2024 – Sustainability in Polaris Management

Section

Management summary
Sustainability metrics
The Sustainable Development Goals
Our methodology

We are committed to actively promote sustainability throughout Polaris.

Through our portfolio companies, we have a significant combined revenue, thousands of employees and operations in many countries across the world and a responsibility towards a broad range of stakeholders. As we work with our portfolio of companies we are also committed to addressing sustainability in our own organization at Polaris Management.

Read sustainability statement

Polaris Management is the fund manager of Polaris’ funds. We are an investment company focusing on supporting mid-sized companies in the Nordics through complementing investment strategies that share the same focus, objective and approach. Although our own operation is small, the funds we manage are owner of, or lenders to, a number of portfolio companies with a significant combined revenue, thousands of employees and operations in many countries across the world. We therefore have a responsibility towards a broad range of stakeholders such as investors, employees, customers, suppliers, business relationships and the communities in which Polaris Management and our portfolio companies operate.

We take this responsibility seriously and we are committed to actively promoting sustainability throughout Polaris. Our commitment to sustainability is executed broadly across our operations. The main opportunity we believe that we have to promote sustainability is through our investment activities. We therefore work to incorporate sustainability throughout our investment process and our portfolio management process in the active ownership period.

Our ambition is to improve the sustainability performance of our portfolio companies during our ownership. Especially in our main private equity investment strategy, where most of our capital is deployed, we are majority investors and are able to have a significant impact on our portfolio companies. In the scope of sustainability we include environmental, social and economic factors. In addition to working with sustainability in our investment activities, we also promote sustainability in our own daily operations. In this work we apply the principles, structures and focus areas for promoting sustainability as those we have set out for the whole of Polaris and our private equity portfolio companies. In Polaris Management, we are therefore committed to reducing our own environmental footprint, continuously improving our working environment and promoting gender equality. We conduct our business with the highest ethical standards and expect the same from our business partners and we employ and promote best practice international standards as the foundation for our work with sustainability. We have made a commitment to engage with peers and industry associations to promote sustainability in the investment industry in Denmark, Sweden and in Europe.

Key statistics 2024

CEO: Jan Johan Kühl

Chairman: Erik G. Hansen

HQ: Copenhagen, Denmark

# of FTEs: 44

Revenue (DKKm): 131

Revenue (EURm): 17

Management summary

As a fund manager, sustainability is executed through a large number of components that continuously need to be developed, adapted and complemented. This work continued during the recent period at the fund manager level, the portfolio company level and at Polaris Management level.

Fund manager level

During the period, we continued to develop how we work with sustainability and integrate it into our investment process. As it is not uncommon for both potential investments and our portfolio companies to have certain impact characteristics, i.e. the potential for some of their products and services to claim to provide some measurable societal value, we have started to include more structural assessments of potential impact claims as part of our due diligence process. We also started to discuss the potential value creation opportunities from positive impacts with our portfolio companies such as Contour, G&O Maritime, Micropower and previously also RelyOn Nutec. In the due diligence process, we have also evaluated potential impact claims in several cases. To strengthen our understanding of impact investing and contribute to the dialogue, we are now also members of Active Owners Impact Committee. During 2023-2024, we have also spent resources to help our portfolio companies in relation to implementation of the CSRD although this has now been postponed. To provide support, we established contacts with relevant advisors that our companies could use, provided general guidelines and advice and conducted dedicated workshops. The CSRD align very well with our own ‘Polaris Sustainability Program’ as they are based on the same fundamental principles: identify your material impacts, address these and measure and report on your progress. For this reason, most of the work conducted by our portfolio companies to prepare for the CSRD, is valuable and useful for their future sustainability work and well in-line with Polaris’ ambition in the area. During the period, we also developed the sustainability concept for our most recent fund, Polaris Public Equity (PPU), which makes minority investments in listed companies in the Nordics, which was detailed in a Pre-Contractual Statement shared with investors. The PPU fund is classified as a SFDR Article 8 as all other funds managed by Polaris. A major milestone was also achieved when we at Polaris defined and submitted our Science-Based Target (SBT) to the Science-Based Target Initiative for approval. Our SBT will include individually defined targets for both our Polaris Private Equity and Polaris Public Equity portfolios.

Portfolio level

During the period, we onboarded five new portfolio companies (Cepheo, Micropower, Awardit, Vinnergi and 7N) and we are now in the process of aligning them with ‘Polaris Sustainability Program’ requirements. Overall, we can see a trend that our newer investments are generally further along on their sustainability journey than previously, and more basic components are already in place at the time of acquisition as in the cases of Micropower, Vinnergi and 7N. Apart from identifying some relevant additions to their work, this means that we can focus on working with these companies to develop their work further beyond a basic platform. This will increasingly be focused on supporting our companies in setting Science-Based Targets (SBTs), which is now part of our concept. At the end of the period, Contour, Link Logistics and Sinful all had SBTs in place, the process is on-going at 7N and being initiated by others. Overall, we are very happy to see a general progression of the sustainability work across our portfolio and at the end of the period, most of our companies now measure their CO2e emissions on Scope 1,2 and 3 and publish their own dedicated sustainability reports in-line with our requirements. We are also happy to see good examples of value creation throughout the portfolio as management teams along with the customers, employees and stakeholders of our companies are increasingly interested in sustainability.

Polaris Management level

Our ambition is to treat our own organization Polaris Management A/S as we would any of our private equity portfolio companies and implement ‘Polaris Sustainability Program’ and its components in a comparable way. Since 2020, we therefor continue to measure and follow up on the same standard sustainability indicators as our portfolio companies which includes as CO2e emissions, gender distribution and employee-initiated turnover together with specific KPIs chosen to suit our specific industry and we attempt to improve in the areas relevant for these indicators. In 2024, we are happy to have reached close to 30% women in the Investment staff (excluding management) and we work proactively to continuously improve the working environment in Polaris which also should promote improved diversity and inclusion. Our regular employee satisfaction surveys and pulse checks provide us with important input to this effort.

As part of Polaris’ Science-Based Target, we will seek to reduce our own Scope 1 and 2 emissions to zero by 2030. As our Scope 3 emissions are mostly driven by our external legal and financial advisors, we will need to try to influence them to reduce their emissions, to impact our own emissions.

Martin Bang-Löwgren
Head of Sustainability

Sustainability Metrics

Sustainability metrics

Polaris sustainability focus area KPIs

Climate Action

Gender Equality

Employer Responsibility

Climate Action

The main CO2e emissions in Polaris Management are indirect Scope 3 emissions from the use of external advisors and purchase of communication and IT hardware. These constitute around 70% of our total emissions in 2024 and increased during the period driven by a higher usage of external advisors in 2023 and 2024 compared to 2022. The emissions from Employee commuting also increased driven by the higher share of employees based in Sweden. This should be reduced as we open our Stockholm office in the end of 2025. As part of Polaris’ Science-Based Target, we will work to source our use of heating and electricity from renewable sources to reach 100% by 2030. Our Scope 1 emissions are already zero through a move to Electric Vehicles (EVs).

GRI: 305-1a, 305-2a, 305-3a, 305-4a

Climate Action Management

Scope 1 & 2

Spend-based calculations with national statistics on fuel and energy prices. Driven by use of electricity and heating in our office.

Scope 3

Combination of spend and activity-based calculations for selected categories. Driven by spend from use of external advisors and purchase of communication and IT hardware.

Strategy & targets

Science-Based Target set for emission reductions for Polaris Management A/S in-line with the requirements of the SBTI. Targets submitted in June 2025 and are awaiting formal approval.

Initiatives

Move to electric vehicles executed. Opening of our Stockholm office should reduce emissions from travel and employee commuting but increase our Scope 2 emissions. Next step is to source energy needs from renewable sources.

TCFD

Not conducted on Polaris Management as climate-related risks & opportunities primarily are associated with the portfolio.

Gender Equality

The gender diversity was essentially unchanged at Board and Management team levels. At the Investment staff level, it now reached 29%, which is an improvement compared to the starting point of 13% which we reported in our sustainability report for 2020. We will continue to work to improve the gender distribution of the Investment staff towards our ambition of at least 40%, which should also support improvements at the Management team level over time. Our combined gender distribution of 21% for Management and Investment staff is slightly above the Danish average for the private equity industry of 17%[1] but still below the Swedish average for the industry of 27%.

[1] Source: Level 20 European Gender Diversity Report 2024

GRI: 405-1(i)

Gender Equality Management

Tracking

Tracking in place on gender across the organization, at different tenures.

Strategy & targets

Targets have been defined and approved by the board of directors.

Initiatives

Initiatives are on-going to improve diversity and inclusion in the Polaris and includes code of conduct training by external experts, follow-up of regular pulse checks and employee satisfaction surveys to continuously improve the working environment as well as execution of our revised parental leave policy to encourage both male and female members to take parental leave.

Employer Responsibility

Employee-initiated turnover continued at low levels albeit at a slightly higher level in 2024. We expect to remain at a stable low level over time and continuously monitor employee turnover.

SASB: Adapted from HC-DY-330a.1

Employee Turnover Management

Tracking

Tracking in place on employee-initiated turnover.

Strategy & targets

Strategy to maintain structurally low historic levels below 8-10% or 2-4 individuals per year.

Initiatives

Continuous initiatives to support an improved working environment. Initiatives prioritized based on regular employee satisfaction surveys and pulse checks among staff (three per year).

Polaris specific sustainability KPIs

Polaris sustainability due diligence

We continued the execution of our dedicated sustainability due diligence concept in the period with the only exception of the acquisition of Awardit which was initially analyzed by Polaris Public Equity who conducted their sustainability review of the company in 2023, which we did not consider necessary to expand in the later acquisition by Polaris Private Equity. Our sustainability due diligence was most recently expanded to include an assessment of the potential impact claims of a potential investment.

SASB: Adapted from FN-AC-410a.1

UN/OECD principles for responsible business conduct

We aim to have all of our private equity portfolio companies aligned with UN/OECD principles for Responsible Business Conduct and implement this as part of 'Polaris Sustainability Program' within 12 months after closing. During 2023 and 2024, we continued onboarding new portfolio companies with these principles but the implementation share decreased slightly driven by exits. Of the six companies that remain to complete the program, two were acquired in less than 12 months while four are lagging behind our implementation objective. We will continue to push for the implementation of this program towards our goal of 100% compliance. We are however aware that it might not always be possible, or advisable, to do this during the first year of our ownership due to conflicting priorities and lack of resources which will make it very difficult to reach this objective in practice.

SASB: Adapted from FN-AC-410a.1

Employee engagement

We are a competence-based organization relying on our employees to fulfill our goals, including our sustainability objectives. Our working environment and employee satisfaction and engagement is consequently critical to our success and a key indicator. We now conduct three pulse-checks and employee satisfaction surveys per year which includes overall Employee Engagement scores. The general level has remained stable at a high level during the past three years. We will continue to monitor this development and use the feedback to guide our development initiatives.

SASB: Adapted from FN-AC-410a.1

Whistleblower Policy

Description of policy and procedure

Polaris Management has had a whistleblower policy since 2014 which allows employees to file anonymous reports on irregularities in our operations. The policy also protects whistleblowers from retributions. The reports are sent anonymously directly to Polaris’ compliance office or chairman in a purpose made system for review, feed-back and potential actions. We consider the whistleblower function as an important opportunity for us to receive important information about our operations that can enable us to address issues that we might be connected to as early as possible to limit damage to ourselves and our stakeholders.

All Polaris employees review Polaris whistleblower policy as part of annual policy updates. In 2023, we implemented an external whistleblower system from EQS to facilitate reporting and protect individuals. We have also made this publicly available on our web site to also allow reports from outside our own organization such as portfolio companies and business partners. We want to encourage whistleblower reports as they can help us address important issues earlier and minimize negative impacts on affected stakeholders and Polaris. We have chosen not to disclose if any reports have been made or how many as we don’t believe this is a relevant sustainability indicator. We do, however, report on any adverse sustainability impacts or incidents in our private equity portfolio to our investors on a quarterly basis.

SASB: FN-AC-510a.2

Sustainability competencies in Polaris management

Our work with sustainability is described in Polaris Responsible Investment policy which is approved, and regularly reviewed, by the Partner Group and Board of Directors in Polaris Management. Sustainability is also integrated into Polaris Excellence Model and executed mainly through 'Polaris Sustainability Due Diligence' and 'Polaris Sustainability Program'. We provide regular training and communication regarding our work in the following ways in Polaris Management:

Quarterly investment team updates: We provide information on updates to our work with sustainability quarterly to our investment staff (as part of Polaris Excellence Program)
On-boarding of new staff: We provide onboarding on our sustainability work to all new employees
Investment team project support: We support, and educate, all investment teams, in our sustainability structure in the final investment evaluation phase (due diligence)

We are still in the process of complementing the training of Polaris Management staff to also include regular training sessions with the investment staff and hope to get this in place during 2025.

Sustainability competencies in portfolio companies

The onboarding and training of Polaris Portfolio companies start already in the due diligence phase and continues in the ownership phase through the following components:

Sustainability due diligence introduction: We conduct a digital meeting in the due diligence process in all potential investment opportunities with key management team members dedicated to sustainability. The call is led by Polaris Head of Sustainability together with any dedicated advisors used in the process. The meeting includes an introduction to Polaris sustainability work, approach, standards and expectations as well as a discussion of material impacts and future plans which serves as a basis for the future business plan for future sustainability work.
Onboarding: We conduct a full day onboarding for the management team and board members of all new investments at Polaris office where we introduce them to the components of Polaris Excellence Model. This includes a session dedicated to sustainability.
Implementation of UN/OECD guidelines: Each portfolio company is onboarded on the UN/OECD guidelines for responsible business conduct. This is initiated in a 5-day workshop process, which also serves as an education of the participating management team members of the company. During the workshop, each company implement SEE Impacts (by Global CSR) which is a cloud-based solution for identifying and managing adverse sustainability impacts.
Annual workshops: We conduct annual digital workshops for the board members and management teams in all of our private equity portfolio companies
Polaris Sustainability Group: We gather all sustainability-leads in a working group who meet every other month to discuss new developments and share best practices in sustainability. This includes discussions of topics like sustainability indicators, CSRD, carbon footprint measurements, supply chain management etc. At the end of 2024, we conducted our 22^nd meeting with this group.

The Sustainable Development Goals

Section

Management summary
Sustainability metrics
The Sustainable Development Goals
Our methodology

Polaris Management’s contribution to the SDGs

Employees & Organization

Investment thesis & process

Active ownership

Employees & Organization

Increasing Positive Impacts

5.5

Supporting gender diversity in Polaris and the private equity industry.

8.8

As Polaris is a people business, and our team is imperative to our success, we are committed to ensuring a good working environment.

Minimizing Negative Impacts

13.1

We are commited to minimizing our contribution to climate change by working to reduce our GHG emissions in Polaris as we also do throughout our portfolio of investments.

Investment thesis & process

Increasing Positive Impacts

We address both positive and negative impacts related to sustainability broadly across our investment process. Through defined selection criteria, we avoid certain types of investments and through a dedicated sustainability due diligence we integrate sustainability considerations in the overall investment evaluation.

Minimizing Negative Impacts

See above

Active ownership

Increasing Positive Impacts

We work to ensure that each of our portfolio companies identify and address both their positive and negative material sustainability impacts and report on the progress of their activities to ensure that they continuously maximize any positive impacts and minimize or mitigate any negative impacts. They should also improve their structured and process related to sustainability.

5.5

To support gender equality among our portfolio companies we work to improve the gender balance in the Board of Directors. We also mandate all our portfolio companies to work to improve gender equality in their respective organizations and report their progress.

8.8

For Polaris as a large employer, ensuring a good working environment is a prioritized area. This focus is formalized as part of our Sustainability Program and made part of the sustainability programs of our portfolio companies who are all asked to work to continuously improve their working environment.

Minimizing Negative Impacts

See above

13.1

We are committed to reducing the climate impact of our portfolio companies and require all portfolio companies to report on direct and indirect CO2e emissions, make a plan for emission reductions and support them in setting a Science Based Target for their emission reductions in-line with the Paris Agreement.

Increasing positive impacts

Concrete initiatives in progress

Employee & organization

Work to support gender equality in the private equity industry in Denmark, Sweden, and Europe
Ensure a working environment supporting gender equality at Polaris Management

Status on initiatives

Employees & organization

During the period, we continued to co-lead the activities of Level 20 in Denmark and we also participate in both the Nordic and European Committees and thereby contribute to the gender diversity agenda in the private equity industry. Our participation also informs our own internal activities and support recruitment and retention,
Implementation of three employee satisfaction surveys and pulse-checks per year provides essential input to our actions to improve our working environment. As a result, we have in the period worked with the rollout of a new and improved the feedback process and redistributed and delegated some internal responsibilities.

Concrete initiatives in progress

Active ownership

Ensure initiatives to improve gender equality in Polaris’ portfolio companies
Expand Polaris’ female network and recruitment base for projects, board, and management team positions

Status on initiatives

Active ownership

We continued to follow-up on gender distribution annually in our portfolio companies and now also follow-up on unadjusted gender pay gap, which helps to inform our portfolio companies actions in the area.
We continue to strive for more gender leadership in our portfolio companies but the results are still unsatisfactory with a female representation of 14% and 27% at board level and management team level among our private equity companies. Our last four acquisitions currently have a 21% female representation at the board level with one female chairperson.

Concrete initiatives in progress

Employees & organization

Initiative to support employee health
Process to foster culture of feedback and personal
development

Status on initiatives

Employees & organization

Plans on-going to refurbish and expand Copenhagen office including improving the indoor climate. A new Stockholm office, will improve the working environment for our Stockholm based staff.
The work to improve the feedback process, which was launched based on feedback from our employee satisfaction survey, is still ongoing.

Concrete initiatives in progress

Active ownership

Ensure initiatives to improve working environment in Polaris’ portfolio companies

Status on initiatives

Active ownership

In addition to following up on employee turnover and the development of portfolio companies employees, we are now also asking annually for information on employee satisfaction surveys, absenteeisme as well as accidents. This will become mandatory data as of our next private equity fund.

Concrete initiatives in progress

Investment thesis & process

Integrate sustainability in Polaris’ investment process

Status on initiatives

Investment thesis & process

During the period, we expanded our Sustainability Due Diligence (SDD) with an ‘Impact assessment’ module. We also integrated the Principle Adverse Impacts (PAIs) in our evaluation structure in-line with our commitment to PAIs and risk management.

Concrete initiatives in progress

Active ownership

Ensure that our portfolio companies address relevant sustainability related risks and opportunities and continously improve their performance through implementation of 'Polaris Sustainability Program'.

Status on initiatives

Active ownership

We continued to implement 'Polaris Sustainability Program', which is part of our Excellence Model. Our most recent acquisitions are in progress of implementing the necessary modules to cover the program. Micropower completed the program while the more recent Vinnergi and 7N only had a few missing components already at signing. The work remains to start at Cepheo and Awardit.

Minimizing negative impacts

Concrete initiatives in progress

Status on initiatives

Employee & organization

Implement initiatives to reduce climate impact in Polaris Management based on calculations of CO2e emissions

Employees & organization

We removed our Scope 1 emissions by moving to Electric Vehicles (EVs). Our new Stockholm office should reduce travel needs for the Swedish team. We will move to sourcing of renewable energy to remove our Scope 2 emissions.

Concrete initiatives in progress

Active ownership

Ensure initiatives to reduce climate impact in Polaris’ portfolio companies based on calculations of CO2e emissions

Status on initiatives

Active ownership

We have now set a Science Based Target (SBT) for our emission reductions at Polaris, which includes a target for our portfolio. This includes the subtarget that 100% of our private equity portfolio companies in Polaris Private Equity (owned more than 24 months) should have their own SBT by the end of 2030 and 50% our the portfolio companies in Polaris Public Equity by 2030. We have consequently increased the promotion of SBTs among our portfolio companies and organized a dedicated workshop for our companies on this topic in 2024.

Concrete initiatives in progress

Investment thesis & process

See “Increasing Positive Impacts”

Status on initiatives

Investment thesis & process

See “Increasing Positive Impacts”

Our methodology

Section

Management summary
Sustainability metrics
The Sustainable Development Goals
Our methodology

Sustainability concept applied to Polaris Management

We have applied the same sustainability principles to our own organisation Polaris Management A/S as those we apply to all of our private equity portfolio companies. We have therefor implemented 'Polaris Sustainability Program' in Polaris Management. This is described in more detail in the Polaris Private Equity section of this report.

Methodology for CO2e accounting in Polaris Management

As part of the implementation of Polaris Sustainability Program in Polaris Management, we also perform annual CO2e measurements according to the GHG protocol and in-line with the principles applied to our portfolio companies. These are described in more detail in the Polaris Private Equity section of this report.

To follow the GHG protocol, we also consolidate the total CO2e emissions for Polaris which, in addition to Polaris Management’s emissions, also include our private equity portfolio companies’ Scope 1, 2 and 3 emissions. Although we do not have majority equity ownership in all private equity portfolio companies, the consolidation approach has been applied to all companies, acknowledging the influence we have across all the companies.

Below you can find the total consolidated emissions for Polaris, an overview of the status of the included companies in the calculation and a list of the Scope 3 categories that have been excluded for Polaris Management.