Sustainability Disclosure

of Silicon Gardens Fund III, fund management, d.o.o.

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The Sustainable Finance Disclosure Regulation dated November 27, 2019 ("SFDR"), which came into effect in the Republic of Slovenia on March 10, 2021, regulates sustainability-related disclosures in the financial services sector. SFDR's definition of financial market participant includes alternative investment fund managers, which means that Silicon Gardens Fund III, fund manager, d.o.o. (“Fund Manager”), is required to publish sustainability-related information on our website silicongardens.com and pre-contractual disclosures.

SFDR establishes uniform transparency rules for financial market participants (such as alternative investment fund managers) to disclose how environmental, social, and governance factors influence their investment decisions. This also includes disclosing sustainability strategies and how each investment product addresses sustainability considerations.

This Sustainability Disclosure therefore outlines how the Fund Manager incorporates sustainability-related considerations into its investment decision-making process.

Integration of Sustainability Risks into Investment Decision-making Process

Article 3 of SFDR requires the Fund Manager to provide information on how sustainability risks are integrated into its investment decision-making process. Under SFDR, sustainability risk is defined as "an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investment."

Although the Fund Manager does not (i) promote environmental or social characteristics under Article 8 of SFDR nor (ii) pursue sustainable investment objectives under Article 9 of SFDR, it remains subject to Article 6 disclosure requirements. Specifically, Article 6 of SFDR mandates that financial market participants must include in their pre-contractual disclosures: (a) the manner in which sustainability risks are integrated into their investment decisions; and (b) the results of the assessment of the likely impacts of sustainability risks on the returns of the financial products they make available.

Following this Article 6 requirement and after careful consideration of the Fund Managers’ business model, the Fund Manager confirms that it manages funds that do not integrate sustainability risks into investment decision-making. Additionally, the investments underlying the Fund Manager's financial products do not consider EU criteria for environmentally sustainable economic activities.

The Fund Manager has determined that sustainability risks are not relevant to its investment approach for the following reasons:

1. Focus on financial performance metrics. The Fund Manager primarily utilizes performance assessment tools that evaluate economic, financial and founding team risks rather than sustainability-related factors when estimating fund returns.
2. Early-stage investment limitations. Given the early-stage nature of the Fund Managers’ target investments (mostly pre-seed or seed stages), comprehensive ESG data is typically unavailable or not yet material to investment decisions at this developmental stage.
3. Limited sustainability reporting. Also, portfolio companies in the Fund Managers’ investment focus areas generally do not report on sustainability risks, which limits its ability to assess and integrate such risks into the investment decision-making process.
4. Investment criteria prioritization. The Fund Manager focuses mostly on evaluating the quality of the founding team, market opportunities, and business models when assessing potential investments. 
5. Sector-specific considerations. The Fund Manager concentrates on investments in marketplaces and network effect businesses, B2B SaaS, B2C digital products (including mobile applications and games), and innovative direct-to-consumer products. These technology-focused sectors typically have lower exposure to traditional sustainability risks that could materially impact investment returns.

Despite the foregoing, the Fund Manager conducts comprehensive due diligence on its investments. Beyond verifying compliance with stated investment policies and restrictions, the Fund Manager incorporates sustainability objectives into investment selection and portfolio management. 

Principal Adverse Sustainability Impact Statement on Sustainability Factors

Under Article 4(1)(b) of SFDR, the Fund Manager must also provide a clear statement regarding why the principal adverse impacts of investment decisions on sustainability factors are not taken into consideration and when the Fund Manager intends to consider such adverse impacts. 

The Fund Manager does not assess how its investment decisions impact sustainability factors, either at the fund level or for individual investments, as required by SFDR regulation. This is because:

• the Fund Managers’ investment strategy focuses mostly on early-stage investments (pre-seed and seed stages) where sustainability considerations are not part of the investment criteria,
• there is insufficient reliable data available to accurately measure sustainability impacts and meet the consistent reporting standards mandated by regulatory technical requirements,
• the portfolio companies (typically pre-seed and seed stage) are generally not obligated to report sustainability metrics in the format required by SFDR, nor do they have the capacity to do so.

Given the Fund Manager's investment strategy and the types of portfolio companies in which it invests, the Fund Manager believes that applying principal adverse impact considerations would not be consistent with its investment approach at this time.

Integration of Sustainability Risks into the Remuneration Policy

Pursuant to Article 5 of SFDR, sustainability risks are not incorporated into the Fund Managers' remuneration policy.

Sustainability Disclosure Review 

This Sustainability Disclosure is reviewed on an annual basis to ensure it reflects Fund Managers’ current approach and complies with applicable regulatory requirements.

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Last modified: May 23, 2025