To provide short-term capital growth with a diversified and actively managed portfolio of sustainable short term bonds, without any specific restriction on tracking error. The sub-fund will use a selection of securities complying with Environmental, Social and Governance (ESG) responsibility criteria. The portfolio will be composed of issuers that are either leading in ESG best-practice or attractive due to their progression in ESG.
Investment policy
The sub-fund promotes environmental and social characteristics and qualifies as an investment product in accordance with article 8(1) of Regulation (EU) 2019/2088 on sustainability related disclosures in the financial services sector.
The sub-fund invests predominantly in euro denominated bonds and securities treated as equivalent to bonds such as fixed-income and floating rate bonds that have an average maturity that does not exceed 3 years (the residual maturity of each investment does not exceed 6 years), and also in derivatives on this type of asset. For floating rate bonds, the next rate adjustment date is taken as the maturity date. The minimum asset allocation in such securities will be of 60% of the sub-fund's net assets.
The sub-fund evaluates ESG issues through a methodology developed in-house ( by a proprietary developed sustainable and responsible investment philosophy), the External investment Manager analyses and assesses the sustainability risks and opportunities that affect issuers.
All direct corporate bonds and sovereign bond portfolio holdings are covered by the extra-financial analysis. Based on OECD universe, at least 20 % of the initial universe is excluded on corporate side. At least 20% is excluded on the country side exclusion due to the extra-financial and exclusion analysis.
Corporates issuers
The ESG universe consists of best positioned companies based on the scores resulting from the Business Activities and Stakeholder Analysis and which have also passed the Norms-based Analysis and the Armament & Controversial Activities reviews.
The ESG Analysis is based on the following pillars:
▪ Controversial Activities exclusions
▪ Norms-Based Analysis determines whether a company complis with the 10 principles of the UN GC for each of main categories ( Human rights), Labour, Environnment and anti- Briberry ( COR)
▪ Business Activities Analysis
▪ Stakeholders Analysis
▪ Stewardship
This in-depth analysis makes it possible to focus securities selection on the best companies from an ESG perspective, to eliminate issuers with the worst ESG profiles from the selection and/or to focus selection on issuers with the greatest exposure to sustainable development themes.The bottom 20% of issuers are removed from the universe.
Countries, public bonds issuers, such as public organisations
The analysis is carried out at the countries level.
The External Investment Manager’s proprietary process employs a broader, four-pillar, quantifiable definition: Human Capital, Natural Capital, Social Capital, and Economic Capital. This is coupled with an exclusion rule relating to high risk regimes and minimum standards of democracy.
The investible universe consists of those countries which perform best across our four categories of sustainable development criteria: Human Capital, Natural Capital, Social Capital and Economic Capital.
This in-depth analysis makes it possible to focus securities selection on the best companies from an ESG perspective, to eliminate issuers with the worst ESG profiles from the selection and/or to focus selection on issuers with the greatest exposure to sustainable development themes.At least, the bottom 20% of issuers are removed from the universe.
Supranational organisations issuing bonds
The ESG analysis procedure is based on 2-step:
1) The purpose of the Mission Statement Analysis is to exclusively select supranational organisations whose mission makes a positive contribution to the economic and social development of regions and countries. Most of today's supranational organisations meet this condition due to the very nature of their activities. In other words, the large majority successfully pass our screening process.
2) The External Investment Manager also performs a norms-based analysis of supranational issuers. With respect to companies, the purpose of this analysis is to determine whether or not the supranational organisation observes the 10
principles of the United Nations Global Compact and, more specifically, the 4 main categories: Human Rights (HR), Labour (L), Environment (ENV) and Anti-Corruption (COR), as defined above.
This analysis aims to eliminate supranational organisations that significantly and repeatedly fail to observe any of the 10 basic principles and which are note considered as highly oppressive regimes and/or are at risk from the perspective of terrorism financing and /or money laundering.
Methodological limitations can be assessed in terms of: nature of ESG information (quantification of qualitative data), ESG coverage (some data are not available for certain issuers) and homogeneity of ESG data (methodological differences).
As part of the Management Company’s Sustainable Investment Policy, the sub-fund complies with the exclusion rules of article 8 investment product.
The sub-fund will respect within the remaining 40% of its total net assets and on a consolidated basis all the following limitations for investments in the below securities/instruments (based on the total net assets of the sub-fund): :
(i) a maximum of 40% may be invested in money market instruments and cash;
(ii) a maximum of 10% may be invested in high yield bonds;
(ii) a maximum of 10% may be invested in other UCITS or UCI.
The instruments described below are not covered by the ESG analysis.
The use of financial derivative instruments is restricted to:
-listed instruments in accordance with the investment policy (including but not limited to interest rate futures, bond futures, swap note futures, currency futures). ,
-OTC instruments for currency hedging purposes (including, but not limited to forward and foreign currency exchange contracts).
The use of OTC instruments for purpose other than currency hedging is prohibited (including, but not limited to OTC derivatives, CDS & CDO contracts).
The sub-fund may not invest in defaulted assets but may invest in Distressed Assets up to 10% of the sub-fund's net assets.
This sub-fund is actively managed and is compared to the risk benchmark as described in Appendix 2 for performance and risk level indicator purposes. However, the reference to this index does not constitute any objective or limitation in the management and composition of the portfolio and the sub-fund does not restrain its universe to the index components.
The index does not evaluate or include its constituents on the basis of environmental and/or social characteristics and is therefore not aligned with the ESG characteristics promoted by the sub-fund.
Therefore, returns may deviate materially from the performance of the reference index.
