Mandatory disclosures under Regulation of the European Parliament and of the Council on sustainability-related disclosures in the financial services sector (EU) 2019/2088 (“SFDR”):
I. Policies on the integration of sustainability risk in investment decision-making processes (Article 3 SFDR)
MX Fund II GmbH & Co. KG and Merantix Fund Management GmbH (together “Merantix”) invest in companies that create a positive global impact with artificial intelligence as the enabling technology of their product. We actively consider ESG factors and sustainability risks as part of our validation and investment decision-making process. Sustainability risks are environmental, social or governance events or conditions, the occurrence of which could have an actual or potential material adverse effect on the value of the investment. Merantix considers sustainability risks as part of the validation and due diligence process prior to any investment. Such assessment is being conducted having numerous discussions with portfolio investments.
II. Principle adverse sustainability impact statement (Article 4 SFDR)
While we place high emphasis on sustainability factors such as environmental, social and employee concerns, respect for human rights and the fight against corruption and bribery, there is no formal process or framework as required by Art. 4 SFDR to include such factors in the investment process. Complying with Art. 4 SFDR would require Merantix to disclose certain portfolio information. Yet, Merantix anticipates the scope of portfolio information to be typically insufficient for purposes of Art. 4 SFDR. Given that the Sustainable Finance Disclosure Regulation (EU 2019/2088) ("SFDR") and the accompanying Regulatory Technical Standards ("RTS") are relatively new, there is very little or no practical experience or practice with regards to applying their respective provisions. Therefore, substantial legal uncertainties would remain when applying those provisions, in particular in light of Merantix’s investment strategy. If and when those uncertainties will be resolved and a practicable market and administrative practice will evolve, Merantix will reevaluate its position regarding adverse impacts on sustainability factors in due course.
III. Sustainability-related information about financial products that promote environmental or social characteristics (Article 10 SFDR)
Merantix Fund Management GmbH (“Merantix”) is the alternative investment fund manager of Merantix AI Fund GmbH & Co. KG (the “Merantix AI Fund”) within the meaning of the German Investment Code (Kapitalanlagegesetzbuch, KAGB) and as such publishes the following information in light of the consideration of sustainability-related aspects in accordance with Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability disclosure requirements in the financial services sector (the “SFDR”).
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Summary
This financial product promotes environmental or social characteristics but does not have as its objective a sustainable investment. The promoted characteristics are investment restrictions. 100% of the investments will be in line with its investment strategy and investment restrictions.
No reference benchmark has been designated to attain the environmental or social characteristics promoted by the financial product.
Zusammenfassung
Dieses Finanzprodukt bewirbt ökologische oder soziale Merkmale, strebt aber keine nachhaltigen Investitionen im Sinne der Definition des Art. 2 Nr. 17 SFDR an. Bei den beworbenen Merkmalen handelt es sich um Ausschlusskriterien. 100 % der Investitionen werden im Einklang mit der Anlagestrategie und den Anlagebeschränkungen getätigt.
Es wurde kein Referenzwert benannt, um die mit dem Finanzprodukt beworbenen ökologischen oder sozialen Merkmale zu erreichen.
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No sustainable investment objective
This financial product promotes environmental or social characteristics, but does not have as its objective sustainable investment.
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Environmental or social characteristics of the financial product
The promoted characteristics of this product are investment restrictions.
Merantix AI Fund may not invest, guarantee, or otherwise provide financial or other support, directly or indirectly, to companies or other entities.
(A) whose business activity consists of an illegal economic activity (i.e., any production, trade or other activity which is illegal under the laws or regulations applicable to Merantix AI Fund or the relevant company or entity, including without limitation, human cloning for reproduction purposes), or
(B) which substantially focus on:
(i) the production of and trade in tobacco and distilled alcoholic beverages;
(ii) the production of and trade in weapons and ammunition of any kind, it being understood that this restriction does not apply to the extent such activities are part of or accessory to explicit European Union policies;
(iii) casinos and equivalent enterprises; or
(iv) the research, development or technical applications relating to electronic data programs or solutions, which (x) aim specifically at supporting any activity referred to under (i) to (iii) above; internet gambling and online casinos; or pornography; or which (y) are intended to enable to illegally enter into electronic data networks or to illegally download electronic data.
No reference benchmark has been designated for the purpose of attaining the environmental and social characteristics promoted by Merantix AI Fund.
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Investment strategy
Merantix AI Fund intends to seek long-term capital appreciation through equity and quasi-equity investments in early-stage technology companies (pre-seed, seed and series A financing), with a focus on Artificial Intelligence.
No investments are made in the area of exclusions. As part of the due diligence and ongoing investment management, the investment team for Merantix AI Fund will initially and continuously monitor whether the investment restrictions are abided by and whether the investment falls within the investment policies.
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Policy to assess good governance practices of the investee companies
As part of the due diligence and ongoing investment management, the investment team will review whether a potential investee company has good governance practices in place. This might include using ESG (environmental, social, and governance) criteria to evaluate companies' performance in areas such as labor practices, human rights, and corporate governance, conducting due diligence on investee companies to assess their management structures, employee relations, and tax compliance, engaging with investee companies through to encourage improvements in governance practices if necessary. The intensity of the assessment is carried out in accordance with the principle of proportionality. Where the Merantix sees higher risks of a non-compliance, they will intensify the audit.
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Proportion of investments
Merantix AI Fund will invest fully in line with its investment strategy and investment restrictions. Merantix AI Fund will not invest a portion of its capital in any other asset class.
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Monitoring of environmental or social characteristics
The investment team for Merantix AI Fund will initially and continuously monitor whether the investment restrictions are abided by and whether the investment falls within the investment policies. Merantix AI Fund will not make any investment in the excluded sectors unless previously approved by the advisory committee. Therefore, the achievement of the promoted ESG aspects – no investment within the excluded sectors – can be tracked in a simple way.
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Methodologies for environmental or social characteristics
See above. The exclusion list is used to measure how the social or environmental characteristics promoted by the financial product are met.
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Data sources and processing
Merantix AI Fund receives data provided by the portfolio companies as part of the due diligence process and at regular intervals after the investment. Where necessary or beneficial, Merantix AI Fund also makes use of publicly available data. Data processing is exclusively internal and DSGVO compliant. Estimates of data are not made.
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Limitations to methodologies and data
Merantix is partly reliant on the information provided by portfolio companies during the due diligence process. Moreover, in the post-investment phase, Merantix is reliant on the company’s reported data. In both cases, complete data may not always be available due to the nature of the investments. The information is verified only if and to the extent misrepresentations are suspected.
Since Merantix AI Fund’s investments are made for a multi-year investment period, Merantix places a high priority on establishing a trusting working relationship with the portfolio companies to ensure that data is submitted reliably and completely and that the above restrictions are met.
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Due Diligence
Merantix considers the promoted ESG aspects when sourcing new portfolio companies for Merantix AI Fund and during the due diligence on targeted portfolio companies. The due diligence is performed by obtaining all information relevant to Merantix AI Fund using a due diligence questionnaire, which is then reviewed internally. If necessary, further specific information is also obtained from the potential portfolio companies, should this still be necessary after the detailed questioning. The due diligence process is not externally monitored.
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Engagement policies
Merantix AI Fund invests in the portfolio companies for a period of several years. Therefore, Merantix makes it a priority to establish and maintain a trusting working relationship with the portfolio companies in order to continuously comply with the investment restrictions. Merantix thus also intends to establish or strengthen the consideration of sustainability risks at the portfolio level. Merantix is in constant dialogue with the portfolio companies, but as a venture capitalist without majority ownership, the influence Merantix can exert on the portfolio companies is limited.
Last Version: August 22, 2023
