We began calculating greenhouse gas inventories for Polaris Management A/S and our private equity portfolio companies in 2020. Our standard process is supported by external advisors and adheres to the Greenhouse Gas (GHG) Protocol. Inventories are established through bottom-up exercises, which we believe is necessary to build understanding and ownership in the organizations and thereby support decarbonization efforts.

At any given time, some portfolio companies may not yet have been onboarded onto our GHG emissions calculation process. To provide an estimate of the complete emissions for our private equity funds, we estimate the emissions of such companies with the help of external benchmarks. We continuously work to onboard new companies to emissions tracking with an ambition to have an inventory established within twelve months of closing.

Boundary setting and consolidation approach: Polaris uses the “Operational Control” approach to organizational boundary setting. We do this because our investment strategy typically gives us majority control through majority ownership. As such, we have the mandate to introduce and implement operating policies in our portfolio companies, and we therefore also take full responsibility for the emissions thereof in our GHG inventory. Although we do not technically have majority ownership in all portfolio companies, we do adopt this consolidation approach for all portfolio companies, acknowledging that we still exert a strong influence even where we are not majority owners.

We consolidate GHG emissions first at the relevant private equity fund level and then at the Polaris Private Equity level, where we also include Polaris Management’s own emissions, although a portion of these should also be allocated to Polaris’ other investment strategies.

Quality and comparability: While emissions are consolidated across portfolio companies to estimate full Polaris private equity emissions (including Polaris Management and all private equity portfolio companies), we acknowledge that the inventories are not directly comparable on an individual basis.

For the companies that have been through our process, these may still vary greatly with respect to complexity, both regarding the type of operations, but also with regards to procurement and reporting being more decentralized in some companies compared to others. This means that the data available for some companies may not be as readily available for others, why the same activity may have been estimated with a different calculation method across portfolio companies, or may not have been included in the base year for some companies due to lack of available data. While these portfolio companies have defined their own operational boundaries, to ensure it reflects their operations and business model, all companies use the operational control approach. To define the operational boundaries, they have gone through all the Scopes and categories of the GHG Protocol and assessed their relevance and feasibility based on the principles of relevance, completeness, accuracy, consistency, and transparency.

We have mainly used one specialized advisor to support our portfolio companies in setting up their GHG emission calculations, which supported seven of our private equity portfolio companies with calculations for 2025. Other specialists support five of the remaining companies and have also generally followed the same methodology with some variations. One company did not perform any of its own calculations (Cepheo), whereas one company provided calculations only for Scopes 1 and 2 (Awardit). In these cases, we used top-down estimates based on external benchmarks to cover the missing data.

In our process, GHG emissions have been calculated through a combination of approaches, including the activity-based method (based on activity data such as total weight of a product, total passenger-kilometers flown, or other relevant metrics), the spend-based method (based on spend on a specific activity or category), and the supplier- and product-specific method (based on actual emissions per SKU or supplier-provided data).

Each inventory process has been initiated with establishing a spend-based estimate, which has been used to prioritize further data collection efforts with the aim of increasing accuracy through moving towards more detailed calculation methods.

Data has been extracted from the respective ERP-systems and invoices and collected from key suppliers when relevant and available (especially purchased energy services, logistics services, waste management services etc.). Where data for applying these methods have not been available, emissions for selected categories have been estimated based on proxy data. For example, for selected portfolio companies, where actual energy consumption was not available for specific sites, energy consumption has been estimated based on the size of facilities and average annual national energy consumption per square meter for a specific facility type (such as office spaces).

Similarly, emissions from employee commuting have in some cases been based on central assumptions and publicly available data on local commuting patterns.

GHG intensity is calculated based on revenue when consolidating the emissions across portfolio companies or otherwise in accordance with industry standards on portfolio company level to allow for comparisons against competition to the greatest extent possible – knowing that a complete “apples to apples” comparison is not possible due to differences in especially Scope 3 coverage, data quality, and methodology between different companies.

GHG intensity and totals are calculated as total Scope 1, Scope 2 (location-based), and Scope 3 emissions. Polaris uses the location-based approach as the main approach when consolidating emission totals and reporting on measures to ensure comparability across portfolio companies regardless of renewable energy procurement. In alignment with the GHG Protocol’s dual Scope 2 reporting requirement, we also publish the market-based Scope 2 results.

Each portfolio company that completes our standard GHG inventory process also develops an emissions data improvement and reduction roadmap. We acknowledge that the quality of each company’s baseline will improve over time, and that there will be uncertainties and gaps in the inventory due to lack of sufficient data. As we strive for continuous improvement over time, these roadmaps include plans to improve the breadth and depth of data collection in the following years. This includes integrating excluded activities that have been deemed significant in terms of the magnitude of emissions, but where sufficient data is not yet available. Further, the roadmaps include a plan for decarbonization initiatives.

At Polaris we request that the roadmap, together with the baseline itself, be approved by the portfolio company’s Board of Directors to ensure commitment to and accountability of the efforts planned. Our SBTi-approved portfolio coverage target aims to have 100% of private equity portfolio companies with their own approved SBTs by 2030.

Emission factors have been collected via environmental product declarations (EPDs), research-based Life-Cycle-Analyses (LCAs), from the UK Department for Environment, Food & Rural Affairs (DEFRA), the International Energy Agency (IEA), ecoinvent, supplier data, and otherwise known and qualified emission factor databases. To the extent possible we have gathered multiple datapoints for each emission factor to validate the sources used.

When working with spend-based emissions factors, these have been adjusted for inflation and currency, to best reflect the working data that they are being applied to.

For Scope 2 electricity calculations, for Danish electricity consumption we have used Energinet’s (the Danish Transmission System Operator) emission factor based on consumed electricity from the grid, while we for all other countries have used IEA’s database and emission factors for produced electricity within the respective countries. We use Energinet as a source for Denmark because most portfolio companies have facilities located in Denmark, and as such we see it as a means to improve the accuracy of the GHG inventory across the portfolio, as Energinet provides grid-specific factors.

We recognize that we will continuously improve our understanding of our emissions and refine our scope and calculation methods over time to improve the accuracy of our calculations and in turn our GHG inventory. Furthermore, given the nature of our operations, the composition of our portfolio will change over time as new companies are acquired and current companies are exited. As such, we have defined a recalculation policy in line with the GHG Protocol.

The Recalculation Policy states that, in the case of structural changes—for example, acquisitions, divestments, mergers, outsourcing or insourcing—we will clearly indicate in the report any added or subtracted parts of the baseline, which can then not be used for year-on-year comparisons. The same applies to the inclusion of additional Scope 3 categories. In the case of methodological change, for example, a change in emission factors, data accuracy, discovery of a significant error (or similarly, a number of cumulative errors that collectively have a significant impact on the GHG baseline), it will trigger a recalculation of the previous 2-3 years to ensure GHG baselines are comparable over time.