Amongst other characteristics, the Fund promotes environmental and social characteristics and invests in companies that apply good corporate governance. JOHCM Funds (Ireland) Limited, the Fund’s manager has therefore categorised the Fund as meeting the provisions set out in Article 8 of EU Regulation 2019/2088 on sustainability-related disclosures in the financial services sector (“SFDR”).
In looking for investments, J O Hambro Capital Management Limited (“Investment Manager”) seeks to avoid investing in companies which contribute to significant social and/or environmental harms, and thereby fail environmental, social and governance (“ESG”) key performance indicators which are directly integrated within all aspects of the investment process.
In order to achieve this, the Fund applies exclusions to the selection of underlying assets as part of its investment process, including an exclusion for businesses that are rated as ‘Severe’ by Sustainalytics, ‘CCC’ by MSCI ESG or assessed as ‘non-compliant’ with the UN Global Compact.
In order to support the reduction of adverse environmental impacts of the Fund’s portfolio, and in particular its contribution to climate change, the Investment Manager excludes investments in companies that:
- derive 10% or more of their total revenue directly from extraction, exploration, distribution, or refinement of fossil fuels (coal, oil and natural gas), or fossil fuel-based power generation.
* Companies with a climate transition plan may be exempted from this exclusion, provided that they have in place a Paris Agreement aligned transition plan and produce climate-related financial disclosures annually, which in both cases we consider credible.
These selection criteria may not be disapplied or overridden by the Investment Manager unless it is a fossil fuel company with a Paris Agreement-aligned climate transition plan and it produces robust climate-related financial disclosures annually, which in both cases the Investment Manager considers credible.
Also excluded, to avoid contributing to social harms, are companies that:
- produce tobacco;
- manufacture controversial weapons;
- derive 10% or more of their total revenue from the production of alcoholic beverages;
- derive 10% or more of their total revenue from the manufacture, ownership or operation of gambling facilities, gaming services or other forms of wagering;
- derive 10% or more of their total revenue from the manufacture of non-controversial weapons or armaments; or
- derive 10% or more of their total revenue from the manufacture or distribution of pornography.
Additionally, the Investment Manager recognises that ESG factors can create risks and opportunities for companies and as such incorporates ESG risks into their analytical framework and portfolio construction.
In order to measure and monitor the environmental and social characteristics of the Fund, the Investment Manager will review a variety of internally- and externally-generated ESG data produced by its third-party data providers and published by its investee companies. This allows the Investment Manager to review performance against those environmental and social characteristics across all four dimensions of the investment process.
The Investment Manager treats climate change mititgation and adaptation as a material factor within its investment approach in accordance with the EU’s Taxonomy Regulation (Regulation (EU) 2020/852 and amending Regulation (EU) 2019/2088). Climate change poses fundamental risks and opportunities that can affect the long-term performance and value of investments.
The Investment Manager accounts for and promotes climate change mitigation and adaption factors by utilising the following methods:
• There is a preference for companies with low exposure to fossil fuels, through the Fund actively not investing in companies where extraction, exploration, distribution, or refinement of fossil fuels (coal, oil and natural gas) or fossil fuel-based power generation account for 10% or more of total revenue.
• The Investment Manager may though disapply these selection criteria to support transitional initiatives, where companies have a transitioning or decarbonising business strategy, aligned with the long-term temperature goal of the Paris Agreement on Climate Change.
• The Investment Manager undertakes active engagement with certain companies that have significantly below average sustainability characteristics but a high propensity for transformation, and therefore supports change.
Due to a lack of reliable, timely and verifiable data, the Investment Manager is unable to make a full assessment of the Fund’s investments against the TR’s Technical Screening Criteria (“TSC”). As such, it has been determined that 0% of the Fund’s investments are in economic activities that qualify as environmentally sustainable under the TR.
The Investment Manager is keeping this situation under review and will provide an updated statement on the percentage of the Fund’s alignment with the TR’s TSC once sufficient data is available.
The do no significant harm principle only applies to those investments underlying the financial product that take into account the EU criteria for environmentally sustainable economic activities. The investments underlying the remaining portion of this financial product do not take into account the EU criteria for environmentally sustainable economic activities.
