Investment objective
To provide long term capital appreciation with a diversified and actively managed portfolio of equities whose companies
generate measurable socio-economic or environmental benefits,and this without any specific restriction on tracking error.
The sub-fund uses a combination of financial and non-financial indicators to identify securities which meet the overall
sustainability criteria applied by the External Investment Manager. The sustainability criteria are designed to identify
companies with positive environmental and social impact and aligned with the UN’s Sustainable Development Goals, while
still providing long term capital appreciation.
Investment universe
The sub-fund invests predominantly in transferable equity securities such as equities, other equity shares such as cooperative
shares and participation certificates issued by, or warrants on transferable equity securities of, companies which
are domiciled worldwide.
The sub-fund is managed through a bottom-up/stock picking process. The team aims to identify long term sustainable
impact themes that will drive companies growth in delivering the UN Sustainable Development Goals(SDGs). The outcome
portfolio of high quality names, comprises 30 to 35 reasonably priced holdings, however this could vary depending on
market conditions.
The investible universe is reduced by at least 20% after implementation of the sustainability filters.
ESG methodology
The sustainability research has various and mutliple sources internal Advisory Committee : guides on themes and new
challenges and opportunities facing companies, academic Institutions inputs: for example, Cambridge Institute for
Sustainability Leadership to develop longer term thinking and to refine the set of themes, indepedant ESG Research
Providers: such as MSCI, ISS, Ethical Screening, to help provide initial analysis of sustainability factors, meetings with
companies management and on-site visits and Sell-side research..
All the above feeds the External Investment Manager’s sustainability matrix rating.. The investment manager will use its
proprietary ESG scoring system to select the companies (the sustainability matrix).
The scoring is the result of the two following analysis:
A first score from A (best) to E (worst) is attributed to the company as an evaluation of the “product sustainability” This
score is a constituent of the sustainability matrix. It assesses the extent to which a company’s core business helps or harms
society and/or the environment. An A rating indicates a company whose products or services contribute to sustainable
development (via the investment themes); an E rating indicates a company whose core business is in a conflict with
sustainable development (such as tobacco or very polluting activities such as coal fired electricity generation).
A score from 1 (best) & to 5 (worst) is attributed to the company as an evaluation of the “management quality” (I;e; : good
governance) of a company. This score is a constituent of the sustainability matrix. The main following metrics are
considered :• independence of the board and key committees (nominations, remuneration and audit) • diversity of the board
• alignment of remuneration with investors • encourage remuneration to be linked with pertinent extra-financial ESG factors.
The sub-indicators used are dependent on what activity the business does; As an illustration, hereunder a list of indicators
used (the list is not exhaustive) : Installed capacity and capital expenditure towards sustainable energy (when it comes to
consider company involved in power generation), healthy business/food qualty improvement (when it comes to consider
company involved in the food business), integration of ESG aspect in a business as operational and safety perfroamnce,
customer satisfaction etc. (all companies), overwiew of the decarbonization targets (to encourage companies to the be
more consistent with the science-based targets on climate).
The extra-financial process covers 100% of securities in the portfolio (cash, derviatives are not covered by the ESG
analysis).
Investment policy
The sub-fund contributes to environmental and social objectives and qualifies as an investment product in accordance
with article 9 of Regulation (EU) 2019/2088 on sustainability related disclosures in the financial services sector. The
sustainable objectifve of the fund is generate competitive investment returns by investing in sustainable businesses helping
to deliver a cleaner, healthier and safer world and use the External Investment Manager’s and the Management Company’s
influences as investors to improve the way businesses manage their interaction with the environment and society.
The sub-fund will focus of its efforts on companies exposed to and helping to deliver the positive changes to our economy
as captured by their themes. For this, all investments are examined for adverse impacts and adherence to global norms
on environmental protection, human rights, labour standards and anti-corruption. The sustainability approach is designed
to implement the Do Not Significantly Harm principle.
Sustainability is integrated into the sub-fund through three main stages of the investment process: stock selection, portfolio
construction and company engagement.
Stage 1: stock selection has four key filters: thematic analysis; sustainability analysis; business fundamentals; and
valuation. The first two are where our view of sustainability and impact is integrated.
The global idea generation approach is emphased through three mega trends as Better resource efficiency (cleaner),
Improved health (healthier) and Greater safety and resilience (safer), and 21 themes within these.Then the selected
companies are given a sustainability rating through the sustainability analysis phase.The business fundamentals must be
robust (growth, resilient returns, quality of earnings).
The company should pass the internal financial forecast test to be part of the list of companies that can be investible for
the portfolio (the list counts around 150 companies at this step).
Next to this process, the company should pass the exclusion rules of the Sustainable Investment Policy of the ManCo. The
portfolio Manager may implement other exclusions as well. In that respect, the External Investment Manager will not invest
in companies that have a strategic involvement in nuclear.
Stage 2: portfolio construction diversifies systemic risk while also skewing the portfolio to enhance the overall impact of
the portfolio. All companies must have at least 50% of their business aligned with positive investment impacts (which are
also directly linked to underlying KPIs in the UN Sustainable Development Goals): all companies in the fund meet this
objective. Thus companies should score in the following range beteween A1 to A4 and B1 to B4. In addition, the portfolio
manager has a rules-based approach where it aims to construct a concentrated portfolio of best ideas, of between 25 and
35 stocks. Turnover is typically 10%, representing the long-term nature of our investments.
Stage 3: sustainability drives the engagement with portfolio companies where the Portfolio manager will use its long-term
ownership and relationship with management to monitor change in carefully selected areas. In that respect, the External
Investment Manager allows to invest for a portion in companies with a management rating of 4 (5, is the worst score),
recognising that the Portfolio manager can engage with management of these businesses to improve their performance
with respect to SDG and other ESG indicators (see methodology above).
The extra-financial process covered 100% of the portfolio.
Methodological limitations can be assessed in terms of: nature of ESG information (quantification of qualitative data), ESG
coverage (some data are not available for certain issuers) and homogeneity of ESG data (methodological differences).
The minimum asset allocation in such securities on a consolidated basis (direct and indirect investments) will be of 60% of
the sub-fund's net assets. Moreover, the minimum sub-fund’s investment in equity securities will be of 75% of the subfund's
net assets.
The sub-fund may invest for maximum 10% of its net assets in funds that have been selected in accordance with a number
of qualitative and quantitative criteria. The qualitative analysis assesses the stability and strength of the investment
manager, as well as its investment process and philosophy. The quantitative selection process aims to select only funds
with proven risk-adjusted performance.
The sub-fund may also hold on an ancillary basis cash and cash equivalents including certificates of deposit and shortterm
deposits.
The sub-fund may also invest in debt securities (such as fixed and floating rate bonds, Money Market Instruments, including
High Yield bonds) up to 10% of its net assets, in particular for cash management purposes.
The instruments described below are not covered by the ESG analysis.
The use of financial derivative instruments is restricted to:
-listed instruments in accordance with the investment policy (including but not limited to interest rate futures, bond futures,
swap note futures, currency futures);
-OTC instruments for currency hedging purposes (including, but not limited to forward and foreign currency exchange
contracts).
The use of OTC instruments for purpose other than currency hedging is prohibited (including, but not limited to OTC
derivatives, CDS & CDO contracts).
This sub-fund is actively managed and is compared to the risk benchmark as described in Appendix 2 for performance and
risk level indicator purposes. However, the reference to this index does not constitute any objective or limitation in the
management and composition of the portfolio and the sub-fund does not restrain its universe to the index components.
The index does not evaluate or include its constituents on the basis of environmental and/or social characteristics and is
therefore not aligned with the ESG characteristics promoted by the sub-fund.
Therefore, returns may deviate materially from the performance of the reference index.
