SFDR Disclosures – TCV Fund Manager B.V.

Context:

TCVII is an Egypt-focused growth capital fund which prioritizes investments in fast-growing family-owned businesses operating in the midcap space and investing across a spectrum of consumer-driven industries. The investment objective of TCVII is to create long-term growth and enhance the portfolio companies’ competitiveness while generating attractive returns to investors. The Fund aims to foster the institutionalization of family businesses in Egypt and focuses on the wider additionality of availing growth capital funding for successful midcap companies. Despite the sustainability risks/environmental and social (“E&S”) policy in place to satisfy the requirements of prospective institutional investors as further explained below, the Fund does not, however, promote environmental or social characteristics, nor does it have sustainable investments as its objective. Additionally, its investment strategy does not intend to contribute to environmental and social objectives.

E&S Policy:

Due to acceptance of the Development Financial Institutions (the “DFIs”), namely the European Bank for Reconstruction and Development, the International Finance Corporation and the Egyptian American Enterprise Fund, as investors in the Fund and to enable the Fund to be compliant with the respective environmental, social and governance (“ESG”) obligations required by the policies of the DFIs, the Fund Manager has developed and adopted the Environmental and Social Management System (“ESMS”), developed in collaboration with a leading ESG advisory firm, in order notably to adhere to the DFIs ESG standards and risk categorization. The Fund Manager strives to ensure effective E&S management of all the Fund’s activities and investments with a special focus on the following:

• Ensuring that E&S factors including risk considerations are integrated in all TCVII’s potential investments as an integral part of decision-making. Considerations will also be given to gender discrimination and inequality issues.
• Ensuring the Fund Manager possesses the necessary resources, training, or recruitment to effectively implement and manage the integration of E&S risks, potentially involving the appointment of external specialists.
• Communicating E&S expectations and conditions to staff, investees and all external stakeholders.
• Ensuring that all activities undertaken by TCVII are consistent with applicable requirements stated in national and international regulations and standards.
• Avoiding financing activities included in TCVII’s exclusion list.
• Ensuring that all investees/portfolio companies are operated in compliance with the applicable requirements on an ongoing basis.
• Identifying, supporting, guiding, or overseeing the realization of E&S impact opportunities at the level of the portfolio companies.
• Including covenants in the investment agreement (contact) requiring investees/portfolio companies to commit with TCVII’s environmental and social requirements.
• Ensuring that the management and the shareholders of the portfolio companies /investees are familiar with the policy commitments.
• Monitoring and transparently reporting on the E&S performance of the portfolio companies in a timely manner as well as TCVII’s E&S-related efforts.
• Minimizing adverse environmental impacts on the environment and stakeholders while enhancing positive effects.
• Eliminating forced and compulsory child labor, modern slavery practices, and any form of gender-based violence or discrimination in employment and other business practices.
• Safeguarding the health, safety, and wellness of TCVII’s employees, portfolio companies’ employees, and surrounding communities.

The top management of the Fund Manager is responsible for overseeing the execution of its E&S policy along with its designated ESG team and supported by the investment committee of the Fund Manager (the “Investment Committee”).

In order to satisfy the requirements from the DFIs, the ESMS is developed in accordance with the following applicable standards, and serves as the primary mechanism for the review, reporting and assessment of potential sustainability risks:

• TCVII’s E&S policy and exclusion list;
• The applicable 2019 EBRD Environmental and Social Policy Guidelines and Performance Requirements (“PR”):
  • PR 1- Assessment and Management of Environmental and Social Impacts and Issues;
  • PR 2 – Labour and Working Conditions;
  • PR 3 – Resource Efficiency and Pollution Prevention and Control;
  • PR 4 – Health, Safety and Security;
  • PR 5 – Land Acquisition, Restrictions on Land Use and Involuntary Resettlement;
  • PR 6 – Biodiversity Conservation and Sustainable Management of Living Natural Resources;
  • PR 8 – Cultural Heritage;
  • PR 9 – Financial Intermediary; and
  • PR 10 – Information Disclosure and Stakeholder Engagement.
• The applicable 2012 IFC Environmental and Social Policy and Performance Standards (“PS”):
  • PS 1 – Assessment and Management of Environmental and Social Risks and Impacts;
  • PS 2 – Labor and Working Conditions;
  • PS 3 – Resource Efficiency and Pollution Prevention;
  • PS 4 – Community Health, Safety and Security;
  • PS 5 – Land Acquisition and Involuntary Resettlement;
  • PS 6 – Biodiversity Conservation and Sustainable Management of Living Natural Resources; and
  • PS 8 – Cultural Heritage.
• The IFC’s Interpretation Note on Financial Intermediaries;
• The SFDR;
• The applicable World Bank Group Environmental, Health and Safety (EHS) Guidelines (i.e. General EHS Guidelines and sector-specific guidelines[1]);
• Core ILO Labour Standards and ILO Basic Terms and Conditions of Employment;
• Applicable national and local, environmental, health & safety and labour related laws, regulations and standards including but not limited to:
  • The Environmental Law 4/1994 and its amendments;
  • The Labor Law 12/2003;
  • The Waste Law 202/2020; and
  • Relevant Ministerial Decrees.
• UN Guiding Principles on Business and Human Rights (UNGPs) (2011);
• Universal Human Rights Declaration;
• UN Principles for Responsible Investing (PRI); and
• The Paris Agreement.

The Fund Manager reviews and assesses potential sustainability risks within the meaning of the SFDR as part of its decision-making process and ongoing risk monitoring with respect to investments made or to be made by the Fund. Sustainability considerations have been integrated across the various stages of the investment lifecycle, including ongoing monitoring and portfolio management, and into its internal procedures and policies, as further detailed hereafter.

Sustainability risks may affect the Fund’s performance having regard to the types of investments made or to be made in accordance with its investment policy and objectives, meaning that if any such risk occurs, returns on investments may be materially negatively affected as a result. Investors and potential investors should note that it is difficult to assess with reasonable certainty the probability of the occurrence of such risks and the likely impact of such materialized sustainability risks on the value of investments.

Implementation of ESMS on the Fund Manager-level:

In line with the requirements of prospective investors, the Fund Manager maintains a formal and documented ESMS to implement the policies and procedures described above. This includes standardized reporting tools and the documentation on internal decision-making related to the management of E&S risks and impacts. The ESMS has been updated as of Q1 2024 with the support of an external advisor, and will be reviewed biannually, and modified if necessary by the ESG team. The ESG team is responsible for communicating the ESMS to all employees, and will be part of the induction training for new employees. Furthermore, the Fund Manager shall undertake annual assessment of the firm’s E&S training needs requirements.

Procedures for Managing Sustainability Risks:

The Fund Manager is dedicated to prioritizing the management of E&S risks and impacts associated with all the Fund’s investment activities and across the investment process, from the transaction screening phase to exit, as outlined below:

Transaction Screening

During the transaction screening stage, a preliminary E&S assessment will be performed by the Investment Committee against the Fund’s exclusion list and a risk category will be assigned to each investment applying IFC’s risk categorization framework. Accordingly, the scope of the E&S Due Diligence (“ESDD”) will be defined (internal/ external) and a broad understanding of the E&S and sustainability risks inherent in the sector and sub-sector will be provided.

E&S Due Diligence

The investment evaluation includes a thorough due diligence exercise based on the preliminary E&S risk category of a prospective investment. Accordingly, the ESDD is either conducted in-house or outsourced to an external adviser. In both cases, the objective of the due diligence exercise is to identify and assess the potential E&S risks associated with the investment using various data collection tools, including a desktop review, management interviews, site visits and questionnaires. The ESDD findings will be summarized in the form of an ESDD report mainly providing confirmation whether the pipeline company complies with TCVII’s E&S expectations, and where gaps are identified, corrective actions will be identified and addressed in an Environmental and Social Plan (“ESAP”).

Deal Structuring and Approval

In order to satisfy the needs of the DFIs, the results of the ESDD exercise form an integral part of the investment proposal and transaction structure, and is presented to the Investment Committee, influencing the final investment decision. Accordingly, E&S requirements including relevant E&S clauses and the final ESAP will be highlighted in the legal documentation and agreements between the Fund and portfolio company.

Portfolio Monitoring

The Fund Manager monitors the E&S performance of the Fund’s portfolio companies on an ongoing basis as part of its governance design where performance will be assessed against the specific recommendations outlined in the developed ESAP with its implementation timeline. Additionally, the portfolio companies will be expected to complete an annual questionnaire covering environmental and social aspects intended to manage risks and drive improvement, manage unplanned events, and enhance the quality of E&S information for stakeholders.

Moreover, TCVII’s portfolio companies are required to notify one of the managing partners of the Fund Manager of any major incident/ accident that has or could have a negative effect on the project operations, or that could result in a non-compliance with national regulations or the Reference Framework of this ESMS.

Exit

Towards the end of the investment term, the Fund Manager seeks to identify any E&S risks that could potentially affect the value or timing of a potential exit. Furthermore, E&S risks and opportunities and any positive outcomes achieved will be documented and adequately communicated to existing and future stakeholders.

[1] General and sector-specific guidelines can found in the link: https://www.ifc.org/en/insights-reports/2000/general-environmental-health-and-safety-guidelines