Polaris Sustainability Report 2023-2024

On February 26^th 2025, the EU Commission proposed the EU Omnibus package with the aim to limit and simplify sustainability reporting mandated through key EU sustainability reporting regulations: the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy. Before the EU Omnibus, about two thirds of our companies were eligible to report according to the CSRD in 2026 for the financial year 2025 (Wave 2). This has now initially been delayed by two years and there is also a wide-spread expectation that the minimum size will be increased to a level where almost all of our portfolio companies will be excluded from the CSRD reporting requirements all together. We continue to ask our portfolio companies to identify their material impacts, address these, follow-up on relevant KPIs and report on their progress, which is in-line with the essence of the CSRD so the work that has already been conducted by our companies will remain valuable. This EU Omnibus will present an opportunity to focus more on their actual activities rather than extensive reporting.

The changed stance towards sustainability by the US administration, fueled by increased focus on geopolitical uncertainty and the EU Omnibus package, is said to be the cause of a sustainability backlash. We frequently discuss this with our investors, partners and advisors and don’t see signs of a reduced focus on sustainability in our part of the market. We believe this is because the underlying drivers such as for example climate change, pollution, importance of a good working environment and good governance along with the related changes to customer behaviors remain, together with their impact on value creation and returns. Whatever the backlash might be, we therefor expect this to be temporary, and we will continue our work to integrate sustainability in our investment process and the way we do business.

In June 2025, we submitted an application to the Science Based Target Initiative (SBTI) for the approval of a Science Based Target for Polaris Management A/S as a fund manager. The target will include a specific portfolio coverage target for both Polaris Private Equity (PPE) and Polaris Public Equity (PPU). PPE will target 100% portfolio coverage by 2030 and PPU 50% by 2030. Although we have promoted science-based targets among our private equity portfolio companies for a number of years and had a 22% coverage rate in PPE and 18% coverage rate in PPU at the end of 2024, the formalization of our commitment will help drive our work in this area.

By the end of 2024,  five new portfolio companies had been added to our private equity portfolio during 2023-2024 (Cepheo, Micropower, Vinnergi, Awardit, 7N and Salfarm). These are now in the process of being on-boarded on the components of ‘Polaris Sustainability Program’. We see a trend that our new portfolio companies generally are more mature at the time of acquisition than before, which means that many components of the program might already be in place at the beginning of our ownership period and we can instead focus on filling-in any gaps. As an example, Micropower, Vinnergi and 7N already measured their CO2 emissions before our ownership. The increasing maturity of our new companies means we can focus more on development than platform establishment. It also means that we need to adapt and modularize our approach and ‘Polaris Sustainability Program’ to fit this new situation.

Implementation of UN GPs/OECD guidelines for Responsible Business Conduct continues to be a cornerstone in ‘Polaris Sustainability Program’ and a unique feature of our sustainability approach. During 2023-2024, both Distriktstandvården and Micropower went through the one-week onboarding. The process is referenced in the EU regulations SFDR, CSRD, the EU Taxonomy (Minimum safeguards) and the upcoming CSDDD.

With the launch of Polaris Public Equity, we now operate three complementing investment strategies. Our overall approach to sustainability is common for all of these but adapted to fit the investment process and governance rights for each of them. We can however share knowledge, networks, tools and methodologies between the strategies. These shared capabilities also supported our ability to take over of the management of Polaris CS Fund I in March 2025, previously managed by Core Sustainability Capital. All of the funds managed in our different strategies fall under CSRD – Article 8.

We want to try to recognize and promote successes in different areas of value creation among our portfolio companies, which includes sustainability. Since the last report, we have designated Futur and Contour Design as winners in this category. By working diligently to establish themselves as a premium partner to their customers on sustainability, Futur has been able to improve their ESG rating as a pension provider in the Swedish market. Ultimately, their work together with their customers is helping end-customers to make more sustainable investment choices. This has in turn directly led to increased inflow of pension funds, an increased market share and a great example of the value creation potential of sustainability. During the past couple of years, Contour Design has been a trail blazer in our portfolio in relation to their climate impact. They were the first of our portfolio companies to set a science-based target for their emission reductions approved by the SBTI and have since worked with to reduce their carbon footprint. They successfully employ Life-Cycle Analysis and have through changed product design, managed to significantly decrease the CO2 emissions of their main products and the company as a whole.

Since 2021, we conduct a dedicated sustainability due diligence prior to all investments in the private equity strategy and a sustainability review in the other strategies. In the sustainability due diligence, we have found that the maturity of a company’s sustainability work is of less importance to us as we are able to address this in the ownership phase. Instead, we focus on trying to understand the material impacts (positive and negative) that a potential investment might have and instead deep-dive on these. Here we get support from specialist consultants with expertise in the relevant sector. Frequently, this includes analyzing potential positive impacts that a company might have, or claim to have, through their products and services. Even though we are not an impact investor, we have several portfolio companies who can claim a positive impact from their products and services and we also frequently come across this in potential investments which we need to evaluate correctly. In the exit process, it is clear that we now need to assume that each of our portfolio companies will be subject to a dedicated sustainability due diligence by a future buyer and that the strength of the company’s sustainability platform and performance is likely to impact the price and terms. We believe we are well prepared for this development, and it strengthens the business case for our investments in this area.

We continue to report on a large range of sustainability indicators to our private equity investors in various formats. Although there is standardization and convergence, the large scope and various formats this present a large challenge for us as a fund manager. To streamline the process for our portfolio companies, we gather information from them in one coordinated process which we call Polaris Sustainability Assessment. This was now completed for the third year for 2024. The data collected in this coordinated process enables us to report according to several standards including EDCI, France Invest, Invest Europe and Efront and also to report on SFDR PAI tables 1, 2 and 3. There seems to be a strong momentum for signing up to the ESG Data Convergence Initiative (EDCI) and we would recommend any investor who is considering their sustainability data requirements and processes to consider using this standard.