Summary
(a) No sustainable investment objective: The portfolio does not have sustainable investments as its objective.
(b) Environmental or social characteristics of the financial product: The portfolio integrates environmental, social and corporate governance factors (ESG) into the investment process with the help of the Investment Manager´s sustainability screening process, which considers underlying companies´ ability to manage sustainability risks and opportunities. Managing ESG risks is a vital part of what makes an investment attractive, together with the traditional financial metrics.
(c) Investment strategy: Sustainability with regard to environmental, social and governance aspects is accomplished through screening and exclusions.
(d) Proportion of investments: The portfolio invests mainly in Swedish equities, normally 20-30 core holdings, and integrates exclusion filters to restrict investments in companies with more than 5% of their revenues from the following activities such as controversial weapons, tobacco, alcohol, adult entertainment, gambling and fossil fuel as well as excludes companies that have any confirmed violations against UN Global Compact. The sector-based exclusions are based on a maximum percentage of 5% of revenue from the excluded sectors at the level of each underlying investment, except from Controversial Weapons that have a zero tolerance. The portfolio is expected to dedicate at least 90% of its NAV to investments that are aligned with its environmental and social characteristics.
(e) Monitoring of environmental or social characteristics: Screening on existing holdings is done on a quarterly basis and potential investments are screened before initial investment against companies with confirmed violations against the UN Global Compact Principles for responsible investments. Investments that do not comply with the requirements will be divested, in an orderly manner, considering the best interests of the shareholders.
(f) Methodologies: The Investment Manager have developed policies and procedures to ensure that the companies the Sub-Fund invest in meet the Investment Manager’s expectations of ESG performance, and that ESG risk is managed in the Investment Manager’s investment process. This is supported by a norm-based screening process and exclusion criteria. Resources independent from the Investment Manager are used in the ESG analysis.
(g) Data sources and processing: The external data provider (MSCI ESG) for the screening service has been chosen to provide with ESG data by multiple requirements but one of the most important was to choose a large reputable external data provider to achieve highest possible coverage and quality of data. The information from the external data provider is, where possible, questioned before used. Apart from information from the chosen external data provider, other external sources for information as well as internal analysis is used to assure that the environmental and social exclusion criteria by the portfolio are met.
(h) Limitations to methodologies and data: It is not always possible to confirm the exact exposure towards these sectors. In the cases where information is not publicly available, an estimate by the chosen external data provider is done which can result in an underestimate or overestimate compared to reality.
(i) Due diligence: The portfolio´s ESG criteria and restrictions are monitored both before the investment and during the life-span of the investments. Furthermore, the Investment Manager is continuously monitoring the investments to secure the environmental and social characteristics of the Sub-Fund, gathering information not only from the chosen external data provider but also directly from the companies, from external sources where the fund is subscribing for analysis and information, or from open sources such as news channels.
(j) Engagement policies: The portfolio may exercise voting rights when it is in the best interest of the portfolio and its investors but as the portfolio is a small investor in the companies and has limited resources to engage, the engagement is usually limited.
(k) Designated reference benchmark: The portfolio does not use a benchmark that is aligned with the portfolio´s environmental or social characteristics.
No sustainable investment objective
The portfolio promotes environmental or social characteristics but does not have as its objective sustainable investment.
The portfolio does not commit to make sustainable investments as defined in article 2(17) of Regulation (EU) 2019/2088 (the SFDR) or article 3 of Regulation (EU) 2020/852 (the Taxonomy Regulation).
Environmental or social characteristics of the financial product
The environmental or social characteristics of this portfolio (together, the “E/S Characteristics”) include:
– The portfolio integrates ESG factors into the investment process with the help of the Investment Manager´s sustainability screening and selection model, which assesses underlying companies´ ability to manage sustainability risks and opportunities.
– The portfolio promotes E/S Characteristics and the ESG analysis is an entirely integrated part of the investment process.
– The portfolio excludes companies that have any confirmed violations against UN Global Compact.
– The portfolio integrates a zero tolerance for controversial weapons.
– The portfolio integrates exclusion filters to restrict investments in companies with more than 5% of their revenues from the following activities including controversial weapons, tobacco, alcohol, adult entertainment, gambling and fossil fuel.
More details on excluding criteria is available in the annex to the portfolio’s schedule contained in the prospectus of Carnegie Investment Fund and information on how the criteria were met will be provided in the annual report of Carnegie Investment Fund. Both documents can be obtained here:
Investment strategy
The portfolio invests mainly in Swedish equities. The portfolio normally consists of 20-30 core holdings: quality companies with stable profit growth, high returns and sound balance sheets. In addition to this, the portfolio invests in equities of a more opportunistic character, for example revaluation cases or growth companies that the market has not caught up with yet, as well as opportunistic positions. The investments are selected using a bottoms up fundamental approach. The Investment Manager strives to achieve sector diversification as sound risk management is important.
The analysis will be based on internal and as well as external research and advisory services.
The portfolio will apply exclusion criteria to determine the investment universe. The portfolio has restrictions against investing in companies of the following sectors: alcohol, tobacco, gambling, controversial weapons, adult entertainment and fossil fuels.
Screening on existing holdings is done on a quarterly basis and potential investments are screened before initial investment against companies with confirmed violations against the UN Global Compact Principles for responsible investments.
Good governance practices of investee companies are addressed in several layers of the security selection process. Governance safeguards are inherent in the norms-based screening both before and during the lifespan of the investment, i.e. the Investment Manager monitors that the investments are in line with the UN Global Compact Principles which includes sound management structures, employee relations, remuneration of staff and tax compliance.
Proportion of investments
The portfolio is expected to dedicate at least 90% of its NAV to investments that are aligned with its E/S Characteristics, i.e. meet the criteria for:
• Sector based exclusions of alcohol, tobacco, gambling, controversial weapons, adult entertainment and fossil fuels.
• Norm-based screening, of the E/S Characteristics promoted by the Sub-Fund in accordance with the binding elements of the investment strategy, including the minimum proportion of sustainable investments of the Sub-Fund.
The portfolio will mainly have direct exposures to investee entities, but indirect exposures can occur via other equity-related investments. There are no limits for these proportions and they can change over time.
The portfolio may use derivatives to gain exposure to companies meeting the E/S Characteristics. The same exclusion criteria apply as for direct investments.
Monitoring of environmental or social characteristics
The binding elements of the investment strategy used to select the investments to attain each of the E/S Characteristics promoted by the portfolio are:
• Sector-based exclusions (based on a maximum percentage of 5% of revenue from the excluded sectors at the level of each underlying investment) prevent investments into activities that are inappropriate for the strategy. The sector-based exclusions include thresholds for exposure to controversial weapons, tobacco companies, alcohol, adult entertainment, gambling and fossil fuel.
• Norm-based screening against violations of the UN Global Compact Principles having a negative impact on the environment, human rights, labour rights and business ethics is done. If violations are suspected in relation to sustainable practices, the Investment Manager will analyze the investment further and without sufficient progress preparation is made to exit the investment.
Resources that are separated from the responsible Investment Manager oversee the ESG analysis. The portfolio will on a quarterly basis be screened via the chosen external data provider for screening service.
The portfolio uses the following sustainability indicators to measure the attainment of the provided characteristics:
- Number of companies in the investment portfolio that violate UN’s Global Compact initiative as a percentage of total investments,
- Zero tolerance for controversial weapons,
- Exclusion of companies which derive more than 5% of their revenue from controversial weapons, tobacco, alcohol, adult entertainment, gambling and fossil fuel.
Methodologies
The Investment Manager have developed policies and procedures to ensure that the companies the portfolio invest in meet the Investment Manager’s expectations of ESG performance, and that ESG risk is managed in the Investment Manager’s investment process, the Investment Manager´s sustainability screening and selection model. This is supported by a norm-based screening process and exclusion criteria.
Resources independent from the Investment Manager are used in the ESG analysis. The portfolio will, on a quarterly basis, be screened using a leading screening service. Investments that do not comply with the requirements will be divested, in an orderly manner, considering the best interests of the shareholders.
Data sources and processing
In the investment decision and in the quarterly periodic monitoring, the Investment Manager is using external ESG data from a well-known external data provider, who has undoubtedly larger resources both to manage large data sets and to do in dept analysis of the investment universe relevant for this portfolio, than is possible with internal resources.
Prior to the external data provider being chosen as a supplier, extensive market research has been conducted, and the potential external data providers have been assessed on issues such as data quality, coverage, security, methodology, price, reliability and conflict of interest.
Apart from information from selected external data provider, qualitative information from other external and internal sources are used as a supplement for analyzing investments.
The data is processed by uploading portfolio holdings to the external data providers platform. The portfolio´s aggregated measures are then manually and internally analyzed. This is the process for regular monitoring of the Sub-Fund.
The ESG part of the Investment Manager’s investment decision making is based on various sources, where the dominant source for the quantitative data is the chosen external data provider.
The investment decisions by the Investment Manager and the monitoring, partly rely on estimated data from the chosen external data provider. No estimates are calculated by the Investment Manager itself and the chosen external data provider is only estimating where minimum quality is considered secured and to be the only alternative.
Limitations to methodologies and data
The information regarding the potential exposure towards investments in excluded sectors and companies that have any confirmed violations against UN Global Compact Principles is limited to information provided by chosen external data providers through public information about the companies invested in. This means that it is not always possible to confirm the exact exposure towards these sectors. In the cases where information is not publicly available, an estimate by the chosen external data provider is done which can result in an underestimate or overestimate compared to reality.
Apart from information from chosen external data provider, other external sources for information as well as internal analysis is used to assure that the environmental and social exclusion criteria by the portfolio are met.
Due diligence
The portfolio ´s ESG criteria and restrictions are monitored both before the investment and during the life-span of the investments.
Furthermore, the Investment Manager is continuously monitoring the investments to secure the E/S Characteristics of the portfolio, gathering information not only from the chosen external data provider but also directly from the companies, from external sources where the fund is subscribing for analysis and information, or from open sources such as news channels.
The external data provider has been chosen to provide the Investment Manager with ESG data by multiple requirements but one of the most important was to choose a large reputable external data provider to achieve highest possible coverage and quality of data. The information from the external data provider is, where possible, questioned before used. This is to make sure that the information from the ESG external data provider is in harmony with other data sources available to the Investment Manager.
Engagement policies
The portfolio may exercise voting rights when it is in the best interest of the portfolio and its investors but as the portfolio is a small investor in the companies and has limited resources to engage, the engagement is usually limited. The portfolio will normally not exercise ownership rights by entering into direct dialogue with companies or by representation on election committees. The Investment Manager is a signatory of UN Global Compact, and as such engaged in the work towards a more sustainable society.
Designated reference benchmark
The portfolio does not use a benchmark that is aligned with the Sub-Fund´s E/S Characteristics.
Information referred to in Article 8 SFDR
The portfolio promotes environmental and social characteristics pursuant to Article 8 SFDR as set out in detail in the annex to the portfolio’s specifics contained is available here: https://www.carnegie.se/private-banking/dokument-och-underlag/fonder-och-portfoljer
Information referred to in Article 11 SFDR
Further information on the extent that the portfolio’s promoted characteristics were met and how principal adverse impacts on sustainability factors were considered for the portfolio will be provided annually here: https://www.carnegie.se/private-banking/dokument-och-underlag/fonder-och-portfoljer