1. Our ESG strategy

Wayra Deutschland GmbH as part of Telefónica Group, is committed to a long-term and ethical management that promotes fairer and more sustainable social and environmental development.

Telefónica has developed a core strategy that is coherent with its mission, “To make our world more human by connecting lives”, focusing on the role as a key enabler to a responsible, inclusive and sustainable digitalization. Telefonica ESG (Environmental – Social – Governance) strategy has been aligned with the United Nation Sustainable Development Goals (SDG), which provide an excellent framework to identify not only major challenges but also new opportunities.

By starting from our Company’s mission “To make our world more human, by connecting lives” Telefonica’s strategy has been built upon three main pillars:

1.1 Environment: to build a greener future, taking advantage of digitalisation to curb climate change

• Minimizing our environmental impact. We pledge to achieve net-zero emissions by 2025 in our main markets, and in 2040 in all the regions and our value chain, and we plan to use 100% of renewable energy sources by 2030.
• We aim to become a zero-waste company by 2030, investing in eco-design, recycling programs supporting the reuse of equipment and reducing our waste.
• Helping to decarbonize the economy. We foster new digital solutions that allow to reduce the environmental impact.

1.2. Social: to help society thrive, promoting economic and social progress based on digitalisation

• Driving inclusivity and equality as an employer, as well as providing safe & healthy working conditions – We’re committed to promoting diversity in all its dimensions but, in particular, gender equality, with the target of achieving 33% executive women and eliminating the adjusted wage gap by 2024.
• Promoting human-centre inclusive connectivity, to bring digital solutions to everybody, leaving no one behind.
• Safeguarding respect for human rights across all our operations.
• Ensuring the incorporation of our values and sustainable principles in our product and services and promoting the responsible use of technology.

1.3. Gobernance: we lead by example, by taking responsibility for our actions to build trust

• Building a culture based on ethical business principles with zero tolerance to corruption.
• Committing to best international practices in Corporate Governance .
• Proactive engaging with suppliers to drive sustainability across our supply chain.
• Protecting our customers’ data with the highest privacy and security standards.

In order to ensure compliance with these Corporate Telefónica objectives, TOI aims to contribute to them fostering the development of an ecosystem of companies that meet our Telefonica Global commitments and our Company’s values and principles.

In addition to contributing through the development of its activity to the achievement of the SDGs that constitute the 3 pillars of Telefónica’s strategy, TOI will be especially focused on the development of SDGs 5, 8 and 9.

Achieve gender equality and empower all women and girls.

The promotion of new solutions and technologies that contribute to increased productivity in industry and social improvements in local communities.

Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

Therefore, TOI is incorporating ESG factors (ESG) into investment decisions process based on:

• Investing in technologies and organizations whose objectives are not only to obtain economic benefits, but also to generate a positive impact on the social and economic development of the regions in which we operate and protect  our natural environment.
• Using its influence to encourage, in addition to the mitigation of sustainability risks, the promotion of ESG best practices in governance bodies and the internal organization.
• Proactive engaging by using TOI influence with our investee companies to promote sustainability and support them in the implementation of their own ESG policies and commitments.  TOI will strongly encourage portfolio companies and the founders and CEOs we work with to actively engage with the ESG implications of their business activities. We want the businesses we invest in to be genuinely focussed on doing well for all stakeholders including their own employees,  customers, suppliers, shareholders, the environment and the wider world at large. We firmly believe that responsible business practices help generate superior long-term performance.
• Acting as responsible investors as part of our fiduciary duty.
  

2. Principles and Commitments

Telefónica has developed and published specific principles and commitments that are described in the following documents and are mandatory for the entire organization, including TOI:

• Telefónica Responsible Business Principles constitute our code of ethics reflecting the company’s commitment to ethics and compliance, as well as to three values on which it bases all actions: Integrity, Commitment, Transparency.
• Company-wide policies and regulations, where we define relevant matters related to the Responsible Business Principles.
• Climate Change action plan, where our environmental strategy and commitments are disclosed.

Moreover, we are committed and report to the following international treaties:

• United Nation Global Compact Principles. Telefonica is signatories of Global Compact since 2002.
• United Nations Universal Declaration of Human Rights.
• United Nations Sustainable Development Goals (SDGs).
• Covenant on Civil and Political Rights.
• Covenant on Economic, Social and Cultural Rights.
• Convention on the Rights of the Child.
• Convention on the Rights of Persons with Disabilities.
• Conventions of the International Labour Organization.
• Basel Convention (hazardous waste).
• International Guidelines (ICNIRP).
• Montreal Protocol.
• Science-Based Target initiative (SBTi).

Beyond the corporate commitments, the general principles that apply to TOI’s Sustainable and Responsible Investment Policy are as follows:

• 1. Respect for the Law as a common criterion. To always comply with applicable international, national or local regulations.
• 2. Respect for Human and Labor Rights: supporting the protection of universally recognized basic Human Rights, avoiding direct or indirect involvement in their violation. Support for the elimination of all forms of forced or compulsory labor, and the eradication of child labor, as well as promoting diversity, inclusion and non-discrimination conditions.
• 3. Protect the Environment and Biodiversity: encouraging initiatives that promote greater environmental responsibility and favoring the development and  dissemination of environmentally friendly technologies.
• 4. Good Governance and anti-corruption policies: fighting actively and consistently against any type of influence contrary to law or ethics with respect to Telefonica ethical principles (Telefonica Responsible Business Principles) and acting against corruption in their own company.
• 5. Good tax practices: Promote the implementation of responsible tax policies within companies.

Furthermore, when undertaking our investment activity, our ambition is to comply with best practices as responsible investors and we are signatories to the United Nations Principles of Responsible Investment (UN PRI). We are committed to the following principles:

• 1. Incorporate ESG issues into the investment analysis and decision-making process.
• 2. To be active owners and incorporate ESG issues into our ownership policies and practices.
• 3. Seek appropriate disclosure on ESG issues by the entities in which we invest.
• 4. Promote acceptance and implementation of the Principles within the investment industry.
• 5. Work together  with other responsible investors to enhance our effectiveness in implementing the Principles.
• 6. Report on our activities and progress towards implementing the Principles.

3. Resources and team dedicated to ESG

At Telefónica Open Innovation we understand that to be able to respond effectively to the commitments undertaken as a responsible investor, it is necessary to have an appropriate ESG governance structure.

Our Responsible Investment Strategy is integrated into our governance structure, the company’s culture, and in its operational processes and procedures. For the monitoring and reporting of ESG activity at global level, a coordinator has been appointed within the Finance and Portfolio management area. His functions include:

• Lead the implementation of ESG practices.
• Ensure progress and updates that incorporate best practices.
• Ensure the investment template includes ESG criteria.
• Consolidate ESG-related KPis.
• Perform an annual checklist of the evolution of the ESG aspects of the investee portfolio .
• Report ESG progress internally / externally in the UN PRI Transparency Report as required .
• Organise an annual training for all TOI members.

Apart from that, no special ESG committee has been appointed as the responsible investment policy is embedded in the governance structure: TOI CEO, who participates in all the investment committees, is ultimately responsible for ensuring that the investment policy is complied with.

During the investment process:

• Each person responsible for presenting an opportunity to the investment committee must ensure that the ESG criteria are considered.

Once the startup is part of TOI portfolio, each country manager and/or investment vehicule manager is responsible for:

• Organizing annually an ESG training for all the startups of their portfolio.
• Following up with startups on ESG KPIs.
• When we have a seat on the board, ensure that ESG factors are considered by the management in their decision-making process.

Where TOI invests as LP in other funds, it will endeavour to confirm that they meet ESG criteria, preferably because they aresignatories to a PRI or, using the DD questionnaire developed by UN for this purpose.

4. The integration of ESG factors in the investment process

4.1 Screening

Investments will be evaluated and analysed to ensure that investees meet Telefónica ESG commitments and policies. As we promote, establish, and maintain high responsible business standards, we expect from our investee’s organizations compliance not only with respect to service quality standards, but also with respect to legislation as well as ethical, social, environmental and privacy TOI commitments.

As a responsible investor, TOI aims to invest in companies whose activities contribute positively to sustainable development stakes. We are also keen to reduce the negative externalities of our investments as much as possible.

As part of our screening process, TOI’s investment teams will assess a company’s ESG-related risks and related factors (including potential issues related to diversity, environmental impact, climate change, ethics, anti-bribery, and corruption, etc.).

4.2 Due Diligence ESG

• In case of Direct investments:

Once it has been verified that the company does not carry out activities excluded by the Telefónica Open Innovation policy, an ESG assessment of the company will be carried out.

The scouter responsible for the investment will assess the company by completing a questionnaire on ESG risks and opportunities, using an ESG Checklist prepared by external advisors.

ESG DD will be part of the Investment Memorandum and evaluated by the investment committee. When considered appropriate due to investment size (on a case-by-case basis) or unusual business model, a detailed analysis by an expert will be required.

If the Investment Committee concludes that the ESG risks related to a potential investment are too great and/or cannot be appropriately mitigated in a reasonable timeframe, no investment is made.

• In case TOI invests as LP:

TOI will check that the potential invested fund integrates Responsible Investment practices and will identify potential risks. This assessment will be taken into consideration in the decision process. Failure to meet the ESG criteria is a cause for rejection of the potential investment.

• In case the LP is not an UN PRI signatory:

The DDQ for VC LPs will be part of the Investment Memorandum and evaluated in the investment committee.

4.3 Approval of the Investment Committee

ESG aspects discussed during the investment committee will be included in the minutes.

When negotiating the terms and conditions with the company, TOI will express its interest in including ESG clauses in the term sheet, SPA, Shareholders Agreement.

4.4 Portfolio Management

Once the company becomes part of TOI’s portfolio, the ESG KPIs defined by TOI will be followed in the same way as the other financial indicators related to its performance.

Additionally, in those investments where there is a seat in the Board, TOI representative will ensure ESG issues are addressed in the annual board meetings.

Finally, annual training will be available for all startups in the portfolio.

When TOI is a LP, we will seek agreements with co-investors to achieve alignment in ESG matters and obtain sufficient capacity to influence the Management of the investee; and at least, try to align on the same KPis.

4.4.1 ESG KPIs for TOI’s Portfolio

The KPIs that TOI requests and monitors from its portfolio are aligned with the EDCI – ESG Data Convergence Initiative1, which pursues generating performance-based and comparable data for private markets.  

TOI tracks the following KPIs:

GHG emissions:  Scope 1 - Scope 2

Gender Diversity:  % Women on Board -  % Women in executive positions -  % Women/men/others in staff  -  Pay gap  - Net new hires (organic & total) - Turnover rate

Employee engagement:  Employee survey (yes/no)

KPIs Definitions:

Metric

Definition

Units

Sources and guidance

Scope 1 Emissions (tCO2e)

Direct emissions due to owned, controlled sources (i.e. vehicle’s emissions, refrigerant gases, etc.)  accounted for using GHG Protocol;

#, mtCO2e, (metric tons of CO2 emissions)

Corporate Standard | Greenhouse Gas Protocol (ghgprotocol.org)

Scope 2 Emissions (tCO2e)

Indirect emissions due to purchase of electricity, heat, steam, etc. accounted for using GHG Protocol;

#, mtCO2e, (metric tons of CO2 emissions)

Scope 2 Guidance | Greenhouse Gas Protocol (ghgprotocol.org)

Total number of board members

Number of people on board of directors at end of Calendar Year (Board defined as the member-elected top governing body of the company, often referred to as: executive committee, management committee, or the council)

#

International Labour Organization (ILO) Board definition (see p. 4 in The Effective Employers‘ Organization: Guide One Governance)

Number of women board members

Number of women on board of directors at end of Calendar Year

#

ILPA Diversity Metrics Template  (see ‘Definitions’ tab in Excel template)

Pay Gap(Average men remuneration -  average women remuneration / average men remuneration)

Understood as the average wage of men versus the average wage of women.

%

Organic Net New Hires

New hires (the number of FTE joining the company, excluding hires that result from M&A) less turnover (the number of FTE leaving the business, excluding those from M&A) during a given calendar year.  
Excludes any FTE growth or decline due to a business acquisition or business unit divestiture.

#

Total Net New Hires

New hires (the number of FTE joining the company, excluding hires that result from M&A) less turnover (the number of FTE leaving the business, excluding those from M&A) plus changes due to M&A (the net change in employees due to M&A) during a given year.

#

Turnover Rate

Turnover (the number of FTEs leaving the business excluding those from M&A) over the course of the year divided by average FTEs in previous year multiplied by 100.

%

GRI Disclosure 401: Employment (pp. 15-17)

Do you conduct an annual employee survey (Y/N)?

Y/N response indicating whether a company issues an annual employee feedback survey.  
An employee feedback survey can include, but is not limited to, questions related to company culture, company values, employee job satisfaction, employee engagement, and training.

Y/N

4.5 Follow-on

In the same way as in the DD phase, the startup evaluated for a potential follow-on will be asked to self-assess, internally completing the same questionnaire on ESG risks.

4.6 Divestment

TOI will make an annual qualitative assessment of the divestments evaluating the degree of maturity reached by the startups in the application of ESG criteria.

5. Communication and transparency

Telefónica Open Innovation has required to be a signatory to the UN Principles for Responsible Investment and is committed to producing an annual Transparency Report to publicly report on its progress in implementing the principles of responsible investment.

Similarly, Telefónica Open Innovation endeavours to be coherent in this commitment and, depending on its ability to influence, will promote a strategy of ESG transparency in its investees.

6. Internal and external promotion of responsible investment

At Telefónica Open Innovation we are committed to applying best practices as a manager in environmental, social, and good governance issues to make a positive impact on our employees and society.

TOI internal policies include:

• Code of Business Conduct.
• Artificial Intelligence Principles.

TOI wants to be an example of ESG best practice for the investment community and its other stakeholders, and will be committed to promoting responsible investment among the Venture Capital community in Spain, Germany, UK, Hispam, Brazil and in other forums where it may be active

TOI is also committed to annually review this Responsible Investment Policy.

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