About Shift4Good
Shift4Good SAS, an independent French management company, was established by four seasoned investment professionals who possess extensive expertise in impact investing across Europe, as well as in countries such as Israel, Asia, and the United States. Motivated by a shared commitment to sustainability, the founders have united their skills and extensive networks to launch Shift4Good Fund 1 (“the Fund”), a venture capital fund dedicated to making a positive impact in the transportation sector by reducing its carbon footprint and mitigating other detrimental environmental factors.
The founders are deeply aware and concerned that the current way of living, producing, and consuming cannot be sustained by the world population in the long run. Social and environmental challenges facing humanity have reached a critical stage, and the team firmly believes that decisive action is necessary. By channeling substantial private capital toward the most promising entrepreneurs, the Fund aims to contribute significantly to achieving the United Nations Global Goals by 2030 and safeguarding our planet’s future. Only companies with a clear mission centered around generating positive environmental impact will be considered for investment by the Fund.
Integration of Sustainability Risks into the Investment Decision-Making Process (SFDR Art.3)
Shift4Good is devoted to investing in sustainable companies that contribute to reducing the environmental impact of the transportation sector. The company is fully committed to allocating 100% of its funds exclusively to companies that actively pursue this environmental objective.
In order to uphold this commitment, Shift4Good has collaborated with a sustainable business and investment expert to develop an impact assessment methodology. This methodology encompasses the evaluation of investment opportunities and associated sustainability risks. It incorporates ESG criteria and considers sustainability risks as integral components of a comprehensive assessment process. By doing so, it enables the evaluation of the impact intentionality and maturity of investment opportunities. This methodology consists of a 4-step screening process assessed using proprietary questionnaires or international standards:
- Impact consideration: Has the product/solution been designed with a focus on its impact? Are other negative impacts considered in the operations?
- Impact strategy: How is the impact strategy implemented within the startup’s activity (assessing leadership, implementation, and results)?
- SFDR alignment: Does the investment align with SFDR sustainability criteria which include Principal Adverse Impacts (PAIs) indicators?
- ESG assessment: An external audit is performed by an external auditor for Series A investments, and it is internally audited for Seed investments to evaluate the startup’s compliance with the best ESG standards. If needed, an action plan is defined to support the startup in achieving best ESG practices.
Once a startup has passed the four steps of the impact assessment, it collaborates with the investment team to establish two relevant Impact KPIs that reflect the positive impact of the startup’s activities on the environment. These KPIs must be directly linked to the business plan to connect the acceleration of activity with impact achievements. These KPIs are validated by the Shift4Good Impact Committee and monitored annually.
The impact due diligence is conducted in parallel with other due diligences and is fully integrated into the investment decision-making process. It carries equal weight to other due diligences and serves as a go/no-go criterion.
Shift4Good is committed to monitoring the impact assessment of its portfolio companies through specific Limited Partner (LP) questionnaires and, when possible, during Board meetings. Additionally, the Impact Committee holds quarterly meetings for the investment team to update its members on the progress and support Shift4Good in monitoring the impact.
Shift4Good is supported by an Impact Committee and an Advisory Committee (composed of major LP representatives) to assess the overall sustainability risk of the Fund, taking into account each investment.
Principal Adverse Impacts in the Investment Decision- Making Process (SFDR Article 4)
Shift4Good Fund has a sustainable objective of reducing CO2 emissions and other negative environmental contributors linked to the transportation sector. It is committed to investing 100% of its funds in sustainable companies, in accordance with SFDR requirements. Since all products and investee companies of Shift4Good have an impact on the environment and society, they are required to report on their principal adverse impacts (PAIs) on sustainability. These impacts are defined by the European Union as “negative, material, or likely to be material effects of investment decisions on sustainability factors.” Shift4Good systematically collects and discloses adverse sustainability indicators on an annual basis. The collection of indicators is conducted during the due diligence process as part of its SFDR Sustainability assessment, as mandated by SFDR Article 4.
The sustainability assessment methodology consists of three steps and is performed by Shift4Good:
- Substantial contribution to climate change mitigation environmental objectives, assessed using EU Taxonomy
- Do Not Significantly Harm (DNSH) other environmental objectives, assessed through Principal Adverse Impact (PAI)
- Assessment of governance good practices through a Governance Compliance questionnaire, confirmed by an external auditor if necessary.
It is important to note that most of the key topics underlying the PAI indicators are included in the impact assessment conducted during the initial due diligence and monitoring period of the investment. Shift4Good will systematically exclude investments in high- impact climate sectors, fossil fuel sectors, or sectors likely to generate negative impacts on other environmental objectives. The ESG audit evaluates the social practices of the opportunity, including HR, gender considerations, and other employee matters. Therefore, the PAIs are assessed multiple times during the due diligence process to ensure an accurate evaluation and the development of an appropriate action plan.
Recognizing that some of the required PAI indicators may be particularly challenging to collect from early-stage startups, Shift4Good requests startups to report these indicators when they reach a certain level of maturity.
PAI indicators are an integral part of the investment process and ensure that principal adverse impacts are minimized, mitigated, or avoided throughout the investment lifecycle.
Access Shift4Good Principal Adverse Impacts statement here.
Integration of Sustainability Risks into a Remuneration Policy (SFDR Article 5)
Shift4Good implements best practices in terms of employee remuneration, following a fair and sustainable model. Compensation for individual employees consists of a fixed salary and potential additional financial incentives, such as bonuses, solely at the discretion of Shift4Good. These incentives are not tied to sales volume. The variable remuneration system is designed to prevent conflicts of interest related to compensation and discourage individuals from taking excessive risks to boost their own pay.
Furthermore, Shift4Good places significant emphasis on gender equality, ensuring equal pay, a non-discriminatory recruitment process, and striving for gender parity within its workforce. As an Article 9 investment Fund, Shift4Good commits to linking 50% of carried interest to the achievement of Impact KPIs. This demonstrates the management team’s genuine dedication to fulfilling the environmental objectives.
Pre-contractual disclosure on the Fund’s environmental characteristics and sustainable investment objectives (SFDR Article 7)
ANNEXE III
Template pre-contractual disclosure for the financial products referred to in Article 9, paragraphs 1 to
4a, of Regulation (EU) 2019/2088 and Article 5, first paragraph, of Regulation (EU) 2020/852
What is the sustainable investment objective of this financial product?
The sustainable investment objective of this financial product is to reduce the negative environmental impact of the mobility industry. The product does not employ a reference benchmark but instead provides annual reporting on 20 criteria established by the EU Regulatory Standard Authority. Furthermore, it specifies a minimum of 2 criteria per portfolio company (which may differ from the 20 criteria mentioned in the EU Regulatory Technical Standards) on which it provides annual reporting. These criteria are collectively referred to as the “criteria”.
What sustainability indicators are used to measure the attainment of the sustainable investment objective of this financial product?
For each portfolio company of the fund, an impact business plan is defined at the investment
phase. This impact business plan defines yearly targets over the projected investment period
on at least two KPIs (Key Performance Indicators) which are typically taken from the list at
https://iris.thegiin.org/matrics.
These KPIs will be independently audited or measured annually and reviewed by the impact
committee of the fund ( which is independent from the managers of the fund ).
How do sustainable investments not cause significant harm to any environmental or social sustainable investment objective?
How has the indicators for adverse impacts on sustainability factors been taken into
account?
Such indicators are taken into account in the impact of due diligence which is conducted
prior to investment. The fund has devised a questionnaire which takes into accounts the
major impact framework ( UN, SDG’s, Future-Fit Business, UN Global Compact Principles,
OECD MNE Guidelines, GRI Standards, and IR IIC ). This questionnaire is split in 19
questions which allows the fund to give an “impact” rating to the potential investee company,
where a minimum score must be reached for an investment to be considered. In addition an
“impact” due diligence is conducted, which is broader in score than the impact questionnaire.
How are the sustainable investments aligned with the OECD Guidelines for Multinational
Enterprises and UN Guiding Principles on Business and Human Rights?
The following fund’s strategic impact objective:
- Actively address the environmental risks and impact associated with its operations and
supply chain, - Ensure safe, healthy and fair working conditions for people directly and indirectly involved in
the business, - Not to compromise on business ethics,
- Market products and services that are safe for people and the environment, and
- Communicate transparently about be positive and negative impacts of its products, services,
and activities,
Encompass OECD Guidelines for Multinational Enterprises III, IV, V, VI, VII, VIII, IX, X, and
XI. And the fund’s strategic impact objectives 3 and 4 are aligned with the UN Guiding
Principles on Business and Human Rights.
Does this financial product consider principal adverse impacts on sustainability factors?
YES, Such indicators are taken into account in the impact due diligence which is conducted prior
to investment. The fund has devised a questionnaire which takes into accounts the major
impact framework (UN SDGs, Future-Fit Business, UN Global Compact Principles, OECD
MNE Guidelines, GRI Standards, and IR IIC). This questionnaire is split in 19 questions
which allws the fund to give an “impact” rating to the potential investee company, where a
minimum score must be reached for an investment to be considered. In addition, an “impact”
due diligence is conducted, which is broader in scope than the impact questionnaire.
Post investment, these indicators are reported with an independent review process. In the
list of Criteria
What investment strategy does this financial product follow?
What are the binding elements of the investment strategy used to select the
investments to attain the sustainable investment objective?
The fund has chosen to invest only in two sectors which are sustainable in nature: smart
mobility with an impact agenda, as well as circular economy.
This choice is contractually binding on the fund.
What is the policy to assess good governance practices of the investee companies?
Our policy stars at investment, when the investee company answers a detailed questionnaire
which allows Shift4Good to assess the governance practices at the time of investment.
Consequently, the investee companies are assessed independently on thier impact results
annually, such independent reviews to include governance in the fund’s investee companies.
WHAT IS THE ASSET ALLOCATION AND THE MINIMUM SHARE OF SUSTAINABLE
INVESTMENTS?
How does the use of derivatives attain the sustainable investment objective?
To what minimum extent are sustainable investments with an environmental objective aligned with the EU Taxonomy?
The Fund invests in companies active in sustainable mobility activities and the economy. The compliance of the investments with the taxonomy will be subject to an independent third party (g-advisory-eu, founded by sustainable expert Guillaume Krepper), or such independent third party as the Fund sees fit.
Shift4Good will use the Taxonomy as a standard to assess the contribution of the investment opportunity to an environmental objective. However, the fund does not evaluate the alignment of investment opportunities with the EU Taxonomy. This is mainly due to the maturity of the opportunities in which Shift4Good invests, which does not correspond to the level of requirements set by the EU Taxonomy.
What is the minimum share of investments in transitional and enabling activities?
The fund does not have specific sub-targets for transitional and enabling activities.
For the sake of clarity, transitional activities are activities for which low-carbon alternatives are not yet available and that have greenhouse gas emission levels that correspond to the best performance in the sector or industry. While enabling activities directly enable other activities to make a substantial contribution to one or more of the climate change objectives.
These two types of activities form part of the fund’s sustainable activities.
What is the minimum share of sustainable investment with an environmental objective that are not aligned with the EU taxonomy?
The Fund does not have specific sub-targets for transitional and enabling activities.
For the sake of clarity, transitional activities are activities for which low-carbon alternatives are not yet available and that have greenhouse gas emission levels that correspond to the best performance in the sector or industry. While enabling activities directly enable other activities to make a substantial contribution to one or more of the climate change objectives.
These two types of activities form part of the Fund’s sustainable activities.
What is the minimum share of sustainable investments with a social objective?
WHAT INVESTMENTS ARE INCLUDED UNDER “# 2 NOT SUSTANABLE”, WHAT IS THEIR PURPOSE AND ARE THERE ANY MINIMUM ENVIRONMENTAL OR SOCIAL SAFEGUARDS?
Is a specific index designated as a reference benchmark to meet the sustainable investment objective?
The fund does not benchmark against a specific index. Rather, each investee company is assessed on one or more impact KPIs, for which an impact business plan is agreed upon and validated by an independent impact committee.
How does the reference benchmark take into account sustainability factors in a way that is continuously aligned with the sustainable investment objective?
N/A
How is the aligned of the investment strategy with the methodology of the index ensured on a continuous basis?
N/A
How does the designated index differ from a relevant broad market index?
N/A
