Disclosures under Regulation of the European Parliament and the Council on sustainability-related disclosures in the financial services sector (EU) 2019/2088 („SFDR“) and its accompanying Regulatory Technical Standards („RTS“).
Approach to sustainability risks in the investment process
Zero Gravity Capital carefully considers and evaluates sustainability risks as part of our investment process. A sustainability risk is deemed as an environmental, social, or governance (ESG) event or conditions, the occurrence of which could cause an actual or potential material adverse impact on the value of the investment. Zero Gravity Capital identifies material risks associated with every proposed investment as an integral part of the investment process, including sustainability risks during the due diligence phase. Such identification is conducted using a standardized sustainability risk checklist, which ensures systematic and adequate assessment of the aforementioned risks. The result of the assessment is taken into consideration in the decision-making phase of the investment process. Zero Gravity Capital remains free in our decision to refrain from investing or investing despite sustainability risks, in which case, Zero Gravity Capital can, in addition, apply measures to reduce or mitigate any outstanding sustainability risks. Lastly, Zero Gravity Capital will continuously apply the principle of proportionality taking due to the account of critical relevance of a proposed investment as well as the proposed investments transactional context.
Consideration of sustainability adverse impacts
Even though Zero Gravity Capital considers sustainability risks and ESG factors as highly important in regards to its mission, it must be noted that Zero Gravity Capital does not currently consider the principal adverse impacts of its investment decisions on sustainability factors. Zero Gravity Capital views that they are currently not in a position to gather and measure all data required under the SFDR reporting systematically and dependably at a reasonable cost in regards to their investment strategies. The administrative difficulty associated with fully considering adverse impacts on sustainability factors is incommensurate regarding the adverse impact’s minimal importance in the context of Zero Gravity Capital’s investment strategy. Moreover, given that the final and conclusive version of RTS has not yet been adopted by the European legislators and given that SFDR is a relatively new directive, there is limited practical experience applying these provisions. As such, it may represent significant legal uncertainty in their translation to Zero Gravity Capital’s current investment strategies. However, should Zero Gravity Capital identify any adverse impacts during the investment process, we will assess their significance and refrain from an investment in case of a negative assessment outcome.
Moreover, when these aforementioned uncertainties are resolved and practicable market and administrative practice evolve to a sufficiently feasible effect, Zero Gravity Capital will re-evaluate and reconsider its position towards principal adverse effects.
Zero Gravity Capital remuneration policy is devised with the highest responsibility to encourage reliable and efficient risk management and dissuade from excessive risk-taking incompatible with the fund’s risk appetite and overall investment strategy.
Key fund managers, namely fund partners, are non-employed and consequently non-compensated via wages as they are only compensated through a limited portion of the management fee. The remuneration policy is set up to consider the sustainability risks. The aforementioned key fund managers leave the majority of the capital intact, so it may be used to mitigate any sustainability risks should they arise.
The broader Zero Gravity Capital team is employed and consequently remunerated via two components: the fixed component in wages and a variable component. The variable component represents a larger portion of the compensation package, represented by e.g. enterprise stock options, which motivates every Zero Gravity Capital team member to act with the highest level of responsibility, carefully considering sustainability risks and ensuring positive impact, in order to maximize each team member’s long-term benefits stemming from the naturally growing value of Zero Gravity Capitals positive impact and their fund participation.