Sustainability and Corporate Governance Report 202
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IN-DEPTH REPORT – HANDELSBANKEN FONDER Sustainabi
lity labels EU classification EU Regulation 2019/2088 (Sustainable Finance Disclosure Regulation, or SFDR) aims to strengthen consumer protection through enhanced sustainability information. The new regulatory framework places increased demands on us as a fund company regarding transparent disclosure of our ARTICLE 6 Funds that integrate sustainability risks into investment decisions Funds that do not integrate sustainability risks into investment decisions sustainability work and will thus help consumers to compare financial products and make informed investment decisions. The regulation introduces disclosure requirements at company and product level in relation to the integration of sustainability risks into the investment and advisory processes. ARTICLE 8 ARTICLE 9 Funds promoting environmental and social characteristics Level of detail in disclosure Funds that have sustainable investments as their objective OUR APPROACH Integrate ESG into investment research and decisions Apply all exclusion criteria Have sustainable investments or reduction in carbon emissions as its objective Based on the new regulatory framework, our funds are classified as follows: The fund has sustainable investments or a reduction in carbon emissions as its objective (Article 9) Funds with sustainable investments as an objective means that the fund invests in companies with products and services that are considered as contributing positively to the direct fulfillment of one or several of the targets in the 2030 Agenda. Funds with a reduction in carbon emissions as an objective means that the fund’s objective is to attain low carbon emission exposure in view of achieving the long-term global warming objectives of the Paris Agreement. These funds track so-called EU Paris Aligned Benchmarks. The fund promotes environmental and social characteristics (Article 8) This fund promotes environmental and social characteristics through its investments but does not have sustainable investments as its objective. As a result, the fund takes into consideration the environment and climate, as well as human rights, employees’ rights and equal opportunities. Sustainability risks are integrated into investment decisions (Article 6) Sustainability risks are integrated into investment decisions, but the fund does not promote environmental or social characteristics or have sustainable investments as its objective. Sustainability risks are managed primarily through engagement in the form of dialogues and active corporate governance. Understanding Morningstar’s Fund Ratings Morningstar’s ratings work together to provide investors with a powerful tool to assess funds. Morningstar Rating™ for funds Scale QQQQQ QQQQ QQQ QQ Q Morningstar Analyst Rating™ for funds Nordic Swan Ecolabel funds The Nordic Swan Ecolabel is the official eco-label in the Nordic region and aims to guide consumers to make positive environmental choices. The Nordic Swan Ecolabel mark on a fund means that 25 mandatory requirements regarding inclusion, exclusion, engagement and transparency must be met. The funds must exclude industries that are at high risk of having a negative effect on the world around us, such as fossil fuels, tobacco and controversial weapons. The ecolabel also means that the fund manager uses capital and ownership to influence the companies the fund invests in to develop in a more sustainable direction. What is it? The Morningstar Rating, or “star rating,” is a purely quantitative, backward-looking measure of a fund’s past performance, measured from one to five stars. Star ratings are calculated at the end of every month. How does it work? The Morningstar Rating methodology rates funds within the same Morningstar Category based on an enhanced Morningstar Risk-Adjusted Return measure. To receive a Morningstar Rating, a fund must have a record of more than three years. Œ „ ´ ˇ ¨ Ø Morningstar Quantitative Rating™ for funds ŒQ „Q ´Q ˇQ ¨Q The Analyst Rating is Morningstar’s forward -looking, analyst-driven ratings system that takes the form of Gold, Silver, Bronze, Neutral, and Negative. The Analyst Rating denotes an analyst’s conviction in a fund’s investment merits. Analysts typically re-evaluate Analyst Ratings on an annual basis. Morningstar’s Sustainability Rating (globes) This sustainability rating measures how well the companies in which a fund has invested manage sustainability risks related to ESG issues relative to other funds in the same fund category. The funds analysed can be assigned a sustainability rating of between 1 and 5 globes, where 5 is the highest rating. Morningstar assigns the Analyst Rating to funds that analysts qualitatively assess, typically through manager interviews and other sources. That assessment turns on three key “pillars”—People, Process, and Parent— that yield an estimate of how well the analysts expect the fund to perform before fees but after adjusting for risk. The rating is a historical holding-based calculation that uses a company’s ESG risk rating from Sustainalytics, a leading provider of ESG analysis. The sustainability rating is calculated for funds, management assignments and indices globally, using Morningstar’s database of portfolio holdings. The Morningstar Quantitative Rating is created by a machine-learning statistical model and analogous to the Analyst Rating a Morningstar analyst might assign to the fund if an analyst covered the fund. Gold, Silver, or Bronze ratings are considered positive. The Quantitative Ratings are calculated monthly. U.S. open-end funds and ETFs that don’t have an Analyst Rating and are in a category Morningstar currently rates are eligible to receive a Quantitative Rating. The model uses Morningstar analysts’ current and historical ratings decisions as well as the data used to support these decisions. Sustainability risks are not integrated (Article 6) Sustainability risks are not integrated into the investment decisions due to the fund’s investment focus. Morningstar Sustainability Rating™ for funds The Morningstar Sustainability Rating helps investors understand the vulnerability of their investment portfolios to environmental, social, and governance (ESG) factors. The Sustainability Rating is depicted by globe icons where a low ESG risk score equals 5 globes and a high ESG risk score equals 1 globe. Sustainability Ratings are updated monthly. The Morningstar Sustainability Rating uses an ESG Risk Rating, which is an absolute assessment of a company’s exposure to material ESG risk factors and can be used to compare across industries. The Sustainability Rating is a straightforward roll-up of the underlying ESG Risk Ratings of companies in the portfolio. 67