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 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 definition 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 by the Investment Manager 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 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 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 seeks medium- to long-term capital growth with an absolute return approach. Depending on market conditions, the fund will change the weights of each asset class in its portfolio, according to their relative fundamental valuation attractiveness. The fund will be mainly invested in bonds. Issuers are picked with a bottom-up approach, based on fundamental valuation parameters, solid issuer’s balance sheets and solvency ratios. Liquid issuers with relative rich yield are preferred.
The Sub-Fund has at least 80% of its exposure, net of cash, ancillary liquidity assets and derivatives, 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, ancillary liquidity assets and derivatives, needs to be at least equal to or higher 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: 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.
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, engagement with investee companies is conducted on a discretionary basis, with the aim to improve overall company-level ESG performance.