Sustainability

United Nations Principles for Responsible Investment

Adrigo Asset Management has adopted the United Nations Principles for Responsible Investment (UNPRI). We are therefore complying with the following six principles for responsible investments:

Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.

Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.

Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.

Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.

Principle 5: We will work together to enhance our effectiveness in implementing the Principles.

Principle 6: We will each report on our activities and progress towards implementing the Principles.

For more information, please visit www.unpri.org.

 

Responsible Investments

Adrigo invests in securities according to a well-defined investment process, which includes specific ESG considerations and active ownership. Our responsible investment framework consists of four pillars. The portfolio managers determine whether an investment is compliant with our exclusion criteria at the time of investment and they monitor compliance during the holding period. Controversy screening on international norms, standards and underlying conventions is conducted using an external research partner. ESG criteria are an integrated part of the investment analysis, and ESG weaknesses are being addressed through engagement with companies.

 

Pillar one: Negative exclusion

We have decided to exclude certain sectors we do not believe offer attractive prospects of long-term returns, because of the negative social and environmental impact of these sectors, and the significant cost they generate for society. The criteria are confirmed upon investment in a new company and exclusion thresholds are reviewed annually in conjunction with reconfirming that all holdings are compliant with the exclusion criteria. Adrigo excludes companies involved in the production of:

  • Tobacco products including electronic cigarettes
  • Recreational cannabis
  • Commercial gambling
  • Adult entertainment
  • Alcohol
  • Fossil fuel extraction and coal
  • Strategic military sales and production of firearms or arms ammunition. Moreover, no investment shall be made in any company involved in production, sale or distribution of inhumane weapons such as cluster munitions, anti-personnel landmines, nuclear weapons and ABC- weapons

 

Pillar two: Norm-based analysis

Companies are monitored to ensure their compliance with international norms, standards, and guidelines on human and labor rights, environmental aspects and corruption. Rather than automatically divesting a company with reported allegations, Adrigo has decided to use the screening results and conclusions as an input for any decision to initiate an engagement dialogue with the company, either on our own or together with other investors, in order to suggest and encourage that the company responds to and, if needed, improves on the specific issue. Rather than simply exiting the investment, an engaged and constructive dialogue will more often lead to convincing the company to initiate positive change. We are, however, upon severe and systematic breaches or where active shareholder engagement is deemed to have limited effect — as a final resort — either ready to refrain from investing or exit our holding.

 

Pillar three: ESG integration

Our fundamental bottom-up research process addresses and integrates investment risk and opportunities associated with material environmental, social and corporate governance factors.

We believe that companies able to identify material sustainability factors for their business, either risks or opportunities, and address them appropriately will outperform the ones which fail to do so. Upon new investment, we identify the most important ESG risks through a proprietary analysis, covering topics such as quality of ownership, management, audit, environmental and social controversies. We monitor these risks continuously through dialogue with the management of our portfolio holdings and various stakeholders.

 

Pillar four: Active ownership

Our Active Ownership Policy specifies how we shall act when exercising the ownership rights in the companies held by these strategies on behalf of our clients, the investors. Additionally, the policy describes how we integrate shareholder engagement in our investment processes, as well as how we exercise voting rights. For more information, please refer to the Active Ownership Policy, at www.eastcapital.com.

 

Environmental, Social and Governance (“ESG”) and Sustainability Related Disclosure

Regulation (EU) 2019/2088 of 27 November 2019 on sustainability-related disclosures in the financial services sector, as amended (SFDR) governs the transparency requirements regarding the integration of sustainability risks into investment decisions, the consideration of adverse sustainability impacts and the disclosure of Environment, Social, and Governance (ESG) and sustainability-related information.

Adrigo identify, analyse and integrate sustainability risks in the investment decision-making process as we consider that this integration could help enhance long-term risk adjusted returns for investors. Adrigo are of the opinion that unmanaged material sustainability risks and opportunities may influence the current and future position of a company. Adrigo consider principal adverse impacts derived from sustainability factors throughout each step of the investment process starting from the definition of the investable universe to portfolio construction and its active ownership approach. The identification of principal adverse impacts is done prior to and during the investment through exclusionary screening which implies that it will not invest in companies which generate a significant part of their revenue from sources which do not match the Adrigo’s ESG criteria; and conducts norm-based screening on all portfolios, which identifies portfolio holdings which are alleged to conduct business in a manner contrary to well-established and generally agreed international norms on ESG issues. Further consultation and finalization of the regulatory technical standards (RTS) are to be continued and when the final RTS is available, this will be reflected in the fund documents and on the website at www.eastcapital.com.

The fund promotes environmental and social characteristics in the management of the fund, as well as follow good governance practices through sector exclusions, norm-based screening, a sustainability analysis that is performed within the framework of the investment analysis and through active ownership. Environmental and social characteristics that are promoted refer to, among other aspects, control of greenhouse gas emissions and gender diversity questions. Good governance practices refer to, among other aspects, sound capital allocation as well as compliance with well-recognised principles for good corporate governance.

Our Active Ownership Policy specifies how we shall act when exercising the ownership rights in the companies held by these strategies on behalf of our clients, the investors. Additionally, the policy describes how we integrate shareholder engagement in our investment processes, as well as how we exercise voting rights. For more information, please refer to the Active Ownership Policy, at www.eastcapital.com.

As part of our sustainability work, Adrigo shall also ensure that the remuneration is consistent with the sustainability work undertaken by Adrigo and that sustainability aspects shall form part of the evaluation of the employees that serves as a basis for determining remuneration.

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