Our commitment to sustainability is operationalized in our Sustainability Strategy and its different components throughout the investment process
The investment process
Sustainability Approach
Outlines how we are working with sustainability and what sustainability means for our investment strategy and process. Our approach also details our focus areas and the international standards and frameworks that we are basing our work on.
Acquisition process
With our Sustainability Approach as the starting point, sustainability is an integrated part of our investment process. Our investment mandate & selection criteria define what we are willing to invest in and how we screen investment opportunities. Our process for Evaluation & Due Diligence dictates how we evaluate investments prior to an acquisition.
Portfolio Management
Our Portfolio Management process outlines how we are working with sustainability in partnership with our portfolio companies as part of our active ownership. Our ‘Polaris Sustainability Program’ help our companies define the appropriate strategy and is an integrated part of our Polaris Excellence Model, which supports value creation in our portfolio companies.
Governance & Reporting
Details how sustainability fits into our overall governance structure, from defining our approach and throughout the acquisition process and active ownership phases, as well as how we measure, track our progress, and communicate around sustainability.
Our Sustainability Approach
Our commitment and rationale
As the fund manager of Polaris’ funds, we at Polaris Management acknowledge that our responsibility stretches beyond our own organization and includes the broader impact we have on all stakeholders of Polaris: the employees, customers, suppliers, and the societies where we and our portfolio companies operate. We are committed to actively promoting sustainability throughout Polaris and do this for two reasons:
- It is a moral imperative – it is the right thing to do
- It is an integrated part of long-term value creation
We promote sustainability by
- Promoting sustainability throughout Polaris and incorporate sustainability considerations into our own operations in Polaris Management as well as in our investment and portfolio management processes for each of our investment strategies. This is our Sustainability Strategy.
- Striving to continuously improve the way we work with sustainability and our sustainability performance both as investors, in our work with our portfolio companies, their management teams and Board of Directors, as well as in Polaris Management.
- Being transparent and reporting on our performance and progress in this Sustainability Report which we publish on an annual basis.
- Working with, and thereby promoting, internationally recognized sustainability standards
- Actively engage in promoting sustainability and transparency around sustainability in the finance sector where we operate.
Our scope
Our sustainability approach sets the direction for our work in Polaris Management. However, as a fund manager, we believe that our main positive, as well as negative, impacts on sustainability derive from the collective actions of our portfolio companies. Therefore, we believe that it is key that all our work with sustainability is integrated in the ongoing work with our companies to promote concrete actions at portfolio company level.
Our approach to sustainability is founded on recognized international standards and concepts and based on these, we have developed an approach to how we believe sustainability should be approached for mid-sized Nordic companies. We call this 'Polaris Sustainability Program'. The program is tailored to allow for company specific considerations and to ensure the most relevance and impact for each company. This is based on our belief that the material sustainability related risks and opportunities are often unique for each sector and often also specific for each company depending on their maturity as well as geographic location, supply chain, business model and culture. For our work to be relevant we must continuously ensure that our sustainability strategy strikes the right balance between standards and minimum requirements and company specific considerations, including maturity, resource availability and ambition level. Our program is well tried and tested in our private equity strategy where we have majority control and it is continuously developed. The program also informs our due diligence process and investment mandate. Our approach is very well aligned with the main principles of the Corporate Sustainability Reporting Directive (CSRD), Double Materiality Assessment (DMA) and reporting. This means that company efforts to prepare for this reporting will at the same time fulfill many of the requirements inherent in ‘Polaris Sustainability Program’ and the other way around.
Our sustainability strategy described in this report is implemented in our work at Polaris Management A/S as a fund manager and investor. The strategy is then operationalized for each of our active investment strategies per the 31st of December 2025 and their respective funds:
- Polaris Private Equity: Majority equity investments
- Fund IV launched in 2015
- Fund V launched in 2021
- Polaris Flexible Capital: Minority equity and junior debt
- Fund I launched in 2021
- Polaris Public Equity (PPU): Minority investments in listed companies in the Nordics
- Fund launched in 2023
The active funds managed under these strategies fall under SFDR – Article 8. Our work at Polaris Management level and for each strategy is further detailed in our publicly available Responsible Investment Policy (RIP).
In March 2025, we also assumed the management of the fund now named Polaris CS Fund I K/S from Core Sustainability Capital A/S. This fund is a SFDR – Article 8 fund and the equity and debt investments in the fund are managed by the investment teams of PPE and PFC.
Sustainability standards
To create a solid foundation for our work with sustainability, our Sustainability Strategy is based on, and aligned with, recognized international standards and regulations. With this approach we seek to ensure that we cover both financial and impact materiality, in a consistent and reliable way in our reporting and that we support strengthened reporting practices and the development of common standards in the investment community with respect to sustainability. As of 2025, Polaris has discontinued the use of the UN Sustainable Development Goals (SDGs) in its public reporting, reflecting a shift toward frameworks more directly aligned with investment decision-making and regulatory requirements, as outlined in the report Highlights.
Since 2017, we have founded our work with sustainability on UN’s Guiding Principles and OECD’s guidelines defining responsible business conduct. The standards cover social (human rights including labor rights), environmental and economic (including anti-corruption) impacts. The management standards are referred to as our Sustainability Principles and form the basis for managing impacts. Before an acquisition, all potential investments’ compliance towards the Sustainability Principles are evaluated and all Portfolio Companies in the private equity strategy are also consequently taken through a comprehensive process to align with these principles. Polaris Management and most of our portfolio companies in Polaris Private Equity are therefore also members of UN Global Compact and work according to these principles. The management system we help implement includes:
- A policy commitment to continuously manage adverse impacts and require the same from business relationships
- A definition of key elements of sustainability: a clear definition of the areas for potential adverse impacts related to:
- Social sustainability (48 areas)
- Environmental sustainability (20 areas)
- Economic sustainability (16 areas)
- Due diligence methodology: a process for assessments of potential and actual adverse impacts throughout the business
- Grievance mechanisms: processes for providing access to remedy to impacted stakeholders
- Management process: a governance process for continuously assessing and managing adverse impacts and requiring business relationships to do the same
The EU regulations part of the EU Green Deal, the SFDR, CSRD, the upcoming CSDD and the EU Taxonomy, all reference this management system, and our Sustainability Principles, and have integrated them in the regulatory framework.
Created by the investment community for the investment community, the PRI provides a voluntary framework for incorporating ESG considerations into investment practice. As a PRI signatory, Polaris uses the six principles as guidelines for its sustainability efforts and reports annually on its progress.
In 2025, Polaris demonstrated strong performance across PRI modules, achieving the highest rating in the private equity module and solid results across policy, governance, and confidence-building measures. These results reflect a high level of ESG integration across the investment lifecycle, including screening, due diligence, active ownership, and exit. Polaris continues to align its investment processes with international best practices and to strengthen its approach through clear sustainability targets, systematic monitoring, and transparent reporting.
To improve transparency on our sustainability performance and support progress, we work to establish relevant key performance indicators (KPIs) related to sustainability both at fund level and for the individual portfolio companies. To the extent possible, our ambition is to follow and promote available international standards. The 'Polaris Sustainability Program' mandates that each company measures three cross-portfolio KPIs (including GHG) and three portfolio company specific KPIs. To identify and define the most material KPIs we attempt to follow the standards established by the EU through the SFDR (PAI indicators) and the CSRD (ESRSs), the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI). Carbon footprint calculations are done according to the guidelines of the Greenhouse Gas Protocol (GHG). In addition to 'Polaris Sustainability Program' we also gather extensive company level data in our private equity portfolios to be able to report on several international sustainability standards including: SFDR PAI indicators (Tables 1,2 and 3), ESG Data Convergence Initiative (EDCI), Efront, France Invest and Invest Europe.
Given the expected impact of climate change on our economy, private equity portfolio companies with significant exposure to climate change are analyzed in accordance with the TCFD recommendations and, since 2023, IFRS S1 and S2, to assess potential future financial impact on our investments from both risk and opportunity perspectives. Similarly, the TCFD principles (IFRS S1 and S2) are an integrated part of our sustainability due diligence in our acquisition processes.
Polaris Management, our funds and portfolio companies are impacted by the developing structure of EU regulations on sustainability which are part of the EU Green Deal. As an Alternative Investment Fund Manager (AIFM), Polaris Management and our funds fall under the Sustainable Finance Disclosure Regulation (EU) 2019/2088 (“the SFDR”). Our companies are also directly impacted by regulations with respect to sustainability and sustainability reporting from local standards in Denmark and Sweden, and at EU level. Depending on the companies' size and classification, they might also be directly impacted by the Corporate Sustainability Reporting Directive (“the CSRD”). These EU regulations, the SFDR and the CSRD, also operationalize the underlying EU Taxonomy regulation (EU) 2020/852 (“the EU Taxonomy”). Our Sustainability Strategy, as applied to all our investment strategies and active funds, fall under SFDR – Article 8 and we are continuously monitoring the development of the related regulations to adapt and align our work to ensure compliance. We have currently not integrated the EU Taxonomy and its definitions of sustainable economic activities into our Sustainability Strategy, as our portfolio companies are not required to report according to this regulation, but we will evaluate this continuously and we use the EU Taxonomy as a frame of reference when applicable We estimate that about 50% of our portfolio companies are to some extent covered by the EU Taxonomy (eligible). We currently don’t claim to be making ‘Sustainable Investments’ according to the SFDR Article 2 (17) but are also continuously evaluating the potential to do so in the future.
Polaris is a member of the private equity industry in Denmark, Sweden and Europe and we are members of the relevant private equity industry associations Active Owners (in Denmark), SVCA (in Sweden) and Invest Europe (in Europe). As members, we follow their respective guidelines related to sustainability. In Active Owners, we are active members of the Private Equity Committee and the Impact Committee.
Polaris’ sustainability focus areas
Polaris has identified three areas within sustainability that form the main pillars of our sustainability work. For each focus area we have formulated a cross-portfolio KPI that we work to apply across all investment strategies and portfolio companies. In the private equity strategy, the KPIs are reported on both at fund level, individually at portfolio company level and for Polaris Management. In our work as active owners, we at Polaris Management will make an extra effort to improve and make a difference in these three areas:
The investment community has an important role to play in addressing climate change. Polaris takes its climate responsibility seriously and acknowledges that it generates considerable greenhouse gas emissions through its investments. Accordingly, Polaris has made Climate Action a key aspect of its sustainability work, with a primary focus on decarbonization. Our objective is to support our portfolio companies in setting their own Science Based Targets and reducing their emissions.
Polaris has promoted science-based targets in its work with portfolio companies for many years. In 2025, a portfolio coverage target for Polaris Management A/S was formally approved by the Science Based Target Initiative (SBTi). Polaris Private Equity targets 100% portfolio coverage by 2030, and Polaris Public Equity targets 50% portfolio coverage by 2030. During 2025, we conducted SBT training for investment teams to support further progress in this area.
We believe in supporting equal opportunity for all genders and see gender diversity as a value creator. As a private equity fund manager, Polaris is a large employer and owner with the ability to impact and promote gender equality at top level management and in the Boards of our portfolio companies. Yet women are currently underrepresented at the upper levels of Polaris Management and most portfolio companies. Our long-term objective is to reach a minimum representation of each gender of 40% in Boards and Management. This has led to initiatives in three areas:
- Working to increase the share of women in Polaris Management
- Working to increase the share of women in private equity and the finance industry as a whole
- Working to increase the share of women across our portfolio companies’ management teams and Boards of Directors
Through our position as a private equity fund manager, Polaris is a large employer, and through our portfolio companies we impact many people across companies, sectors and geographies. It is a core focus for us, and a naturally integrated part of our DNA and culture at Polaris, to actively work in this area and support our portfolio companies in their focus on being good employers.
Our ability to attract, develop and retain talent is key to value creation – both in Polaris Management and in our portfolio companies. Employer Responsibility and ensuring a strong ongoing focus on creating strong organizations that continuously improve their work environment is therefore an overall focus area in our sustainability work as fund managers.
The investment process
Our investment process has been adapted to support our commitment to sustainability and our Sustainability Strategy and is aligned with international standards. Our investment process is described in our publicly available Responsible Investment Policy (RIP).
Investment process
Our investment mandate defines how we screen investment opportunities as a fund manager and defines what we are willing to invest in. Our core commitment to sustainability is to work to help to improve the companies we invest in by promoting the strengthening of their structures around sustainability and by promoting improvements of their sustainability performance through minimizing negative impacts and increasing positive impacts. Our ability to influence our portfolio companies depends on the governance rights we have in each investment strategy and in each individual investment. All investments, in all strategies do however have to fulfill the following basic criteria:
- The company does not have an unacceptable exposure to countries, persons, or entities on the UN sanctions list
- The risk of sustainability related adverse impacts of the company, as defined in our Sustainability Principles, is determined to be acceptable and manageable. This is also achieved through exclusions of certain sectors in each of the investment strategies
- The company has, or will have, a governance structure (e.g. through processes, procedures, and policies) that is deemed adequate to manage sustainability and the company's adverse impacts, as defined in our sustainability principles. This is integrated into 'Polaris Sustainability Program'
We evaluate potential opportunities in a structured investment process, a stage gate process model, where sustainability has been integrated throughout the different steps:
- Investment mandate control: Ensuring alignment with our investment mandate throughout the process as we gain more information about the potential investment
- Risks & opportunity evaluation: Identification of current and future material sustainability-related risks and opportunities including climate-related assessments in line with TCFD principles and an early identification of sustainability hypothesis for the investment
- Industry assessment: Review of relative sustainability performance in the sector (compared with customers, peers, suppliers etc.)
- Maturity assessment: Assessment of the current status and maturity of the company’s sustainability performance and structure. This includes a formalized data request on sustainability elements in due diligence and interviews with management depending on the investment strategy
- Sustainability Program: Identification of initial key elements in our plan for the future development of sustainability of the company
- Business case impact: Potential financial impacts related to sustainability to be included in the business case and valuation of the potential investment
For the final due diligence stage of the process, we have developed a standard sustainability due diligence structure which can be supported by external sustainability experts as required. We also ensure that each of the other due diligence tracks cover relevant sustainability related topics in their respective areas (e.g. legal, IT, commercial, etc.). The standard has been developed for, and is used by, our private equity strategy, while the other investment strategies use sustainability reviews that are appropriate to their specific investment process. Polaris Flexible Capital follows the same sustainability platform and applies aligned due diligence principles, adapted to reflect its investment strategy and governance rights.
To support the development of our portfolio companies, we operate the Polaris Excellence Model, our structured approach to working in partnership with management teams. The model builds on our experience in medium-sized companies in the Nordic region and combines standards, tools, and best practices with access to a network of external specialists.
Sustainability is an integrated module within the Polaris Excellence Model, implemented through the Polaris Sustainability Program. This defines the capabilities we expect portfolio companies to establish across all strategies and provides a structured framework and supporting toolbox for delivery.
We support portfolio companies throughout their sustainability journey with:
- Online toolbox: Polaris Sustainability Program materials, including reference content, templates, project frameworks, benchmarking data, and a defined set of minimum requirements.
- Polaris Discussion Partner: Dedicated sustainability support from Polaris Management, led by the Head of Sustainability, available to all portfolio companies for ongoing dialogue and guidance.
- Polaris Expert Network: Access to a network of specialized advisors and consultancy firms to support implementation where needed.
- Onboarding: Structured onboarding for management teams and boards of new private equity portfolio companies, introducing the Polaris Excellence Model and Polaris Sustainability Program in detail. This builds on sustainability topics covered during due diligence and supports early alignment. Onboarding is also available to companies in other investment strategies, as relevant.
- Knowledge building: Regular portfolio workshops and facilitation of peer knowledge sharing across portfolio companies.
- Polaris Sustainability Assessment: Annual data collection covering key sustainability indicators, combined with quarterly follow-up on incidents and adverse impacts. The assessment supports tracking of portfolio company maturity and underpins Polaris’ external reporting, including SFDR (PAI), as well as reporting aligned with frameworks such as EDCI, Efront, France Invest, and Invest Europe. It also supports portfolio companies in preparing for potential regulatory and business relationship reporting requirements.
Polaris Sustainability Group:
A structured network of sustainability leads across the portfolio, serving as a core platform for capability building and execution support. The PSG is designed to facilitate:
- Cross-portfolio knowledge sharing, allowing companies to apply proven approaches rather than develop solutions independently, and
- Ongoing alignment on emerging requirements, including evolving regulatory expectations and customer-driven sustainability demands
Through regular sessions and continuous dialogue, the group supports more consistent implementation of the Polaris Sustainability Program and accelerates capability development across the portfolio.
All investment decisions, which include considerations on sustainability related risks and opportunities, are discussed and recommended by the investment committee dedicated to each investment strategy and approved by the board of Polaris Management A/S and/or the board of each respective fund according to the defined governance structure of each strategy. Polaris overall Sustainability Strategy and the operationalization of that for each investment strategy and their respective investment processes is also approved by the Partners in Polaris Management A/S and on an overall level by the board of Polaris Management A/S. All employees and board members in Polaris Management A/S are responsible for assisting Polaris and our portfolio companies to fulfill our commitment to sustainability. In our private equity strategy, the Board of Directors and Management team of each portfolio company are subsequently responsible for the execution, follow-up and reporting on the sustainability initiatives in their respective company and also to report annually and quarterly to Polaris. In addition, each company reports on sustainability as required by local legislation and EU regulations. Our ambition is to ensure, as our governance rights allow, a governance structure and process in each of our portfolio companies that qualify as good governance practices under the Sustainable Finance Disclosure Regulation (SFDR), Article 2 (17).
Polaris Sustainability Program
The Polaris Sustainability Program includes a set of fundamental actions and deliverables that constitute the sustainability structure that we believe is suitable for the medium-sized Nordic companies in which we invest. The components of ‘Polaris Sustainability Program’ are also integrated and aligned with our investment strategy and sustainability due diligence. While the program is based on Polaris Sustainability Principles and internationally recognized standards and best practices within sustainability, it is structured to be customized to the specific risks and opportunities of the specific company, the specific industry and the company's level of maturity. It is mandatory in our private equity investment strategy where we have majority control. It is consequently extensively tested and continuously developed. The program process is supported by onboarding sessions during which both Board of Directors and management teams of a new portfolio company will be introduced to Polaris’ sustainability work and sustainability strategy. The work builds upon established frameworks and practices and is supported by specialist consultants that support the portfolio companies as they embark on the journey and help build sustainability competencies in the portfolio companies.
The program consists of the following elements:
- Impact assessment: An assessment of the material positive or positive sustainability-related impacts a company might have according to our Sustainability Principles. Performed from a 'double materiality' perspective in-line with the CSRD.
- Sustainability Platform: Establishment of a sustainability policy including a commitment to UN/OECD guidelines. Implementation of a management system for managing adverse impacts (grievance mechanism). Establishment of a Code of Conduct for employees (CoC) and a Business Relationship Code of Conduct (BRCoC) to set expectations on suppliers and other business relationships in line with UN/OECD guidelines. Membership of UN Global Compact.
- Market overview: Structured review of the status of sustainability in the relevant sector, including a review of relevant competitors, peers, customers and suppliers.
- Establishment of carbon footprint baseline: Establishment of a first bottom-up calculation of the company’s carbon footprint according to the GHG protocol.
- Climate Related Risks & Opportunities Assessment: Identification of climate related risks & opportunities according to TCFD principles (Task Force on Climate-related Financial Disclosures). Performed for companies considered to be materially impacted by climate change.
- Sustainability Focus Areas: Identification of the company’s Focus Areas based on the materiality assessment of positive and negative sustainability related impacts across the value chain.
- Sustainability Statement: Formulation of sustainability statement detailing what sustainability means for the portfolio company, level of ambition and overall plan going forward.
- Establishment of Polaris standard sustainability KPIs:
- Climate change:
- GHG footprint: according to Greenhouse Gas Protocol on Scope 1, 2, and 3
- Gender Equality:
- Gender distribution for company Board, Management and at all staff level
- Working environment:
- Employee turnover
- Absenteeism (beginning with PPE VI)
- Employee satisfaction (beginning with PPE VI)
- Health & Safety KPIs for relevant companies (beginning with PPE VI)
- Total Recordable Incident Rate (TRIR)
- Lost-Time Injury Frequency Rate (LTIFR)
- Climate change:
- Establishment of company specific KPIs: Establishment of company specific sustainability KPIs that are material to the portfolio company.
- Action plan: Prioritized implementation plan with initiatives to improve sustainability structures and performance – increasing positive impacts and minimizing negative impacts including action plans to address our three focus areas: Climate change, Gender Equality and Employer responsibility.
- Annual portfolio company board review: Annual update on sustainability to Board of Directors.
- Portfolio company report: Annual sustainability report in-line with the requirements of each portfolio company with respect to timeline and content but also in accordance with Polaris minimum standards) published by the company separately or as part of their annual report.
- Polaris Sustainability Report: Reporting from Polaris on sustainability including certain shared portfolio KPIs as part of the regular 'Polaris Sustainability Report'.
We strongly encourage each portfolio company to appoint a sustainability responsible within management, to dedicate a part- or full-time resource to sustainability, and to place responsibility for the approval and follow-up on the Polaris Sustainability Program with its Board of Directors. Specialist consultants and Polaris internal resources can support the sustainability responsible employees, management teams and Board of Directors in each portfolio company.
Regulatory & compliance
Polaris is subject to a number of regulations and industry practices.
Polaris Management A/S and the funds managed by us in our different investment strategies are subject to a number of regulations and industry practices. We work continuously to monitor and adapt to these to ensure compliance, and we engage with external experts to support us in this effort. We also aim to set a good example and promote the development of standards and industry practices related to sustainability in our industry.
Polaris Management A/S is licensed by The Danish Financial Supervisory Authority to operate as an Alternative Investment Fund Manager (AIFM) in accordance with the Danish Alternative Investment Fund Managers Act (Polaris FT number is 23009) and the Alternative Investment Fund Manager Directive Regulation (EU) 2011/61 (“the AIFMD”). Polaris has appointed Private Equity Administrators Depositary Service ApS as Depositary for the Polaris funds.
Polaris Management, our funds and portfolio companies are impacted by the emerging structure of EU regulations on sustainability which are part of the EU Green Deal. As an Alternative Investment Fund Manager (AIFM), Polaris Management and our funds fall under the Sustainable Finance Disclosure Regulation (EU) 2019/2088 (“the SFDR”).
The SFDR sets new standards as to how financial market participants should report on sustainability relating to their financial products. With the SFDR, financial products are divided into categories determined by their level of articulated promotion of sustainability. These categories are defined as Article 6, 8 and 9 financial products. Article 6 products do not consider sustainability as a goal. Article 8 products consider sustainability as a goal, amongst other things, whereas Article 9 products consider sustainability as their primary goal. Article 8 and article 9 products are also termed as “light green” and “dark green” products, respectively.
Our portfolio companies are also directly impacted by regulations with respect to sustainability and sustainability reporting locally in Denmark and Sweden and at the EU level. Depending on their size and classification, they might be directly impacted by the previous Non-Financial Reporting Directive (EU) 2014/95 (“the NFRD”) which is being replaced by the Corporate Sustainability Reporting Directive (“the CSRD”). These EU regulations, the SFDR and the NFRD/CSRD, also operationalize the underlying EU Taxonomy regulation (EU) 2020/852 (“the EU Taxonomy”).
The EU Taxonomy aims to establish a uniform framework as to how environmentally sustainable economic activities are defined. When published in 2020, the EU Taxonomy made amendments to the SFDR, which means that parts of the disclosure regulation refer back to the EU Taxonomy. Hence, the two regulations are interrelated.
Polaris sustainability strategy, which is described in our Responsible Investment Policy and in this sustainability report, is applied to the investment strategies we operated in the period and the active funds under these strategies:
- Polaris Private Equity (PPE). Majority equity investments. Active funds:
- Fund IV: Polaris Private Equity IV K/S
- Fund V: Polaris Private Equity V K/S
- Polaris Flexible Capital (PFC): Junior debt and minority equity investments. Active funds:
- Fund I: Polaris Flexible Capital I K/S
- Polaris Public Equity (PPU): Minority equity investments in listed companies. Active funds:
- Polaris PPE Feeder Fund SICAV
- Other managed funds (since 24th of March 2025)
- Polaris CS Fund I K/S. Closed fund with equity and debt assets managed by PPE and PFC investment teams respectively.
Based on our assessment of the SFDR, and the expected interpretation of this regulation, and the sustainability goals and claims in our sustainability strategy, we believe our current work with sustainability means that our funds fall under SFDR – Article 8. We therefore assume that all active funds across all strategies fall under this categorization. Polaris will consequently align disclosures on behalf of our active funds with the requirements for SFDR - Article 8 funds. We are actively monitoring developments in the SFDR 2.0 process to understand the implications, if any, for existing and future Polaris funds.
The EU Omnibus has materially changed the expected direct regulatory impact of the EU Green Deal on businesses, most notably through the proposed narrowing of scope for the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). For many mid-sized companies, including much of our portfolio, this is likely to reduce or remove formal reporting obligations.
However, we do not expect the underlying expectations for sustainability performance to disappear. The standards embedded in these regulations are increasingly being transmitted through business relationships, as customers, suppliers, lenders, and other stakeholders continue to ask for credible information and progress across environmental, social, and governance topics. In practice, sustainability requirements are therefore shifting from a primarily regulatory obligation to a more uneven, market-driven set of expectations that varies by sector, geography, value chain position, and customer exposure.
For fund managers, this creates a more complex operating environment: the need to support improved sustainability performance remains, but the relevant requirements are less uniform and must be assessed in light of each company’s industry, markets, value chain, and maturity. We are therefore continually assessing developments in our markets to understand where sustainability expectations are changing and how they may affect our portfolio companies. We believe the Polaris Sustainability Program is well positioned for this landscape. It is designed to establish a common foundation while allowing for flexibility and customization based on each company’s material impacts, maturity, commercial context, and governance situation, rather than imposing a uniform model across the portfolio.
Our commitment to sustainability is executed broadly throughout Polaris and affects our activities throughout our investment process, ownership, and exit, and covers all our investments. Within the Scope of sustainability, we include social, environmental, and economic impacts according to the internationally agreed principles for sustainable development consisting of the UN Guiding Principles (UNGPs from 2011), and as referenced by the OECD Guidelines (OECD from 2011) and we refer to these as our “Sustainability Principles”. Our sustainability commitment and Sustainability Principles are described in the Polaris Responsible Investment Policy (RIP).
Our commitment to sustainability includes the promotion of both environmental and social objectives. We ensure that these objectives are reached by following our sustainability strategy described in this report, which includes defined investment criteria and ambitions with respect to sustainability.
The material sustainability related risks and opportunities for each of our investment opportunities and portfolio companies are unique. Which environmental and social factors should be promoted and improved upon, and how such improvements should be measured, are therefore also unique and are established on a case-by-case basis.
As described in this report, for our three focus areas, we do however systematically follow-up and report on progress, development of Key Performance Indicators (KPIs) and actions taken across our portfolio companies:
We have not identified any general indices to measure our progress against, as our portfolio companies are active in a broad range of industries and geographies.
The EU Taxonomy offers a definition of what constitutes sustainable economic activities, and this definition is expanding to include more areas/sectors. As part of our work on sustainability, we will report on the EU Taxonomy eligibility and alignment of our portfolio companies as required by regulations and integrate this into our work. We have however not yet set any specific investment criteria or performance targets related to the EU Taxonomy.
Our commitment to sustainability is detailed in our Polaris Responsible Investment Policy (RIP) and Polaris Sustainability Commitment. It is further elaborated in certain other Polaris policies: our Anti-Corruption Policy, Gender Equality Policy, Privacy Policy and Remuneration Policy. All documents are publicly available on our sustainability webpage.
A sustainability risk means, according to the Sustainable Finance Disclosure Regulation (SFDR) “an environmental, social or governance (“ESG”) event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investment”. Further, the Corporate Sustainability Reporting Directive (CSRD) states that "A sustainability matter is 'material' when it meets the criteria defined for impact materiality or financial materiality".
This is commonly referred to as "Double materiality". Sustainability risks, as well as material sustainability matters as defined by double materiality, are integrated into the investment decisions of Polaris and are considered during the investment process in a manner proportionate to each product’s investment objective and in the same way as Polaris approaches other forms of risk management in relation to its products. This is done primarily as part of the due diligence process, whereby should an investment have a material exposure to a sustainability risk or material sustainability matter, Polaris may choose not to make an investment on this basis in accordance with the relevant investment and risk management policies.
As described in our Responsible Investment Policy, Polaris considers the principal adverse impact on sustainability factors that our investment decisions have in our private equity strategy. Polaris’ investment process consists of several pre-defined “gates”. The due diligence in the final gate consists of several aspects that are to be investigated for the target company. This includes an analysis of the investment from a sustainability perspective. This process is supported by reputable advisors in the area as suitable in each case.
In our private equity strategy, the principal adverse impacts are also evaluated, alongside all other risks and opportunities of a potential investment.
If a particular investment fulfills our investment criteria, all risks and opportunities, hereunder sustainability related risks and opportunities, are then fully included in the business plan, the financial forecast and the overall valuation of the company.
It is our ambition that our portfolio companies shall, at a minimum, establish governance structures to meet the requirements embedded in our sustainability principles and in line with good governance principles as referenced in the SFDR. Our sustainability principles are founded on the UNGPs and the OECD’s guidelines that consist of a policy commitment to having a sustainability policy including a code of conduct for employees and suppliers in line with this commitment, sustainability due diligence processes, and grievance mechanisms. The key objective for Polaris is to create value and build a stronger company by active ownership through a structured value creation process, combined with good and effective corporate governance structures. In our private equity strategy, we also address principal adverse impacts through our active ownership and investment restriction activities, as described in our Responsible Investment Policy.
Climate change mitigation refers to avoiding and reducing greenhouse gas emissions, while climate change adaptation focuses on managing the impacts of climate change. Addressing both is a core component of our sustainability approach.
To support mitigation, we measure and work to reduce greenhouse gas emissions across Polaris and our portfolio. In 2025, we formalized this through a Science-Based Target (SBT) for Polaris as a fund manager, which was approved by the Science Based Targets initiative (SBTi). The target includes portfolio coverage ambitions across our investment strategies. For private equity investments, we target 100% portfolio coverage by 2030. For listed equity investments, the corresponding target is 50% coverage by 2030.
To address adaptation, we assess how current and potential investments may be materially impacted by climate change and evaluate related risks and opportunities. This includes consideration of transition and physical climate risks, based on principles aligned with the Task Force on Climate-related Financial Disclosures (“TCFD”). These assessments are integrated into our due diligence process and ongoing portfolio management through the Polaris Sustainability Program.
The boards of our portfolio companies must establish policies and systems that ensure board oversight with executive management, performance and remuneration reviews. Further, it must ensure legal compliance with respect to books, records, and accounting standards, effective internal controls, and solid risk management processes. Specifically, it is important that the remuneration of the management team and employees in the portfolio company does not encourage risk taking, including sustainability risks, beyond acceptable levels.