Sustainability risk management is embedded in the way Lakestar seeks to originate investments and make investment decisions, as well as in ongoing portfolio and asset management and fund advisory activities. Lakestar recognises the importance of identifying, assessing and managing material sustainability risks as an integral part of conducting business. Lakestar's Sustainability Risk Policy provides a comprehensive framework for integrating sustainability risk management into investment decision making.
The Sustainability Risk Policy sets out how sustainability risks are integrated into Lakestar's investment decision-making processes. The Sustainability Risk Policy is applicable to all Lakestar entities and all portfolio activities of Lakestar's investment professionals.
The risks which are identified in the Sustainability Risk Matrix using guidance from the Sustainability Accounting Standards Board framework, which identifies financially material ESG risks by asset class. The following sustainability risks are considered: climate change resilience, pollution, carbon emissions, resource efficiency and depletion of finite resource, human rights in supply chains, health and safety, labour and employment practices, diversity, risk management, bribery and corruption practices and business ethics. The materiality of each risk will be determined based on the investment in question.
The Sustainability Risk Policy concerns the entire Lakestar organization and it is the responsibility of all investment professionals to observe it. The investment team is required to apply Lakestar's ESG standards during all stages of the investment process, from the initial approval through the holding period until and including the exit.
Lakestar's General Counsel, Natalia Neuman, oversees the implementation of the Sustainability Risk Policy to ensure that the investment professionals fulfil their ESG obligations throughout the investment cycle. Ms. Neuman regularly reviews the operations of the investment professionals in order to ensure optimal practices. Together with the respective portfolio company and responsible Lakestar member, Ms. Neuman prepares bespoke ESG action plans in the event that any sustainability risks are identified. It is the responsibility of Ms. Neuman to report directly to the applicable Lakestar board regarding any ESG incidents.
The SFDR requires Lakestar to make a "comply or explain" decision whether to consider the principal adverse impacts ("PAIs") of its investment decisions on sustainability factors, in accordance with a specific regime outlined in SFDR. Lakestar has opted not to comply with that regime, both generally and in relation to the Fund.
Lakestar will keep its decision not to comply with the PAI regime under regular review.
Lakestar has carefully evaluated the requirements of the PAI regime in Article 4 of the SFDR, and in the draft Regulatory Technical Standards which were published in April 2020 (the "PAI regime"). Lakestar is supportive of the policy aims of the PAI regime, to improve transparency to clients, investors and the market, as to how financial market participants integrate consideration of the adverse impacts of investment decisions on sustainability factors. However, Lakestar is concerned about the lack of readily available data to comply with many of the reporting requirements of the PAI regime, as Lakestar believes that companies and market data providers are not yet ready to make available all necessary data for the PAI regime.
Notwithstanding Lakestar's decision not to comply with the PAI regime, Lakestar has implemented positive ESG-related initiatives and policies, as part of its overall commitment to ESG matters, as summarised in this section. For the avoidance of doubt, none of the following information is intended to suggest that Lakestar complies with the PAI regime.
Lakestar has established a remuneration policy applicable to all Lakestar entities. The policy is developed, approved, implemented and monitored within the Lakestar structure. This policy applies to all employees of Lakestar, save for limited exceptions.
The remuneration policy has been developed with the aim of supporting Lakestar's business strategy, corporate values and long‐term interests, including by facilitating the identification, assessment and management of sustainability risks when determining individual remuneration packages. The key principles of the Policy include fostering appropriate risk culture (including with respect to the management of actual and potential conflicts of interest) and compliance with applicable law and regulation.
The performance management and rewards framework envisioned by the policy has been designed to promote effective risk management, including in particular by:
Ensuring that assessment of performance takes full account of adherence to risk management requirements, covering all relevant types of current and future risks, including sustainability risks; and
Providing for reduction of deferred variable remuneration awards to senior personnel in certain circumstances, such as in the event that the entity in which the relevant employee works suffers a significant failure of risk management, or experiences a significant downturn in its financial performance (as determined in the sole discretion of Lakestar), including in connection with a sustainability risk concerning an investment.