The pre-analysis highlights the main ESG risks, opportunities and recommendations and is considered during the Investment Committee before making an investment decision.

The ESG analyses are conducted based on both financial and extra-financial data. Our investment teams have access to specific sector reports, studies from industry experts as well as a guide created by Naxicap’s ESG team covering the main material issues of each sector.

The audits cover an in-depth analysis of each relevant ESG theme, including their level of materiality for the company, their strategic importance in relation to the sector, a summary of the company’s performance, relevant KPI’s and other key performance elements as considered material by the auditor.

Our auditors conduct interviews with the management teams and have, in addition to their own internal sources, access to relevant documents provided directly by the target company.

ESG issues analyzed:

The analysis presented in the investment memos and in the audits cover central ESG issues considered material to the specific target company, as evaluated by the auditor. Examples of issues analyzed are:

• Corporate Governance and Risk Management,
• Business ethics,
• HR strategy & Career management,
• Health & Safety,
• Environmental management system,
• Energy Consumption & GHG emissions,
• Responsible procurement,
• Service quality & Customer satisfaction,
• Community involvement

An ESG clause is systematically included in the Shareholders Agreement. When signing the Shareholders Agreement, companies commit to implement a detailed action plan, to inform Naxicap regularly on their actions and to annually report on ESG data.

Our companies answer an annual ESG questionnaire enabling Naxicap to monitor and report on the progress made by its portfolio companies.

Information and sources used for analysis of material issues:

In order to collect the c.120 indicators on which Naxicap requires its portfolio companies to report annually, Naxicap has implemented an online reporting tool – Reporting 21 – available to every portfolio company.

ESG issues analyzed:

As a General investor, the 120 indicators on which Naxicap requires its portfolio companies to report annually cover a wide area of central ESG issues applicable to all sectors and activities. These indicators derive from consolidated recommendations and studies by industry experts such as the PRI, the ESG Commission of France Invest, external consultants as well as industry peers.

Naxicap encourages collaboration with the company management to identify the material ESG issues and to support the development of its ESG roadmap. The roadmap is approved at least once a year during a Supervisory Board, as defined in the Shareholders Agreement. The companies have to present their progress and realized actions, especially on how they act on factors regarded as being of high importance as evaluated by the auditor.

Naxicap answers the inquiries of its investors and provide them with detailed ESG reviews throughout the investment cycle. Naxicap provides its investors with dedicated ESG reports by funds (as described in the By-laws) in addition to an annual ESG report.

ESG Vendor Due Diligences (VDD) are conducted for all investments where a financial Vendor Due Diligence has been undertaken.

The ESG VDD highlights the key ESG issues identified and managed throughout the period of ownership in order to limit risks and to create value. Reporting on the progress on environmental management made during the ownership period is also done through the ESG Vendor Due Diligences.

As a signatory of the IC20, Naxicap systematically factors climate risks into its investment process, defined by the scope of its ESG policy.

A detailed analysis of the company’s exposure to significant climate issues facing its sector and activity is carried out to evaluate the materiality of the company with regards to relevant climate issues. The analysis follows a methodology elaborated by PWC.

Naxicap has integrated indicators into its online ESG reporting tool to monitor the portfolio companies’ exposure and adaptation strategies to physical and transitional climate risks with the potential of impacting their business operations. These indicators are presented in Naxicap’s annual ESG report.

By using emission factors from ADEME (Agence de l’Environnement et de la Maîtrise de l’Énergie), we are able to estimate the Scope 1 & 2 emissions of our portfolio companies.

The climate analysis undertaken pre-investment identifies areas of improvements and concrete actions to be implemented by the company, whether it is to capitalize on opportunities related to the transition towards a low carbon economy or to limit exposure to significant climate risks.

Naxicap seeks to see actions taken for reduced GHG emissions and approves the roadmap in the Supervisory Board, as defined in the Shareholders Agreement.