Fund/Portfolio Size: £501.90m

Total screened & themed / SRI assets: £10968.70

Total assets under management: £10968.70

As at: 30/09/25

Overview

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Policy

The Investment team strategy is founded on the principle of stewardship. Stewardship relates to the ability and desire of the owners and leaders of companies to make good long-term decisions on behalf of the businesses they run while effectively balancing the interest of all stakeholders. The Investment team takes a bottom-up and qualitative approach to finding and investing in companies which it believes are both of (a) high quality and (b) contribute to, and benefit from, sustainable development.

To determine whether a company contributes to, and benefits from, sustainable development, the Investment team will assess whether the activities of a company lead to positive social or environmental outcomes. Please refer to Project Drawdown and the Human Development Pillars previously mentioned, for further information. The Investment team has a strong conviction that such companies face fewer risks and are better placed to deliver positive long-term, risk-adjusted returns. The Investment team believes that this approach will help to preserve client capital in volatile and falling markets allowing for the steady compounding of returns through economic cycles.

The Investment team does not set quantitative thresholds for incorporating sustainability or ESG considerations but rather evaluates a company’s track record and business model against the following quality and sustainability frameworks and makes qualitative judgements.

Quality assessment
The Investment team will only invest in companies that have been through its quality assessment process. When assessing the quality of a company, the team considers quality across three dimensions: management, franchise and financials.

1. The quality of management will include but is not limited to:

• competence and integrity (e.g., evidence that the company's leaders are delivering outcomes in line with the Investment Manager’s expectations and acting honestly in their dealings with shareholders and other stakeholders)
• alignment with all stakeholders (e.g., evidence that the company's leaders consider and balance the interests of all stakeholders, for example, employees or local communities with shareholders for the long term benefit of all)
•  track records over extended periods (e.g., how the company’s leaders have behaved in their current and previous roles, including in difficult circumstances)
• stewardship and time horizon (e.g., evidence that the company's leaders take decisions with the long-term interests of the company in mind; including its reputation and resilience, rather than focussing solely on enhancing short-term gains)

2. The quality of the franchise will include but is not limited to:

• necessary and responsible products and services and business practices (e.g., products that support more efficient and sustainable use of resources)
• pricing power, barriers to entry (e.g., a company that produces a product with unique, hard-to-replicate features or that is essential to its customers)
• sustainable and profitable growth opportunities (e.g., products that benefit from sustainability tailwinds, including decarbonisation, circular economy, and affordable and accessible healthcare)
• return on invested capital (e.g., the ability of the company to generate reasonable returns on its investments for the long-term benefit of the company)

3. The quality of the financials will include but is not limited to:

• resilient cash flows and profit margins (e.g., the continued demand at reasonable prices of products and services during economic and market downturns)
• appropriate payment of taxes e.g., not engaging in aggressive or elaborate tax minimisation strategies)
• strong balance sheets (e.g., preference for net cash or low debt)
• conservative accounting (e.g., not engaging in complex accounting practices that disguise the underlying financial performance of the company or that are used for non-business purposes like reducing tax liabilities or enriching management).

The quality assessment is a binding part of the investment process (i.e., it is undertaken for every investment). However, it is not part of the process to confirm that an investment is a Sustainable Investment (refer to the Prospectus for details).

Sustainability assessment
The Investment team will invest primarily (at least 90% of Net Asset Value) in companies it believes contribute to, and benefit from, sustainable development. The team considers that a company will contribute to, and benefit from, sustainable development if its activities lead to positive social outcomes and/or positive environmental outcomes. In assessing whether a company “contributes to and benefits from” sustainable development, the Investment team will consider whether:

1. there is either a direct or enabling link between the activities of the company and the achievement of a positive social or environmental outcome;
2. any contribution to positive social or environmental outcomes has resulted from revenue or growth drivers inherent in the company’s business model, strategic initiatives that are backed by research and development or capital expenditure, or from the company’s strong culture and sense of stewardship e.g. for equity and diversity; and
3. the company recognises potential negative social or environmental outcomes associated with its product or services and works towards minimising such outcomes, e.g. a company that sells affordable nutritious food products in plastic packaging, but is investigating alternative packaging options.

The Investment team documents and discloses its assessment and framework mapping of investee companies on its website: www.stewartinvestors.com/all/how-we-invest/ourapproach/introducing-portfolio-explorer. Contribution is assessed under two frameworks, social and environmental. Both the social and environmental frameworks are described on the Stewart Investors website and within the Prospectus.

Process

Sustainability is core to our investment philosophy and integrated into our investment process. The investment team focus on the sustainability of each company’s products and services as well as operational ESG factors.

The sustainable investment objective of our portfolios is to invest in companies which both contribute to, and benefit from, sustainable development, achieving positive social and environmentally sustainable outcomes. All investee companies contribute to improving human development, while many also contribute to positive environmental outcomes.

Positive social outcomes
The team assesses positive social outcomes by reference to the human development pillars. Stewart Investors has developed these human development pillars, by reference to, amongst other things, the UN Human Development Index.

Positive environmental outcomes
The team assesses positive environmental outcomes by reference to the climate solutions developed by Project Drawdown, a non-profit organisation that has mapped, measured and modelled over 90 different solutions that it believes will contribute to reaching drawdown – i.e., the point in the future when emissions stop increasing and start to steadily decline.

We only invest in high-quality companies that contribute to, and benefit from, sustainable development. We define development as sustainable if it furthers human development and has an ecological footprint that respects planetary boundaries. All members of the investment team sign our Hippocratic Oath, pledging to uphold the principles of stewardship.

Our consideration of sustainability is holistic; it includes ESG but is more than ESG. For example, financial sustainability in the form of conservatism around the balance sheet, or the fair treatment of all stakeholders by management in the time of crisis. We believe these considerations to be as important to the sustainability positioning of a company as the product or service it sells.

When assessing a company’s sustainability we ask ourselves the following questions:

• Products and services
  Do the products and services make a valuable contribution to sustainable development?
• Context
  Can the company benefit from sustainability tailwinds and navigate headwinds?
• Company ethos
  Do the culture and values embody sustainability and continuous improvement?
• Operational impact
  Is the company trying to reduce impacts from its operations?

We avoid companies that do not contribute to sustainable development, and we engage with companies to improve sustainability outcomes.

An initial investment will only be made if the company contributes to, and benefits from, sustainable development. Sustainability must be core to each company’s business model and management must be committed to managing ESG risks and opportunities effectively.

ESG and sustainability analysis and engagement are fully integrated into the role of each team member as sustainable investment is central to their roles. Our focus is on evaluating the sustainability of companies based on fundamental bottom-up research. We carry out the majority of research ourselves. Third-party ESG data is of limited value as our process is qualitative and long term. Data providers tend to focus more on the operational efficiency of companies than the contribution of a company’s products and services towards sustainable development. Data providers also tend to use historic data which is incomplete and often misleading.

The investment team receives support from our Impact Communication and Engagement team (ICE) who support the investment team with regulatory and operational activities relating to ESG and RI, this includes support to monitor and report on engagement, voting, sustainability and impact reporting. The ICE function allows the investment team to remain focused on investment-related activities while ICE provides the supporting resources to meet the growing demands from clients, consultants, regulators and other stakeholders. The team also includes a research function which helps maximise the value of Stewart Investors strategic research partnerships (including external communication), provides support in building on our priority research tender engagement topics such as Conflict Minerals, Plastic Wastes and the Circular Economy and further utilise important providers like Verity and Net Purpose.

Additional research support is also provided by the First Sentier Group (the Group) global team of dedicated RI professionals who run regular webinars on topical issues such as ESG policy and regulation, ESG reporting including PRI, SFDR, TCFD and net zero. Other sessions have included: biodiversity, cybersecurity, ESG & member engagement in defined contribution pensions, micro plastic pollution and microfibers, COVID vaccines, UK Stewardship code, the EU taxonomy, the Investment Consultant Sustainability Working Group and Marine Conservation Society on forever chemicals.

The Stewart Investors team also learns through its interactions with the PRI, UK Stewardship code, UKSIF, Responsible Investment Association Australasia (RIAA) and other industry bodies, as well as through dialogue with clients, prospects and intermediaries.

Following a period of research and team discussion which results in the creation of a company report, analysts will add high conviction companies (based on quality and sustainability) to the focus list. These companies may stay on this list for a long time before they become positions in one (or more) of our strategies. Whether a company is on the focus list or in the portfolio will depend on an ongoing evaluation of the relative merits of the companies in the strategies and those on the list relating to quality, sustainability, valuation, long term growth prospects, and portfolio construction considerations relating to diversification.

External resources
We supplement our internal research around sustainability using Sustainalytics. At the end of each quarter, portfolios are checked to ensure companies meet global norms for best practices and raise no exceptions against our thresholds for harmful activities. We also receive controversy reporting from RepRisk.
Issues such as climate change, biodiversity and water, human rights and modern slavery, and diversity and inclusion are integrated into our investment selection and engagement and voting processes. Our approach to climate change is explained in our Climate statement.

Our approach to biodiversity and water is reflected in our selection of companies that mitigate their impact on the natural environment or provide services/products that improve efficiencies.

We have engaged on a number of related issues such as palm oil, deforestation, plastic waste and the use of harmful chemicals. Human rights and modern slavery are a risk throughout the supply chain of our investee companies. Our approach is to focus on quality companies that treat their employees well and manage the risks in their supply chain effectively. Where we identify problems, we engage. Our recent collaborative engagement on conflict minerals in the semi-conductor supply chain is a good example of this. Our approach to diversity is explained in our diversity update. We will provide updates on related activities on these issues, amongst others, in our annual report.

Resources, Affiliations & Corporate Strategies

Internal research
All investment ideas are generated in-house. Everyone on the investment team is first and foremost an investment analyst. Portfolio managers are analysts with additional responsibilities. Every team member performs a broad ranging role and is encouraged to participate in the generation of ideas for all strategies.

Our investment process is bottom-up and qualitative. While investment ideas are primarily driven by our proprietary research, we also draw on a wide variety of inputs from external providers (including NGOs, local focus groups, journalists and broker analysts that the team respects). We typically find that the research of traditional sell-side brokers is too short-term in its perspective.

The investment team receives support from the Impact Communication and Engagement team (ICE) which has four interconnected areas of activity: content, engagement, research and strategic partnerships and company relationships. The investment team also receives support from First Sentier Group’s dedicated team of RI professionals who work with the Group’s investment teams to support the firm’s wider commitment to integrating ESG issues into investment decision-making and ownership practices

External research
Stewart Investors augment internal research by commissioning independent third-parties to complete bespoke research, often focused on a particular industry or a particular issue. Specialist third-party research is commissioned to deepen and broaden the team’s understanding of complex sustainability issues. Recent examples have included the sustainability of supply chains (soy, palm oil, and coffee), alternatives to soy, micro insurance, smallholder farming, gender diversity and inclusion, plastic and hazardous chemicals, accounting quality, living and minimum wage, retail pharmaceuticals, conflict minerals and industrial circularity. Third-party research helps to challenge and evolve the team’s thinking on sustainable development issues, emerging themes and the practices on companies relative to each other and versus industry best practice.

Currently Sustainalytics and RepRisk (for controversy reporting) are our main external providers of ESG data - we use these services to validate our own in-depth analysis of companies. At the end of each quarter, portfolios are checked to ensure companies meet global norms for best practices and raise no exceptions against our thresholds for harmful activities.

We also use ISS for carbon foot printing. In addition, we use Net Purpose for impact and company level climate change targets data.

Dialshifter

This fund is helping to ‘shift the dial from brown to green’ by…

• Investing in companies contributing to sustainable development
• Avoiding companies engaged directly in harmful and controversial products and services
• Engaging and voting to improve companies’ environmental and social policies and processes and practices (including leading collaborative engagements)
• Promoting transparency and accountability
• Researching and knowledge sharing on sustainable investing.

Literature

• Fund literature (including factsheet)
• Fund Policy
• Regulation & Reporting

Important Information
This document has been prepared for informational purposes only and is only intended to provide a summary of the subject matter covered and does not purport to be comprehensive. The views expressed are the views of the writer at the time of issue and may change over time. It does not constitute investment advice and/or a recommendation and should not be used as the basis of any investment decision.

This document is not an offer document and does not constitute an offer or invitation or investment recommendation to distribute or purchase securities, shares, units or other interests or to enter into an investment agreement. No person should rely on the content and/or act on the basis of any material contained in this document.

This document is confidential and must not be copied, reproduced, circulated or transmitted, in whole or in part, and in any form or by any means without our prior written consent. The information contained within this document has been obtained from sources that we believe to be reliable and accurate at the time of issue but no representation or warranty, express or implied, is made as to the fairness, accuracy, or completeness of the information. We do not accept any liability whatsoever for any loss arising directly or indirectly from any use of this information.

References to "we" or "us" are references to First Sentier Group. Certain of our investment teams operate under the trading names First Sentier Investors, FSSA Investment Managers, Stewart Investors, Igneo Infrastructure Partners, RQI Investors and AlbaCore Capital Partners, all of which are part of the First Sentier Group. RQI branded strategies, investment products and services are not available in Germany In the EEA, issued by First Sentier Investors (Ireland) Limited which is authorised and regulated in Ireland by the Central Bank of Ireland (registered number C182306). Registered office: 70 Sir John Rogerson's Quay, Dublin 2, Ireland number 629188. In the UK, issued by First Sentier Investors (UK) Funds Limited which is authorised and regulated by the Financial Conduct Authority (registration number 143359). Registered office Finsbury Circus House, 15 Finsbury Circus, London, EC2M 7EB number 2294743. Outside the UK and the EEA, issued by First Sentier Investors International IM Limited which is authorised and regulated in the UK by the Financial Conduct Authority (registered number 122512). Registered office: 23 St. Andrew Square, Edinburgh, EH2 1BB number SC079063.

Certain funds referred to in this document are identified as sub-funds of First Sentier Investors Global Umbrella Fund plc, an umbrella investment company registered in Ireland ("VCC"). The distribution or purchase of shares in the funds or entering into an investment agreement with First Sentier Group, may be restricted in certain jurisdictions.

Further information is contained in the Prospectus and the relevant key information documents which are available free of charge by writing to: Client Services, First Sentier Group, 1 Grand Canal Square, Grand Canal Harbour, Dublin 2, Ireland or by telephoning +353 1 635 6798 between 9am and 5pm (Dublin time) Monday to Friday or by visiting www.firstsentierinvestors.com Telephone calls may be recorded.

In the EU: This document is a marketing communication. The fund(s) mentioned here may or may not be registered for marketing to investors in your location. If registered, marketing may cease or be terminated in accordance with the terms of the EU Cross Border Distribution Framework or at First Sentier Group's discretion. Copies of the prospectus (in English, French and German) and key information documents in English, German, French, Danish, Spanish, Swedish, Italian, Dutch, Norwegian, and Icelandic along with a summary of investor's rights are available free of charge at www.firstsentierinvestors.com

In the UK: The sub-funds of First Sentier Investors Global Umbrella Fund plc are authorised overseas but not in the UK. As a result, the UK Financial Ombudsman Service is unlikely to be able to consider complaints related to any fund, its operator or its depositary. Any claims for losses relating to the operator and the depositary are also unlikely to be covered by the UK Financial Services Compensation Scheme. Prospective investors should consider getting financial advice before deciding to invest and should see the fund prospectus for more information.

Representative and Paying Agent in Switzerland: The representative and paying agent in Switzerland is BNP Paribas Securities Services, Paris, Succursale de Zurich, Selnaustrasse 16, 8002 Zurich, Switzerland. The prospectus, key investor information documents, the instrument of incorporation as well as the annual and semi-annual reports may be obtained free of charge from the representative in Switzerland.

First Sentier Group entities referred to in this document are part of First Sentier Group, a member of Mitsubishi UFJ Group (MUFG), a global financial group. First Sentier Group includes a number of entities in different jurisdictions. MUFG and its subsidiaries do not guarantee the performance of any investment or entity referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk including loss of income and capital invested.
© First Sentier Group

Last amended: 28/08/23 02:13