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AMX CCF – Metropolis – Valuefund

AMX CCF – Metropolis – Valuefund “(the Sub Fund”) has been categorised as meeting the provisions set out in Article 8 of SFDR for products which promote environmental and social characteristics, as further described below.

 

A description of the environmental or social characteristics promoted

Metropolis’s approach to ESG is primarily risk driven, which considers the risk of poor ESG practices on a business’s long-term economic model rather than a more subjective ethical assessment.

Metropolis’s focus is first on governance.  This is based on the belief that if management is acting in the best long-term interests of the company and shareholders, then it is likely that its practices will be sympathetic to its broader stakeholders, consumers and the environment.

The valuation of each investee company for the portfolio is fundamentally grounded in an assessment of the long-term sustainability and predictability of the relevant company’s earnings. Metropolis Capital considers the possible impacts of identifiable disruptive forces in the markets of all companies, which are considered for inclusion in the portfolio. There are a number of industries which are unlikely to pass Metropolis’s tests for long-term sustainability of revenues and margins. In particular, it is the policy of the Sub-Fund to avoid direct exposure to the following types of companies:

  • Tobacco manufacturers
  • Manufactures of controversial weapons;
  • Tar sand oil extraction companies; and
  • Thermal coal mining companies.

The Sub-Fund may, from time to time, invest in high-quality conglomerates that may have exposure to some of the above areas, directly or indirectly. These areas will represent no more than 10% of Metropolis’s assessment of a conglomerate’s intrinsic value.

 

Methodology used to assess, measure and monitor the environmental or social characteristics

Metropolis deploys a four staged process in the execution of its investment due diligence for any investee company.  Stage 1 is a quantitative screening process from which candidates are generated for further research.  Companies with exposure to the industries set out above are excluded at this stage.

In Stage 2, Metropolis deploys a semi-automated template for each investment candidate which includes externally sourced ESG data.  There are also a number of checklist questions for the analysts to answer from desktop research, which includes questions on the potential for disruption to the investment candidate’s business model from ESG risks.  In the process, these risks are scored which highlights areas for greater scrutiny in stages 3 and 4 of the research process.  High scores (which means high risk) can result in investment candidates in stage 2 being ruled out for further research.

Further work on potential disruption risks, including ESG risks, are reviewed in stages 3 and 4.   Sources of data will be third party (e.g. Bloomberg), the company itself (annual report, company website) and other third-party data sources specific to the industry being analysed (e.g. KnowTheChain).   If following this research, Metropolis believes that the risk could undermine its ability to model a sufficiently narrow range of future scenarios for the purpose of valuation, then Metropolis will engage with the company directly.

This engagement seeks to understand the company’s perspective on the risks identified and whether any action is being taken to resolve the risk.  Often, the issues are around disclosure, in which case Metropolis will actively encourage the company to improve this area of their activities.  If following engagement, Metropolis’ score attributed to any disruption risk including those related to Governance, or the company’s impact on the environment or society, are too high, then the investment candidate will be ruled out for inclusion in the portfolio and moved to a list of companies which have failed the quality threshold.

Once in the portfolio, Metropolis has developed a portfolio monitoring framework for maintaining its assessment of ESG risk during the ownership of the position.  This looks at objective measurable parameters such as carbon emissions and considers the following three dimensions: (a) progress over time – looking at historical progress over multiple years, (b) comparison against identified peers in the same industry, and (c) progress in the level of disclosure.  This data informs Metropolis’ ongoing engagements with each of the portfolio companies.

Metropolis engages with portfolio companies through active and thoughtful voting on shareholder resolutions and will make its viewpoints known to the Board where there is a strong divergence between its views and the strategy being followed by the Board. Ultimately, Metropolis will exit a position if it believes that it cannot influence change and without change, the investment thesis and long-term value of the company is materially impaired.

 

Sustainability Indicator: 1. Greenhouse gas emissions (scope 1 & 2) and 2. Carbon footprint

Metric

Companies in the following industries are excluded1:

·         thermal coal mining

·         tar sand oil extraction

1The Portfolio Manager may invest in conglomerates that may have exposure to some of the areas above either directly or indirectly up to 10% of the Intrinsic Value of the company as determined by Metropolis Capital.

Threshold

0% of the portfolio invested in companies for whom future profit generated from these industries (in total) is greater than 10% the Intrinsic Value of the company as determined by Metropolis Capital

 

Sustainability Indicator: Exposure to controversial weapons

Metric

Companies in the following industries are excluded1:
• Manufacture of controversial weapons (anti-personnel mines, cluster munitions, chemical weapons and biological weapons)
1The Portfolio Manager may invest in conglomerates that may have exposure to some of the areas above either directly or indirectly up to 10% of the Intrinsic Value of the company as determined by Metropolis Capital.

Threshold

0% of the portfolio invested in companies for whom future profit generated from these industries (in total) is greater than 10% the Intrinsic Value of the company as determined by Metropolis Capital

 

Review

Metropolis Capital conducts periodic monitoring of the underlying assets, to check that positions remain within the permitted thresholds, and takes corrective action if those thresholds are breached.

 

Periodic reports

 description of the extent to which environmental or social characteristics are met by the Fund will be available as part of the periodic report. The Funds most recent periodic report does not include any information pursuant to SFDR.

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