Responsible Investment Policy

1. Introduction

Oxy Capital – SGOIC, S.A. (“Oxy”) is committed to invest responsibly and in accordance with environmental, social, and corporate governance (“ESG”) criteria, observing its fiduciary duties of maximizing returns for investors and minimizing the negative impacts of risks at portfolio companies, including ESG-related risks.

This Responsible Investment Policy (“Policy”) details:

objective and scope of the Policy;
philosophy, principles and commitments in terms of sustainable investment;
governance, human resources and tools available to carry out this Policy;
key ESG areas; and
integration of ESG factors into the investment process.

2. Objective

This Policy serves as a comprehensive guide for professionals at Oxy Capital, informing and directing their adoption of a Responsible Investment Policy. It outlines Oxy’s commitment to integrating ESG considerations into investment and monitoring processes, ensuring that our investments not only generate financial returns but also contribute positively to society and the environment.

By adhering to this Policy, our professionals are equipped with the necessary framework and principles to make informed and responsible investment decisions that align with our values and long-term objectives.

3. Scope

All employees of Oxy are expected to adhere to this Policy without exception. Furthermore, we aspire to extend the principles outlined in this Policy to all portfolio companies.

4. Regulatory framework

The EU sustainable finance framework includes:

Sustainable Finance Disclosure Regulation – Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (“SFDR”).
“EU Taxonomy” – Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088).
Regulatory Technical Standards (“RTS”) – Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022 supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details of the content and presentation of the information in relation to the principle of ‘do no significant harm’, specifying the content, methodologies and the content and presentation of the information in relation to the promotion of environmental or social characteristics and sustainable investment objectives in pre-contractual documents, on websites and in periodic reports.
Corporate Sustainability Reporting Directive – Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards Corporate Sustainability Reporting (“CSRD”) (not yet applicable to Oxy).

Additionally, consideration is taken into:

2030 Agenda for Sustainable Development, the new global sustainable development framework adopted by the UN General Assembly, which has at its core the Sustainable Development Goals (“SDGs”).

5. Responsible investment philosophy

Oxy acts in the best long-term interests of its stakeholders and, in this fiduciary role, the observance of ESG criteria will be performance-enhancing in varying degrees across companies, sectors and through time.

By considering ESG criteria alongside traditional financial metrics, we are better equipped to identify opportunities and sustainability risks that might have a relevant material negative impact on the financial return of an investment or advice.

This holistic approach allows us to make more informed investment decisions that not only deliver financial returns but also contribute to positive environmental and social outcomes.

Furthermore, the inclusion of ESG criteria promotes the efficient use of resources. By prioritizing sustainable practices and responsible governance, we help ensure the longevity and stability of portfolio companies, thus benefiting the portfolio companies and also contributing to broader social and environmental goals.

In essence, our responsible investment philosophy underscores our belief that sustainable financial performance and positive societal impact are mutually reinforcing. By prioritizing ESG considerations, we aim to generate value for our stakeholders while promoting a more sustainable and equitable world.

6. Commitments

As signatories to the United Nations Principles for Responsible Investment ("UN PRI") since 2021, Oxy is committed to the six Principles for Responsible Investment, namely:

Incorporate ESG issues into investment analysis and decision-making processes;
incorporate ESG issues into our ownership policies and practices;
provide appropriate disclosure on ESG issues into our portfolio companies;
promote the acceptance and implementation of ESG Criteria in the investment;
working collaboratively to increase effectiveness in implementing these principles;
preparing regular reports on activities and progress in the application of ESG criteria.

As set in the SFDR, Oxy is committed to:

Transparency of sustainability risk policies (“Article 3”);
transparency of adverse sustainability impacts at entity level (“Article 4”);
transparency of remuneration policies in relation to the integration of sustainability risks (“Article 5”);
transparency of the integration of sustainability risks (“Article 6”);
transparency of adverse sustainability impacts at financial product level (“Article 7”);
transparency of the promotion of environmental or social characteristics in pre‐contractual disclosures (“Article 8”);
transparency of sustainable investments in pre‐contractual disclosures (“Article 9”);
transparency of the promotion of environmental or social characteristics and of sustainable investments on websites (“Article 10”);
transparency of the promotion of environmental or social characteristics and of sustainable investments in periodic reports (“Article 11”).

With regards to the Agenda 2030, Oxy commits to work closely on the following:

SDG 7: Ensure access to affordable, reliable, sustainable and modern energy;
SDG 8: Promote inclusive and sustainable economic growth, employment and decent work for all;
SDG 9: Build resilient infrastructure, promote sustainable industrialization and foster innovation;
SDG 12: Ensure sustainable consumption and production patterns.

7. Governance and resources

The inclusion of this Policy in Oxy’s processes is a responsibility of Oxy’s Board of Directors: responsible for defining, approving and supervising compliance with the Policy, including oversight and ultimate responsibility for achieving results.

Oxy’s Investment Committee – composed by the Board of Directors, investment principals and seniors associates – will be in charge of i) ensuring that the appropriate ESG criteria are chosen and measured at the time of the decision to invest, ii) the follow-on measurements and decision-making process at the level of portfolio companies and iii) ensuring ESG compliance at the time of divestment.

The ESG Team – composed by at least on Board Member, the Compliance Officer and 3 additional members from the financial and investment teams will i) discuss the ESG strategy, ii) promoting an ESG culture, including training, iii) monitor regulatory compliance, iv) ensure the development, implementation, follow-up, and monitoring of ESG strategies and action plans.

8. Tools

To follow through on Oxy’s commitments, it is essencial to choose, measure, analyse and decide upon ESG criteria, both on a GP level and on portfolio company level. And to include them in the investment process as well as in the portfolio monitoring process.

After a careful consideration, 3 tools were defined:

Introductory questionnaire for all portfolio companies and Oxy;
PRI reporting and assessment tool for Oxy;
B Corp Impact Assessment for several portfolio companies and Oxy;

When Oxy started its sustainability journey, it committed to the UN PRI in 2021 and subsequently attained B Corp Certification in 2023. Oxy endeavors to routinely utilize both evaluation tools to uphold its dual certifications.

9. Key areas

Oxy’s Policy prioritizes key areas that align with our commitment to sustainable development and responsible investment. These include:

9.1. Climate Change (SDG 7):

Implementation of initiatives to mitigate climate change, conserve natural resources, promote biodiversity and to transition to a low-carbon economy;
integration of environmental risk assessment into investment decisions and portfolio management strategies;
identifying emissions and developing plans to help reduce carbon footprint;
integration of renewable energy sources and energy efficiency measures across portfolio companies;
engagement with stakeholders to promote climate resilience and adaptation strategies.

9.2. Fairer Society (SDG 8 and SDG 12):

Approach to responsible investment is grounded in the principle of sharing capital gains with all employees; Oxy actively advocates, at all portfolio companies, the adoption of a profit-sharing mechanisms for employees;
promotion of fair labour practices, including health, safety, human rights, equal treatment, equal opportunities, equal pay and living wages, for employees at Oxy and within portfolio companies;
monitor diversity indicators;
support for inclusive economic growth, job creation, and entrepreneurship opportunities, particularly in underserved communities;
adoption of sustainable consumption and production practices to minimize waste and promote resource efficiency;
adoption of robust and transparent corporate governance practices to ensure transparency, accountability, and ethical behavior; as well as integrating strategies to bolster cybersecurity, prevent bribery, and tackle corruption;
establishment of clear policies and procedures for risk management, compliance, and internal controls.

9.3. Innovation (SDG 9):

Embracing technological innovation and advancements to drive sustainable development and enhance productivity;
investment in research and development initiatives that address global, which aims to build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation;
promote innovation by providing financial resources, strategic guidance, operational support, and access to a network of industry contacts, advisors, and strategic partners;
modernize and advance industrial processes, aiming at an efficient resource management, granting higher levels of productivity;
additionally, Oxy’s SIFIDE funds are specifically targeted at investing in innovative companies developing technologies, products, or services, empowering them to scale up operations, accelerate product development, and bring their innovations to market.

9.4. Continuous Improvement:

Ongoing evaluation and enhancement of ESG policies, practices, and performance metrics;
regular reporting on ESG-related initiatives and outcomes to stakeholders and the public;
engagement with industry peers, experts, and stakeholders to share best practices and drive collective action towards sustainability goals.

By addressing these key areas within our ESG policy, we strive to uphold our commitment to responsible and sustainable business practices, create long-term value for our stakeholders, and contribute to positive social and environmental outcomes.

10. Integrating ESG criteria in the investment process

10.1. Negative screening

As a preliminary step in the analysis of any investment, investment teams avoid opportunities in controversial sectors, such as:

Illegal economic activities: any production, trade or other activity, which is illegal under the laws or regulations applicable to the fund, including without limitation, human cloning for reproduction purposes;
Production or trade of tobacco, distilled alcoholic beverages and related products;
Production or trade in weapons and ammunition of any kind, or the financing of such production or trade, it being understood that this restriction does not apply to the extent such activities are part of or accessory to explicit European Union policies;
Pornography: companies that derive their revenue from adult entertainment services, including the publication and distribution of pornographic magazines or newspapers;
Research, development or technical applications relating to electronic data programs or solutions, which are intended to enable to illegally enter into electronic data networks; or download electronic data.

Our list of exclusions is regularly reviewed and updated to include additional controversial issues.

10.2. Due diligence

Companies that meet the investments criteria and do not belong to any of the excluded sectors are subject to thorough due diligence processes. In addition to commercial, financial, and legal verification processes, the due diligence work includes the analysis of the most relevant environmental, social and corporate governance issues.

This process allows the company to identify the commercial, financial, legal, and ESG risks and opportunities. The conclusions of this due diligence allow for discussions on recommendations to exploit the opportunities found and mitigate or reduce the risks and negative impacts identified. As ESG red flag leads to a no-go decision.

During this phase, for “Article 8” funds, special attention will be paid to key performance indicators before the investment and their expected evolution during the holding period.

10.3. Investment Decision

The conclusions of due diligence processes, together with the resulting action plan, shall be submitted to the Investment Committee.

10.4. Holding period

During the holding period, Oxy aims to improve the sustainability performance of portfolio companies in the above mentioned key areas.

To achieve this target, ESG team conducts an annual review of portfolio companies in coordination with the Investment Team, to ensure sustainability management is integrated by all investees.

Once a year, the portfolio companies will be required to complete a questionnaire that include questions about the improvement in the responsible management of investee companies and contribution to the achievement of specific SDGs.

In specific cases, the B Impact Assessment (an impact measurement tool that is the basis of B Corp certification) will be used by portfolio companies to evaluate the overall impact, including governance, social and environmental impact, transparency, and ethics.

For non-controlling investments in companies, the ESG team and Investment team monitor sustainability initiatives through active dialogue with companies’ management when appropriate, and annual collection of ESG data.

The review can include, among others, action plans intended to support companies and assets in improving their performance. The Investment Team is also in regular contact with portfolio companies which can assist in continued monitoring and engagement on ESG performance.

10.4. Divestment

Oxy’s Compliance team performs the relevant know your customer (KYC) checks in accordance with the anti-money laundering and the prevention of terrorist financing rules on potential bidders.

11. Document control

This policy shall be prepared by the ESG team, reviewed and approved by all Board members.

The Policy will be reviewed and where appropriate updated by the Board of Directors to reflect initiatives taken, envolving practices and emerging requirements, or at least on an bi-annual basis. Oxy actively communicates the Policy to the Oxy team and to external stakeholder by publishing it on its website.

This procedure is an Appendix to the Manual de Governação e Organização Interna and its updated version should be archived at Z:\000 Oxy\0 Organisation folder on Oxy Capital’s internal server.

The Responsible Investment Policy was first approved by the Oxy’s Board of Directors on January 2021 and last updated on March 2024.