Sustainable, Responsible &/or ESG Policy:

The Stewardship Investment Policy of the Master Fund excludes companies that do not meet certain ethical standards or that are considered to harm society or the environment. Examples of exclusions include alcohol, gambling, animal testing, manufacture of weapons, tobacco, coal, oil, nuclear power, adult entertainment and pornography, and companies connected to aviation due to their climate change risk. In addition, ESG factors are integrated into the investment process for the selection of investments for the Master Fund once the excluded companies have been removed.

The Fund also actively engages with companies with the aim of positively influencing company behaviour to improve ESG standards and helping to create competitive returns. To allow assessment of the Master Fund’s ESG outcomes, key indicators, such as the carbon footprint of the Master Fund and the board diversity of companies that the Master Fund invests in, will be reported to investors annually. Full details of the Stewardship Investment Policy and ESG integration in the Master Fund are available in the Prospectus and on our website.

In addition, the Master Fund has limited exclusions based on Aviva Investors’ UK Responsible Investment policy. Further information on the Aviva Investors UK Responsible Investment policy is available on our website and in the Prospectus.

Process:

1.Integration.

• Integrated into the investment process is a base-level ESG assessment which allows the Investment Manager, using a combination of external data, internal data and proprietary data modelling to assess investment opportunities on an absolute and relative basis;
• Bespoke integration processes are used to consider ESG risks and opportunities in the investment process;
• Risk monitoring includes ESG considerations in equity portfolio risk reports;
• Performance against Aviva Investor’s broader ESG objectives is embedded into the Investment Managers’ annual evaluation and remuneration framework.

2.Screening.

In addition to Aviva Investors’ firm-wide “Baseline Exclusion Policy” which prohibits investment in Controversial Weapons and Civilian Firearms, the Stewardship range has its own set of negative screening criteria. These include:

• Ethical & Social exclusions:
  • Adult entertainment, pornography and violence;
  • Alcohol;
  • Animal welfare - animal testing and fur;
  • Endangered species;
  • Gambling;
  • Genetic Modification;
  • Labour standards, human rights and Health & Safety controversies;
  • Military - weapons and systems; and
  • Tobacco
• Environmental exclusions:
  • Chemicals;
  • Climate change - Aviation;
  • Coal;
  • Oil;
  • Nuclear power generation; and
  • Pollution

By applying an exclusions layer based on companies that don’t meet certain ethical and sustainability standards or that harm society or the environment, approximately 20% of companies are screened out.

3.Idea Generation.

Our collaborative culture is implemented through structured teamwork across all equity, credit and wider asset class teams.

The global equity team attend a wide range of company meetings alongside the regional equities teams and participating in daily regional meetings and regional sector review discussions. Evidence and research are at the heart of our investments.

The broader equity and credit teams, both regional and global, have structured sector coverage with each regional sector specialist formally conducting a regional sector review, which is presented to the equity teams every four months with detailed analysis of at least 10 companies. Each sector specialist conducts a global sector review, supplementing stock specific coverage contained within a regional sector review.

4.Fundamental Analysis.

Next, we aim to identify change-led investment opportunities backed by robust fundamental analysis. The output of this stage is a formal structured research note with seven key considerations. A common template across all equities teams enhances information flow into individual portfolios and is published and accessible on our global research platform.

For every stock research note, ESG analysis is one of the key questions our analysts need to address, which involves collaborative work between our equity analysts and ESG analysts.

Research includes a quantitative summary score, written reports, and verbal contributions to investment reviews and forums. The ESG content produced supports investment decisions, education on sector specific ESG analysis, and engagement with companies and clients.

Report Types

• Primer: super-sector level reference report focused on education;
• Industry Report: industry group level report focused on identifying best-/worst- in class players and general industry dynamics;
• Company Report: focused on providing company specific information to support stand-alone investment position or engagement with management.

Quantitative ESG assessment: ESG Rating Score

The qualitative work of the ESG Corporate Research team is bolstered by our quantitative proprietary ESG score1. We use our ESG Proprietary tool to assess the relative importance of ESG factors for the companies within each sector to identify where the ESG characteristics of a company may result in outperformance. These ESG Proprietary tool scores (which use a combination of inputs from externally sourced data as well as our own voting data) are considered a core part of the investment decision-making process and help identify potential sustainability risks for the companies we invest in. A low score denotes poor ESG credentials, while a high score indicates good ESG credentials. The ESG score is based on third-party data as well as our own research. We then look to optimise the portfolio’s aggregate ESG score by allocating more to companies with good ESG credentials and less to companies with poor ESG credentials.

5.Active Ownership and Stewardship

• The Investment Manager undertakes extensive proactive and reactive engagement with management and boards of issuers and borrowers to monitor ESG practices and encourage best practice. Where ESG risks are identified within an individual company, and it has not responded to a period of engagement to reduce them, the Investment Manager may use the ESG analysis, alongside other parts of the investment process to support a decision to reduce or remove exposure to that company where doing so remains consistent with the objectives and strategy of the Fund. Further details are available in our Annual Responsible Investment Review https://www.avivainvestors.com/en-gb/individual/about-us/responsible-investment.html
• Aviva Investors publishes annual proxy voting guidelines and a UK Stewardship Code compliance statement providing details of the responsible investment approach and outlining views on ESG best practice. The Investment Manager will vote globally at all shareholder meetings that it has the legal right to do so and where costs are not prohibitive. It will endeavour wherever practicable, to recall lent stock prior to contentious shareholder meetings when this is considered in the Funds’ best interests.
• The Investment Manager is committed to transparency through timely publication of voting records and reporting of engagement activities, further details of which are available in our Annual Responsible Investment Review https://www.avivainvestors.com/en-gb/individual/about-us/responsible-investment.html

1 Our proprietary tool emphasises the ESG factors which we determine are most closely correlated to potential financial outperformance. Accordingly, it should not be used as a comprehensive measure of the sustainability risks (or the overall ESG quality/credentials) of a portfolio. ESG data for Benchmarks and Portfolios is reliant on: (i) data provided by third party data providers; and (ii) AI and third-party proprietary models. Data from these third-party data providers or used in our proprietary models may be incomplete, inaccurate or unavailable. As a result, there is a risk that AI may, from time to time, incorrectly assess a security, issuer or index. There is also a risk that AI, or the third-party data providers on which we may depend, may not interpret or apply the relevant ESG characteristics correctly.

Resources, Affiliations & Corporate Strategies:

Research resources

Our dedicated Sustainable Investing team is comprised of 50+ professionals who are co-located with our investment teams and have an average ESG experience of 10 years. They provide analysis to our investment teams and collaborate on investment research and generating investment ideas, engagement cases and voting decisions. The Sustainable Investing team acts as a centre of expertise on ESG matters and works collaboratively with portfolio managers and analysts. The Sustainable Investing team facilitate knowledge sharing across the business and upskill the investment teams.

Research includes a proprietary ESG score, provision of a range of other ESG data and related tools, written reports focusing on thematic topics and value chain analysis, and verbal contributions to investment reviews and forums. ESG content is a key input into the investment process, employee education and engagement with companies and clients. The Sustainable Investing team and the investment teams together seek to identify material ESG risks and opportunities relating to an investment case and engage with the relevant company as required.

We have established a firmwide ESG ecosystem with six expert teams fully embedded in our investment teams:

• Market Reform 
• Sovereign ESG research
• Corporate Governance
• Sustainable Outcomes research
• Corporate ESG research
• Private Markets ESG research

We believe that for ESG considerations to have a proportionate impact on investment decisions, they must be fully embedded within the fundamental investment process. Our Sustainable Investing team works together with fund managers and analysts to add value through the integration of ESG factors into the specific investment analysis and decision-making process of each investment desk. We have also integrated ESG factors into our incentive structures for all staff.  

Governance

Our governance structure and processes ensure our approach to sustainability – including ESG integration, holistic stewardship and delivering on clients’ sustainability preferences – is embedded throughout our business. This allows us to meet the requirements of the Shareholder Rights Directive II (SRD II) on how we monitor and engage with companies on strategy, financial and non-financial performance, risk, capital structure, social and environmental impact and corporate governance. This also includes how we work with other shareholders. These governance processes also ensure we are acting in a way that is consistent with other ESG-related regulation, for example, Sustainable Finance Disclosure Regulation (SFDR) and TCFD reporting obligations.

Aviva, our parent company and largest client, has set out its Sustainability Ambition which includes setting targets as part of the Science-Based Target initiative (SBTi). Aviva Investors plays an integral role in supporting the delivery of Aviva’s investment-related sustainability ambitions through the assets we manage on their behalf. Aviva Investors has also signed up to the Net Zero Asset Managers (NZAM) initiative. The Sustainable Investing Leadership Team is chaired by the Aviva Investors Chief Executive and is responsible for the investment aspects of the Aviva Sustainability Ambition.

Our Chief Sustainable Investing Officer has overall responsibility for Aviva Investors approach to sustainability and is a member of our executive committee. He oversees the business’s firm-wide sustainable investing policies. His personal committee, the Sustainable Investing Business Oversight Committee, includes representation from across the business and seeks to ensure sustainable investing policies and procedures are aligned with firm-wide policies and procedures, and that the business is embedding client preferences into its approach to sustainability. Our executive committee directly oversees objectives, targets and performance related to sustainability. The Chief Sustainable Investing Officer’s leadership team comprises individuals responsible for Public Markets ESG integration, Private Markets ESG integration, the Aviva Sustainability Ambition, ESG strategy and Macro Stewardship. Public and Private Markets ESG analysts work collaboratively with their counterparts on the investment desks throughout the investment process.

Our analysts as well as our regulatory development and client-facing teams monitor ongoing sustainability developments, with any revisions to policies subject to final approval by the Policy Approval Group.

ESG integration-related controls are embedded in support of the investment process to ensure ongoing oversight and compliance, which ultimately contributes to and supports the delivery of a strong first-line risk and controls governance framework. Examples of key controls embedded into the investment processes include ensuring that:

• strategies are being managed in accordance with our baseline exclusions policy
• investment processes are aligned to and in compliance with SFDR guidelines
• processes are being managed in accordance with our Responsible Investment and Sustainability Risk policies
• suitable protocols are in place so that each fund has applicable screens applied in accordance with IMA guidelines
• ESG scores and analytical tools are made available to portfolio managers (on the investment platform) and are referred to and considered as part of the investment process
• relevant ESG factors are considered in support of investment ideas and asset allocations
• a mandatory ESG-specific section is completed on all investment analysts’ research documentation
• ESG investment-specific staff are members of key Public Markets strategy meetings

Aviva Investors Global Financial Crime Policy covers AML/CTF, ABC, FTE, Fraud and Sanctions. There are currently over 40 staff responsible for researching ESG issues.

Memberships and affiliations

Active engagement and collaboration with other investors are an important, if not essential, requirement to exercise appropriate influence at companies. Taking part in, initiating and leading initiatives on responsible investment forms a key part of Aviva Investors’ approach. Influencing companies, sectors and financial markets on a broader basis can amplify impact and, in some instances, be more powerful than work completed individually. We are connected to shareholders and broader stakeholders through various national, regional and global forums that facilitate collective discussion and action.

Aviva Investors is a founding signatory to the UNPRI and a strong supporter of the UN PRI since its inception in 2006. Steve Waygood, our Chief Sustainable Finance Officer, was a member of the Expert and Advisory Committees that wrote the principles. Aviva Investors catalysed the development of the Sustainable Stock Exchange (SSE) Initiative and World Benchmarking Alliance that aims to publicly rank 2000 companies on ESG credentials. 

Aviva Investors lead or collaborate on over 100 initiatives such as industry associations, collaborative engagement initiatives and market reforming projects, including:

Policy

International Platform for Climate Finance (IPCF) coalition: Through the Aviva Investors-convened IPCF coalition, they have made a series of proposals to the G7 and G20 nations and at COP 27 with the aim of enabling the global financial system to tackle the climate crisis in an effective and cohesive way.

UK Green Finance Taskforce: Aviva Investors were members of this taskforce established to deliver ambitious proposals to accelerate investment in the transition to a low carbon economy. Their recommendations were published in March 2018, and encouragement continues to be given to the government since this date. 

Transition Pathways Initiatives: An initiative run by the National Investing Bodies of the Church of England and the Environment Agency Pension Fund working together with the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science (LSE). This initiative aims to evaluate what the transition to a low carbon economy looks like for companies in high-impact sectors.

Regulation

Taskforce for Climate-related Financial Disclosure (TCFD): Aviva Investors continued to participate in the TCFD itself for the duration of the Taskforce’s existence to drive forward mandatory reporting of TCFD via, for example, the Pensions Bill in the UK and the Non-Financial Reporting Directive in Brussels. Climate risk remains an important consideration in the long-term valuation of companies, and Aviva Investors expect boards to be able to demonstrate 'climate competency' in their communications with investors. From 2020, it has been an expectation of companies to be reporting climate risks, strategy, policies, and performance against the Taskforce disclosure framework. This should include stress testing of business models and assets against various climate policy scenarios. Aviva Investors will vote against the report and accounts of companies operating in high and medium impact sectors that have not made sufficient progress in providing the market with investment relevant climate disclosures.

EU High-Level Expert Group (HLEG) on Sustainable Finance: The European Commission established the EU HLEG to help develop an overarching and comprehensive EU roadmap on sustainable finance. Aviva Investors' Chief Sustainable Finance Officer, Steve Waygood, was part of the HLEG and remains closely involved with the officials at FISMA who are responsible for its implementation.

Sustainable Disclosure Requirements (SDR): In the UK, Aviva Investors have worked together with the Financial Conduct Authority (FCA) to help develop the sustainability disclosure requirements regime. 

Standard Setting

BSI Responsible Investment Standard: Aviva Investors are on the steering group for the BSI responsible investment standard that will produce a suite of new standards to raise the bar in responsible investment.  This will also lead to an ISO standard at international level.

Aviva Investors are proud to have led or been involved in a vast array of collaborative engagements, covering a breadth of thematic focuses. Please refer to the below expanded examples of initiatives they have an active role in: 

• Finance Sector Deforestation Action (FSDA) Group - Aviva Investors is a part of the FSDA Group, which acts to use its best efforts to eliminate commodity-driven deforestation from its portfolios by 2025. This micro stewardship example is a nature focused engagement, which is implemented through a deforestation lens.
• Principles for Responsible Investment (PRI) - Aviva Investors is a founding signatory and has been a strong supporter of the PRI, the UN-supported network of investors; since its inception in 2006. Steve Waygood, Chief Sustainable Finance Officer (CSFO), was a member of the Expert and Advisory Committees that wrote the principles. They continue to play a prominent role within the PRI. A recent example of this includes the PRI collaborative sovereign engagement programme.
• ShareAction - Good Work Coalition- Aviva Investors have been engaging with holdings in the chemicals sector for several years to invest in addressing their climate impact and mitigate transition risk. This has been both bilaterally and through their support of the ShareAction Chemicals Decarbonisation Working Group. 

 Aviva Investors are proud advocates of the Financial Reporting Council’s (FRC) UK Stewardship Code and continues to fully support the Code and complies with all its principles. Although by its nature the Code is focused on the UK, we consider it to be a global framework. The Aviva Investors' Sustainability Annual Review details the impact that their responsible investment approach has had on their clients and on the society they serve. 

In the 2023 UN PRI Transparency report, Aviva Investors received a 5-star rating in Policy, Governance and Strategy. This rating has been consistently maintained, reflecting their focused and effective approach in this important area of the business. 

A full collaborative list and be found within the Aviva Investors’ Sustainability Annual Review.

https://www.avivainvestors.com/en-gb/about/responsible-investment/policies-and-documents/

Founders: 

• Aviva Investors/Church Commissioners/Scottish Widows (collaborative engagement targeting proxy advisors and data providers to advance corporate HRDD data)
• Business Benchmark for Farm Animal Welfare (BBFAW)
• Carbon Disclosure Project (CDP)
• CDSB – Climate Disclosure Standards Board
• Corporate Human Rights Benchmark (CHRB)
• Investor Initiative on Hazardous Chemicals (IIHC)
• Sustainable Stock Exchange Initiative
• UN Principles for Responsible Investment (UNPRI) 
• World Benchmark Alliance (WBA)

Members: 

• 30% Club 
• Aldersgate Group
• As You Sow – Plastic Solutions Investor Alliance (PSIA) 
• Asia Research & Engagement’s Protein Transition Platform
• Asian Corporate Governance Association (ACGA)
• Business for Nature Pledge Business in the Community Ireland, Low Carbon Pledge (The World Business Council for Sustainable Development)
• Christian Brothers Investment Services (CBIS) child safety and tech working group
• European Sustainable Investment Forum (Eurosif)
• Finance for Biodiversity 
• Finance Sector Deforestation Action (FSDA)
• GFANZ 
• Global Impact Investing Network (GIIN)
• Global Real Estate Sustainability Benchmark (GRESB) 
• Institutional Investors Group on Climate Change (IIGCC) 
• International Cooperative and Mutual Insurance Federation (ICMIF) 
• Investment Association Remuneration and Share Schemes Committee 
• Investor Action on Antimicrobial Resistance 
• Living Wage Foundation (UK)
• Nature Action 100
• Net Zero Asset Managers Initiative (NZAM) 
• Partnership for Carbon Accounting Financials (PCAF) 
• Taskforce on Nature-related Financial Disclosures Forum 
• The City UK 
• The European Fund and Asset Management Association (EFAMA)
• The Institutional Investors Group on Climate Change (IIGCC)
• The International Corporate Governance Network (ICGN) 
• The Investment Association 
• The Investor Forum
• Transition Pathway Initiative (TPI)
• Transition Plan Taskforce (TPT)
• UK Corporate Governance Forum 
• UK Sustainable Investment and Finance Association (UKSIF) 
• UN PRI – Investors Policy Dialogue on Deforestation (IPDD) 
• Valuing Water Finance Initiative (Ceres)

Signatories and Collaborative Events: 

• 2020 FRC Stewardship code 
• Access to Nutrition Initiative
• Access to Medicine Foundation
• Carbon Disclosure Project (CDP) 
• Non-Disclosure Campaign 
• CCLA- Find it Fix It Prevent It Collaborative Initiative 
• CDP- Science-Based Targets (SBTs) Campaign 
• Cerrado Manifesto (deforestation), FAIRR
• Climate Action 100+ (CA100) Collaborative Initiative
• Climate Engagement Canada (CEC) 
• Corporate Human Rights Benchmark (CHRB) 
• Deforestation Pledge (Financial Sector Commitment Letter on Eliminating Commodity Driven Deforestation) 
• Dutch Association of Investors for Sustainable Development (VBDO) coordinated Investor Statement on Plastics 
• FAIRR Initiative 
• Farm Animal Investment Risk & Return (FAIRR) – the Biodiversity, Waste & Pollution programme 
• Farm Animal Investment Risk & Return (FAIRR) – the Regenerative Agriculture programme 
• Financial Sector Deforestation Action (FSDA) Working Group
• Forum for the Future 
• G7 & World Benchmarking Alliance (WBA) Sustainable Supply Chain Initiative 
• GC100 & Investor Forum Group – Remuneration Reporting Guidance
• Global Financial Institutions’ Statement to Governments on Deep Seabed Mining (Finance for Biodiversity) 
• ICCR – Investor Statement on the EU Artificial Intelligence Act
• Labour Rights Investor Network (LRIN) 
• Living wages in the US [ICCR] 
• ShareAction – Chemical Decarbonisation Working Group
• ShareAction – Good Work Coalition
• Sycomore AM and AXA IM (collaborative Investor led initiative on tech, mental health and wellbeing)
• The Council on Ethics of the Swedish AP Funds (AP1, AP2, AP3 and AP4) – Collaborative Initiative with technology sector on human rights
• The Investor Forum – ISS Investor Engagement Working Group 
• The Investor Forum – UK Water collaborative engagement
• UN PRI – Advance (Social Issues and Human Rights) 
• UNEP FI Sustainable Blue Economy 
• UniGlobal - Investor Initiative for Responsible Care 
• United Nations Principles for Responsible Investment (UN PRI) Collaborative Sovereign Engagement on Climate Change 
• World Benchmarking Alliance (WBA) Advancing Ethical and Responsible Artificial Intelligence CIC 
• World Benchmarking Alliance (WBA) – Just Transition CIC
• World Benchmarking Alliance (WBA) – Nature CIC

SDR Labelling: Unlabelled with sustainable characteristics