Responsible Investment Policy

Through its actions and conduct, DBAG takes responsibility for how decisions affect others now and in the future. The company therefore strives to gear individual actions toward minimising greenhouse gas emissions and maximising resource efficiency: 

• DBAG deliberately limits business travel to a necessary minimum; business trips are replaced as far as possible with alternative forms of communication, e.g. video conferencing, and the company has adopted a travel expenses policy that promotes cost-efficient and environmentally friendly practices. 

• When procuring consumables, e.g. office supplies, DBAG adheres to sustainability criteria and maintains a technical office infrastructure that promotes a significant reduction in paper consumption. DBAG purchases electricity generated from renewable sources.

• Greenhouse gas emissions from business operations – remaining after all measures to avoid them have been taken - are offset in a suitable form.

• DBAG recognises the physical risks from climate change and the transition to a low-carbon economy to the organisation and its investments. Therefore, the investment strategy is regularly reviewed. ESG due diligence as the basis for any future investment decision shall also include an assessment of climate-related physical and transition risks. 

In many ways, DBAG recognizes that its employees are its most important resource. To continue fostering an inclusive workplace where employees can perform and develop, a range of initiatives were implemented, including:

• Employee satisfaction surveys are regularly conducted, the outcome is measured and results are reported to leadership in order to develop actions to maintain high satisfaction across the company.

• The working conditions strive to provide a healthy balance between professional and private pursuits. In addition to other benefits, employees can make use of a mobile working policy or receive support with their childcare needs.

• Employees receive regular training on anti-discrimination and inclusion. DBAG measures and reports the proportion of women in management positions and actively seeks to increase this proportion. The company commits to women representing at least 20% of senior positions by joining the Level 20 initiative. 

• Paid parenting leave for primary caregivers supports employees transitioning to and from parenthood. The “Women in PE” Campus Event Series, that caters to female students interested in Private Equity, helps build and provide networks from early career stages. 

• DBAG conducts a regular gender pay gap review and established remuneration systems to ensure fair pay across all positions.

• Structured and regular training opportunities are provided for all employees at DBAG for personal development via a comprehensive training curriculum, which is updated yearly. 

• Occupational safety and protecting the health of employees is one of the top priorities – DBAG provides occupational health & safety training regularly and benefits for well-being, such as fitness subsidies or annual flu shots.

DBAG practices broad engagement in society:

• Since 2002, DBAG has a long-standing partnership in support of the arts with SCHIRN KUNSTHALLE in Frankfurt am Main as a member of the FREUNDE DER SCHIRN KUNSTHALLE e.V.

• Its foundation (Gemeinnützige Stiftung der Deutschen Beteiligungs AG) places particular emphasis on supporting young people who have had a difficult start in life, to open up opportunities for them and enable them to participate in society. 

DBAG commits fully to good corporate governance where responsible management and supervision are among the top priorities. Through open, timely and regular disclosures as well as transparent decision-making structures, the company earns and maintains the trust of its shareholders. Although many of the requirements stem directly from the German Stock Corporation Act (AktG), the German Securities Trading Act (WpHG) and other laws, the company’s Articles of Association, its rules of procedure and, above all, its business practices exceed these minimum standards at many points. Every year, a Declaration of Compliance is issued in accordance with section 161 of the AktG and published on DBAG’s website. This declaration transparently communicates the extent of compliance with the principles and recommendations of the “German Corporate Governance Code“ developed by the German Federal Government commission of the same name.

DBAG reports annually the total amount of any administrative fines or penalties imposed for compliance violations over the previous financial year. The target for this reporting metric is ‘zero’.

Compliance with legal regulations at DBAG is beyond question. A ‘zero tolerance’ policy is pursued when it comes to compliance issues. DBAG is strictly opposed to all forms of corruption and other unethical business practices. To meet these high compliance standards both within DBAG and in its dealings with the portfolio companies, a far-reaching compliance system was introduced in 2012. 

• DBAG’s Code of Conduct sets out its core values and guiding principles.

• The compliance rules contain detailed provisions and instructions on matters of money laundering, IT security, data protection, employees’ personal account transactions, equal treatment, travel expenses, hospitality and the handling of gifts and invitations. These rules are regularly reviewed to assess the need for updates. 

• There are clear rules governing the organisation and monitoring of the compliance system; these rules cover updating of the system as well as regular employee information and training.

• A whistle-blower system is in place.

• There are clear rules on compliance in acquisition processes, i.e. due diligence and purchase agreements for investment in new portfolio companies.

As this extends to the investment process, also the expectations for compliance systems at the portfolio companies is clearly formulated.

When assessing potential investments in new portfolio companies and during the investment phase, we focus on the following ESG criteria:

• Environment: professionally managing and minimising damage to nature and the climate
• Employment and social affairs: promoting good working conditions and high social standards as well as making a positive contribution to society
• Corporate governance and business ethics: adherence to the highest possible standards and promoting good business practices

We also assess and consider whether the business model can be deemed ‘sustainable economic activity’ in line with the EU taxonomy classification system.

2.1.1 Environment: professionally managing and minimising damage to nature

We are convinced that improving the environmental performance of our portfolio companies results in sustainable value creation. Of course, we are aware that not all decisions are free of inherent contradictions. Our aim, however, is to arrive at the best possible solution, ecologically and economically.

What we expect from portfolio companies:

• Strict compliance with applicable environmental legislation in each location, with a ‘zero tolerance’ policy for violations.
• Collection of CO₂ emissions data (Scope 1, 2 and, if possible, also Scope 3) and alignment of their actions with low-carbon business practices.
• Transparent reporting on how the physical and transitional risks and opportunities of climate change have been identified and how business strategies have been adapted accordingly.
• Measures to prevent environmental damage.
• Measures to minimise consumption of energy and water as well as generation of hazardous waste.
• Measures to eliminate waste production or, where full elimination is not possible, minimise it.
• Measures to achieve the highest possible rates of reuse or recycling.

In addition to these core topics, we expect our portfolio companies to actively address any environmental issues that may arise from their specific business activities, e.g. the preservation of natural biodiversity or the introduction of a procurement policy geared toward sustainability. 

2.1.2 Employment and social affairs: promoting good working conditions, high social standards as well as making a positive contribution to the society

We are convinced that safe working conditions, opportunities for personal development and attractive remuneration models are key factors for the portfolio companies we support to attract and develop outstanding employees. Moreover, we place importance on each portfolio company making positive contributions in its local community, and we expressly support such engagement.

We expect the decision-making bodies of the portfolio companies to intensively address the following issues: 

• Occupational safety, giving priority to the protection of employees’ health and maintaining a discrimination-free working environment.
• Providing opportunities for both continuing professional development and personal development.
• Gender balance in leadership positions and appropriate measures to increase the proportion of women.
• Remuneration based on systems that appropriately reward success and performance.
• Surveying of employee satisfaction, aiming for a continuously high level.
• Recognition and respect of collective bargaining autonomy and the right to collective bargaining.
• We expect international conventions on human rights and the prevention of child labour to be respected. We are guided, in this context, by the core labour standards of the International Labour Organization (ILO) and the Universal Declaration of Human Rights.

If, as a consequence of economic and/or business disruptions, measures to reduce the number of employees should become necessary, the employees, committees and corporate boards of DBAG, as members of the advisory and supervisory boards of our portfolio companies, are aware of their great responsibility for preserving jobs. Our aim in this context will be to find the best possible solution, socially and economically.

2.1.3 Corporate governance and business ethics: adherence to the highest possible standards and promoting good business practices

Good corporate governance is an important aspect of our investment strategy. We consider it vital that the portfolio companies we support comply with all legal requirements, and we pursue a ‘zero tolerance’ policy in this regard. In particular, we are strictly opposed to all forms of corruption and other unethical business practices. 

When assessing potential investments in new portfolio companies and during the investment phase, we place particular emphasis on the following aspects, which are described in more detail in section 2.2:

• Compliance in transaction processes
• Compliance systems of portfolio companies
• Supervisory or advisory boards of portfolio companies

The investment process includes advisory support in the execution of the investments of DBAG Funds, the subsequent investment phase and the sale of the portfolio company. This document is intended to serve as a clear recommendation for the employees, committees and corporate boards of DBAG, the members of the investment committees of DBAG Funds and the management of the portfolio companies. 

2.2.1 Assessment of investment opportunities

All investment opportunities are analysed that meet the criteria of the investment strategy of the respective DBAG Fund. The level of information available generally improves with the progress of the acquisition process. Especially at the beginning, there is usually only rudimentary information available.

There are certain sectors and companies that are generally excluded from DBAG Funds (see Annex 1). However, as these sectors are not part of DBAG’s Sector Focus and generally do not reflect the area of expertise of the Investment Advisory Team, neither the investable universe nor cash-on-cash returns are affected by this commitment.

The provisions on compliance in transaction processes (i.e. due diligence and purchase agreement for investment in new portfolio companies) apply when assessing potential investments. These are part of the compliance system of DBAG.

2.2.2 Due diligence

Sustainability topics are an integrated, undisputable addition to other due diligence workstreams such as commercial and financial with clear responsibility within each deal team as they are required to perform ESG due diligences for all new deal opportunities and actively discuss findings in the Investment Advisory Committee. Prior to any investment, a third-party due diligence provider is usually engaged and conducts an independent materiality assessment which guides focus topics post-closing. Best practice would be to follow SASB Materiality Map or the MSCI ESG Industry Materiality Map. However, the due diligence providers are expected to also adequately use GRI standards, UN Sustainable Development Goals (SDGs), UN Guiding Principles on Business and Human Rights, IFC Performance Standards, climate risk & exposure analysis tools as well as geopolitical and macro-economic considerations in their analysis. If available, the assessment also considers any materiality assessment which the target has previously conducted (e.g. due to CSRD implementation). These topics and initiatives may be broadened out to cover additional issues identified during due diligence and to reflect any business model or competitor considerations that may influence materiality. A standardized approach shall ensure comparability across deal opportunities. The ESG Manager confirms coherence also when switching service providers.

2.2.3 Investment proposals

The Portfolio Manager makes sure that every decision document presented to her includes an overview of sustainability-related strengths, weaknesses, improvement potential and risks as well as material issues to be reflected in the SPA and major to-dos post-closing as identified in the due diligence process. This shall ensure adequate representation of the responsible investment principles in investment advice.

2.2.4 Investment phase

The Portfolio Manager attaches importance to the formation of a supervisory or advisory board for portfolio companies located in jurisdictions where two-tier board structures are common practice.  In the case of majority investments, these boards will be comprised of independent industry experts as well as board members or employees of DBAG. The members of these supervisory and advisory boards should – if not already stipulated by law – be equipped with supervisory rights and be available to the management of the portfolio companies in an advisory capacity. The portfolio companies are expected to hold regular supervisory or advisory board meeting where the strategy, budget as well as good governance practices are reviewed regularly and discussed with the management. The Portfolio Manager exerts influence during the investment phase via DBAG’s employees, committee members and board members sitting on the supervisory or advisory boards. 

In the case of new portfolio companies, if they do not already have one, DBAG expects them to promptly introduce an up-to-date compliance management system or to quickly remedy any deficiencies in the compliance management system found during the due diligence. 

Based on the findings of the due diligence, the Portfolio Manager expects the management of the portfolio companies, with the support of their supervisory or advisory boards, to 

• address any material aspects identified in the due diligence process during the investment phase; 
• take action to improve sustainability performance and regularly address environmental, social and governance issues in supervisory or advisory board meetings; 
• define meaningful qualitative and quantitative sustainability performance indicators to measure performance on general and core company-specific aspects;
• make these regularly available to the shareholders and supervisory or advisory boards in a suitable form at least once a year; and
• appropriately review these guidelines prior to execution when making company acquisitions.

Since employees of DBAG’s subsidiaries do not act in any executive capacity for portfolio companies, they are limited to stewardship during the investment phase. The members of the Investment Advisory Team on the advisory boards of the portfolio companies promote environmental, social and governance aspects through calls with representatives of the portfolio companies (including management) where the ESG Manager acts as sparring partner for the portfolio and advises on best practices, recommended project approaches, potential advisors and proper prioritization of initiatives. In addition, plenum calls with the entire portfolio are offered to all DBAG Funds in which i.a. regulatory updates are shared, and third-party experts are invited occasionally.

At the time of investment, the portfolio companies may have varying levels of maturity with respect to the material sustainability matters relating to their business. The Portfolio Manager seeks to support portfolio companies to improve their sustainability profiles by identifying companies that already demonstrate a mature approach to material sustainability matters, or which can meaningfully mature during the ownership or management.

The Portfolio Manager will also seek to help portfolio companies to increase the transparency, quality and availability of their sustainability-related data both by integrating the ESG Data Convergence Initiative’s (EDCI)¹ core themes and metrics into the due diligence process and by measuring and monitoring the performance in those areas over time, as appropriate.

Furthermore, in the event of serious irregularities, the Portfolio Manager expects the portfolio companies to report to the supervisory or advisory board promptly on the matter, including any actions taken, insofar as this is legally permissible and appropriate given the facts of the case. In DBAG’s view, such serious irregularities include, e.g. accidents resulting in personal injury or serious environmental pollution, as well as severe compliance violations. The aim is to report in an appropriate manner on the sustainability performance of the investment portfolio.

2.2.5 Sale of portfolio companies

DBAG is convinced that the measures taken during the investment phase serve to protect as well as enhance the value of the investment and that this will be reflected by a corresponding increase in proceeds from the sale of the investment. In preparation for a divestment process, the portfolio company’s management, supported by the Investment Advisory Team, compiles data that demonstrates as well as possible for successor investors the value created through the integration and improvement of sustainability factors during the investment phase. Depending on the materiality and relevance of such considerations to potential investors, the Portfolio Manager shall include these aspects in varying depths during exit preparations.

2.2.6 Communicating to and engaging with stakeholders and clients 

Investor Relations and Corporate Communications share responsibility for communicating to DBAG’s stakeholders about sustainable business practices and responsible investing. They are actively supported by the ESG Manager. 

One component of the communication to shareholders, the public and investors in DBAG Funds is the regular disclosure of DBAG’s and its portfolio companies’ sustainability performance. The sustainability performance of the portfolio is reported to the investors in DBAG Funds at least once a year; it is also presented as part of the annual investor meeting. Moreover, DBAG uses pertinent meetings of industry representatives and events organized by industry-specific associations to actively engage with stakeholders in order to contribute to the development of responsible investment in private markets.

1 The EDCI is a global private markets initiative committed to streamlining the industry’s historically fragmented approach to collecting and reporting sustainability data between GPs and LPs. As such, the initiative is continuously being developed and adapted.