Grounded Investment Cooperatief U.A. Sustainability Disclosure

These are our (“The Grounded Investment Cooperatief U.A.,” “GIC,” “the Fund”) website disclosures in terms of REGULATION (EU) 2019/2088 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 November 2019 on sustainability‐related disclosures in the financial services sector (SFDR).

GIC is currently a “dark green” Fund, in accordance with Article 9. This means that the Fund’s core objective is sustainable investment. The following disclosures are required in terms of the aforesaid Regulation.

The sustainable investment objective of Grounded Investment Cooperatief U.A. is to make farming more profitable for producers and facilitate their transition to regenerative farming systems. This objective is achieved by investing in mission-aligned agri-businesses (investees) committed to creating fair, transparent, and honest value chains.

Investing in and working together with mission aligned agri-businesses creates the economic underpinning needed to drive the adoption, scaling and success of regenerative agriculture. When agricultural land is managed regeneratively to restore soil, water and biodiversity, this results in carbon sequestration, climate change mitigation and the halting of biodiversity loss, which ultimately leads to restoration of degraded farmland and preservation of the environment. Regenerative production, in turn, results in improved product quality and reduced input costs (which increases farmer income and market access), and thus improves the resilience of rural farming households. Honest and transparent value chains lead to transfer of a fair share of the value to the farmer.

The Scorecard includes the following negative screening criteria:

• No structural violation of international human rights laws, environmental laws, or anti-corruption laws
• No use of prohibited pesticides, herbicides, fungicides, or chemical fertilizers
• No negative impact on high-value conservation areas
• No discrimination or coercive behaviour regarding staff opportunities or remuneration

The positive screening criteria are as follows:

• Production system suitability – prevalence of use of agrochemicals by producers, potential for regenerative model (e.g. agroforestry, intercropping)
• Potential to generate positive farmer outcomes first (margins, plans to certify / introduce price incentives / profit shares)
• Intention/alignment of founder
• Existing embedded impact structures (e.g. certifications, premiums / profit shares, farmer training, traceability, direct sourcing)
• Operational efficiency is a multiplier – without this, impact would collapse
• (Current) potential to scale (number of farmers x growth plans)

To select only those investments that do not cause significant harm to any environmental or social sustainable investment objective, GIC performs a thorough sustainability, financial and risk analysis (including but not limited to the MVO Nederland CSR Risk Check aligned to OECD guidelines), preferably on site. The comprehensive analysis verifies the outcome of the initial selection phase.

The sustainable investment objective of Grounded Investment Cooperatief U.A. is to make farming more profitable for producers and facilitate their transition to regenerative farming systems. This objective is achieved by investing in mission-aligned agri-businesses (investees) committed to creating fair, transparent, and honest value chains.

A reference benchmark has not been designated for the purpose of attaining the sustainable investment objective.

Our sustainable investment objective is achieved by investing in mission-aligned agri-businesses (investees) committed to creating fair, transparent, and honest value chains. Investments take the form of equity or debt, or any hybrid convertible instrument, made into early-stage agricultural processing companies that are vision-aligned with the Fund’s investment objective and have the potential to effectively absorb investment. The processing companies must operate within the agricultural sector in Africa; directly or indirectly employ or source from local producers or are producer aggregators in some other way; and deal in high-value, non-perishable crops or produce.

Our investment process is defined in the following stages to attain the sustainable objectives of the fund:

Phase 0 – “Filling the Funnel”
Value chain research and opportunity mapping to develop a strategic investment pipeline. The first input to the impact scorecard occurs in this phase, ensuring early impact alignment by assessing production system suitability and potential for positive farmer outcomes.

Phase 1 – Exploration
One (or multiple comparative ) opportunities are each evaluated through the impact scorecard and a SWOT analysis. If interesting, a first-look memo is developed for investment team and GIC management approval. The second input to the impact scorecard occurs in this phase. This tests the reality of the Phase 0 research outcomes and captures additional insights for positive and negative screening based on on the ground visits and in-person conversations.

Phase 2 – Deep Dive
The second-look stage involves deep due diligence into the company, entrepreneurs, financials, and valuation, leading to the presentation of an investment memo to the Fund’s Investment and Impact Committee (IIC). The impact scorecard is updated from the initial snapshot to capture refined impact insights, and a comprehensive investment memo, which includes a descriptive impact case and scorecard, is reviewed for non-binding strategic input on impact alignment before the investment proceeds to term sheet development.

Phase 3 – Term Sheet
Terms are negotiated, prepared, and agreed upon, including impact-linked conditions precedent. Impact commitments are explicitly embedded at the term sheet level.

Phase 4 – Due Diligence
Due diligence on financial, legal, and operational aspects, structuring, and preparing transaction documents occurs in this phase. The final impact structure and reporting commitments are submitted for approval by the IIC to ensure alignment with fund-wide impact objectives.

Phase 5 – Transaction Completion
Final transaction document review and execution process. Impact is embedded at the shareholder agreement level through governance, reporting and business structuring commitments.

Phase 6 – Post-Investment Implementation
GIC collaboratively works with portfolio companies through board seat and technical assistance (regenerative agriculture and other support). Ongoing impact monitoring and TA ensure long-term impact execution and tracking.

The sustainable investment objective of the Fund is a dual social and environmental objective: to make farming more profitable for producers and facilitate their transition to regenerative farming systems. All of our investments target companies where environmental and social impact are integral to the product/service being created. We expect that the investments of the fund will be sustainable investments that contribute to one or more of the six EU Taxonomy environmental objectives; however agriculture is not yet included in the Taxonomy. The Fund’s Theory of Change demonstrates that its environmental and social outcomes are interdependent and mutually reinforcing: investing in agri-processors to scale their businesses (Impact Goal 1) creates the sustainable business environment (Impact Goal 2) that provides economic incentives for farmers to transition to regenerative agriculture (Impact Goal 3). This transition delivers both environmental outcomes – enhanced water retention, greater soil health, and increased biodiversity – and social outcomes – improved farmer profitability through reduced input costs, higher yields, and job creation. Accordingly, the minimum shares of 50% environmental and 50% social reflect the equal weight given to each dimension of the Fund’s dual objective and are not mutually exclusive: a single investment may be assessed as contributing to both an environmental and a social objective.

The GIC impact pathways are our framework for measuring investee progress in four key areas, and, in turn, the fund’s progress towards the attainment of its sustainable investment objective. The framework translates our Theory of Change into a concrete assessment, enabling us to track impact alongside financial returns.

Each of the pathways has four levels. An investee’s position along each of the pathways is assessed annually, substantiated by measurable indicators and approved by our Investment and Impact Committee (IIC). The table below shows how metrics reported by investees annually may contribute to an assessment of the investee’s progress along the four impact pathways. These and additional metrics form the basis of the annual impact report, along with the results of annual socioeconomic farmer surveys and soil health assessments.

To manage impact, GIC uses an Impact Management and Monitoring Framework. The framework sets out to the Impact Pathways (see above), informed by detailed metrics tracked at the portfolio-company level. Reporting of the outcomes for the Fund and the Fund’s portfolio companies is done on an annual basis in the GIC impact report.

The main source of data is the information received from the investee companies. Portfolio companies deliver data related to the impact KPIs on an annual basis. Additionally, board meetings for the portfolio companies are another source of data as every portfolio company includes a GIC board member. Collected data will be processed by GIC’s impact team and GIC’s portfolio company managers.

The status of the portfolio company can limit the scope and quality of data collection and lead to the use of estimates rather than reported actual figures. Limited resources and capacity at the portfolio companies is often a limitation on resources available for reporting.

GIC’s investment process includes two due diligence processes. The second-look stage involves deep due diligence into the company, entrepreneurs, financials, and valuation, leading to presentation of an investment memo to the Fund’s Investment and Impact Committee (IIC). In this phase, the impact scorecard is updated from the initial snapshot to capture refined impact insights, and a comprehensive investment memo (including descriptive impact case and scorecard) is reviewed for non-binding strategic input on impact alignment before proceeding to term sheet development.

The dedicated due diligence phase, which follows term sheet development, includes due diligence on financial, legal, and operational aspects of each potential investee, as well as structuring and preparing of transaction documents. The final impact structure and reporting commitments are submitted for approval by the IIC to ensure alignment with fund-wide impact objectives.

GIC investments are structured to ensure transparency and alignment on impact from the term sheet stage onwards to deeply embedding impact in the governance of the investee company through the shareholders agreement (SHA). Doing so ensures the investee’s long-term alignment with regenerative and ethical business practices.
GIC’s term sheets define and ensure alignment with impact commitments (along with general deal terms) and develop a shared goal or vision between GIC and investees upfront. The termsheet template draws on LISI’s Impact Term Sheet to align the legal investment process with safeguarding impact. Impact commitments and conditions precedent are integrated into the term sheet to ensure transparency with regards to expectations, use of funds, minimum standards and transition targets.
The shareholders agreement protects and embeds impact by codifying the impact objectives to prevent mission drift and support mission aligned exit. It:

• Captures impact objectives – GIC and investee co-define clear impact objective(s).
• Ensures strong governance – A multi-member management board is established whose responsibility includes the safeguarding of the companies’ impact objectives. GIC secures a director seat and minority protection rights as a shareholder.
• Stipulates reporting: Shareholders receive regular impact-aligned financial and operational updates, including:
  • 24-month financial projections
  • Strategic development and progress against impact goals aligned with GIC’s impact indicators
  • Immediate reporting on any material risks to impact, financials, or business strategy
• Ensures investee commitment to identifying and avoiding, and if avoidance is not possible, mitigating and managing negative screening activities (structural violations of human rights laws, environmental laws, or anti-corruption laws; use of prohibited agri-chemicals; negative impact on conservation areas; discrimination or coercive behaviour towards staff or remuneration) using an approach aligned with good international industry practice.

Post investment, GIC works collaboratively with portfolio companies through its board seat and technical assistance (Regenerative Agriculture and other support).

There is not a reference benchmark available and therefore no reference benchmark has been designated.

Pre-contractual disclosure for the financial products referred to in Article 9, paragraphs 1 to 4a, of Regulation (EU) 2019/2088 and Article 5, first paragraph, of Regulation (EU) 2020/852 (Annex III) regarding GIC can be downloaded here.