The Fund has the objective of generating a positive impact by investing in companies that have the potential to address the world’s major social and environmental challenges.
J O Hambro Capital Management Limited (“Investment Manager”) will identify investment opportunities that have a positive, measurable social and environmental impact when measured against a taxonomy developed by the Investment Manager (the “Regnan Taxonomy”) relating to the targets which underlie the United Nations Sustainable Development Goals. The Investment Manager will use the Regnan Taxonomy to:
i. understand and identify the underlying environmental and social problems to be addressed;
ii. identify the products and services which contribute to finding solutions to these problems; and
iii. identify suitable investee companies which are selling these products and services.
The solutions to underserved environmental and societal needs are identified using the Regnan Taxonomy. The Regnan Taxonomy identifies potential products or services that can contribute towards the achievement of these solutions, helping to identify listed companies that sell such products and services, understand the market growth opportunity for these solutions and therefore understand to what extent these companies can drive a positive impact.
The Investment Manager has built a unique and rigorous process, designed to ensure that only truly mission-driven companies, which are able to drive additional positive impacts through the sale of a solution to a particular problem identified using the Regnan Taxonomy, make it into the portfolio. The Investment Manager will measure and monitor the positive and negative social and environmental impacts of potential investment opportunities. Additionally, it will seek to understand a potential investee company’s culture and attitude with respect to governance, and therefore how open the company would be to engage with the Investment Manager, so it may seek to reduce negative environmental or social impacts the company may have.
The Investment Manager treats climate change mitigation and adaptation as a material factor within its investment approach in accordance with the EU’s Taxonomy Regulation (TR) (Regulation (EU) 2020/852).
To achieve the climate change mitigation and adaption objective under the TR, the Investment Manager undertakes the following:
• Generation of an investment universe by identifying companies that provide solutions to challenges faced by our environment and society through their proprietary framework.
• 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. Companies with a climate transition plan may be exempted from this exclusion, provided that they have in place a credible Paris Agreement aligned transition plan and produce robust climate-related financial disclosures annually.
• Recognising that an economic activity should not qualify as environmentally sustainable if it causes significantly more harm to the environment than the benefit it brings. They assess the impact of any potential investment through assessing the extent of the positive and negative impacts generated by the company and whether that change will be greater or lesser in the future. This analysis covers both the company’s products and operations. This may include, for instance, scrutinising ecosystem impacts of renewable energy projects or the carbon and energy footprint of the manufacturing of a new battery chemistry.
• The wider value created by a company will also be considered before a buy decision is made to ensure that growth can be sustained over the long term. This value assessment considers a wide range of ESG factors including carbon, water, waste footprints, ecosystem impacts, employee health & safety, diversity, supply chain management, business ethics. In particular, the Investment Manager considers the exposure, performance and management around company carbon emissions and the extent to which energy is sourced from renewable sources.
• Actively engaging with companies on climate change to compel them to reduce any negative impacts that their business is generating. Engagement objectives are defined and tracked to ensure that successful outcomes can be identified. This also extends to proxy voting activities.
• Ensuring the economic activity must be carried out in compliance with minimum safeguards specified in the Taxonomy Regulation to ensure the alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights (“Minimum Safeguards”).
However, 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.
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