The Fund promotes environmental and/or social characteristics but does not have as its objective sustainable investment. The environmental and/or social characteristics promoted by the Fund are protecting our environment, improving our society, growing our economy and valuing our people.
To promote these characteristics, the Fund applies two core elements:
The Investment Manager uses a qualitative, judgement‑based approach to assess companies before investment and to monitor them during ownership. Information used for this assessment is drawn from:
Because the Fund invests in small and growth‑stage UK companies, sustainability information is often limited or inconsistently reported. The Investment Manager therefore places significant emphasis on direct engagement with management to understand operational practices and progress against environmental or social objectives.
Throughout the life of the investment, the Investment Manager monitors whether companies continue to align with the Fund’s promoted characteristics and engages proactively with management teams to encourage improvements in identified sustainability areas.
The Investment Manager will only invest in companies it believes follow good governance practices, including sound management structures, strong employee relations, responsible remuneration arrangements, and appropriate tax compliance. The Investment Manager may exclude companies from the portfolio where it believes governance practices are materially lacking or inconsistent with these expectations.
A minimum of 90% of the Fund’s investments will align with the binding elements of the Fund’s environmental or social characteristics. These investments consist entirely of unlisted UK private companies. The remaining proportion may consist of cash or cash‑equivalent holdings for liquidity and portfolio management purposes.
To measure how the environmental and social characteristics of the Fund are met, the Investment Manager applies a structured methodology that combines screening, qualitative assessment and ongoing monitoring. This approach is adapted for size, scale and nature of the companies in which we invest, where sustainability-related information is often more limited.
Due to the nature of UK private markets, sustainability data availability is often limited. Most UK private companies are not subject to mandatory sustainability reporting frameworks and choose for themselves which sustainability factors to disclose. As a result:
While the Investment Manager prefers reported data where available, the limited and sporadic nature of issuer disclosures means estimated data may be required in certain cases. Where third‑party data is used, the Investment Manager assesses the provider’s methodology and treats the information as an input into its own independent judgement rather than a determinative source.
Sustainability factors form a holistic and embedded part of the Investment Manager’s due‑diligence approach. These factors are considered alongside commercial, operational, and financial considerations where the Investment Manager believes they may influence risk‑adjusted returns. This integrated approach ensures sustainability issues are evaluated as part of investment selection, risk management, and value‑creation planning.
No reference benchmark has been designated for the purpose of attaining the environmental or social characteristics promoted by the Fund.
The Fund promotes environmental or social characteristics, but it does not have sustainable investment as its objective.
At this time, the Investment Manager does not consider the principal adverse impacts (“PAIs”) of investment decisions on sustainability factors for the purposes of Article 7 of the SFDR in relation to the management of the Fund.
The Investment Manager, in accordance with Article 4 (1) (b) of SFDR, does not currently consider the principal adverse impacts of investment decisions on sustainability factors due to the nature and scale of its activities and the range of financial products it makes available. This approach is considered by the Investment Manager to be transparent and pragmatic. Many of the investee companies are small, growth‑stage businesses that are not required to report against consistent data sets and often have limited resources, making reliable and comparable sustainability information unavailable.
Despite these challenges, this position will be kept under review and reassessed periodically as market practices and data availability develop.
The Fund promotes environmental and social characteristics by investing in companies that promote the following: protecting the environment, improving society, and valuing people.
The fund invests exclusively in UK-headquartered businesses, primarily targeting those operating in the Business Services sector, in the UK lower middle market.
The Investment Manager follows a systematic and consistent investment process, it assesses investment opportunities by reference to a wide range of factors to ensure that investments are appropriate for the Fund’s investment strategy. Whilst the due diligence and assessment process can differ depending on the stage and sector of each business, it includes:
> Initial screening: each prospective investment will initially be assessed by the Investment Team. This includes an exclusionary screen. If it does not meet the investment criteria, it will not be considered further.
> Investee company assessment: the Investment Team work to understand the investee company’s senior management team and culture at the company. This includes an assessment against the relevant sustainability indicators.
> Peer review: the wider investment team, including YFM’s investment committee (“Investment Committee”) members, review the opportunity and consider and challenge the investment case.
> Due diligence: early-stage opportunities are first subject to in house due-diligence; as the process develops and, following agreement of heads of terms with the investee company, third party experts are often commissioned. Due diligence may include financial, commercial, technology, legal and others as necessary. Material sustainability indicators which have been flagged as red (on a RAG rating) will be considered in further detail at this stage.
> Investment Committee: all investments must be approved by the Investment Committee. The committee will consider various factors including, but not limited to, the strength of management team, potential return, output from due diligence, the suitability of the investment in line with the Fund’s investment policy and sustainability factors.
While the Fund promotes environmental and social characteristics it does not commit to a minimum level of sustainable investments, in practice it may (but is not required to) make some sustainable investments.
The only binding element of the investment strategy used to select investments that meet the Fund’s environmental or social characteristics is the exclusionary screen. All companies the Fund invests in must successfully pass this screen.
For cash management purposes, the Fund may hold up to 10% in cash and cash equivalents, typically we would expect this percentage to be significantly lower. These assets are neither aligned with the environmental or social characterises, nor are they sustainable.
The Fund does not utilize derivatives to attain the environmental and/or social characteristics that the Fund promotes.
The Investment Manager monitors each investment throughout its lifecycle using a proprietary sustainability assessment, engagement with management, annual data collection and board-level discussions. The sustainability assessment is based on information gathered from publicly available sources where possible, such as company filings, financial statements, industry reports, and other relevant materials the Investment Manager considers material. Where such information is not available, the Investment Manager obtains the necessary insights directly from the portfolio company,
As part of the ongoing assessment, the Investment Manager also engages directly with portfolio companies. These engagements provide an opportunity to discuss and encourage progress on initiatives that the Investment Manager believes could meaningfully strengthen how a company manages the business matters linked to the Fund’s promoted environmental or social characteristics. Through this engagement process, the Investment Manager also reviews whether each company continues to align with the Fund’s promoted characteristics.
The Investment Manager applies screening, proprietary assessments and ongoing monitoring, tailored to the size and reporting practices of UK private companies.
The Fund applies an initial sustainability screen to identify and exclude companies engaged in activities that are inconsistent with the Fund’s promoted characteristics. This screen includes restrictions related to controversial weapons, tobacco products, alcohol, gambling, adult entertainment, ESG controversies, exploration or extraction of fossil fuels, exploitation of vulnerable persons and animal testing.
The Investment Manager conducts a proprietary sustainability assessment for each portfolio company. This assessment is designed to assess the materiality of the company’s sustainability factors and management approach to these critical themes and allows the Investment Manager to pinpoint key ESG improvement areas that are both material to the company’s growth and to its broader stakeholder ecosystem.
From the proprietary sustainability assessment, we identify 3 to 5 priority sustainability themes that have the potential to drive significant impact within the company and align with the interests of its stakeholders. This structured approach ensures that each company’s sustainability focus is both actionable and relevant to the business model.
After identifying these themes, the Investment Manager collaborates with the company’s management to create a targeted action plan. To measure progress against this plan, the company complete an annual survey gathering sustainability metrics. This data feedback allows us to ensure momentum, recognise achievements, reassess priorities, and adapt to the evolving needs of stakeholders. A more detailed breakdown of this process can be found below:
The Investment Manager applies a minimum set of standard governance practices across all portfolio companies. This set of minimum requirements consists of key policies and practices all companies are encouraged to implement.
The Investment Manager uses a mix of publicly available information and company‑provided information to assess how each investment aligns with the Fund’s promoted environmental and social characteristics. Publicly available sources include financial statements, company filings, industry reports, investor presentations, and other material information identified as relevant by the Investment Manager. Where public data is limited, as is often the case for privately held, early‑stage or growth companies, the Investment Manager obtains information directly from portfolio companies through engagement and ongoing dialogue. In addition, third‑party data vendors or consultants may be used to supplement these data sources where appropriate.
Given the nature of private equity and the limited reporting obligations of privately held companies, the Investment Manager applies a qualitative, internal assessment approach supported by third‑party data where available. The Investment Manager reviews the methodologies, data collection practices, and credibility of any third‑party vendors used. While YFM may not be able to independently verify all third‑party data, it uses such information only as an input into its own proprietary sustainability assessment and makes its own determinations regarding the accuracy and relevance of the information.
Data, whether publicly available, provided directly by portfolio companies, or sourced from third‑party vendors, is assessed through the Investment Manager’s proprietary sustainability assessment framework. This framework considers both qualitative and quantitative inputs and incorporates the Investment Manager’s judgement on how each company is performing against the Fund’s environmental and social characteristics.
Due to the limited disclosure obligations of privately owned growth businesses, the Investment Manager cannot reliably quantify the proportion of estimated versus reported data. While the Investment Manager prefers reported information where available, gaps in issuer‑provided sustainability data, common in the private equity market, may require the use of estimated data from third‑party providers.
The methodologies used to assess the environmental and social characteristics promoted by the Fund are subject to several limitations, particularly given the nature of the small and growth‑stage UK companies in which the Fund typically invests.
Although sustainability reporting expectations in the UK are evolving, most UK private companies are not legally required to report against consistent ESG data standards and therefore determine for themselves which sustainability factors are material and what information to disclose.
These limitations are even more pronounced in the UK private equity market, where early‑stage and growth‑stage companies often have limited internal resources and no mandatory sustainability reporting obligations. As a result, there is frequently little or no publicly available sustainability information, requiring the Investment Manager to rely heavily on direct engagement with management to obtain the information needed to carry out its proprietary sustainability assessment.
Third‑party ESG data providers also use different methodologies and scoring approaches, which results in inconsistent outputs. This inconsistency is particularly evident where data for small, private companies must be inferred or approximated due to limited direct disclosures.
Despite these constraints, the Investment Manager uses a structured qualitative sustainability assessment supported by management engagement and supplementary data sources to form a balanced and well‑reasoned view of each UK company’s alignment with the Fund’s promoted environmental and social characteristics.
Please refer to section 9 above.
Please refer to section 9 above which details the engagement with investee companies.
No index has been designated as a reference benchmark for the Fund.
