Sustainability-related disclosures Impact Investing Fund

Summary

The Anthos Fund II RAIF-SICAV – Impact Investing Fund (hereinafter: the ‘Fund’) has the following sustainable investment objectives:

to invest in external investment funds that have an impact objective
the impact objectives of the external investment funds that this Fund invests in should contribute to Anthos’ values: Sustainability, Human Dignity and Good corporate citizenship.

These values translate into the following three impact themes:

Protecting the environment (environmental)
Elevating people and communities (social)
Rethinking the economy (combination of ESG)

As a fund of funds, the Fund invests in investments that are managed by other investment managers. Anthos therefore requires that the investment managers of these external investment funds demonstrate to Anthos that the underlying investments do not significantly harm the sustainable investment objectives of the respective external investment funds. Anthos also identifies and monitors the potential adverse impacts of the investment funds this financial product invests in by assessing the ESG investment practices implemented by the external investment managers of these investment funds, and more specifically obtaining information from them on the potential adverse impacts they make through their investment fund’s underlying investments.

The investment objective of the Fund is to invest capital in impact investing strategies across a wide range of investment styles and deliver Eurozone Core CPI Inflation +3%. The Fund will invest indirectly in impact investing, by participating in investment funds. This financial product may also invest in ETF’s.

External investment funds eligible for consideration for this financial product should be assessed as a "Professional" or "Leader" in Anthos' ESG score.
External investment funds eligible for consideration for this financial product should obtain an impact score of 7 and above and an IMP label of "B" or "C".

The Fund does not invest directly in investee companies, but indirectly, through its direct investments in investment funds. Anthos expects the investment managers of these investment funds to assess good governance practices of their investee companies. Furthermore, this financial product is assessed on a periodic basis (mostly yearly) to determine whether an investee company is violating or at risk of violating, one or more of the UN Global Compact Principles and related international norms and standards.

The Fund seeks to invest at least 80% of its assets in external investment funds that qualify as sustainable investments with environmental or social objectives. This financial product seeks to invest a maximum of 20% of its assets in investments that do not qualify as sustainable investments. This includes investments in cash and money market instruments for liquidity management purposes and derivatives for hedging and efficient portfolio management purposes.

Anthos developed an impact assessment tool – Anthos’ Impact Scorecard – based on the Impact Management Project norms to assess and select external investment funds for this financial product. This financial products selects external investment funds (‘impact funds') that have a clear impact intention, allocation and impact measurement and management and professional or leading practices in integrating environmental, social and governance issues and stewardship. This assures Anthos that the underlying investee companies do not cause significant harm and have good governance practices. Impact potential is scored by looking at the intention, the allocation of capital and the measurement capabilities of the external investment fund and the investment manager Anthos wants to invest in. Each potential external investment fund is assessed against the impact criteria shown in figure 1 below and given a score between 0 and 9 points. A potential external investment fund needs a score of at least 7 in order to be selected for this financial product.

This financial product selects external investment funds (‘impact funds') that have an impact objective which aligns with the three impact themes stated above. To do so, per external investment fund one or more sustainability indicators is chosen and monitored to ensure alignment between the three impact themes and the impact objectives of the external investments funds.

This financial product qualifies the external investment funds included in this product with an ESG rating, an IMP label and an IMP score using Anthos proprietary tools. The ESG rating, IMP label and IMP score are the result of an internal assessment performed by the Anthos portfolio managers and analysts, based on the relevant information shared by the external investment managers themselves during the RFP phase or during engagement conversations that take place at least on a yearly basis.

As a fund of fund manager, Anthos invests in investment funds managed by external investment managers, and it relies on these external investment managers for engagement in connection to the investee companies. However, Anthos believes it also needs to address active ownership through additional engagement activities, either via a service provider or, where possible, directly. This enhances investor stewardship and the pursuit of responsible investment.

Although a benchmark is used for comparing its financial performance, this financial product does not use a specific benchmark to determine whether it is aligned with its sustainable investment objectives. Going forward, Anthos will keep on monitoring whether any benchmark could become relevant regarding the sustainable investment objectives of this financial product. This financial product attains its sustainable investment objectives through its investment guidelines, which are based on its investment strategy.

1. No significant harm to the sustainable investment objective

Anthos also identifies and monitors the potential adverse impacts of the investment funds this financial product invests in by assessing the ESG investment practices implemented by the external investment managers of these investment funds, and more specifically obtaining information from them on the potential adverse impacts they make through their investment fund’s underlying investments. Pre-investment, Anthos assesses these external investment managers on a wide scope of criteria (Negative impacts of the portfolio to the world, exclusions applied to the investment funds, Diversity, Equity & Inclusion, climate change) using the Anthos ESG Scorecard. This financial product only invests in investment funds that score either as ‘Professional’ or ‘Leader’ on the Anthos ESG scorecard.

This financial product implements Anthos' exclusion list by communicating the exclusions criteria to its external managers during the pre-investment phase. This exclusion list is included in the side letter upon investment. Businesses that should be eliminated include tobacco, gambling, controversial and conventional weapons, adult content when they are responsible for more than 5% of revenues for that particular tenant and criminal enterprises. The external investment funds usually already have an exclusion list aligned with Anthos’ exclusion list or aligned with the IFC exclusion list (which is stricter than Anthos’ exclusion list).

Anthos integrates the OECD Guidelines for Multinational Enterprises (MNEs) and the UN Guiding Principles on Business and Human Rights (UNGPs) through a commitment to human rights, responsible investing, and sustainability. The impact team adopts risk-based due diligence across its investment process, ensuring that ESG factors are embedded next to an impact assessment to address social, environmental, and governance risks while aligning portfolios with sustainable development goals. An exclusion list is a starting point to determine where there should not be an exposure from values and sustainability perspective. The RI scorecard, which is at the core of the due diligence process, includes all the relevant questions for the assessment of the external manager's capacity to identify and manage potential and actual risks and impacts. The same scorecard questionnaire is used throughout the investment period to engage and work towards improvement.

The fund excludes investments following Anthos Exclusion Policy and where more restrictive, the ESMA (PAB) exclusions. For public markets we use Sustainalytics to screen, and for private markets we include these in our side letter, and we focus on the sector exposures for screening.

Companies that have any % revenue from developing, producing, stockpiling or selling controversial weapons.
Companies that have 5% or more revenue coming from manufacture, sale of assault weapons to civilians or military and law enforcement customers; manufacture or sale of key components of small arms; manufacture of weapons or weapons systems; providing tailor-made products or services for weapons or weapon systems. Does not include companies that provide dual-use products and services.
Gambling: Companies that have 5% more revenue coming from ownership or operation of gambling establishments, specialized equipment and supporting products and services.
Tobacco: Companies that have any % revenue coming from production, manufacturing of tobacco products. And 5% from retail.
Pornography/adult entertainment: Companies that have 5% or more revenue from pornography, adult entertainment, production or distribution thereof.
Coal: Companies that derive 1% or more of their revenues from exploration, mining, extraction, distribution or refining of hard coal and lignite.
Oil sands: Companies that have 10% revenue from extracting oil sands, that own exploration license, lease and are currently drilling oil sands deposits.
Arctic oil and gas exploration: Companies that have 5% revenue coming from oil and gas exploration in the arctic
Companies that Sustainalytics finds in violation of the United Nations Global Compact (UNGC) principles or the Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises.
Oil fuels: companies that derive 10% or more of their revenues from the exploration, extraction, distribution or refining of oil fuels.
Gasseous fuels: companies that derive 50% or more of their revenues from the exploration, extraction, manufacturing or distribution of gaseous fuels; e/kWh.
Electricity intensity: companies that derive 50% or more of their revenues from electricity generation with a GHG intensity of more than 100g CO2.
Sovereign bonds of countries with EU/UN sanctions directed at central governments and including an arms embargo.

2. Sustainable investment objective of the financial product

Anthos believes in the steering power of capital and has the ambition to contribute to impact through systems change and on the ground.

The sustainable investment objectives of this financial product are:

to invest in external investment funds that have an impact objective
the impact objectives of the external investment funds that this financial product invests in should contribute to Anthos’ values: Sustainability, Human Dignity and Good corporate citizenship.

These values translate into the following three impact themes:

Protecting the environment (environmental)
Elevating people and communities (social)
Rethinking the economy (combination of ESG)

3. Investment strategy

The investment objective of this financial product is to invest capital in impact investing strategies across a wide range of investment styles and deliver Eurozone Core CPI Inflation + 3%. This financial product will invest indirectly in impact investing, by participating in investment funds. This financial product may also invest in ETFs.

The following binding elements apply to attain this financial product’s sustainable investment objective:

External investment funds eligible for consideration for this financial product should obtain an IMP score of 7 and higher.
External investment funds eligible for consideration for this financial product should have an IMP label of “B” or “C”.
External investment funds eligible for consideration for this financial product should have investment manager that are assessed as a "Professional" or "Leader" in Anthos' ESG score.

This financial product does not invest directly in investee companies, but indirectly, through its direct investments in investment funds. Anthos expects the investment managers of these investment funds to assess good governance practices of their investee companies. Before investing in a new investment fund for this financial product, Anthos performs an assessment on the policies of the investment manager of that investment fund, including whether material ESG factors – such as good corporate governance practices at investee companies – are considered in the investment process. Such assessment of the investment manager is repeated by Anthos on a periodic basis (mostly yearly). Furthermore, this financial product is screened on a periodic basis (mostly yearly) to determine whether an investee company is violating or at risk of violating, one or more of the UN Global Compact Principles and related international norms and standards.

4. Proportion of investments

This financial product seeks to invest at least 80% of its assets in external investment funds that qualify as sustainable investments with environmental or social objectives. This financial product seeks to invest a maximum of 20% of its assets in investments that do not qualify as sustainable investments. This includes investments in cash and money market instruments for liquidity management purposes and derivatives for hedging and efficient portfolio management purposes.

5. Monitoring of the sustainable investment objective

Anthos assesses all investment funds that are considered for this financial product on responsible investment practices and key ESG characteristics prior to investing, using its proprietary tools (ESG and IMP scorecard). This financial product only invests in investment funds with investment managers that have an ESG rating as "Professional" or "Leader", with an IMP score of 7 and above and an IMP label of "B" or "C".

In addition to this, Anthos engages on a regular basis with the external investment managers on the components of the ESG scorecard to:
a) ensure the ESG rating correctly reflects the responsible investments practices of the investment manager; and
b) signal the importance of responsible investing, highlight Anthos' expectations about key ESG characteristics (for example, Climate Change, DEI and Human rights) and monitor the progress made against Anthos' expectations.

The ESG+IMP scorecard is updated at least once a year to reflect the outcome of the engagement conversations between Anthos and the external investment managers.

6. Methodologies

Objective 1: To invest in external investment funds that have an impact objective

Anthos developed an impact assessment tool – Anthos’ Impact Scorecard – based on the Impact Management Project norms to assess and select external investment funds for this financial product.

This financial products selects external investment funds (‘impact funds') that have a clear impact intention, allocation and impact measurement and management and professional or leading practices in integrating environmental, social and governance issues and stewardship. This assures Anthos that the underlying investee companies do not cause significant harm and have good governance practices.

Impact potential is scored by looking at the intention, the allocation of capital and the measurement capabilities of the external investment fund and the investment manager Anthos wants to invest in. Each potential external investment fund is assessed against the impact criteria shown in figure 1 below and given a score between 0 and 9 points. A potential external investment fund needs a score of at least 7 in order to be selected for this financial product. On a quarterly basis, the average portfolio impact score is monitored for this financial product.

Figure 1

An investment fund can have one of the following IMP labels:

Avoid Harm (IMP label A): the investment fund seeks to improve its impact and avoid the potential negative impact it may cause or have caused.
Benefit stakeholders (IMP label B): the investment fund seeks to maintain the well-being of one or more group of people and/or the condition of the natural environment within the sustainable range.
Contribute to solutions (IMP label C): the investment fund seeks to address a social or environmental challenge not caused by the organization by improving the well-being of one or more group people and/or the condition of the natural environment so that it is within the sustainable range.
May/Does cause harm (IMP label M/D): If the investment fund does not have an impact intention, it is classified as ‘May/Does cause harm'.

Anthos ESG scorecard:

The Anthos ESG scorecard shows the quality of the integration of environmental, social and governance assessments in the investment process at the external investment manager.

An investment manager can have one of the following ESG ratings: "Laggard", "Novice", "Professional" or "Leader". An investment fund with an investment manager that has an ESG rating of "Professional" or "Leader" will have strong governance policies and requirements, will include sustainable risk assessment as a part of the investment process and will have a developed stewardship approach.

Objective 2: The impact objectives of the external investment funds that this financial product invests in should contribute to Anthos values and the selected impact themes

This financial product selects external investment funds (‘impact funds') that have an impact objective which aligns with the three impact themes below. To do so, per external investment fund one or more sustainability indicators are chosen en monitored to ensure alignment between these impact themes and the impact objectives of the external investments funds.

Anthos monitors the development of these sustainability indicators and it engages with the external investment managers and collaborate with others to increase the impact of the external investment funds, as measured by these sustainability indicators.

7. Data sources and processing

This financial product qualifies the external investment funds included in this product with an ESG rating, an IMP label and an IMP score using Anthos proprietary tools. The ESG rating shows the quality of the integration of environmental, social and governance assessments in the investment process at the investment manager. The IMP assessment shows the impact intention of the investment funds that this financial product invests in and the investor influence that the investment manager of that investment fund exercises. This results in an IMP label (showing the impact intention of the investment manager for the fund) and an IMP score (showing the impact potential of a fund).

The ESG rating, IMP label and IMP score are the result of an internal assessment performed by the Anthos portfolio managers and their analysts, based on the relevant information shared by the external investment managers themselves during the RFP phase or during engagement conversations that take place at least on a yearly basis.

8. Limitations to methodologies and data

Assessing the information shared by the external investment managers may be influenced by the amount of knowledge of the Anthos staff performing the assessment on ESG practices, ESG topics, market standards, etcetera. Anthos mitigates this limitation by providing regular training to its staff, either on processes or specific topics (for example climate training and human rights workshops). The Anthos ESG & IMP scorecards are accompanied of a scoring guide which indicates which kind of requirements lead to specific ratings/labels/scores.

The assessments are also reviewed by the Anthos Responsible Investments Team on a need basis and the tools are continuously improved to keep up with market standards.

Anthos aims to incorporate outcomes in its assessment, as external ESG and Impact data becomes more reliable and methodologies more robust.

9. Due diligence

As part of the due diligence process the external investment manager as well as the investment fund are investigated by the portfolio manager. Therefore, the external investment manager has to provide the information necessary for Anthos to be able to perform the ESG and IMP assessment. Once the information is received, Anthos will assess the information resulting in an ESG score ‘Laggard’, ‘Novice’, ‘Professional’ or ‘Leader’. And also, in an IMP label ‘A’, ‘B’, ‘C’ or ‘M/D’. Anthos will not invest in investment managers and funds with an ESG score Laggard or Novice neither in investment funds with an IMP label M/D.

Anthos assesses the governance structure and resources of the external manager to manage environmental, social and governance issues and integrate in the investment process. The assessment contributes to the final rating of the managers on ESG (Laggard-Leader) which helps the portfolio managers make a decision.

During the due diligence, the first assessment is done by the portfolio manager, together with their analysts. The assessments are also reviewed by the Anthos Responsible Investments Team on a need basis and the tools are continuously improved to keep up with market standards.

10. Engagement policies

As a fund of fund manager, Anthos invests in segregated mandates and investment funds managed by external investment managers, and it relies on these external investment managers for engagement and voting in connection to the investee companies. However, Anthos believes it also needs to address active ownership through additional engagement activities, either via a service provider or, where possible, directly. This enhances investor stewardship and the pursuit of responsible investment.

Anthos has high expectations of the external investment managers selected for this financial product and incorporates ESG considerations into the entire external investment manager due diligence and relationship lifecycle. Anthos expects the selected external investment managers to be signatories of the Principles for Responsible Investment (PRI) and to support the Principles of the European Fund and Asset Management Association (EFAMA) Stewardship Code or a similar guidance, which clearly outlines engagement and voting good practices for direct investors.

Internally, engagement is carried out by Anthos’s portfolio managers, who assess the ESG integration capacity and quality of the external investment managers of the investment funds that this financial product invests in. Anthos also engages via an external engagement service provider that engages on behalf of Anthos' clients, even when Anthos does not appear as shareholder at the investee companies in question. In this way Anthos gives its voice to the pool of like-minded investors wanting meaningful change.

More information on Anthos' engagement process and objectives can be found in its Stewardship Policy.

11. Attainment of the sustainable investment objective

Although a benchmark is used for comparing its financial performance, this financial product does not use a specific benchmark to determine whether it is aligned with its sustainable investment objectives. Going forward, Anthos will keep on monitoring whether any benchmark could become relevant regarding the sustainable investment objectives of this financial product. This financial product attains its sustainable investment objectives through its investment guidelines, which are based on its investment strategy.