AMX UCITS CCF - Storebrand - Emerging Markets ESG Plus
ESG and Sustainability Information
Below, investors can find relevant information regarding the investment strategy of the Sub-Fund and its related ESG and sustainability considerations.
1.a. Transparency regarding the integration of sustainability risks, the promotion of environmental or social characteristics, and sustainable investment
- Among other things, the Sub-Fund promotes environmental or social characteristics
Manner in which sustainability risks are integrated into investment decisions
The Portfolio Manager takes into consideration sustainability risks when taking investment decisions. Sustainability risks are defined as environmental, social or governance events or conditions that, if they occur, could cause an actual or a potential material negative impact on the value of an investment and/or returns from that asset. The Portfolio Manager identifies such sustainability risks and integrates them into its investment decision making and risk monitoring to the extent that they represent actual or potential material risks and/or opportunities to the long-term risk-adjusted returns of the Sub-Fund.
Sustainability risks that may be relevant to the Sub-Fund’s investments include, but are not limited to:
- Environmental risks: the ability of companies to mitigate and adapt to climate change, the potential for higher carbon prices, exposure to increasing water scarcity and potential for higher water prices, waste management challenges, and impact on global and local ecosystems.
- Social risks: product safety, supply chain management and labour standards, health and safety and human rights, employee welfare, data & privacy concerns and increasing technological regulation.
- Governance risks: board composition and effectiveness, management incentives, management quality and stakeholder alignment.
Impact of sustainability risks on returns
The impacts of sustainability risk may be numerous and vary depending on the specific risk, asset class and region. The assessment of the likely impact of sustainability risks on the Sub-Fund’s return will therefore depend on the type of securities held in its portfolio. In respect of equity securities, the sustainability risks that may affect the price of a stock, result in the need to raise capital or impact the issuer’s ability to pay a dividend.
The Sub-Fund may be able to avoid or mitigate the sustainability risks mentioned above to some extent through the application of the Storebrand Asset Management Sustainable Investment Policy and the Sub-Fund’s specific ESG criteria.
Further details can be obtained at https://www.storebrandfunds.co.uk/sustainability/pioneering-sustainable-investing/exclusions/the-storebrand-standard.
1.b. Sustainability-related characteristics promoted in the management of the Sub-Fund:
- Environmental characteristics (eg companies' impact on the environment and climate)
- Social characteristics (eg human rights, labour rights and equal treatment)
- Good governance practices (eg shareholders' rights, issues of remuneration to senior executives and anti-corruption)
The Sub-Fund promotes environmental and social characteristics by integrating ESG aspects into all its investments. These aspects include analyzing both ESG risks and climate change mitigation. The promotion of environmental and social characteristics comes on top of the investment criteria set out by the general exclusions criteria (the “Storebrand Standard”).
The Sub-Fund excludes all companies with a significant part of their revenue related to fossil fuel production or distribution. In addition, the Sub-Fund will attempt to replace exposure to the fossil fuel companies with companies that are involved in solving the climate problem such as renewable energy companies. Using the index optimization technique, the Portfolio Manager seeks to minimize the deviation from the Index whilst promoting the sustainable focus. The Sub-Fund also apportions higher weightings to entities with a high proportion of "green revenue”, as well as entities with Paris-agreement-aligned plans for the future, as certified by the Science Based Targets initiative.
The Sub-Fund seeks to invest in companies that have a high sustainability rating, and refrain from investing in companies with a low rating. The rating is based on an ESG risk rating supplied by a leading independent global provider. This rating is combined with the Portfolio Manager’s analysis that ranks companies according to how sustainable their services and products are and to what extent they operate in line with the UN's sustainability goals. The Portfolio Manager’s analysis draws on a wide range of data providers and publicly available sources.
The Sub-Fund seeks to invest in companies with a low carbon footprint. The “carbon footprint” of a company may be considered in terms of (i) tons of carbon dioxide output divided by revenue, commonly referred to as "carbon intensity"; or (ii) tons of carbon dioxide output divided by enterprise value or (iii) any other measure that meets an internationally agreed approach or industry or environmental standard. The Sub-Fund also refrains from investing in certain sectors, e.g. companies whose main business is the production and/or distribution of fossil fuels. Instead, the Sub-Fund may invest more than the Index in companies related to clean energy, energy efficiency, recycling and low-carbon transport. In that regard, the Sub-Fund is aims to achieve a well-diversified, sustainable portfolio with a relatively low deviation from the Index.
As outlined in the Supplement, to achieve the above, the Portfolio Manager utilises an optimization methodology in its management of the Sub-Fund. The Portfolio Manager identifies the risk characteristics of the Index and composes a portfolio of stocks that, based on the risk characteristics, are expected to approximate the performance of the Index. This optimization methodology is used in consideration of the large exclusion list pursuant to the Storebrand Standard that the Portfolio Manager maintains and the reduction of the expected deviation between the performance of the Sub-Fund and the performance of the Index when removing entire sectors such as fossil fuel related industries.
In addition, the Sub-Fund promotes social aspects by not investing in entities which violate human rights, workers' rights in the supply chain, child or slave labour, issues relating to health and safety, rights relating to freedom of association and freedom of expression, diversity, activities in conflict zones, health and access to medicines.
The Portfolio Manager applies the Storebrand Asset Management Sustainable Investment Policy to the Sub-Fund, on the following basis:
- Integration of the Storebrand Standard for the selection of companies:
Learn more about the Storebrand Standard at www.storebrandfunds.com.
- Extra criteria excluded beyond the Storebrand Standard
The Sub-Fund excludes a range of products and services from its investment universe, such as weapons, alcohol, commercial gambling, pornography, fossil fuels, etc. (see below).
Measuring the effects of the ESG characteristics promoted by the Sub-Fund:
As part of the Sub-Fund's investment strategy to apply ESG criteria and have a sustainability focus, the Sub-Fund seeks to have a higher sustainability rating, a significantly lower carbon footprint and a higher proportion of "green revenue” than the Index.
Four times per year, the Portfolio Manager measures the Sub-Fund's carbon dioxide emissions, the Sub-Fund's carbon risk rating, the Sub-Fund's sustainability rating and the proportion of "green revenue” of the companies comprising the Sub-Fund as compared with the Index.
2. Consideration of Adverse Sustainability Impacts
The Manager does not currently consider the principal adverse impacts of investment decisions on sustainability factors within the meaning of 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 (“SFDR”), as the relevant information required to appropriately assess the principal adverse impacts of investment decisions on sustainability factors, is not yet available.
The Manager will keep the decision to not consider the principal adverse impacts of investment decisions on sustainability factors within the meaning of SFDR under regular review.
The Portfolio Manager in the management of the Sub-Fund relies on the Storebrand Asset Management Sustainable Investment Policy in the negative screening of potential investments and the ongoing assessment of active holdings of the Sub-Fund to avoid potential adverse sustainability impacts.
Further details can be obtained at www.storebrandfunds.com.
- No benchmark index has been chosen for comparing ESG achievements
The Sub-Fund is actively managed and uses the Index for asset allocation pursuant to the optimization methodology risk model in seeking to approximate the risk profile of the Index and performance comparison purposes only. The Sub-Fund does not use a benchmark index in pursuit of its strategy relating to environmental and social characteristics.
4. Methods used to integrate sustainability risks and promote environmental or social characteristics:
Included products and services
All entities that are selected by the Sub-Fund are awarded a sustainability rating where the entities are rated on the basis of many different sustainability indicators. Entities that are prioritised for selection have comprehensive systems for managing ESG risks. The selection of entities involves several steps, with the most important parameters being entities with a low carbon footprint, climate solution-focused entities, that is, entities that the Portfolio Manager believes contribute solutions to the climate crisis, entities with high ratings in the Portfolio Manager’s analysis and entities with a high proportion of "green revenue”.
Excluded products and services
The Sub-Fund does not invest in companies that are involved in the following products and services, provided that a maximum of five percent of the turnover in the company where the investment takes place may refer to activities that are attributable to the specified product or service.
- Cluster bombs, anti-personnel mines. Zero tolerance.
- Chemical and biological weapons. Zero tolerance.
- Nuclear weapons. Zero tolerance.
- Weapons and / or munitions.
- Commercial gambling operations.
- Fossil fuels (oil, gas, coal).
- Other. The Sub-Fund also excludes entities involved in unsustainable palm oil, recreational cannabis and companies lobbying against the Paris Agreement. In addition to fossil fuels, the Sub-Fund also excludes entities with large fossil fuel reserves: entities with more than 100 million tons of CO2 in fossil fuel reserves.
Reports of excluded entities can be found at www.storebrandfunds.com.
The Portfolio Manager, which is part of Norway's Storebrand Group, has signed and adheres to: the UN Principles for Responsible Investment (2006), OECD, ILO, Global Compact (2000), Tobacco-Free Finance Pledge (2018), Fossil-free Sweden (2016), Net Zero Asset Owner Alliance (2019), CDP (2015), Montreal Pledge (2015) and TCFD.
The Sub-Fund avoids investing in entities that are involved in violations of international standards and conventions (as a minimum the UN Global Compact and the OECD Guidelines for Multinational Enterprises) concerning the environment, human rights, working conditions and business ethics.
- The Sub-Fund does not invest in entities that violate international standards.
If the Portfolio Manager suspects a violation of the Storebrand Asset Management Sustainable Investment Policy in an entity in which the Sub-Fund is invested, the Portfolio Manager will obtain more information or, in the case of an entity that, for example, is working on improvements which have not yet been implemented, in certain circumstances the Portfolio Manager can place the entity on its observation list. The Portfolio Manager maintains a close dialogue with the entities about its expectations of measures and results. Depending on the outcome, the entity will either be completely excluded from the Sub-Fund’s investment universe or removed from the observation list and once again available for investment.
The Portfolio Manager's engagement
The Portfolio Manager engages with the companies in which the Sub-Fund invests on sustainability-related issues. The Portfolio Manager is in contact with entities in order to influence them in a more sustainable direction.
- The Sub-Fund acts alone to engage with companies
- The Sub-Fund acts in collaboration with other investors to engage with entities
- Engaging with entities through external suppliers/consultants
- Voting at shareholders' meetings
The Portfolio Manager’s specialists in sustainable investment and corporate governance, together with the asset managers, maintain a continuous dialogue and hold meetings with the entities, by phone, email or in person. By actively asking questions about the entities' ambitions and activities in the area of environment and sustainability, the Portfolio Manager encourages the entities to deliver concrete results and make a positive contribution to the UN's global sustainability goals.
In the case of common issues, the Portfolio Manager collaborates with other major stakeholders through its involvement in, among other things, PRI (United Nations' Principles for Responsible Investment) in order to achieve greater influence.
The Portfolio Manager collaborates with Sustainalytics B.V. and Institutional Shareholder Services Inc. in discussions with entities covering sustainability issues. The dataset on ESG risk produced by Sustainalytics B.V. is used by the Portfolio Manager in its internal ESG score model. Both Sustainalytics B.V. and Institutional Shareholder Services Inc. are used by the Portfolio Manager for the purpose of screening the investment universe of the Sub-Fund for incidents or events to filter down potential exclusion cases, and to screen out companies that are in breach of the revenue threshold of 5% for the fossil free and ethical additional criteria. Further information is available at www.storebrandfunds.com.
The Portfolio Manager generally attends and votes in general shareholders' meetings on behalf of the Sub-Fund in matters deemed to be in the interests of Unitholders and to address matters that are deemed not to be in line with the Portfolio Manager’s corporate governance policy.