Responsible Investment Policy

1. Background

ETHENEA Independent Investors S.A. has a long-standing commitment to ensuring that our investment practices meet the highest standards in terms of environmental, social, and governance (ESG) considerations. We recognize our responsibility to provide our clients with responsible investment solutions that offer competitive and sustainable returns - and this is reflected in the investment policies, processes, and practices of the Ethna Funds.

In November 2017, ETHENEA took a step to formalize this commitment further by becoming a signatory of the United Nations-supported Principles for Responsible Investment (PRI). We firmly believe that the six principles set out by the PRI will support our goal of delivering long-term sustainable value for our clients.

ETHENEA’s Responsible Investment Policy applies to all of the Ethna Funds. We also encourage our external partners to respect these principles, and consider their willingness to apply ESG principles in our selection process.

2. Our exclusion approach

Our Responsible Investment Policy is based on a list of exclusions, which defines the companies that ETHENEA will not finance or invest in.

2.1 Investment process

ETHENEA’s ESG research is carried out by the external rating agency Sustainalytics, which conducts its “Controversial Weapon Radar” research on more than 40,000 issuers, to identify the issuers of equities and bonds that do not meet our investment criteria.

The research results in a list of non-investable securities (an exclusion list), which we upload into our central asset management IT system. This prevents Portfolio Managers from investing in securities featured in the exclusion list. In exceptional cases, deviations from this procedure may be granted by the Responsible Investing Committee. Any deviations must be properly documented.

In addition to the results provided by Sustainalytics, we make it to our aim not to consider companies that, as part of their publicly declared core business, are involved in any of the following areas:

• Tobacco
• Pornography
• Food speculation
• Armaments
  
  

In this last area, however, we are aware that we cannot completely rule out the possibility that one of our funds will invest in large international companies or groups (for example Siemens) that, along with other customers, supply the military.

Companies also will be excluded if there is an unacceptable risk that the company contributes or is responsible for serious or systematic human rights violations, such as murder, torture, deprivation of liberty, forced labour and the worst forms of child labour.

2.2 Definition of controversial weapons

At ETHENEA, we consider the following to be controversial weapons:

• cluster munitions
• anti-personnel mines
• chemical and biological weapons
• nuclear weapons
• depleted uranium ammunition
• white phosphorus weapons
  
  

We have based this list on the definitions of controversial weapons outlined in the following UN Conventions:

• The Convention on Cluster Munitions (2008), which prohibits the use, stockpiling, production and transfer of cluster munitions
• The Ottawa Treaty (1997), which prohibits the use, stockpiling, production and transfer of anti-personnel mines
• The Chemical Weapons Convention (1997), which prohibits the use, stockpiling, production and transfer of chemical weapons
• Biological Weapons Convention (1975), which prohibits the use, stockpiling, production and transfer of biological weapons.
• The Treaty on the Non-Proliferation of Nuclear Weapons (1968), which prohibits the spread of nuclear weapons and permits only five countries, the so-called Nuclear Weapon States (USA, Russia, UK, France and China), to maintain nuclear arsenals
  
  

Using these conventions as a basis, ETHENEA, supported by its external research service providers, has created a list of the types of companies excluded by us for investment:

• Companies that are largely involved in the development, production, use, maintenance, finance and/or sale of controversial weapons or components that are considered key and/or dedicated to controversial weapons. This includes instances where:
  
  
  • The ultimate holding company owns a large amount of voting rights of an involved company
  • A large amount of a company’s voting rights are owned by an involved company
    
    

2.3 Divestment process

Should pre-existing investments not meet the criteria set out in ETHENEA’s “exclusion list”, ETHENEA will liquidate them within two months of this policy taking effect. In exceptional cases, exceptions may be granted by the Responsible Investment Committee. In these cases, the Responsible Investment Committee must document the reason for the exception.

3. Scope of the policy

The scope of the policy encompasses all of the Ethna Funds.

4. Review of the policy

The policy is reviewed and updated on an annual basis.

5. Transparency

ETHENEA will publish its UNPRI Transparency Report on an annual basis.