Sustainability-Related Disclosures

1. Summary

The sustainable investments of the Sub-Fund respect the “do no significant harm principle” by abiding to the following negative screening criteria:

• Exclusion from the investible universe of the Sub-Fund of all investments in companies involved in socially controversial activities (tobacco, gambling, civilian and military weapons, controversial weapons and non-responsible alcohol).
• Exclusion from the investible universe of the Sub-Fund of countries with low democratic levels, as measured by the PAI indicator average rule of law score.
• Exclusion from the investible universe of the Sub-Fund of companies involved in either violations of UN Global Compact principles and OECD Guidelines for Multinational Enterprises or in very severe controversies regarding environmental, social or governance issues.
• Exclusion from the investible universe of the Sub-Fund of companies not meeting at least one of the following criteria:
  - a positive or improving impact performance, as measured by either the net impact ratio or the SDG performance indicator
  - EU Taxonomy alignment
  - a positive health impact performance indicator
  - a decarbonisation trajectory, calculated according to the methodological requirements set out in Commission Delegated Regulation (EU) 2020/1818, consistent with the achievement of Paris Agreement’s objectives and carbon neutrality by 2050

In the investment process of the Sub-Fund, the following Principal adverse impact (PAI) indicators are considered at the investment- and portfolio-level, owing to their relevance for the investment strategy:

• GHG emissions (1) – trajectory improvement
• GHG intensity of investee companies (3) – trajectory improvement
• Violations of UN Global Compact principles and OECD Guidelines for Multinational Enterprises (10) – exclusion from investible universe
• Lack of processes and compliance mechanisms to monitor compliance with UN Global Compact principles and OECD Guidelines for Multinational Enterprises (11) – exclusion from investible universe
• Exposure to controversial weapons (14) – exclusion from investible universe
• Rate of accidents (2) – Table 3 – trajectory improvement
• Number of days lost to injuries, accidents, fatalities or illness (3) – Table 3 – trajectory improvement
• GHG intensity of investee countries (15) – trajectory improvement
• Average rule of law score (24) – Table 3 – exclusion from investible universe

The sustainable investment objective of the Sub-Fund is that of investing 100% of its net assets, net of cash, ancillary liquid assets and derivatives in social or environmental sustainable investments by allocating capital in favour of companies that prove to have either a positive or improving social and environmental impact or alignment to Sustainable Development Goals (SDGs) and that can generate stable and decent job opportunities, particularly in Italy for women and young workers.

The Sub-Fund invests 100% of its net assets, net of cash, ancillary liquidity assets and derivatives in sustainable investments, with a minimum share of 20% in sustainable investments with a social objective and a 30% in sustainable investments with an environmental objective. For an investment to qualify as sustainable with a social objective, the investment-level health impact performance indicator needs to be positive. For an investment to qualify as sustainable with an environmental objective, the investment needs either to be EU Taxonomy-aligned or its decarbonisation trajectory, calculated according to the methodological requirements set out in Commission Delegated Regulation (EU) 2020/1818, needs to be consistent with the achievement of Paris Agreement’s objectives and carbon neutrality by 2050. A targeted minimum of 10% of the underlying investments selected for the Sub Fund’s portfolio will be aligned with the first two objectives of the EU Taxonomy, climate change mitigation and climate change adaptation.

The attainment of the sustainable investment objective of the investment strategy is measured by the following sustainability indicators:

• Net impact ratio (NIR) indicator: Net Impact Ratio is a resource efficiency indicator that comprehensively captures investment's impacts on society, knowledge, health, and the environment, considering both positive and adverse impacts.
• SDG performance indicator: the SDG performance indicator aggregates third-party data measuring product and operational contribution at company-level to the attainment of each SDG.
• Health impact performance indicator: for a given investment to qualify as sustainable with a social objective, its health impact performance indicator needs to be positive. The health impact performance indicator, which is one of the impact dimensions of Upright’s Net Impact Framework, measures the real-world effects that a given investee company generates on human health.
• Employment impact performance indicators: given the impact theme of the investment strategy, the investment strategy takes into account into investment decision-making company-level performance with respect to equal managerial opportunities, job and career opportunities for young workers and job safety.
• Taxonomy alignment indicator: the Sub-Fund pursues the objective of investing in sustainable investments contributing to climate change mitigation and climate change adaptation, as per Regulation (EU) 2020/852 (“EU Taxonomy”).
• Decarbonisation trajectory indicator: for an investment to qualify as sustainable with an environmental objective without being EU Taxonomy aligned, its decarbonisation trajectory needs to be consistent with limiting the temperature rise to 1.5°C as compared to pre-industrial levels and achieving the European Commission’s climate neutrality objective by 2050.

Sustainability data are provided by at least one of the following sustainability data providers: The Upright Project, MSCI ESG Research, Physis Investment and Bloomberg. The choice to have multiple sustainability data providers is driven by the objective of reducing data inconsistency issues. The selection of external sustainability data providers is based, among others, on their data quality verification processes, in order to ensure, to the maximum possible extent, that sustainability data are as reliable as allowed by market data quality standards.

Owing to current limited availability of standardized sustainability data, both actual and estimated data will be used to measure investment- and portfolio-level EU Taxonomy alignment, SDG performance, health impact performance, employment impact performance, net impact performance and decarbonisation performance. Whenever available, actual sustainability data are preferred.

Given the impact theme of the investment strategy, the investment strategy monitors and takes into account into investment decision-making company-level performance with respect to equal managerial opportunities, job and career opportunities for young workers and job safety. If an investee company has a deteriorating performance on one or more of relevant employment impact performance indicators, the Management Company engages with the investee company, with the objective to help the investee company improve its employment impact over time.