Sustainable Business Practices and Responsible Investment Policy

Through our actions and conduct, we take responsibility for how our decisions affect others now and in the future. We therefore strive to gear our individual actions toward minimising greenhouse gas emissions and maximising resource efficiency:

• We deliberately limit business travel to a necessary minimum; we replace business trips as far as possible with alternative forms of communication, e.g. video conferencing, and we have adopted a travel expenses policy that promotes cost-efficient and environmentally friendly practices.

• When procuring consumables, e.g. office supplies, we adhere to sustainability criteria and maintain a technical office infrastructure that promotes a significant reduction in paper consumption. We purchase electricity generated from renewable sources.

• We publish detailed information about greenhouse gas emissions on an annual basis as part of the Carbon Disclosure Project (CDP).

• Greenhouse gas emissions remaining from our business operations after all measures to avoid them have been taken are offset in a suitable form.

• We recognise the potential impact from climate change and the transition to a low-carbon economy on our organisation and its investments. We therefore regularly review our investment strategy. ESG due diligence as the basis for any future investment decision will also include potential climate change risks and opportunities.

In many ways, we recognize that our employees are our most important resource:

• For us, occupational safety, protecting the health of our employees and maintaining a discrimination-free working environment are top priorities.

• We offer working conditions that enable our employees to achieve the best possible balance of professional and private pursuits. Among the benefits we offer are support with childcare and the option of remote working whenever the concerns of the business permit.

• We create opportunities for both continuing professional and personal development for our employees.

• We measure and report on the proportion of women in management positions at our Company, and we actively seek to increase this proportion. We have joined the "Level 20" initiative, whose goal it is to have women hold 20 per cent of senior positions in the European private equity industry.

• We have remuneration systems in place that appropriately reward success and performance.

We regularly measure and strive to continuously improve employee satisfaction.

• We practice broad engagement in society:

• Since 2002, our Company has been a patron of the SCHIRN KUNSTHALLE in Frankfurt am Main as a member of the FREUNDE DER SCHIRN KUNSTHALLE e.V. – a form of engagement that has also benefited our shareholders. Every year, they receive a voucher to visit one of the gallery’s art exhibitions.

• We have a foundation (Gemeinnützige Stiftung der Deutschen Beteiligungs AG): Its primary purpose is to provide financial support in times of need to active and former employees of current and former portfolio companies of Deutsche Beteiligungs AG and their dependents. The foundation also promotes the arts and cultural projects in the greater Frankfurt area.

• DBAG participates in ‘Social Day’, an initiative that supports social projects through the active participation of our employees.

• For a company of our size, we also have a disproportionately strong commitment to the training of young people: For many years, our Company has served as a vocational training centre for office management and IT systems clerks. And we regularly offer openings for ambitious interns to gain insight into the business of investment.

We put a premium on compliance with recognised corporate governance standards. All our companies, from the listed Deutsche Beteiligungs AG to the investment management and advisory companies belonging to the DBAG Group and the portfolio companies we support, are committed to good corporate governance.

For Deutsche Beteiligungs AG, good and responsible management and supervision are among the top priorities. Through open, timely and regular disclosures as well as transparent decision-making structures, we earn and maintain the trust of our shareholders. Although many of the requirements stem directly from the German Stock Corporation Act (AktG), the German Securities Trading Act (WpHG) and other laws, our Company’s Articles of Association, our rules of procedure and, above all, our business practices exceed these minimum standards at many points. Every year, we issue a Declaration of Compliance in accordance with section 161 of the AktG and publish it on our website. This declaration transparently communicates the extent of our compliance with the principles and recommendations of the “German Corporate Governance Code“ developed by the German Federal Government commission of the same name.

We report annually the total amount of any administrative fines or penalties imposed for compliance violations over the previous financial year. Our target for this reporting metric is ‘zero’.

Compliance with legal regulations at Deutsche Beteiligungs AG and our portfolio companies is beyond question. We pursue a ‘zero tolerance’ policy when it comes to compliance issues. We are strictly opposed to all forms of corruption and other unethical business practices. To meet these high compliance standards both within our Company and in our dealings with our portfolio companies, we introduced a far-reaching compliance system in 2012.

• Our Code of Conduct sets out our core values and guiding principles.

• Our compliance rules contain detailed provisions and instructions on matters of money laundering, IT security, data protection, employees’ personal account transactions, equal treatment, travel expenses, hospitality and the handling of gifts and invitations. We regularly review these rules to assess the need for updates.

• There are clear rules governing the organisation and monitoring of the compliance system; these rules cover updating of the system as well as regular employee information and training.

• We have a whistle-blower system in place.

• There are clear rules on compliance in acquisition processes, i.e. due diligence and purchase agreements for investment in new portfolio companies.

We have clearly formulated our expectations for compliance systems at our portfolio companies.

When assessing potential investments in new portfolio companies and during the investment phase, we focus on the following ESG criteria:

• Environment: professionally managing and minimising damage to nature and the climate

• Employment and social affairs: promoting good working conditions and high social standards as well as making a positive contribution to society

• Corporate governance and business ethics: adherence to the highest possible standards and promoting good business practices

We also assess and consider whether the business model can be deemed ‘sustainable economic activity’ in line with the EU taxonomy classification system.

2.1.1 Environment: professionally managing and minimising damage to nature

We are convinced that improving the environmental performance of our portfolio companies results in sustainable value creation. Of course, we are aware that not all decisions are free of inherent contradictions. Our aim, however, is to arrive at the best possible solution, ecologically and economically.

What we expect from portfolio companies:

• Strict compliance with applicable environmental legislation in each location, with a ‘zero tolerance’ policy for violations.

• Collection of CO₂ emissions data (Scope 1, 2 and, if possible, also Scope 3) and alignment of their actions with low-carbon business practices.

• Transparent reporting on how the physical and transitional risks and opportunities of climate change have been identified and how business strategies have been adapted accordingly.

• Measures to prevent environmental damage.

• Measures to minimise consumption of energy and water as well as generation of hazardous waste.

• Measures to eliminate waste production or, where full elimination is not possible, minimise it.

• Measures to achieve the highest possible rates of reuse or recycling.

In addition to these core topics, we expect our portfolio companies to actively address any environmental issues that may arise from their specific business activities, e.g. the preservation of natural biodiversity or the introduction of a procurement policy geared toward sustainability.

2.1.2 Employment and social affairs: promoting good working conditions, high social standards as well as making a positive contribution to the society

We are convinced that safe working conditions, opportunities for personal development and attractive remuneration models are key factors for the portfolio companies we support to attract and develop outstanding employees. Moreover, we place importance on each portfolio company making positive contributions in its local community, and we expressly support such engagement.

We expect the decision-making bodies of the portfolio companies to intensively address the following issues:

• Occupational safety, giving priority to the protection of employees’ health and maintaining a discrimination-free working environment.

• Providing opportunities for both continuing professional development and personal development.

• Gender balance in leadership positions and appropriate measures to increase the proportion of women.

• Remuneration based on systems that appropriately reward success and performance.

• Surveying of employee satisfaction, aiming for a continuously high level.

• Recognition and respect of collective bargaining autonomy and the right to collective bargaining.

• We expect international conventions on human rights and the prevention of child labour to be respected. We are guided, in this context, by the core labour standards of the International Labour Organization (ILO) and the Universal Declaration of Human Rights.

If, as a consequence of economic and/or business disruptions, measures to reduce the number of employees should become necessary, the employees, committees and corporate boards of Deutsche Beteiligungs AG, as members of the advisory and supervisory boards of our portfolio companies, are aware of their great responsibility for preserving jobs. Our aim in this context will be to find the best possible solution, socially and economically.

2.1.3 Corporate governance and business ethics: adherence to the highest possible standards and promoting good business practices

Good corporate governance is an important aspect of our investment strategy. We consider it vital that the portfolio companies we support comply with all legal requirements, and we pursue a ‘zero tolerance’ policy in this regard. In particular, we are strictly opposed to all forms of corruption and other unethical business practices.

When assessing potential investments in new portfolio companies and during the investment phase, we place particular emphasis on the following aspects, which are described in more detail in section 2.2:

• Compliance in transaction processes
• Compliance systems of portfolio companies
• Supervisory or advisory boards of portfolio companies

We follow this policy in the investment process for our Company as well as for the investments we manage. For us, the investment process includes our advisory support in the execution of the investment, the subsequent investment phase and the sale of the portfolio company. This document is intended to serve as a clear recommendation for the employees, committees and corporate boards of Deutsche Beteiligungs AG, the members of the investment committees of DBAG funds and the management of the portfolio companies.

2.2.1 Assessment of investment opportunities

All investment opportunities are analysed that meet the criteria of the respective investment strategy. The level of information available generally improves with the progress of the acquisition process. Especially at the beginning, there is usually only rudimentary information available.

There are certain sectors or companies in which our Company does not invest (see Annex 1), and we have contractually agreed to observe exclusion criteria for the investors in the funds we manage. Such excluded investments are not (further) pursued.

The provisions on compliance in transaction processes (i.e., due diligence and purchase agreement for investment in new portfolio companies) apply when assessing potential investments. These are part of the compliance system of Deutsche Beteiligungs AG.

2.2.2 Due diligence

Due diligence (careful examination of an investment opportunity) always includes the analysis of opportunities and risks arising from the fulfilment or non-fulfilment of ESG criteria. We are aware that every investment opportunity is unique and that generalisations are often difficult, and we appreciate that the aforementioned ESG criteria are of varying relevance. The scope of every assessment will be limited to the information available at the time the assessment takes place. Nevertheless, the members of the investment team or the investment advisory team follow a uniform framework in their due diligence. We routinely consult with a specialised advisor who supplements this uniform framework with aspects specific to the business model.

ESG criteria are an integral part of any due diligence process. The obligation to incorporate ESG criteria is binding for all members of the investment team or investment advisory team; a clear responsibility for coordination of ESG due diligence is defined for each potential transaction.

2.2.3 Investment proposals

For the success of our business and that of our portfolio companies, it is crucial to anchor sustainability aspects in the value creation strategy. We therefore expect investment proposals to include careful consideration of opportunities and risks arising from (core) ESG issues identified in the due diligence process. The members of the investment or investment advisory committee use this report as a benchmark. The members of the investment committees are responsible for review and approval of investment proposals.

2.2.4 Investment phase

As shareholder representatives, we attach importance to the formation of a supervisory or advisory board for each portfolio company we support, which routinely includes independent members as well as board members or employees of Deutsche Beteiligungs AG.

The members of these supervisory and advisory boards should – if not already stipulated by law – be equipped with supervisory rights and be available to the management of the portfolio companies in an advisory capacity. We expect our portfolio companies to hold regular supervisory or advisory board meetings. The supervisory or advisory board of the portfolio companies is to regularly review the strategy as well as budget and discuss them with the management. We exert influence during the investment phase via DBAG’s employees, committee members and board members sitting on the supervisory or advisory boards.

In the case of new portfolio companies, if they do not already have one, we expect them to promptly introduce an up-to-date compliance management system or to quickly remedy any deficiencies in the compliance management system found during the due diligence.

Based on the findings of the due diligence, we expect the management of the portfolio companies, with the support of their supervisory or advisory boards, to

• address any material ESG aspects identified in the due diligence process during the investment phase;

• take action to improve ESG performance and regularly address ESG issues in supervisory or advisory board meetings;

• define meaningful qualitative and quantitative ESG performance indicators to measure performance on general and core company-specific ESG aspects;

• make these regularly available to the shareholders and supervisory or advisory boards in a suitable form at least once a year; and

• appropriately review ESG criteria prior to execution when making company acquisitions.

Furthermore, in the event of serious ESG-related irregularities, we expect the portfolio companies to report to the supervisory or advisory board promptly on the matter, including any actions taken, insofar as this is legally permissible and appropriate given the facts of the case. In our view, such serious irregularities include, e.g. accidents resulting in personal injury or serious environmental pollution, as well as severe compliance violations. Our aim is to report in an appropriate manner on the ESG performance of our investment portfolio.

2.2.5 Sale of portfolio companies

We are convinced that the measures taken during the investment phase serve to protect as well as enhance the value of the investment and that this will be reflected by a corresponding increase in proceeds from the sale of the investment. In preparation for a divestment process, the portfolio company’s management, supported by our investment teams or investment advisory teams, compiles ESG data that demonstrates as well as possible for successor investors the value created through the integration and improvement of ESG factors during the investment phase.

2.2.6 Communicating to the stakeholders of DBAG

Investor Relations and Corporate Communications share responsibility for communicating to DBAG’s stakeholders about sustainable business practices and responsible investing.

One component of the communication to shareholders, the public and investors in DBAG funds is the regular disclosure of DBAG’s and its portfolio companies’ ESG performance. The ESG performance of the portfolios is reported to the investors in DBAG funds at least once a year; it is also presented as part of the annual investor meeting.