Investment objective
To provide medium term capital appreciation with a diversified and actively managed portfolio of euro sustainable aggregate bonds, without any specific restriction on tracking error. The sustainable objective of the sub-fund is to invest into entities that need financing, with a positive contribution to the companies.
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 sub-fund invests predominantly in euro denominated investment grade bonds and other fixed and floating rate securities. The sub-fund may also make use of a variety of instruments including, but not limited to, forward rate notes, forward foreign exchange contracts (including non-deliverable forwards), interest rate futures, bond futures and OTC swaps such as interest rate swaps and credit default swaps and strategies (e.g. yield curve and arbitrage strategies by way of investments in the securities and derivative instruments listed above) in order to achieve the sub-fund’s objective.
The sub-fund uses a combination of financial and sustainability indicators to identify issuers of debt that positively contribute to the United Nations Sustainable Develompent Goals, called SDGs. As the sub-fund is investing (but not only) in Green/social/sustaianbility and SDGs bonds (and other impact debt securities), the sub-fund may invest in environmental activities as defined by the Taxonomy regulation. The sub-fund is also investing in social activities.
In that respect, the selection process combine an exclusion and selectivity approach set out below.
Exclusion filters: the purpose of these filters is to exclude, firstly companies and activities that might a have negative effect on society or environment. Secondly, companies involved in severe human rights violation and environmental damage are also excluded. Finally, countries that are deemed as oppressive regimes and countries that have not ratified some international treaties are excluded too.The exclusion filters should comply with the exclusion rules of the management company. On purpose, the sub-fund may derogate.
A selectivity approach using sustainability criteria to identify companies and countries (and relatives) that better manage their ESG risk than their peer group average and that offer positive impact solutions to contribute to the SDG’s archivements.
The extra-financial analysis covered 100% of the securities in portfolio ( cash are not covered by the sustainability analysis.
The investible universe is wider than the benchmark one’s. Indeed, the sub-fund will invest in Euro Investment Grade denominated (Sub)Sovereign, and Suprationals bonds with 1-10 yr maturity band incorporating as well, corporate bonds to the portfolio. The selection process targeting impact solutions would give the preference to green/social/sustainability/sdg bonds (and any other kind of “impact” debt instruments) even if this criteria is not considered into the benchmark. Nonetheless, the sub-fund aims to invest at least 50% of its securities in Green/social:sustainability/SDGs Bonds that have been qualified as such by an external party. (The 50% goal is subject to the flow of upcoming emissions which pass the sustainability filters).
Countries, public bonds issuers, such as public organisations:
The analysis is carried out at the countries level.
The sub-fund follows a best in class 50% approach on global countries, and excludes highly oppressive nations, and nations that have not ratified the Paris agreement, the non-proliferation of nuclaear wepaons agreement, and the ILO Convention 182 on Child Labour. This unless bond in the fund is a green/social/sustainability/SDGs bond. The sub sovereign issuers inherit the country ranking and sustaianbility analysis.
The sub-fund does not follow a best in class approach for supranational entities, as their existence is tied almost directly to impact objective of adding to the United Nations Sustainable Development goals.
Corporate bonds issuers:
Although not core to the sub-fund, investing in corporate bonds is allowed. The sub-fund follows a best in class 50% approach on corporate issuers (at sub-industry level). In some specific cases, the sub-fund can invest in a corporate issuer that does not belong to the best 50% but should not cross the 75% limit (High Yield bonds for example as smaller companies tend to have less extensive policies, which negatively affects the ESG Risk rating). By the way, the issuer should be rated positively on net contributing to the UN SDG’s. Unless the debt instrument is a green bond, social bond, the sustainability bond or SDG Bond (or any impact debt instrument), which is independently verified as tied to the frameworks of said bond types as a qualification for having impact.
To verify the eligibility of a corporate or a governement issuer, the sub-fund will relies on the ESG risk research provided by Sustainalytics.
The ESG Risk score, on which the "best in class" filter is based, evaluates companies on Material ESG issues (MEI). Sustainalytics has identified 20 key criteria’s in each sub-sector. Each ESG issues is given different weight depending on the company's sector (as for example : Access to Basic Services, Bribery and Corruption, Business ethics, Data privacy
and security, Carbon own operatio, E&S impact on operation, Resource use in supply chain, Land use and biodiversity Health and safety…) Moreover, part of the sustainability risks are taken into account by our exclusions policies, best in class approach and by excluding companies with controversies 4 and 5 according to the Sustainaltyics methodology.
Unless the bond is a green/social/sustainability or SDGs bond.
The Country Risk score, on which the "best in class" filter is based, measures the risk to a country’s long-term prosperity and economic development by assessing national wealth of a country and the ability to use and manage this wealth in an effective and sustainable manner.The rating measures national wealth comprised of natural and produced capital, human capital, and institutional capital, and a country’s ability to use and manage these capitals in an effective and sustainable manner determined by its ESG performance, ESG trends and ESG events. The aggregated score includes a wealth score and an ESG risk factors score corresponding to these two components unless the bond is a green/social/sustainability or SDGs bond.
The Overall impact score : to verify the eligibility of a corporate issuer, the sub-fund relies mainly on the “SDG Overall score” provided by ISS-Oekom , which measures the positive and negative impacts of a companies’ product and service portfolios. It follows a thematic approach that encompasses 15 distinct sustainability objectives, using the United Nations (UN) Sustainable Development Goals (SDGs) as a reference framework. The SDG Solutions Overall Score ranges on a scale from -10.0 to +10.0 with an underlying classification into five broad assessment categories.
Unless the bond is a green/social/sustainability or SDGs bond or a bond issued by supranational entities, as their existence is tied almost directly to impact objective of adding to the United Nations Sustainable Development goals (internal impact process).
The sub-fund applies the “Do Not Significantly Harm (DNSH) any other environmental or social objective” principle introduced by the Regulation. In that respect, our ESG methodology includes sustainability risk analysis, our investment policy excludes severely controversial activities and companies and our impact methodology assesses negative and positive impact to return a net impact score. The objective of the fund in to invest in positive impact scores (can be neutral on purpose).
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 through the use of derivative instruments) will be of 60% of the sub-fund's net assets.
The sub-fund will respect within the remaining 40% of its total net assets and on a consolidated basis all the following limitations for investments in the below securities/instruments:
(i) a maximum of 10% of the total net assets of the sub-fund may be invested in High Yield bonds;
(ii) a maximum of 25% of the total net assets of the sub-fund may be invested in convertible bonds and other equity-linked debt securities;
(iii) a maximum of one third of the total net assets of the sub-fund may be invested in Money Market Instruments, including, but not limited to, cash and cash equivalents including certificates of deposit and short-term deposits;
(iv) a maximum of 10% of the total net assets of the sub-fund may be invested in transferable equity securities;
(v) a 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 financial instruments described below are not covered by the ESG analysis.
The sub-fund may seek to minimize the exposure to currency fluctuations by hedging currency risk through financial derivative instruments as described in Appendix 2 of the full prospectus.
The sub-fund may not invest in defaulted assets but may invest in Distressed Assets up to 10% of the sub-fund's net assets.
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.
