Sustainable, Responsible &/or ESG Policy:

Companies will be identified as Sustainable Investments if they satisfy the “Solutions” or “Transition” eligibility criteria set out below and are not excluded from the investment universe.

The Sub-Fund will follow the Investment Manager’s Sustainable Transition Equity Exclusion Policy which is designed to ensure no significant harm is caused to the climate, natural capital or people. It is comprised of three levels of exclusions:

• Level 1: The Investment Manager’s ESG Baseline Exclusions Policy.
• Level 2: A set of exclusions that apply across all equity SubFunds in the Sustainable Transition fund range focussing on climate, nature and social-related issues.
• Level 3: Where relevant, exclusions specific to the Sub-Fund. However, for this Sub-Fund there are currently no Level 3 exclusions applied.

Further information on the Sustainable Transition Equity Exclusion Policy can be found within the Annex III – Precontractual Disclosure and on the website https://www.avivainvestors.com/en-gb/about/responsibleinvestment/policies-and-documents/. 

Process:

The strategy employs an bottom-up, fundamental, research-driven approach to capturing opportunities arising from the transition to a more net zero economy. The strategy’s key performance driver will be bottom-up stock selection which leverages off the combined connected analytical resources of our ESG and equities investment teams.

1. Avoid significant harm

There are over 80,000 listed stocks globally, of which over 6,000 have a market cap of over $1bn and trade an average of $10m a day or more. We would be willing to go below these thresholds in certain situations, but broadly this is what we consider our starting investment universe. We then apply our exclusions to this universe – we have baseline exclusions which extend across the firm, exclusions specific to the sustainable transition portfolio range. Our Fossil Fuel exclusions filter out stocks that are negatively impacting the climate trend. Almost three quarters of emissions arise from the combustion of fossil fuels. Over the next 30 years, GHG emissions from fossil fuels need to decline to net zero.

As such, an exclusion is applied on fossil fuel stocks whereby companies deriving certain levels of revenue from producing or generating electricity by certain fossil fuels will be specifically removed from the investment universe.

2. Climate filter

We apply our climate transition analysis to our investable universe of ideas driven by our active equity research process. Our climate transition analysis applies a holistic assessment of climate change risks and opportunities through three sleeves: Fossil Fuel exclusion, solutions (both mitigation & adaptation) and transition orientated companies.

Solutions providers

The main premise is that society needs to aggressively reallocate assets into solutions that either mitigate or adapt to climate change risks. Companies will be categorised in the solutions sleeve if are targeting or drawing material revenues (over 20%) from the below climate-related themes:

• Mitigation:
  • Sustainable Transport
  • Energy Efficiency
  • Forestry & Agriculture
  • Renewable Energy
  • Low Carbon Energy
  • Electricity Infrastructure
• Adaptation:
  • Forestry & Agriculture
  • Extinction
  • Urban Areas
  • Water
  • Health
  • Oceans
  • Weather

The mitigation sub-sleeve looks at themes that help to reduce carbon emissions which includes:

• Sustainable transport (e.g. rail or flying; electric vehicles or internal combustion engine);
• Energy efficiency (e.g. insultation, automation, lighting);
• Renewable Energy (e.g. wind, solar); and
• Agriculture & forestry (e.g. sustainable agriculture, plant-based proteins, reforestation).

The adaption sub-sleeve looks at themes that will help society adapt to a warmer, lower-carbon world:

• Water scarcity (e.g. sourcing, treatment, pipes);
• Ocean (e.g. aquaculture, sea defence);
• Weather (e.g. Heating Ventilation Air Conditioning)
• Health; and
• Agriculture and Forestry (e.g. biotechnology, drip irrigation).

Transition-orientated companies

The underlying hypotheses is that all stakeholders within the global economy will be impacted at some point in their value chain by efforts to decarbonise the economy or the physical impacts of climate change, but that these T-Risks will vary by sub-industry (e.g. a utility faces very different climate risks to a software company).

These impacts will affect a company’s financials (e.g. extreme weather interrupting supply chain and thus impacting cost of goods sold, or a carbon price imposed on energy driving up operating costs) and so an analysis of the T-risk exposure of a sub-industry and the climate risk management practices of a company within that industry will provide valuable insight.

At the core of identifying transition-orientated firms is our proprietary T-Risk model which is designed to categorise companies that are better prepared to deal with climate change risks than their peers. The model combines top-down sector analysis and fundamental bottom-up analysis.

Top- down sector analysis

Our proprietary T-Risk methodology synthesises opinions from leading climate change organisations such as Mercer, MSCI, TCFD, CDP. It assesses the impact of both the physical and decarbonisation risks across 159 GICS sub-industries assigning each sub-industry a high, medium or low rating based on its transition risk exposure.

Bottom-up analysis

We assess a companies’ progress towards managing their T-Risk exposure through the Carbon Disclosure Project (‘CDP’) rating system. The CDP is a non-profit organization managing a global information system targeting investors, companies, cities, countries and regions so that they can manage their environmental impacts. Each year they send out their questionnaire to the world’s largest companies (6,000 in 2018). Once a company has completed CDP’s questionnaire, they will be given a grade from A to D-:

• Grades A and A-: companies showing best in class Climate practices.
• Grades B and B-: companies managing the totality of impacts, risks and opportunities.
• Grades C and C-: companies aware of their environmental impact.

Having established both the T-Risk score and CDP grade of a company, we then combine both data sets to identify securities that can be integrated in the investable universe.

3.Fundamental Research

Every member of our investment team has analytical responsibilities and works together in ESG integrated sector hubs to generate ideas that can be applied across our strategy range.

Our regular meeting cycle facilitates the generation and debate of coherent, high conviction ideas across the equity team and the company’s wider investment platform, including Credit and Multi-asset & Macro capabilities. We believe what sets us apart is our ability to integrate and maximise our resources both within the equity team and across asset class boundaries.

Our meeting cycle includes a range of portfolio manager, analyst and sector led discussions alongside broader meetings where insight is shared across the liquid markets investment platform.

Company management contact is another important source of insight. Company meetings are led by the analyst covering that stock with attendance of other colleagues from the wider equities, credit or ESG teams.

New stock ideas are captured in a formal research note that covers four key areas with an investment recommendation assigned.  The research template is common across of the team to enhance information flow and applicability of ideas across strategies.

Fundamental research framework 

The common research template provides an important level of core consistency for our fundamental equity analysis whist still retaining some flexibility to adapt its application across different industry sectors where certain considerations are more pertinent than others. We have provided some example applications of our research framework as follows:

Fundamental drivers – linked to evaluating the company’s competitive advantage we assess its scale in the context of the industry consolidation. How does this link through to pricing power, ROCE, other forms or returns and cash flow generation. What are the industry structural growth dynamics, how sustainable are they, how exposed is the company to those, and how durably can this translate to cash flow and returns? What level of cash flow generation and leverage is being generated from the company’s capital allocation decisions.

Valuation & materiality – as fundamentally driven investors, discounted cash flow analysis is often a key part of our valuation assessment. Dependent on the company and sector under coverage, we flex various DCF inputs to reflect our views vs. consensus on the sustainability of growth and returns, which we translate to a view on the company’s intrinsic value and scope for potential re-ratings. For certain sectors, we may also consider various relative valuation techniques and multiples, such as P/E, P/B, P/S, PEG, EV/Revenue, EV/EBITDA, FCF Yield, ROIC, Net Debt/EBITDA.

Key risks – in a world fraught with uncertainties, it’s critical to clearly identify the key risks to the investment thesis. Linked to several of the risks described above is ESG risks – the key is translating that into the probability of the financial risks occurring, their magnitude and how that can impact the overall investment thesis.

Investment opportunity – what are the key aspects that translate our fundamental equity analysis into an investable company. What are the structural investment thematics, translation into earnings, and where is our differentiated angle vs. the market? For example, what is our visibility and conviction on management strategy, pricing, EPS growth and earnings resilience.

This consistent expression of our ideas in this structured way enables effective peer review and debate of each stock idea. It allows us to effectively compare ideas across various sectors and focus on where we have highest conviction and highest upside ideas backed by stock-specific non-consensus insights.

ESG analysis integrated into fundamental analysis

To undertake a proper and comprehensive ESG analysis, we believe a responsible investor needs to consider a wide variety of perspectives and how these interact to complete the picture. Our Liquid Markets investment teams are supported by a well-resourced ESG platform. ESG insight is used to help drive better investment decision-making through analysing ESG factors as part of the investment case

Bottom-up research is provided by our ESG research & Stewardship team while top-down thematic impact-oriented research is provided by the Sustainable Outcomes team.

Source: Aviva Investors as at 25 January 2023. Numbers include team head and include graduate program colleague. 

ESG Corporate Research

Our ESG corporate analysis is rigorous, leaving no stone unturned. We bring together and connect:

• Quantitative ESG metrics which allow portfolio managers and analysts to understand how an issuer compares to its peers. The scores can be used to highlight potential areas of concern that can be further investigated within our qualitative process.
• Qualitative research through two dedicated teams analysing corporate ESG credentials and alignment to systemic themes linked to the UN SDGs
• A fully integrated engagement approach coordinated by our dedicated Governance and Stewardship team to bring together research, knowledge and working with our investment professionals to deliver impact.

Our ESG analysis process is circular with a continuous feedback loop, where each pillar informs the other and ultimately our view of the company. To provide one example of this, our voting activities are used as one of the inputs in our Proprietary ESG scoring framework, which is described in further detail below.

All of this comes together, to empower portfolio managers with the ESG insights they need to integrate ESG into their investment process.

• Quantitative ESG research

The investment teams are supported by a variety of ESG data and analytical tools, including our proprietary ESG scoring tools and PAI (Principle Adverse Indicator) Framework underpinned by our PAI Notation Tool (PAINT).  We acquire data from various sources depending on purpose. These included traditional market data vendors, specialist companies, NGOs and directly from companies and other issuers.

Our Proprietary quantitative ESG score uses a combination of inputs from externally sourced data as well as our own voting data. It is designed to support our portfolio construction process by providing a relative score for the companies within each sector. The Proprietary score is a starting point for our investment teams, when evaluating ESG credentials, which is complemented by qualitative insights through the investment process.

Our investment professionals can leverage the ESG Proprietary score in their processes, where the score is integrated in portfolio management systems and therefore widely accessible. We are currently upgrading our quantitative ESG tools. Aviva Investors has developed a proprietary PAI Framework.  This framework and tool highlight where an issuer’s performance against an SFDR PAI Indicator potentially indicates a risk to the value or volatility of an investment and therefore may be material to an investment decision.  

• Qualitative ESG analysis

ESG Analysts are aligned to the equity sectors and work closely with the relevant equity analyst to provide insight into sector and company specific ESG issues.

Research includes qualitative reports and verbal contributions to investment reviews and forums. In addition to company reports, the team produces (i) thematic research which focuses on current and emerging ESG trends and/or issues, which pertain to industry, regulatory or technological developments; (ii) industry/sector reports; (iii) high level primer reports discussing key ESG themes and trends. The ESG content produced supports investment decisions, education on sector specific ESG analysis, and engagement with companies and clients.

To further supplement the qualitative ESG input into the investment process, our Sustainable Outcomes team, produces top-down thematic research on the three Sustainable Outcomes we seek to deliver – People (social justice), Earth (nature positive) and Climate (net zero). These 3 objectives are formed from the 17 Sustainable Development Goals put forward by the United Nations.

Portfolio managers across all asset classes have access to research and insights on the major sustainability issues. This research informs portfolio managers and analysts from the top-down, which is complementary to the bottom-up analysis research produced by the ESG corporate research team and supports the integration of ESG considerations into the investment process across the firm.

• Engagement

We believe active ownership creates long-term value for our clients. Using our collective voice and power as an investor is central to support our long-term investment case and rationale.

We have provided our broader engagement approach in this section of the investment process. Details of the more relevant and bespoke engagement programme of the Aviva Investors Climate Transition Global Equity strategy can be found in stage 6 of the investment process.

In practical terms, this means monitoring, engaging, and, where appropriate, intervening, on matters that can have a material impact on the long-term value of our clients’ investments – issues such as board diversity, human rights abuses, and greenhouse gas emissions, avoiding adverse hits to the bottom-line.

We also utilise our voting rights as investors to hold companies to account on the extent to which they are protecting the long-term interests of investors and growing their businesses in a sustainable and responsible manner.

We direct our engagement resources towards maximising positive outcomes and informing our investment decision-making to add value to our portfolios, using the below framework.

Power through collaboration – to ensure efforts are joined-up and efficient. We have a dedicated Governance and Stewardship team, and they work to coordinate activities across our investment teams so we channel our collective voice to make an impact. Our ESG Corporate Research team and Sustainable Outcomes team (thematic research) provide the foundational research platform needed to inform how best to engage.

Delivering impactful outcomes – our engagement results are an important input for evaluating the long-term investment case. We enter every engagement with a clear expected ‘ask’ and outcome which we track. The progress and outcomes from engagement inform our investment research and determine next steps (refinement of engagement plan, escalation to votes etc). We have a clear engagement escalation approach - outlined in our stewardship statement - which lays out strategies to failed engagement, which in extreme cases leads to divest or cease to provide fresh capital to an investment. 

4.Stock selection

Sustainability is the key to long-term performance potential for this strategy. Our climate and fundamental analysis stages of the investment process generate a list of approximately 100 potential investment ideas that fulfil both return and risk criteria from an investment perspective, as well as either passing as a solution or a transition leader. These ideas are then considered by the portfolio management team (Andrea Carzana and Max Burns) and by the Climate Pillar Lead, Rick Stathers, as well as Luisa Jobson, climate analyst, who corroborate the climate credentials of the companies and other risks we should be aware of.

Our 3-dimensional view assesses if the focus on climate is translated in higher financial returns – the outcome of this approach is profitable growth as we invest in those companies that can generate a return from their climate focus. We think about sustainability as a temple with three equally important sustainability pillars. We analyse each pillar and how they reinforce each other

The first one is the internal sustainability – here we look at how efficient a company is, we analyse the governance of companies and if management incentives are aligned to shareholders interests. We also look at how management has reacted to controversies in the past, with particular focus on management reaction to controversies as this gives us good visibility into the corporate culture.

The second pillar is financial sustainability – here we assess whether a company has a competitive advantage and how sustainable it is. We do that by assessing each company using the Porter’s 5 Forces framework.

The third pillar is external sustainability – here we assess whether the company is financially successful with either their solutions to climate change or in their transition. What is critical in this phase, is to assess what is the financial return the company generates with the focus on climate. We want companies that generate higher incremental return on capital employed and we avoid those companies that spend money towards climate without generating any return.

Example: European steel makers

Steel production represents circa 8% of GHG emissions globally (World Steel Association, Decarbonization challenge for steel, McKinsey & Company, June 2020). European players have been looking at ways to reduce their carbon intensity by switching from traditional coal furnaces into electric furnaces and by using green hydrogen into the production process.

While these shifts are very positive from an environmental perspective, we believe steel makers are not currently going to gain a competitive advantage by doing so, at least until the cost of making green steel remains very elevated. As a result, while we continue to closely look at the technology and its cost curve, we do not believe that the steel industry will fundamentally gain a competitive advantage by investing in electric furnaces, and we see this as a clear case where the link between the focus on climate and return on capital employed is missing.

Climate deep dives: The climate specialists provide a deep dive research note on investment ideas to assess whether a stock is eligible for inclusion into the portfolio.

5.Portfolio construction

The Strategy is designed to be a 35-50 stock portfolio comprising of high conviction holdings linked to the climate change theme and its associated market inefficiencies.

The portfolio takes an unconstrained approach to portfolio construction so does not factor benchmark weights. Highest conviction stock ideas are balanced in the portfolio based on their contribution to total risk. This allows ideas across the market cap spectrum to be optimally combined in the strategy. Stock weightings reflect the risk-adjusted return expectations and fundamental conviction level. Stocks with higher forecasted upside, lower risk profile and lower correlation with other ideas will receive a higher active weight in the strategy.

Stocks are typically sold if the company fundamentals materially or the climate investment thesis change.

The portfolio manager is cognisant of the thematic nature of the strategy and therefore the inherent sector bias. As a result, the strategy is constructed in a way to ensure maximum stock specific risks as opposed to systematic risks. The current portfolio is concentrated with 44 holdings delivering 85% active share and attractive stock specific risk characteristics (as at 30 June 2023).

Portfolio monitoring and risk controls

As part of our overarching risk management framework we combine the expertise of the portfolio management team as the first line of defence and our independent investment risk team as the second line of defence to continue to deliver the following:

• Monitor any style drift or factor bets: portfolio managers and our independent risk team utilise leading risk tools and scenario analysis to ensure portfolios are primarily stock-driven rather than exposed to significant unintended macro, style or currency factors.
• Active stewardship: we vote and engage in partnership with our ESG team to promote sustainable business practices and on matters that can have a material impact on the long-term value of our investments.

In order to achieve this, we evaluate a range of characteristics including:

• Risk decomposition: breaking down and assessing all components that contribute to overall portfolio risks such as macro, style, industry sector, liquidity and right down to individual stock level to ensure a transparent understanding of where the key drivers of risk and diversification are for the portfolio.
• Scenario analysis: we replay historical events in history and forward looking “what if” scenarios on the current portfolio. Typically, one market parameter is “shocked” by e.g. 10% (e.g. MSCI World down 10%) then a correlation matrix subsequently shocks lots of other market parameters and evaluates how that would affect the current portfolio.
• Tracking error: we assess our risk deviation vs. each strategy’s benchmark to ensure we’re continuously using our risk budget to allocate capital to active positions but within the strategy’s tracking error range.
• ESG Analysis and Engagement: the ESG score for each stock is displayed for portfolio managers in the portfolio construction module of BlackRock Aladdin, our main portfolio management software. In addition, our independent investment risk team produce formal monthly reports detailing the top and bottom 15 stocks by ESG score as well as a summary at portfolio level. This provides key input into ESG risks which can influence our conviction in the form of position sizing an investment idea and help identify areas for future engagement with company management.

Sell discipline

Positions are initiated where the portfolio manager has a strong ‘non-consensus’ view relative to the market and a clear catalyst that will change the market view and positively re-rate the stock has been identified. Peer review and debate of investment ideas ensures that robust challenge takes place to identify the best ideas, as determined by conviction and materiality, go into client portfolios.

The sell discipline is reflective of what drives the original ‘buy’ rating, i.e. a stock is sold when we no longer have a non-consensus insight, either because the investment case has materialised and is priced in by the market, or the portfolio manager/analyst has re-assessed the initial investment case and changed their view. An exception to this may be when the risk associated with the stock has heightened for reasons beyond what was included in the original research note, and this risk dominates the investment thesis and increases position volatility beyond an acceptable level given the outcome the portfolio is trying to achieve.

A further sell decision catalyst may also be a change in the investment team’s view on the relative attractiveness of other stock ideas, which may lead to replacing the stock with a more attractively valued opportunity.

The ultimate decision as to whether to buy or sell a stock is the responsibility of the lead portfolio manager.

Our formal stock ratings are constantly reviewed and checked against market movements to determine success. A successful case would be when the portfolio manager/analyst correctly predicted a change in a key driver, the change was priced into the stock and it was sold at a gain.

6.Bespoke engagement

Aviva Investors are committed to playing our part to address climate change. We are a member of the Net Zero Asset Managers Alliance, with ambition to reach net zero across our investments by 2040 (in line with Aviva plc). Aviva is also a member of the Glasgow Financial Alliance for Net Zero (or GFANZ), with CEO Amanda Blanc on the CEO Principals Group. We support her co-chairing of GFANZ workstreams on policy advocacy and transition plans for financial institutions. We have also put our experience in macro stewardship with politicians, policymakers and stakeholders into action, often in collaboration with others, to strengthen our voice.

We have also developed two bespoke climate engagement programmes with a specific focus on aligning with the SBTs framework:

• Climate Engagement Escalation Programme (CEEP). CEEP applies across our equity and credit portfolios and is focused on 30 of the most systemically important carbon emitters from the oil and gas, mining, steel and utilities sectors that contribute approximately a third of all global emissions, considering their Scope 3 footprint. Phase 1 launched in January 2021, when letters were sent to all board chairs on our expectations of what constitutes a robust climate strategy and approach. We are willing to use all the tools and power available to ensure our impact is on a scale commensurate with the climate crisis. Companies have been given notice that if certain expectations regarding the management of climate risk are not met within acceptable timeframes, we will fully divest our holdings in those companies. Our five key asks are:
  • Climate lobbying: Transparency over and Paris-alignment for all lobbying activities
  • Climate disclosures: High-quality TCFD disclosures, including scenario analysis
  • Management incentives: Effective board oversight and meaningful climate targets in variable pay plans for senior leadership and wider business
  • Transition plans: Integrate decarbonisation roadmap into corporate strategy, include near-term targets
  • Climate targets: 2050 net-zero Scope 3 targets for entire business operations, validated by SBTi

• Climate Transition Fund Engagement Programme (CTEP) The Climate Transition Global Equities Fund (CTF) invests in companies deemed to be responding to climate change effectively as well as those providing solutions for climate change mitigation and adaptation.

CTEP is a three-year engagement programme targeting all companies invested in our CTF franchise. Its objective is to help the fund achieve its aims of positively influencing climate-related behaviour and generate competitive returns. These core elements of our climate pillar expectations are available in our annual letter to company chairpersons. CTEP will achieve this by asking all companies to make progress against two requests within three years to demonstrate their commitment to supporting the transition to a low-carbon economy:

• Set science-based emission reduction targets (SBT) validated by the Science-Based Targets Initiative (SBTi) consistent with a 1.5°C pathway. The IPCC’s Sixth Assessment report calls for net global emissions to decline by about 45 per cent from 2010 levels by 2030 to comply with a 1.5°C pathway. SBTi-validated SBTs provide a clearly defined pathway for companies to reduce emissions in line with Paris Agreement goals.
• Provide annual public disclosure to the CDP’s Climate Change questionnaire and strive to continually improve performance. The CDP’s data set and resulting scores are a key resource in identifying and managing ESG and climate-related risks within our portfolios. It is the most complete source of self-reported corporate environmental data in a standardised and comparable format, widely used throughout financial markets. Sustainable Outcomes Programme – Climate Transition Fund Engagement Programme (CTEP).

While acknowledging we are still in the early stages, there were several areas of progress during the year that have given us cause for optimism. 

Resources, Affiliations & Corporate Strategies:

In-house resources, roles and responsibilities

The Sustainable Investing function at Aviva Investors contains 40+ specialists within several teams that report to the Chief Sustainable Investing Officer to support the wide-ranging activity that underpins our sustainable investing approach. 

The Sustainability Strategy team leads and co-ordinates sustainability strategy, commercialisation of our sustainability capabilities at firm level and institutional governance matters.

The integration and stewardship team covers all asset classes, including credit, equities and multi-asset in Public Markets, and real estate, private debt and infrastructure in Private Markets. The team oversees the integration of environmental, social and governance (ESG) factors into the investment process across Aviva Investors’ spectrum of liquid and illiquid assets. This includes proprietary quantitative scoring, bottom-up ESG corporate research, top-down thematic research and outcome related analysis. The team is also responsible for conducting stewardship activities with our clients’ investments; exercising proxy voting rights and engaging with investee companies and borrowers to enhance long term shareholder value. Our ESG integration and stewardship teams work closely, and have multiple touch points, with our public and private investment functions. This helps to ensure close communication and collaboration between our investment professionals and sustainability analysts. 

Our Sustainable Investments team oversees Aviva Investors’ sustainable funds. The team develops and evolves strategic frameworks that respond to the changing landscape of sustainable markets, ensuring tangible outcomes for clients. It works to enhance the philosophy and processes underpinning existing sustainable funds, including the development of supporting data, quantitative research models, and the measurement and delivery of sustainability impacts. The team also supports sustainability research across asset classes and plays a key role in the development of new sustainability and impact strategies.

We also have a team that works closely with our parent company, Aviva, to deliver on the investment components of the Aviva Sustainability Ambitions. This relates to climate, nature and social objectives and involves defining sustainability objectives and action plans. In addition, the team is responsible for building investment solutions to deliver on sustainability objectives as well as developing net zero and nature investment analytics and tools and the solutions linked to these capabilities.

Aviva Investors works in collaboration with the Group Public Policy team to engage with national governments, regulators, standard-setters and international institutions to develop and advocate for policy measures that aim to create more sustainable capital markets.

External resources/responsibilities

As an active manager we source information that, alongside investment research, can support regulatory and client reporting activity. We source sustainability data from a variety of data providers, which we review regularly. We hold regular reviews with our largest third-party data provider to discuss how continuous improvements could be made to data or research outputs. Additionally, we hold ad-hoc meetings to discuss broader trends in sustainability.

Our market data team is an independent function that manages commercial relationships and renewals with our market data service providers. This function operates an hourglass model that sits between the business and suppliers. There are regular reviews in place to check that contracts are still meeting business needs, including service quality, availability and accuracy of data.

Our investment engineering team is responsible for several models and analytical dashboards, using data science techniques to derive greater value from vendors, NGOs and proprietary sourced datasets. Dashboards provide transparency into the construction of models. Integration of model outcomes into our portfolio management tool allow analysts and fund managers to take these insights in consideration.

Examples of data providers used:

Data vendors – Large-scale providers with multiple datasets and deep coverage

• MSCI
• LSEG
• Trucost Analysis – S&P Global

Data specialists – Innovative and niche providers with specific scope and high quality

• BoardEx
• IBAT
• Iceberg Data Lab
• Auquan

NGOs - Specialist analysis, often not for profit; detailed datasets with issuer scope aligned to purpose

• CDP
• Climate Bonds Initiative

To support us in making voting decisions on thousands of meetings a year, we subscribe to research from third-party providers. Our main provider for voting services since October 2023 is Glass Lewis. We also subscribe to IVIS research (provided by the Investment Association) and MSCI. We use research for data analysis only and do not automatically follow research provider voting recommendations. We also receive recommendations from Glass Lewis based on our own policy, which we can override in consideration of other factors, including internal views, additional context provided in external research, and company explanations.

Briefly describe governance structure and responsibilities

The Aviva Investors boards, including Aviva Investors Holdings Limited, Aviva Investors UK Fund Services Limited, Aviva Investors Luxembourg (Lux.) Supervisory, Aviva Investors Lux. Management Company and Aviva Investors Lux. SICAV, receive regular reporting on key sustainability risk management metrics throughout the year. These include the results of sustainability risk assessments, do no significant harm indicators, climate value at risk and carbon intensity figures. These give the boards oversight of our approach to sustainability risk management and of how we are delivering on our clients’ sustainability preferences. In 2024, the Boards also received deep dives into climate metrics and the commercialisation of sustainability capabilities. We continue to develop and refine our approach to Board reporting to support effective oversight of our stewardship activities, including reviewing metrics to ensure they remain current and providing narrative and rationale to contextualise the sustainability information our boards receive.

The Aviva Investors Holdings Limited Board sets our overarching approach for sustainability. Responsibility for executive management of this approach is delegated to the CEO. The CEO is provided with advice and support from the executive team, which includes our chief sustainable investing officer.

The chief sustainable investing officer is responsible for proposing and implementing our sustainability strategy, oversight and execution policies and commitments at a firm and product level, and oversight of compliance with the relevant internal controls environment. Our sustainability strategy director chairs, on behalf of the chief sustainable investing officer, the sustainable investing business oversight committee, which includes representation from across the business. This committee ensures sustainable investing policies and procedures are aligned with firm-wide policies and procedures, and that the business is embedding client preferences in its approach to sustainability.

Working collaboratively with investment desks, the chief sustainable investing officer’s team is responsible for ESG integration and stewardship in public markets, ESG integration and stewardship in private markets, development of sustainable funds, development of sustainability analytics and tools, and sustainability strategy and governance.

Our analysts, regulatory development and client-facing teams monitor ongoing sustainability developments, with any revisions to policies subject to final approval by our policy approval group.

List related affiliations, memberships, and involvement with groups such as UNPRI / IIGCC / CA100+/CDP

The list below shows collaborative initiatives in which Aviva Investors participates as an active member, where we have participated in events or where we have indicated support for a statement as a signatory. More information regarding any of the initiatives or statements can be provided on request. This list is as of 31.12.2024 and can be found in our 2024 Annual Sustainability Review here: Policies and documents - Aviva Investors

Founding member

• Collaborative Sovereign Engagement on Climate Change
• Investor Action on Anti-Microbial Resistance
• Investor Initiative on Hazardous Chemicals (IIHC)
• Investor Initiative on Human Rights Data (II-HRD)
• Sustainable Stock Exchange Initiative
• UN Principles for Responsible Investment (UN PRI)
• World Benchmarking Alliance (WBA)

Memberships and working groups

• 30% Club UK Investor Group
• Advance
• Aldersgate Group
• Asian Corporate Governance Association (ACGA)
• Benchmarking Human Rights Performance
• Bondholder Stewardship Working Group
• Chatham House
• Climate Engagement Canada (CEC)
• FAIRR – Biodiversity, Waste and Pollution Programme
• FAIRR – Protein Diversification
• FRC UK Stewardship Code 2020
• GC100 and Investor Group – Remuneration Reporting
• Guidance
• GFANZ Policy Workstream
• Global Impact Investing Network (GIIN)
• Global Institutional Governance Network (GIGN)
• Good Work Coalition
• Global Real Estate Sustainability Benchmark (GRESB)
• Institutional Investors Group on Climate Change (IIGCC)
• Investor Policy Dialogue on Deforestation (IPDD) Initiative
• Labour Rights Investor Network (LRIN)
• Nature Action 100
• Net Zero Asset Managers Initiative (NZAM)
• ShareAction – Chemical Working Group
• Sovereign Debt Advisory Committee
• The Investment Association
• The Investment Association – Climate Change Working Group
• The Investment Association – Remuneration and Share Schemes Committee
• The Investment Association – Sustainability and Responsible Investment Committee
• The Investor Forum
• TheCityUK Sustainable Finance Forum
• Transition Finance Market Review Expert Advisory Panel
• UN Principles for Responsible Investment Sustainable Systems Investment Managers Reference Group
• VBDO (Vereniging van Beleggers voor Duurzame Ontwikkeling) Investor Statement on Plastics

Signatories and collaborative events

• Access to Medicine Foundation
• Carbon Disclosure Project (CDP)
• Climate Action 100+ (CA100)
• Global Investor Statement to Governments on the Climate Crisis
• Partnership for Carbon Accounting Financials (PCAF)
• Planet Tracker Plastic Pollution Investor Statement
• Rathbones Statement on Reporting Requirements re: Section 54 of UK Modern Slavery Act

SDR Labelling:

Unlabelled - promotes sustainable characteristics (has CFD)

SDR Literature:

• Consumer Facing Disclosure