Fund/Investment Strategy Category
Avoid Excluding particular companies or whole sectors from the investable universe
Assess Considering the material effect on risk and return of ESG factors on investments alongside traditional factors in the investment process “ESG INTEGRATED” (used in description of strategy and fund offering documents, but not in the fund names) Portfolio manager systematically and explicitly include material ESG considerations as a factor in its investment analysis and investment decisions for all securities.
Amplify Focusing on ‘better’ companies based on ESG factors that are expected to have a material effect on the investments’ risk and return “SUSTAINABLE” (in name of strategy and offering documents) Portfolio manager selects and includes securities on the grounds that they fulfill certain sustainability criteria, such as being best-in-class issuers. There are clear investment rationales for focusing on sustainability leaders, such as the potential to signal business quality or to align with secular sustainability trends. Engagement outcomes are set and tracked with influence on sell decisions.
Aim for Impact Seeking to intentionally generate positive social and environmental impact alongside a financial return
“IMPACT” (in name of strategy and offering documents)
Portfolio manager seeks to achieve positive social and environmental outcomes for people and the planet alongside a market rate financial return. The core business, products or services of each holding contributes to solutions of pressing environmental and social issues. Further, all holdings meet the firm’s ESG threshold for a “sustainable” fund.
The Rise of Regulation Rapidly evolving global sustainability-driven regulations are being felt across the asset management industry. European regulations such as the Sustainable Finance Disclosure Regulation (“ SFDR ”) 1 and European Taxonomy Regulation have set the global benchmark by introducing EU sustainability disclosure obligations and creating an EU common classification system.
The SFDR Regulatory Technical Standards (the “ SFDR Level 2 ”), which will set out the content, methodology and detailed disclosure requirements is expected to be implemented on 1 January 2023, following a further postponement of the implementation date by the EU Commission. Until SFDR Level 2 comes into effect, compliance with SFDR Level 1 is on a principles or high-level basis only.
1 “SFDR” means Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector. European Taxonomy Regulation means Regulation EU/2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment and amending SFDR, as may be supplemented, consolidated, substituted in any form or otherwise modified from time to time;
14 2021 ESG ANNUAL REPORT
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