Napkin Capital Oy is an alternative Investment Fund Manager (AIFM) licensed and supervised by Finnish Financial Supervisory Authority (FIN-FSA, Finanssivalvonta). Our funds are Alternative Investment Funds (AIF), and we adhere to the rules and regulations governing the management of Alternative Investment Funds, as defined in the Finnish AIFM Act (laki vaihtoehtorahastojen hoitajista 162/2014)
Napkin Capital Oy is the company owned by a group of European founders and operators supporting the next generation of entrepreneurs.
Principles of active ownership by Napkin Capital Oy
General
An investment service provider that provides asset management services within the meaning of the Act on Investment Services (asset manager) by investing its clients’ assets in shares of a (listed) company traded on a regulated market must establish an active ownership policy.
The active ownership policy must describe how ownership is manifested in the asset manager’s investment strategy. The policy must describe the procedures for monitoring the performance of a company traded on a regulated market in matters relevant to the asset manager’s investment strategy and for exercising voting or other rights attached to shares. The policy must also describe how the asset manager engages in dialogue with the investee company, its other shareholders and stakeholders.
This policy has been drawn up to provide guidelines for Napkin Capital Oy as regards the rights and ownership related to investments in shares of listed companies, to be applied when Napkin Capital Oy manages its clients’ investment assets under an asset management contract. This policy also guides the assessment of the principle adverse impacts associated with the investment portfolio. (PAI, Principal adverse impact*).
Napkin Capital Oy provides asset management services to its clients mainly by investing in funds. However, investments may also be made directly in individual listed shares.
Decision-making power and the active means of exerting influence described in the active ownership policy and, in particular, in relation to exerting shareholder voting rights and other rights of shareholders for asset management clients must be determined in the asset management contract. Exerting the means of influence may also be concluded in a separate case-specific agreement.
The funds selection process takes into account the active ownership policy and sustainable investment activities of each fund manager in line with clients’ sustainability preferences.
These policies are approved by the Board of Directors of Napkin Capital Oy.
Active ownership policy – our expectations and available means of influence
Active ownership is a factor that can contribute to good governance of the investee companies and improve the conditions for the good long-term performance of the investee companies or investment portfolios. Napkin Capital Oy applies a comprehensive analysis to evaluate the equity investments held in its clients’ portfolios, taking into account both financial and non-financial reporting data and the material risks and opportunities that can be analysed. In particular, it is ensured that the investee companies comply with international law and standards relating to environmental protection, human rights, workers’ treatment and anti-corruption activities. This also ensures that potentially relevant PAIs* are understood and reported.
As a rule, all companies are expected to comply with good governance practices of their home market and any corporate governance code (in Finland, the Securities Market Association’s Corporate Governance Code).
It is important that companies describe their governance and administration systems and report to investors not only financial information but also sustainability factors relevant to their strategy and operating environment so that Napkin Capital is able to analyze the company’s risks and return potential in a comprehensive manner. Companies are expected to comply with the NFRD and, in the future, the CSRD reporting regulations, if they are subject to such regulation. Companies are expected to communicate and report in an accurate and truthful manner at all times.
Napkin Capital Oy monitors matters relevant to its investment strategy using the companies’ financial reporting data, other company communications and market information and carries out its own investment analysis and, where appropriate, by meeting with the companies’ representatives and discussing issues of importance to the companies’ development.
In the case of direct investments of asset management clients, Napkin Capital may attend meetings of shareholders either itself or through a proxy representative, but only if the client so wishes and in a manner consistent with the client’s wishes. Napkin Capital may participate in formal means of investor co-influence if the asset management client so wishes in relation to a company.
Public disclosure of the active ownership policy and an annual report on its implementation
This Napkin Capital Oy corporate active ownership policy may be made public and is discussed with all asset management clients and included in the client contracts. The client’s preferred model of active ownership is specified in the asset management contract. The client’s suitability assessment and asset management contracts take into account the client’s sustainability preferences and any desired exclusions.
Attendance at shareholder meetings and any voting are always agreed separately with the asset management client.
Napkin Capital Oy’s clients are unlikely to be major shareholders in any listed investee companies.
Napkin Capital Oy considers that disclosure of the implementation of its corporate governance policy is not essential, as any exertion of influence and corporate governance are agreed with each asset management client separately and the implementation of such governance is reported. As objectives and actions are agreed separately with each asset management client, it is not rational to report a uniform single set of policies and objectives for each company, or to report unequivocally on how influence is exerted.
Corporate governance and any influencing activities are, of course, reported directly to those clients who request them.
In line with Napkin Capital Oy’s strategy, direct investments in shares of listed companies are likely to be very limited in the portfolios of asset management clients, with investments mainly consisting of fund investments and unlisted shares.
*Negative externalities of investment decisions, PAI definition by ESMA: “Negative, material or likely to be material effects on sustainability factors that are caused, compounded by or directly linked to investment decisions and advice performed by the legal entity.”
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Our Sustainability Principles
The basics
– Napkin Capital Oy is an authorized Alternative Investment Fund Manager (AIFM), pursuant to the Finnish Act on Alternative Investment Fund Managers (162/2014) (the “AIFML”).
– The AIFM manages AIF funds with fund-of-fund and private equity strategies. It also offers investment services to professional clients.
– Considering relevant sustainability risks related to environmental, social, and governance matters is an integral part of the due diligence process of the AIFM when selecting investments.
– For the time being, the AIF fund that Napkin Capital manages is categorized as an Article 6 fund according to the SFDR regulation.
– All parties involved in our investment process follow the principles stated on this page and guidance provided by the Board of Directors.
Sustainability in investment decision-making
ESG implementation & due diligence
We expect all the companies and funds we invest in to operate responsibly and take environmental, social, and governance (ESG) aspects into account. We consider sustainability risks in the AIFM’s investment due diligence processes. Regarding direct investments, we screen potential ESG risks and opportunities and potential negative and positive impact of the investment. Regarding fund investments, we review the funds’ due diligence and ESG processes and analyze potential risks and opportunities. We discuss any potential risks during the investment decision-making process and document these in investment proposals.
Active ownership & monitoring
Our active ownership is based on open and continuous dialogue. We systematically meet with and monitor the portfolio companies and funds, helping them develop their practices and solve problems if needed. Naturally, ESG is on the agenda of our regular meetings and calls, and we discuss those when relevant. We also ask about the ESG policies of our portfolio companies and funds regularly to monitor and track the ESG status of the entire portfolio.
Sectoral exclusions
We don’t invest in companies focusing on tobacco, pornography, controversial weapons, palm oil, gambling & casinos, fossil fuels, fur, non-pharma animal testing, private prisons, or predatory lending.
Thematic investing
While we’re industry agnostic, we continuously research investment themes connected to the environment and social inclusion and search for more investment opportunities in those fields.
No consideration of adverse impacts of investment decisions on sustainability factors
For now, the AIF fund that Napkin Capital manages is categorized as an Article 6 fund according to the SFDR regulation. It means that for now, Napkin Capital doesn’t consider adverse impacts of investment decisions on sustainability factors as meant in Article 4(1) of the EU Regulation 2019/2088 on sustainability-related disclosures in the financial services sector.
The main reason for this is the unclear regulatory environment and the regulatory incompleteness. In addition, our portfolios consist of several minority investments in unlisted early-stage companies, and several fund investments with minority investments in unlisted companies. Therefore, reporting of principal adverse impacts is challenging as it isn’t certain whether all data can be reliably obtained.
Still, we always aim to consider sustainability factors (environmental, social, and employee matters, human rights, anti‐corruption, and anti‐bribery) when making investment decisions, as described above.
For now, Napkin Capital Oy does not consider adverse impacts of investment decisions on sustainability factors in its investment advice in a unified way.
The main reason for this is that our customers may have very diverging sustainability preferences and all investment advice will be tailored to each customer's preferences. Therefore, having specific binding criteria and thresholds or reporting of principal adverse impacts in a consistent way is challenging as it isn’t certain whether all data can be reliably obtained and consolidated as well as presented in a coherent and understandable way.
Still, we always aim at taking relevant sustainability factors (environmental, social, and employee matters, human rights, anti‐corruption, and anti‐bribery) into consideration when making investment decisions or offering investment advice, as described above, in line with each customer’s specific preferences. We include the analysis of principal adverse impact statements to the selection of investment products we recommend by using the information published by financial market participants. In this way make sure that our advice is in line with the specific preferences by each client.
We are evaluating the ability to consider principal adverse impacts in a meaningful and consistent way in our operations and will change our processes as and when it becomes feasible in a reliable manner.
Management processes
We aim to minimize the ecological footprint and take environmental and social sustainability as well as sound ethical principles into account in all our operations.
Our Board of Directors ensures sustainability risks are considered in decision-making procedures, organizational structure, compliance controls, internal reporting, record keeping, and risk management policies and procedures of the company.
Napkin Capital Oy does not systemically consider sustainability risks in its remuneration policy.
Relevant sustainability risks for the operations of the AIFM are included in the annual risk assessment conducted by the compliance function. They go through the investment strategies, due diligence conducted, and the risk limits of the funds. The Board of Directors reviews the compliance and risk management reports annually.