Monterro’s ESG Policy for Sustainable Investments

1. Background and Purpose

The purpose of this Environmental, Social and Governance (ESG) Policy is to outline the ESG principles and guidelines for Monterro Fund Management AB. It ensures that investments managed by Monterro have a solid foundation for long term sustainable growth and are protected against unwanted sustainability risks.

Monterro has adopted this ESG policy as a commitment to its investors, staff, and the communities in which Monterro and its portfolio companies operate.

The principles outlined in this policy aim to facilitate more sustainable investments while also managing financial risks arising from ESG issues.

Effective from January 1, 2023, Monterro holds a license by the Swedish Financial Supervisory Authority as a manager of alternative investment funds (“AIFM”), with the investment strategy private equity (“riskkapitalfonder”) in accordance with the Swedish AIFM act.

Furthermore, Monterro’s sustainability approach involves integrating sustainability risks into our investment process, without specifically promoting environmental or social factors or making sustainable investments an explicit objective (i.e., the level of compliance with the Sustainable Finance Disclosure Regulation is considered to be Article 6).

2. Introduction

Monterro’s focus is on building and developing sustainable, long-lasting software businesses that create value for shareholders, minimize risk, offer safe and equitable working opportunities for employees, and deliver value to the end-customers of its portfolio companies. This approach also benefits investors in Monterro’s funds. The core of Monterro’s portfolio companies revolves around fostering innovative technology usage that leads to a more efficient utilization of the world’s resources.

Consequently, the most significant impact on sustainability originates from Monterro’s portfolio companies. Nonetheless, Monterro remains committed to actively considering and addressing sustainability risks in our business practices. This sustainability yield short-term and long-term benefits for both Monterro’s portfolio companies and its funds’ investors.

3. Monterro’s investment strategy

Monterro’s investment decisions are based on a comprehensive analysis of both financial and ESG factors. Monterro systematically integrate sustainability risks into the investment decision process, including conducting internal ESG due diligence for all cases.

Companies that receive investments from Monterro must adhere to fundamental principles concerning human rights, labor law, environmental protection, and anti-corruption. These principles are based on the United Nation's Global Compact and the OECD's guidelines for multinational enterprises.

Monterro aims to uphold the following ESG principles:

Environmental

• Monterro assesses and identifies environmental consequences and issues related to investments as mandated by relevant laws or regulations.
• Environmental impacts, particularly regarding the use of hazardous materials and ongoing operations in software companies, are minimized in accordance with industry best practices.
• Monterro tracks and discloses the portfolio companies’ greenhouse gas emissions in alignment with GHG protocols.

Social

• Monterro excludes investments in companies engaged in illegal activities, as well as businesses involved in tobacco, assault weapons and ammunition, casinos and gambling, or pornography.
• Relevant social and human rights issues of an investment is identified and assessed.
• Monterro monitors and manages gender diversity within portfolio companies.
• Fundamental employee rights, including those of significant suppliers, are acknowledged and upheld.

Governance

• Corruption and/or bribery are strictly prohibited, both directly or indirectly, by any parties involved in an investment.
• Adequate disclosure on environmental, social and governance issues is encouraged.
• Effective risk management are promoted.
• All parties involved in an investment must adhere to laws and regulations concerning environmental, human rights, and labor rights as stipulated by relevant authorities.

4. ESG risk management

In addition to integrating ESG considerations into Monterro’s investment process, robust risk management is a key focus. Effective risk management is recognized as critical for the long-term success of Monterro’s portfolio companies and the organization as a whole.

Monterro employs various measures to incorporate sustainability risks into its investment processes, starting from the identification of potential portfolio companies through to the exit process.

Monterro evaluates ESG risk exposure at both company and portfolio levels.

4.1. The due diligence process

Monterro follows a structured process to assess environmental, social, and corporate governance risks due diligence process. When evaluating a potential target, Monterro:

• assesses the overall ESG maturity of the target
• identifies key ESG issues
• investigates potential breaches of ESG principles

4.2. The value creation process

Monterro’s aim is to nurture the growth of sustainable, enduring software companies. To maintain or enhance the portfolio companies’ sustainability focus, Monterro monitors a selection of Principle Adverse Impact (PAI) factors. The objective is to track and reduce portfolio companies’ greenhouse gas (GHG) emissions and monitor social and governance factors that could have negative impact. Data collection includes:

• GHG Scope 1 (direct emissions from facilities and company vehicles)
• GHG Scope 2 (indirect emissions from purchased electricity, heating and cooling)
• Selected elements of GHG Scope 3 (indirect emissions from business travel, waste, electronic devices, data centers and servers)
• Gender diversity across board, executive team, and company.

Monterro collects ESG data from its portfolio companies since 2023 and reports PAI sustainability factors from 2024, in accordance with the Commission’s delegated act (EU 2022/1288).

Furthermore, Monterro advances climate impact reduction by mandating the use of fossil-free electricity and promoting waste recycling among its portfolio companies.

Through Monterro’s annual collection of sustainability data from portfolio companies, the organization possesses a tool for tracking and monitoring companies’ sustainability performance. 

Monterro shall ensure that ESG is a recurring item on each portfolio company’s board agenda.

5. Monterro in society

Contributing to society is deeply rooted in Monterro’s values. Monterro pledges 1 million SEK per year to support sustainable initiatives and allocates two days per employee annually for volunteering. 

6. Transparency and reporting

Monterro proactively publishes its ESG policy, along with other relevant sustainability information, on its website. Monterro is committed to transparency with its fund investors, providing updates on policy, status, and progress concerning ESG, for both portfolio companies, and Monterro itself.

Monterro employs a platform to aggregate and visualize PAI indicators and emission calculations for Monterro and its portfolio companies.

These insights are presented annually to fund investors and included in the annual report.