2023 ESG Report

A message from The Partners

At Horizon we hold a deep understanding of our responsibility as investors to ensure we are making a positive contribution and supporting companies that create value to society.

2022 has been an instrumental year for Horizon with regard to ESG progress. Having built the foundation of our ESG strategy in 2020 and 2021, this year has been key to developing upon this and embedding ESG initiatives within both our investment practise, and the operations of our portfolio.

This year we have focussed in particular on taking a closer look into every stage of our investment process and how we can actively identify and exploit opportunities for improving our ESG impact at each.

We are inspired by each of our portfolio companies and the enthusiasm their teams demonstrate towards taking action to address a wide variety of ESG issues.

This year we have learnt the value that can be derived from providing our portfolio companies with the opportunity to collaborate and learn from each other’s strengths in this regard. This in turn educates our team at Horizon and provides continuous motivation to support these initiatives.

Horizon Highlights

- Team growth: from 12 to 17 - 38% of Horizon investment / origination team is female (up from 36% in previous year)

- 100% investment committee stage papers include an ESG section

- 4 internship opportunities donated to students from disadvantage background as part of our longstanding commitment to charities that support social mobility

Portfolio Highlights

- 4500+ employees across the portfolio, of which 36% are female (10 points above the UK tech industry average)1

- 29% of senior management is female across the portfolio (vs. 26%)

- 100% of companies calculate GHG emissions

- 90 ESG measures collected across portfolio

Horizon Group ESG Journey

2022

Expanded Scope 3 emission to include employee commuting and suppliers

Delivered a diversity and inclusion roundtable with representative across the portfolio

Active member of iCI working group developing climate trainings for investment teams

2020

Launched New Horizon Capital ESG Policy

Developed proprietary Horizon ESG Framework, collecting 90 ESG metrics across the portfolio

Delivered first ESG training for investment teams, now delivered annually

2021

Conducted first internal ESG pre-deal screens, now a mandatory pre-deal diligence element

Started calculating carbon emission across the portfolio and for the firm

Held First ESG Roundtable

Started sponsoring upReach internship programme, now an annual commitment to improve social mobility in the finance industry

Joined the Initiative Climate International (iCI) UK Network 2019

Began to track essential ESG metrics

Became PRI Signatory

Stats from Tech Nation suggest only 26% of the UK tech workforce are women [insert source as hyper link -https://www.womenintech.co.uk/8-factswomen-tech-industry#:~:text=Women%20are%20still%20in%20the%20minority%20in%20tech&text=Stats%20from%20Tech%20Nation%20 also,and%20Asian%20women%20just%205%25

Our Approach

The aim of Horizon Capital’s ESG policy is to incorporate ESG factors into investment decisions, which the Firm consider necessary to ensure efficient risk management and to generate sustainable, long-term outsized returns. Our comprehensive approach to sustainable investment is summarized in the image below and flows through the whole of the investment cycle, from pre-deal considerations to active ownership and exit preparation. We collect, track and monitor data via an online portal:

The Process

Origination

- Sector

- Exclustion Lists

Pre-Deal

- ESG DD Screening

- In-house working culture assessment

Completion

- Risk and opportunities identified

- In the ESG screening form part of plan / 100-day plan.

Post Deal

- Carbon emission calculation

- 35+ social & governance mertrics tracked, including mandatory PAIs

- Yeary Porfolio ESG Roundtablle

- ESG board

Exit

- Exit process preparation and ESG reports

The Environment Element

Horizon understands the risks global warming pose on the planet and its people and, as such, has taken a proactive approach since 2020 to measure and monitor the portfolio emissions – Scope 1, 2 and 3. Originally we focused primarily on Scope 1 and 2 emissions, with a lighter touch on Scope 3, but gradually we have been increasing the number of Scope 3 categories that we collect, all whilst ensuring high levels of data quality and transparency. Studies show Scope 3 emissions typically represent up to around 75% of a company’s total GHG emissions , and this percentage is likely to be significantly higher for technology companies.

Therefore, by measuring and reducing their scope 3 emissions, technology companies can leverage value, create competitive advantages, and mitigate environmental, market and regulatory risk.

Our carbon emission calculation, both at firm and asset level, is done in accordance with the accounting principles of the GHG Protocol. We continue to partner with our longstanding advisor, Carbon Responsible, who supports us on the carbon emission calculation front. Wherever possible we prioritise the use of primary data, however, estimates are used to bridge data gaps and ensure completeness of the calculations. Findings from our 2022 calculations can be find below.

https://cdn.cdp.net/cdp-production/cms/guidance_docs/pdfs/000/003/504/original/CDP-technical-note-scope-3-relevance-by-sector.pdf

Table 4 - Comparing Horizon Capital’s 2021 and 2022 carbon emission profiles by emission sourse

The 15 companies in the Horizon Capital portfolio are of different sizes and operate in different sectors, and consequently their impact is extremely diverse, and their emissions are distributed very differently among the three emissions scopes. We observe in 2022 that overall scope 1 and 2 emissions have decreased by 4% and 15% respectively (10% overall). However, for transparency purposes it has to be said that this is not exclusively the result of emission reduction efforts.

Explaining the decrease in scope 1 and 2 emissions is not possible, due to a relatively low data quality and availability in these emissions areas. We believe data quality and disclosure has the potential to continue to improve across the portfolio, with a focus on expanded reporting in 2023, particularly in Scope 3, and use of more actual data, not proxy or estimates wherever possible. Scope 3 emissions have substantially increased since 2021 (+309%), attributable to the inclusion of new emissions categories (such as employee commuting and supply chain), the introduction of a new company in the portfolio (Dains) and of an improved data availability for most scope 3 categories (in particular, we have witnessed an increase in granularity of travel data for most companies, as a result of aligning the company’s expense systems to produce accurate information).

In conclusion, despite the analysis showing scope 3 emissions have increased across the portfolio we can with confidence say that this is not as a result of further emissions, in fact, we have multiple examples of implementing initiatives focused on emission reduction across the portfolio, for example Modern Network’s investment in solar panels and Agilico’s refurbishment of the low-utilisation printers.

Case Study Agilico

Agilico is our workplace technology provider that offers a broad range of capabilities including print services, information management solutions, agile working technology, telecommunications and managed IT services. Their team comprises of over 250 people operating across the UK, managing 40,000 devices currently in the field.

At the core of Agilico’s business is the sale of Multi-Functional Devices (MFDs). Agilico’s mission is to make world class technology that can last. At the forefront of this effort is the use of refurbished machines that are contributing to the global effort towards building a circular economy. Agilico have established a new, purpose-built national refurbishment centre in Leicester. Here, Agilico’s team of expert engineers take low-utilisation devices and restore their functionality to that of a brand-new machine.

This not only reduces the waste involved in the alternative practise of scrapping and replacing an old machine, but also increases the Agilico’s profit margins, and lowers prices by up to 50% for customers. Therefore, this initiative is mutually beneficial for Agilico’s customers, shareholders, and the environment. Agilico’s longstanding partnership with Konica Minolta provides additional access to MFDs being removed from their direct consumers, aiding access to sufficient stock. Recycling the machines enables Agilico to realise an 80% profit margin, as compared to the standard alternative of 40% when manufacturing a new machine. Consequently, gross margins across the business have improved from 55% to 59% from 2019 to 2023. Additionally, MFD gross margins have improved from 42% to 52% across the same period. By implementing this, and other environmentally friendly initiatives, Agilico has achieved large emission reductions in the last twelve months.

“At Agilico we’ve built our reputation on forging trusted relationships with our colleagues, customers and wider communities. Our ESG framework is at the heart of this, helping us to identify new resources to support our actions,and guide us as we continue to grow and develop as an organisation. We’re committed toleading by example, and always operating withintegrity, trust and responsibility.“

Simon Davey CEO, Agilico

Case Study Modern Networks

Modern Networks is our IT managed service provider to the UK’s commercial property and medium-sized enterprise markets. Their team of 120 employees across the UK help to provide consolidated IT, broadband and telephone services to over 2000 office buildings, shopping centres, science, retail and business parks.

The Modern Networks team are extremely passionate about improving their environmental performance and realising new strategies to reduce their energy consumption and carbon footprint. This is spearheaded by the Modern Networks CEO, Matthew Reeve, who led an initiative to install solar panels at one of the three Modern Networks offices in Hitchin. They now have 132 solar panels that can generate up to 80 Kilowatts of electricity in one day, a significant excess of the amount required to power the building, allowing the remainder to be sold back to the National Grid. This solar system is estimated to take three years to reach carbon neutral status and two years to create a return on investment. The carbon footprint created by the solar panels is 20 times less than the electricity produced by a coal-fired power station.

Another strategy Modern Networks is implementing to reduce their environmental impact is the use of electric vehicles. At this stage, their fleet only has 3 vehicles still running on petrol/diesel. Their collection of electric vehicles is powered by charging stations located at the Hitchin office and therefore run off of the energy generated by the solar panels. These energy management efforts contribute to Modern Network’s overarching environmental policy that the team are working to push to the highest standards. These investments will make a significant contribution to improving the energy efficiency of the business.

”At Modern Networks we take our environmental and social responsibilities very seriously. This means looking at everything we do from reducing energy consumption in our offices and the amount of paper we use to our carbon footprint for business travel. We are committed to reducing our environmental impact and continue to improve our environmental performance as an integral part of our business strategy and operating methods”

Matt Reeve Founder & CEO, Modern Networks

132 Solar panels installed

The Social Element

As B2B and technology investors in growing people-based businesses, we believe that the Social element of ESG is by far the one in which we can create more value. Horizon recognised the importance of its people, in the same way our portfolio companies support and value their employees. We are fundamentally all peoplebased businesses where people are the main asset, and therefore, we must do everything we can to ensure they are happy and feel valued, to ensure long-term success.

Horizon has invested in its team, which has grown from 12 to 17 over the last 12 months (to March 2023). Investment has not only been made in new heads, but also in our existing staff base – for example the Investment Directors were sponsored to attend an LSE course on Negotiation. Furthermore, the Partners released a new corporate initiative available to all Horizon’s staff to promote volunteering. Both the volunteering and charitable initiative were embraced positively by the team.

On a yearly basis, we track 90 ESG measures across our portfolio which allow us to gain a reasonable insight into the social initiatives that develop across the portfolio. In 2022 we have recorded:

We are proud of our portfolio companies and as such, not only monitor the initiatives that they implement but we support them wherever we can with brainstorming and/or financially.

774 hrs of volunteer (vs. 473 in 2021)

1,088 weeks of apprenticeships (vs. 1708 in 2021)

1,263 hrs of staff support (vs 999 in 2021)

180 hrs of career support sessions (vs. 38 in 2021)

Having the opportunity to attend the Negotiation Course was a fantastic chance to further develop a skill that I use on a daily basis in real life scenarios in my working life. The course was interactive, full of both theory and practical content, and was a great experience in meeting and negotiating with a wide range of people from diverse backgrounds.

Matt and Emily - Horizon Captial

Case Study Sapphire Systems

Sapphire is our digital operating platform provider to global mid-market and mid-enterprise customers, with over 400 employees across UK, US, Mexico, Argentina, Lebanon, India and the Philippines.

Sapphire employees globally nominated and voted to support the Rotary Club of Metn Gate charity, encouraging widespread involvement and charitable enthusiasm across the company. They undertook several fundraising activities in 2022 including the three Yorkshire peaks challenge, the Kalsubai trek in India and the US services charity walk raising over £14k globally. These funds were used to provide a school in Lebanon with the installation of solar panels. This was a challenging initiative, particularly given the turbulent political and economic climate in Lebanon that created significant obstacles in safely executing this donation and gaining confidence that the contribution will have the intended benefit.

This is a fantastic achievement by the team.

Moreover, Marcus Vinicus Gantos from the automation team at Sapphire spent 12 weeks in Brazil running automation workshops for underprivileged students alongside Automation Anywhere, whose long-standing relationship with Sapphire has enabled many philanthropic endeavours. This will have a profound impact in spreading knowledge and understanding about this industry and potentially inspire these students to pursue careers in this growing sector. Marcus hopes to continue his efforts in Argentina in the future. In this way, Marcus has been a powerful example to the wider Sapphire team and inspired others to consider how they might follow similar pursuits. Simultaneously, his work has promoted Sapphire’s profile within the international landscape.

“We believe our catalyst technology can be part of the foundation for a more equitable society, creating a diverse and accessible future of work for all.”

Janice Phyre Head of ESG at Sapphire

£14K

Raised for charity in 2022

Cybersecurity

The Governance Element

Cybersecurity risk is an area of high priority for both Horizon and our portfolio companies. According to a survey conducted by the ONS, 39% of businesses experienced a cyber breach in 2022. The occurrence of such an incident can create significant disruption to business operations and therefore it is essential to take a proactive approach to fortifying data and IT infrastructure to improve our ability to detect, manage and prevent cyberthreats. We have therefore strengthened the firm’s cybersecurity protections.

This includes a review by a third-party consultant, CyberCrowd, and the achievement of Cyber Essentials and Cyber Essentials Plus Certification. This is a government-backed scheme designed to guard against common cyber threats and demonstrate a commitment to cybersecurity. As a part of the annual certification process for Cyber Essentials, Horizon receives an external

Diversity & Inclusion

assessment audit that helps us to maintain confidence in the security of our data and IT system. These controls have proven successful as the firm has not experienced a cybersecurity or other security threat to date. We strongly encourage the same caution and protocol within the data and IT infrastructure of our portfolio companies to ensure the security and safety of their business operations.

(D&I) is a topic that has received increasing attention at both firm and portfolio level. At Horizon we have been focusing on growing the team to meet the deployment expectations of current and future fundraising, welcoming a total of 9 new members since end of 2021 – 5/9 were female hires and 4 directly involved in deal cycle (origination / investment)

Horizon hosted a diversity and inclusion roundtable with representatives from each portfolio company. We discussed neurodiversity in business, trans & non-binary inclusion and menopause policy in an open forum format. We had champions for each of the initiatives across the portfolio share best practices and encourage discussion. Overall, it was a highly successful event and the feedback we collected is encouraging.

Thanks

Nikki Sandham- CFO of Modern Networks

3https://www.gov.uk/government/statistics/cyber-security-breaches-survey-2022/cyber-security-breaches-survey-2022

to all the presenters for pulling together an insightful and thought provoking afternoon

upReach

Furthermore, in 2022 we continued our efforts to promote social mobility in the industry by partnering with upReach charity, an established institution that helps students from less advantaged backgrounds secure placements in traditionally difficult to access industries (i.e. finance, law etc.). We welcomed two interns from their programme in the summer of 2022 and the feedback we received from them was very positive.

Portcos Split CEO / Chair

Portcos With At Least 1 NED

Portcos With Material Incidents