This Sub-Fund invests primarily in equities issued by companies registered in or carrying a major part of their commercial activities in Japan
It promotes environmental and social characteristics but does not have as its objective sustainable investment. However, it will have a minimum proportion of 1% of sustainable investments.
This Sub-Fund promotes to maintain an average portfolio’s ESG score, based on the Investment Manager’s analyses of companies ESG profiles using a proprietary scoring methodology, above the median ESG Score of the investment universe as defined below.
As environmental characteristics, this Sub-Fund promotes a lower weighted average carbon intensity than its benchmark, Topix TR.
The benchmark is a standard reference representing the Sub-Fund’s universe but is not aligned with the environmental and social characteristics promoted by this Sub-Fund.
The objectives of the sustainable investments that this Sub-Fund partially intends to make may include but are not limited to:
- environmental such as climate change mitigation through resource efficiency: for example through investments in companies with revenues from products or services that help reduce the consumption of energy, raw materials, and other resources
- companies with an identified portion of their revenues that contribute to objectives like decent work, adequate living standards and well-being, and inclusive & sustainable communities and societies. These revenues cover matters like nutrition, major disease treatments, education, sanitation, affordable real estate, SME financing and connectivity.
To ensure sustainable investments that this Sub-Fund intends to make do not cause significant harm, the Investment Manager assesses whether these companies do no harm through an internally-designed methodology which covers principal adverse impact, controversies, misalignment with SDGs and ESG/governance quality.
The Investment Manager takes into consideration and seeks to minimize the following potential principal adverse impacts of its investments: 1) GHG Intensity of Investee Companies, 2) Violations of UN Global Compact principles and Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises and 3) Exposure to Controversial Weapons.
The ESG approach starts with the filtering of the investment universe which includes both norm-based screening and the exclusion of some controversial activities.
This is followed by the exclusion of the worst issuers in terms of ESG practices, as assessed by the Investment Manager’s proprietary methodology.
This methodology aims to assess the E, S and G practices of companies taking into account the materiality of each issue according to companies’ sectors.
This leads to an exclusion rate of at least 20% from the eligible investment universe defined as the best 300 Japanese listed stocks ranked according to the above mentioned ESG proprietary methodology among the 1000 most liquid Japanese listed stocks.
The ESG analysis covers 100% of the portfolio’s equity holdings.
This Sub-Fund intends to have a minimum of 90% of its assets aligned with the environmental and social characteristics promoted, including a minimum of 1% in environmentally and/or socially sustainable investments.
The binding criteria used to attain each of the environmental and/or social characteristics promoted by the Sub-Fund are integrated in control systems, to ensure pre- and post‑trade checks. Compliance is monitored by the Risk department on an ongoing basis.
The Investment Manager may use data reported directly by issuers or sourced from third-party data providers such as MSCI ESG Research or Sustainalytics. The service and data quality provided by third-party ESG data providers are reviewed regularly.
Depending on the metric considered, some data may be estimated by data providers. Although the Investment Manager applies a thorough selection process of third-party providers, their processes and proprietary ESG methodology may be flawed. As a result, there is a risk of incorrectly assessing an issuer, resulting in an inappropriate capture of ESG risks and potential incorrect inclusion or exclusion in the product. This is expected to have limited impact on the overall environmental and/or social characteristics promoted by the product.
The investment due diligence process ensures that the investment decisions comply with the objectives and the investment strategy of the Sub-Fund. The consideration of sustainability-related risks is integrated into the investment decision-making process to ensure better-informed investment decisions as well as awareness of the risk exposure. The first level of due diligence is conducted by the Investment Manager, while the second level is conducted by the Risk department.
Engagement with investee companies can be conducted collaboratively as well as directly by the Investment Manager.
The Investment Manager exercises its voting rights, in line with the voting policy which follows sustainability principles.
No reference benchmark has been designated for the purpose of attaining the environmental or social characteristics promoted by this Sub-Fund.
For more information, please see the fund’s Sustainability-related disclosures.