Disclosures pursuant to Regulation (EU) 2019/2088 

Masawa Management GmbH (“Masawa“) is an alternative investment fund manager within the meaning of the German Capital Investment Act (Kapitalanlagegesetzbuch, “KAGB”) and as such publishes the following information in light of the consideration of sustainability-related aspects in accordance with Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability disclosure requirements in the financial services sector (“SFDR”). The following disclosures have been carefully prepared in accordance with the SFDR, the Commission Delegated Regulation (EU) 2022/1288 and additional guidance issued by the European Commission, the European Supervisory Authorities and the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht). However, certain ambiguities remain in the interpretation of the regulatory framework, and there are ongoing discussions regarding the need to amend the SFDR. As a result, the text below may need to be adjusted in response to future interpretative guidance or legislative changes.

Art. 3 SFDR – Integration of sustainability risks

Masawa addresses sustainability risks in its investment decision-making process insofar as relevant.

“Sustainability risk” means an environmental, social, or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment. When identifying a sustainability risk during the due diligence on potential investments, Masawa decides in light of the specific situation taking due account of the proportionality principle whether it gives up on the investment or proceeds with the investment alongside appropriate measures to mitigate the relevant sustainability risk.

Masawa regularly reviews its policies to ensure that they address new and emerging risks as well as investors’ concerns.

Art. 4 – Consideration of principal adverse impacts

Masawa is committed to transparently considering Principal Adverse Impacts (“PAI”) in its investment decision-making process. Masawa Impact Fund I systematically evaluates potential negative effects on sustainability factors, including social, environmental, and governance aspects, throughout the lifecycle of its investments. This includes rigorous due diligence, ongoing monitoring, and impact assessments aligned with internationally recognized standards. While not all PAI will be directly applicable or insightful to the investment strategy, Masawa will still consider them to ensure comprehensive oversight. By integrating PAI considerations, Masawa ensures that its investments not only promote mental health and wellness but also mitigate potential adverse impacts on broader sustainability goals.

Annual reports outlining on relevant PAI assessments and impact metrics will be made available on the Masawa website for stakeholders to review.]

Art. 5 – Remuneration Disclosure

As a registered alternative investment fund manager within the meaning of the KAGB, Masawa does not have and does not need to have, a remuneration guideline or policy in accordance with the requirements of the KAGB. Sustainability risks are not considered with respect to the determination of remuneration.

Status: November 2024

Sustainability related disclosures (Art. 9 SFDR)

Sustainability-related information about financial products that promote environmental or social characteristics in accordance with Art. 9, 10 SFDR for Masawa Impact Fund I GmbH & Co. KG (“Masawa Impact Fund I”) managed by Masawa Management GmbH (“Masawa“) an alternative investment fund manager within the meaning of the German Capital Investment Act (Kapitalanlagegesetzbuch).

Summary

Masawa Impact Fund I is a venture capital fund with a focus on mental health. It makes at least 90% sustainable investments with a social objective.

Masawa Impact Fund I aims to support impact-driven enterprises that advance mental health and wellness, promoting a healthier world. Its investments target businesses that prevent, diagnose, or treat mental health conditions, improve well-being, or address factors like sleep and nutrition. For each portfolio company, a specific impact goal and timeline will be established. Early-stage companies will have impact goals until Series-A financing, while later-stage companies will have longer-term goals.

No benchmark is designated for achieving social and environmental goals; instead, a custom metrics framework measures impact, ensuring transparency and accountability. Impact Key Performance Indicators (“KPIs”) are developed with the Impact Advisory Committee’s approval and are disclosed to investors. These KPIs may include symptom reduction via standardized scales, improved mental health outcomes, or reduced time on harmful apps, depending on available data quality.

Zusammenfassung

Masawa Impact Fund I ist ein Risikokapitalfonds mit Schwerpunkt auf der psychischen Gesundheit. Er tätigt zu mindestens 90 % nachhaltige Investitionen mit einer sozialen Zielsetzung.

Der Masawa Impact Fund I zielt darauf ab, impact-orientierte Unternehmen zu unterstützen, die die mentale Gesundheit und das Wohlbefinden fördern und so zu einer gesünderen Welt beitragen. Die Investitionen zielen auf Unternehmen ab, die psychische Erkrankungen verhindern, diagnostizieren oder behandeln, das Wohlbefinden verbessern oder sich mit Faktoren wie Schlaf und Ernährung befassen. Für jedes Portfoliounternehmen werden ein spezifisches Impact-Ziel und ein Zeitplan festgelegt. Unternehmen in der Frühphase haben Impact-Ziele bis zur Serie-A-Finanzierung, während Unternehmen in der Spätphase längerfristige Ziele haben.

Für die Erreichung sozialer und ökologischer Ziele wird kein Benchmark festgelegt; stattdessen werden die Auswirkungen anhand eines maßgeschneiderten Bewertungsrahmens gemessen, der Transparenz und Nachprüfbarkeit gewährleistet. Die wichtigsten Leistungsindikatoren (KPI) werden mit Zustimmung des Advisory Impact Committee entwickelt und den Investoren mitgeteilt. Diese KPIs können je nach verfügbarer Datenqualität die Verringerung von Symptomen anhand von standardisierten Skalen, die Verbesserung der psychischen Gesundheit oder die Verringerung des Zeitaufwands für schädliche Apps umfassen.

No significant harm to the sustainable investment objective

Principal Adverse Impacts

Masawa Impact Fund I takes into account indicators for adverse impacts on sustainability factors for mental health-focused software companies by assessing environmental, social, and governance (“ESG”) criteria. Environmentally, Masawa Impact Fund I evaluates the energy consumption and carbon footprint associated with data centers and digital infrastructure, when applicable. Socially, the focus is on data privacy and security, ensuring the protection of user information, and assessing the impact of software on user well-being and mental health outcomes. Governance factors include evaluating corporate governance practices such as ethical conduct, transparency, and the management of potential biases in algorithms. By monitoring and managing these ESG indicators, Masawa Impact Fund I ensures that its investments align with the sustainability objectives and mitigate adverse impacts.

Alignment with international principles and standards

The approach aligns with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, ensuring that Masawa Impact Fund I’s investments respect human rights and promote ethical business practices. Masawa Impact Fund I adheres to the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work, which include the elimination of forced labour, child labour, discrimination, and the right to collective bargaining. Additionally, Masawa Impact Fund I aligns with the International Bill of Human Rights, ensuring that its investments contribute positively to societal well-being and uphold fundamental human rights.

Sustainable investment objective of the financial product

The investment objective pursued by the Masawa Impact Fund I is to support and scale impact-driven enterprises that drive significant positive direct or indirect impact in the field of mental health and wellness, ultimately contributing to a more mentally healthy world. The mental health and wellness focus can be on preventing, diagnosing, or treating mental illness, improving overall wellbeing and flourishing, or addressing adjacent or social determinants of mental health like sleep, nutrition, etc.

At the time of an investment in a portfolio company, Masawa shall determine in cooperation with the portfolio company with respect to such portfolio company a specific impact goal, including a specific timeline. For portfolio companies at Pre-Seed and Seed stages, the Impact Goal shall cover the period until Series-A financing is closed. For portfolio companies at or reaching Series-A and later financing stages, the Impact Goal will be co-created or adjusted, as needed, and shall cover the life of the portfolio investment.

No reference benchmark has been designated for the purpose of attaining the environmental and social characteristics promoted by Masawa Impact Fund I.

Masawa Impact Fund I has, however, developed a robust custom metrics framework to measure and manage its impact on mental health and wellness. This includes tailored qualitative and quantitative assessments, regular reporting, and third-party validations to ensure transparency and accountability. Masawa Impact Fund I’s approach reflects a deep understanding of the unique nature of its focus and demonstrates a commitment to meaningful and measurable outcomes.

Investment strategy

Masawa Impact Fund I intends to seek long-term capital appreciation through equity and quasi-equity investments in early-stage companies that improve mental health and wellness.

Masawa Impact Fund I’s investment strategy focuses on early-stage startups that catalyse mental health and wellness. Its approach integrates a comprehensive evaluation of both financial viability and social impact. During the initial investment phase, rigorous due diligence is conducted to assess each company’s potential to drive positive mental health outcomes and financial returns. This involves evaluating leadership, culture, and alignment with impact goals.

Once invested, a continuous support and monitoring process is implemented. Bespoke development paths are co-designed to address each founder’s unique needs, fostering leadership effectiveness and team resilience. Regular check-ins, impact assessments, and performance reviews ensure that Masawa Impact Fund I’s investments consistently align with its strategic objectives.

As part of the due diligence and ongoing investment management, the investment team will review whether a potential portfolio company has good governance practices in place. This might include using ESG (environmental, social, and governance) criteria to evaluate companies’ performance in areas such as labor practices, human rights, and corporate governance, conducting due diligence on portfolio companies to assess their management structures, employee relations, and tax compliance, engaging with portfolio companies through to encourage improvements in governance practices if necessary. The intensity of the assessment is carried out in accordance with the principle of proportionality. Where Masawa sees higher risks of non-compliance, he will intensify his audit. Masawa will be at least partly reliable on the information provided by the portfolio companies. Unless there is evidence to suggest that the information provided is incorrect, it will not be examined for accuracy.

Proportion of Investments

The Partnership will make at least 90% investments with a social objective. There will be a maximum of 10% of not sustainable investments.

Monitoring of the sustainable investment objective

At least one key performance indicator (KPI) will be used to measure the achievement of the respective Impact Goal (“Impact KPI”), provided that the establishment (or subsequent amendments) of any Impact KPI is subject to approval by an impact advisory committee.

Any Impact KPI formally established shall be documented in writing and disclosed to the Investor Limited Partners. In addition, the Investors will receive quarterly updates on progress toward reaching the Impact KPIs. The Impact Advisory Committee will determine whether the Impact KPIs have been met, including the ‘Impact Target Achieved (ITA)’, and/or if an independent third-party impact verifier should be engaged.

Some examples include:

• Reduction in symptoms measured by standardised scales (PHQ-9, GAD-7).
• The number of product users who report an overall improvement in their mental health.
• The reduction in the number of minutes spent on problematic smartphone apps.
• Improvement of mental health biomarker ranges in microbiomes, e.g. fatty acids, amino acids, vitamins, hormones

However, the consideration of these indicators strongly relies on the availability of relevant data. Due to the early stage of the portfolio companies, the relevant data may not always be sufficiently available and/or of adequate data quality. Depending on the individual data situation Masawa might not always be able to track all KPIs. When tracking KPIs, Masawa will rely on the information provided by the individual (potential) portfolio companies.

Methodology

The methodologies used to measure the attainment of the sustainable investment objective are both quantitative and qualitative, tailored to the specific objectives of each investment. For every portfolio company, we identify and utilize relevant sustainability indicators that align with their unique impact goals. Data is collected from existing business metrics, product usage statistics, and/or direct feedback, usually self-reported, from users or beneficiaries. This includes information obtained from underlying business operations and user-provided data. The collected data is then analyzed to assess progress toward the sustainable investment objectives, ensuring that both the impact and the effectiveness of each investment are accurately measured and monitored over time.

Data sources and processing

Masawa Impact Fund I receives data provided by the portfolio companies as part of the due diligence process and at regular intervals after the investment. Where necessary or beneficial, Masawa Impact Fund I also makes use of publicly available data. Data processing is exclusively internal. Estimates of data are not made.

Limitations to methodologies and data

Masawa Impact Fund I is partly dependent on information provided by portfolio companies during the due diligence process. In addition, in the post-investment phase, Masawa Impact Fund I relies on data reported by the portfolio company. In both cases, due to the nature of the investments, complete data may not always be available. The information is only verified if and to the extent that misrepresentation is suspected.

As the investments of the Masawa Impact Fund I are made for an investment period of several years, Masawa attaches great importance to establishing a trusting working relationship with the portfolio companies in order to ensure that the data provided is reliable and complete and that the above-mentioned restrictions are complied with.

Due Diligence

During the due diligence process, Masawa Impact Fund I assesses three critical areas: profit (commercial viability), purpose (external impact), and people (internal impact).

1. Commercial Due Diligence (Profit): Masawa Impact Fund I performs traditional commercial evaluations to ensure the company’s business model is sound, viable and capable of generating returns. This includes analyzing financial statements, market potential, competitive landscape, revenue streams, unit economics and operational efficiencies to validate the investment’s profitability and growth prospects.
2. External Impact Due Diligence (Purpose): Masawa Impact Fund I focuses on the company’s potential to create meaningful outcomes. This involves assessing the impact thesis and the opportunity for significant positive change. We leverage existing proprietary data, validated metrics, and peer-reviewed academic research to substantiate the company’s impact potential and ensure that their strategies are grounded in proven methodologies (science, academia, research).
3. Internal Impact Due Diligence (People): Masawa Impact Fund I evaluates the team’s dynamics, leadership capabilities, and organizational culture to ensure they can effectively work together towards their goals. This includes assessing the team’s experience, cohesion, commitment to the mission, and their ability to execute both commercially and impactfully or sustainably in terms of impact.

Internal Controls: Masawa Impact Fund I’s team members bring extensive experience across these three areas, enabling a thorough and nuanced due diligence process. The internal experts collaborate to cross-verify findings and ensure a comprehensive assessment.

External Controls: By the final close of the fund, Masawa Impact Fund I will have established advisory committees comprising industry experts and stakeholders. These committees will provide external oversight, offer independent evaluations, and hold Masawa Impact Fund I accountable for its due diligence processes, and investment decisions and portfolio management, ensuring integrity and alignment with itsour sustainable investment objectives.

Engagement Policies

Masawa Impact Fund I invests in the portfolio companies for a period of several years. For this reason, Masawa attaches great importance to establishing and maintaining a relationship of trust with the portfolio companies in order to comply with the investment restrictions on an ongoing basis. Masawa also intends to establish or strengthen the consideration of sustainability risks at the portfolio level. Masawa is in constant dialogue with the portfolio companies, but as a venture capital Fund without a controlling interest, the influence Masawa Impact Fund I can exert on the portfolio companies is limited.

This statement was last updated on November 30, 2024. For questions, contact us at hello@masawa.fund.