the Group became a signatory in 2021.

For the purposes of considering ESG within our investment process, we focus on the following key phases:

Pre-Investment ESG Integration

Identification of Investment and Pre-selection

As a first step, an investment opportunity is identified and screened to make sure it is aligned with the fund’s strategy and does not fall into our exclusion list.

For investment preselection to take place, initial due diligence of an investment comprises a risk focused review of legal, tax, accounting, financial, technical and ESG aspects.

Due Diligence

Following this initial due diligence, expert third parties may be commissioned to perform further in-depth due diligence including financial, commercial, legal, technical and ESG to better understand risks and opportunities with respect to a project’s location, industry standards and benchmarks if this is considered sensible by the Investment Advisor or the General Partner.

In conducting due diligence on ESG factors, we understand our responsibility to identify and assess risks and opportunities allowing for a reasonable calculation of the return on investment while protecting and increasing value for our investors. In relation to ESG integration into the investment process, scenario modelling on internal rate of return under consideration of different stress scenarios based on a set of defined risk metrics is performed. These may take into account technical, environmental, production, operational, rights over property, political, legal, and other risks.

Investment Committee

IKAV Group has implemented a formalized oversight and approval process which is steered by the Investment Committee. The Investment Committee reviews the results of the due diligence process and is informed on key findings. The approval process ensures that material ESG risks and opportunities of potential investments are appropriate, and part of sub-fund mandates as defined in the private placement memorandum. All material due diligence findings, including ESG and recommendations from the Investment Team and third parties, are communicated in investment reports to investors, fund directors and the asset management team. The Investment team will have formed an in-principal recommendation to execute the investment, including their views on the ESG risks within the Director’s Report, which is used to inform the decision-making at Investment Committee level.

IKAV Group may receive advice from third party advisors on potential investments and contracts with such advice based on quality, cost and most notably safety. Third parties may be monitored on compliance with contractually agreed quality and safety requirements by IKAV Group itself, via internal revision of the third party or via competent third parties.

Post-investment ESG integration

ESG risks and opportunities identified during the due diligence process are integrated post-investment by the local management teams of IKAV Group. Local management is responsible for post- investment performance monitoring of ESG aspects also comprising technical operations and maintenance interventions. Detailed reports on value development and performance as well as significant indicators are prepared for each fund. Performance reports are reviewed by risk management to ensure compliance with the predefined risk profile of the fund and to identify potential conflicts of interest.

Material ESG updates will be provided as part of the investor reporting and the reporting to the Investment Committee. We may report on items such as

• Safety: the existence of occupational safety measures at service company level and accident rates at investee companies during construction and operation.
• Environment: relevant metrics include but are not limited to reporting on Scope 1 and Scope 2 emissions, the existence of GHG reduction strategies vis-à-vis the vendor's /current operation's business plan or prior to project construction or significant contribution to GHG reduction (e.g., leveraging opportunities related to environmental technology development, offsetting emissions through an effective carbon capture and/ or storage strategy)

Further sustainability indicators will continue to be integrated into the monitoring phase as we proceed over time to integrate ESG into all aspects of our investment process.

Roles and Responsibilities

Investment Committee

The Investment Committee is responsible for pre- and final approval and execution of investments as well as divestments. The Investment Committee is actively integrated in the due diligence process and the review of identified risks and opportunities of assets against the risk profile of the fund.

Investment Team

The Investment Team has responsibility for implementing the ESG Policy during the investment phase. It is responsible for first screening on risks and opportunities related to responsible investment practices which includes health and safety, environmental, legal, operational, technical, and other risks. The Investment Team will, if needed, request support from IKAV affiliated companies. The Investment Team is also responsible for communication to the asset management team of the key ESG items that require monitoring post acquisition.

Asset Management Team

IKAV ensures that asset management operated through IKAV Group’s local offices is responsible, where possible, for post-investment integration of ESG matters in terms of monitoring due diligence findings related to operations and maintenance. This also includes monitoring aspects related to health and safety. Asset management is also responsible for preparing and providing performance reports to the fund administration team.

Fund Administration Team

The fund administration team is responsible for investor relations comprising the provision of performance reports to investors.

Risk Management Team

The risk management team of the fund has oversight on the appropriate implementation of risk management processes from fund to asset level.

Divestments

IKAV’s strategy overall is to acquire assets and investments for the long term, ensuring value preservation and value creation. In the event of a divestment or exit, the investment team may make ESG progress and achievements available to prospective buyers via data room materials or sales process documents.

Communication on ESG to Stakeholders

At IKAV Group we consider ourselves primarily as service providers to our investors. We aim to be as transparent as possible on risks, opportunities, and performance data. We achieve this by maintaining accurate and complete financial information and records of the business and performance and ensuring all transactions are properly authorized, recorded, and reported.

We report on fund performance on a quarterly basis and provide a thorough picture on performance and strategy during our annual investors’ meetings.

We take good care to listen to our stakeholders – including our investors, employees, shareholders, business partners and communities in which we are active – taking into account their input to our management of ESG-related issues. In the event of any major ESG incident, IKAV strives to communicate to investors as soon as possible after IKAV has become aware of the incident.

For each individual acquisition we provide a transparent picture on incurred risks and opportunities in the form of our investment reports to our investors. We aim to educate on risk and opportunity profiles of our asset classes and regularly hold workshops to inform and offer insights to our stakeholders like our investors surrounding key issues, including ESG related issues, with respect to the funds and the market in general. IKAV Group discloses on potential conflicts of interest to investors and further relevant third parties during the investment cycle.

IKAV Group cooperates with ecoprime and/or third parties, who adhere to our ESG Policy – we endeavour to assign responsibilities to effectively identify, manage and monitor ESG risks as well as engage proactively with stakeholders.

We ensure that our stakeholders, in particular the internal ones, are actively involved in the implementation of the ESG Policy through appropriate training and sharing of information.

IKAV SICAV-FIS SCA - SFDR Disclosures

The EU’s Sustainable Finance Disclosure Regulation (“SFDR”) came into force in December 2019, with key disclosure requirements that were applicable from 10 March 2021. Further disclosure requirements under SFDR Regulatory Technical Standards (“SFDR RTS") are applicable as of 1 January 2023. 

The SFDR applies to financial market participants (“FMP” or “entity”), which include alternative investment fund managers (“AIFMs”). Furthermore, the SFDR sets out requirements in relation to the financial products (“product”) offered by FMPs, which include alternative investment funds (“AIF”) managed by AIFMs.

The SFDR sets out disclosure obligations that apply at both product and entity level, i.e., at both AIF and AIFM level. Product level disclosures include disclosures that are made to investors, whilst those made at entity level include public disclosures made on the entity’s website. The types of disclosures that are required can be broken down into the disclosure of prescribed information:

• On an entity’s website
• In the pre-contractual information for a financial product; and,
• In the periodic information provided to investors.

IKAV SICAV-FIS SCA is an AIF with an external manager as AIFM according to the directive 2011/61/EU and corresponding Luxembourg law. The fund has various sub-funds which are categorized either as Article 8 or 9, except for one Article 6 fund.

All product level disclosures as per SFDR RTS apply to IKAV SICAV-FIS SCA’s sub-funds.

In the event that IKAV categorises a product or investment as “sustainable,” it will do so by referring to the SFDR or relevant Taxonomy guidance framework.

In relation to such sustainable investments as defined under SFDR and in relation to our Article 8 or Article 9 funds, wider exclusions and requirements are considered and set out in the Private Placement Memorandum available to investors.

Scope and Applicability

This policy is applicable to IKAV Group comprising IKAV General Partner S.à.r.l. funds and sub- funds, ecoprime GmbH and affiliates. For SPV type investments or projects, which do not have or have limited direct employees and rely on outsourcing of a range of functions to contractors beyond the support that can be provided by IKAV’s Investment Advisor, IKAV will seek to consider contractors that are aligned with our ESG Policy and would adhere to our ESG policy.

The ESG Policy is published on IKAV Group’s website and reports on the implementation of the ESG strategy to relevant external stakeholders. Management will ensure that internal stakeholders are actively involved in the implementation of the ESG Policy through appropriate training and sharing of information.
 

Disclaimer

IKAV goals may differ over time and a single decision may result in non-compliance with the ESG policy. This is wholly undesirable. It is, however, part of the process and being human. We accept that mistakes in day-to-day activities may happen on the level of the individual employee, as a team and as a company. We believe it is important to identify and disclose mistakes to learn from them and to avoid them in the future investment decisions. We are aware that our employees may act in such a manner that could contradict our views of better practice. Insofar as we can identify such decisions early on and are able to change course towards adhering to our ESG policy, we regard this as an important part of this policy and a path to continually improve on our business processes and investment decisions.

This policy will be reviewed periodically and may be subject to updates over time (if required).

Please direct any questions regarding this policy to investor@ikav.com

This policy was adopted by Constantin von Wasserschleben (CEO)