Website product disclosure for financial products that promote environmental or social characteristics
1. Summary
The financial product promotes Environmental and Social characteristics and while it does not have as its objective a sustainable investment, it will have a minimum proportion of 5% of sustainable investments with an environmental objective in economic activities that qualify as environmentally sustainable under the EU Taxonomy.
The investment strategy of the Sub-Fund promotes environmental, social and governance practices by adopting a two-layer selection process: the first layer is determined by the identification of the Sub-Fund’s investable universe by means of criteria of exclusion on the securities selection process. The second layer is represented by an active asset selection seeking to invest mainly in companies which deem to have good or improving ESG characteristics and good governance practices as defined by SFDR.
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. The Management Company considers that a targeted minimum of 5% 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 Sub-Fund’s proportion of investments with a positive taxonomy alignment to climate change mitigation and climate change adaptation will take into account Principal Adverse Impact (PAI) indicators.
The Sub-Fund promotes a range of environmental and social characteristics by integrating environmental, social and governance ('ESG') criteria into the investment process. The Sub-Fund undertakes to promote, through the implementation of specific criteria of selection and the application of exclusion lists, investments aimed at reducing the negative impacts on society and the environment, by allocating capital in favour of companies and countries that adequately manage and intentionally reduce their negative effects on the environment and on human health and well-being. In the selection criteria key elements of attention are climate change, water stress and biodiversity, pollution, waste and resource efficiency, and from the social performance end, human well-being, product quality and safety, and human rights.
The Sub-Fund’s portfolio promotes social and environmental characteristics by predominantly allocating capital in favour of companies and countries able to adequately manage ESG risks and opportunities, as measured by their ESG ratings.
The Sub-Fund’s portfolio invests, directly and indirectly, at least 80% of its assets, net of cash and ancillary liquid assets, in companies and countries with an ESG rating equal to or higher than B. The weighted average ESG rating of the portfolio, net of cash and ancillary liquid assets, cannot be lower than BBB. The Sub-Fund’s portfolio does not invest in companies with ESG rating below B.
Within the 80% of the Sub-fund allocated to companies and countries aligned with environmental and social characteristics, 5% will be in environmentally sustainable investments aligned with the first two objectives of the EU taxonomy, climate change mitigation and climate change adaptation.
Monitoring of compliance with investment- and portfolio-level limits related to the promotion of social and environmental characteristics is conducted ex post on a weekly basis. Owing to current limited availability of technical solutions, ex ante monitoring of compliance with sustainability-related portfolio limits is not applicable. In case of breach detection of such limits, the Management Company will divest accordingly, to assure portfolio limit compliance, within the shortest possible time span and in a way consistent with protecting investors’ best interests.
The ESG ratings are attributed at the investment level and then aggregated at the portfolio level. For the attribution of the ESG ratings seven different levels are used, from the best rating of AAA to the worst rating of CCC, which are derived from a normalized ESG score, which ranges from 0 (worst performance) to 10 (best performance).
Involvement of companies in environmental, social and governance controversies: The Sub-Fund’s portfolio does not invest in companies involved in very severe environmental, social and governance controversies, which correspond to a 0 score.
Involvement of companies in socially controversially activities: it is assessed by the share of company revenues generated by the following socially controversial activities: civilian and military weapons, controversial weapons, tobacco, gambling, and non-responsible alcohol. The Sub-Fund’s portfolio does not invest in companies with a revenue share equal to or greater than 5% being generated by such activities, except for controversial activities, with respect to which any revenue-based involvement leads to exclusion from the Sub-Fund’s portfolio.
Democratic level of countries: it is assessed by the PAI indicator “average rule of law score”. A low democratic level corresponds to a country-level performance with respect to the average rule of law score below the 50th percentile of all countries for which data are available. The Sub-Fund’s portfolio does not invest in countries with a low democratic level.
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”). The Management Company considers that a targeted minimum of 10% of the underlying investments selected for the Sub Fund’s portfolio, net of cash, ancillary liquid assets and derivatives, will be aligned with the first two objectives of the EU Taxonomy, climate change mitigation and climate change adaptation.
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 standards.
Actual and estimated Taxonomy alignment data are provided by external sustainability data providers. Owing to current limited availability of standardised EU Taxonomy alignment data, both actual and estimated data will be used to measure investment-level EU Taxonomy alignment. Estimated EU Taxonomy alignment can be subject to a certain degree of uncertainty, which is expected to decrease over time, mainly due to an evolving regulatory framework and limited corporate disclosure on EU Taxonomy alignment.
Sustainability data are provided by external sustainability data providers.
Owing to the nature of the investment strategy of the financial product, engagement with investee companies is conducted on a discretionary basis, with the aim to improve overall company-level ESG performance and portfolio-level Taxonomy alignment performance.