Website product disclosure for financial products that promote environmental or social characteristics
1. Summary
The financial product does not have a minimum share of sustainable investments.
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, both directly and indirectly through equity derivatives, investments aimed at reducing the negative impacts on society and the environment, by allocating capital in favour of companies 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 objective of the Sub-Fund is to achieve medium- to long-term capital growth by combining different eligible assets. The Sub-Fund will invest at least 20% of the total assets under management in global equity market indexes, according to fundamental valuation analysis. The exposure is obtained through option strategies. These strategies are built on listed options on global equity market indexes, granting optimal liquidity. Delta-adjusted weight of all the option legs is considered in order to reach the flexible market exposure.
The Sub-Fund has at least 80% of its exposure, net of cash and liquidity assets, to corporate and sovereign securities with an ESG rating equal to or higher than B. The Sub-Fund’s average ESG portfolio rating, net of cash and ancillary liquidity assets, needs to be at least equal to or higher than BBB. Equity exposure gained through derivatives is considered on a net basis for ESG rating attribution. Equity indices to which the Sub-Fund’s portfolio gains exposure through derivatives need to have an average ESG rating at least equal to or greater than BBB.
For the remaining proportion of direct and indirect investments in corporate and sovereign securities without an ESG rating, minimum social and environmental safeguards apply insofar as company-level sustainability data are available. Companies need to be compliant with the UNGC principles or OECD Guidelines for Multinational Enterprises and not involved in very severe controversies regarding environmental, social or governance issues or in aforementioned socially controversial activities. With respect to any sovereign exposure, the Sub-Fund will only invest in securities issued by countries with a high democratic level.
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 measure the company-level capacity to manage environmental and social risks and opportunities that could materially impact business performance, positively or negatively.
The ESG ratings are attributed at the company-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: it is assessed on a 0-10 scale, with 0 corresponding to an involvement in very severe controversies and 10 corresponding to no involvement 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.
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.
Due to limited data standardisation, consistency and availability, sustainability data can be subject to a certain degree of uncertainty, which is expected to decrease over time, mainly due to an evolving regulatory framework, limited corporate disclosure and inconsistency among methodologies of sustainability data providers for assessing ESG performance.
Once an investible universe is approved, an ex-ante blocking procedure is implemented in front office systems, to ensure compliance with sustainability-related investment-level limits. Before deciding to invest in a security with the fund’s portfolio, a security-level sustainability performance contribution analysis is conducted. The assessment determines to what extent a given investment contributes to portfolio-level sustainability performance and whether such contribution is consistent with portfolio-level sustainability limits.
Owing to the nature of the investment strategy of the financial product, no active engagement is to be expected.