Sustainable, Responsible &/or ESG Policy:

The Rize Sustainable Future of Food UCITS ETF (the “ETF”) is classified as an Article 9 Fund under SFDR. SFDR defines Article 9 funds as “a Fund that has sustainable investment as its objective or a reduction in carbon emissions as its objective”. The SFDR defines sustainable investment as an investment in an economic activity that contributes to an environmental or social objective, provided that the investment does not significantly harm any environmental or social objective and that the investee companies follow good governance practices.  Article 9 Funds/themes focus on future and emerging sectors that are enabling the transition to a greener, more conscientious and sustainable economy.

The ETF is designed to enable investment in the transition to a Sustainable Food System. The ETF achieves this by replicating the Foxberry Tematica Research Sustainable Future of Food Index (the “Index”) which was designed by Rize in conjunction with Foxberry and Tematica Research.

Accordingly, the Index/ETF provides exposure to global publicly-traded companies that are innovating across the food value chain to build a more sustainable, secure and fair food system for our planet. These are companies that are (1) advancing agri-science and digital and precision farming and water management technologies to produce food more efficiently, with less input resources and with a reduced environmental impact and carbon footprint than traditional methods; (2) addressing the growing demands of conscious consumers for foods that are natural and organic and plant-based proteins and foods which are increasingly proven to be both healthier for humans and have a much reduced impact on forests, biodiversity and carbon emissions than animal protein; or (3) innovating in key areas of the food value chain such as in food and ingredient safety and testing and sustainable, reusable and recyclable packaging solutions that help improve environmental outcomes, such as reducing single-use plastic pollution and promoting a more circular economy.

Only companies that derive a significant proportion of their revenues or operating profits from the above-mentioned activities are eligible for inclusion.

Furthermore, the Index/ETF follows a purity-based weighting scheme where companies with higher revenue exposure to the theme achieve a bigger weight in the Index/ETF.

We apply a consistent approach to ESG integration across all our Article 8 and 9 thematic indices/ETFs. We build all of our ETFs and corresponding indices from scratch, and we can therefore apply a consistent, standardised approach to the integration of ESG features across our full product range. Conversely, most other ETF providers license indices from a variety of third party index providers and, accordingly, cannot adopt/apply their own consistent approach to the incorporation of ESG and Sustainability features across their ETF ranges (i.e. they are beholden to the respective ESG strategies of the various index providers that they use).

ESG criteria are reviewed on an ongoing basis as part of the outcome of our active engagement process. We endeavour to evaluate our portfolio companies on a regular basis through internal research and watchlists, our thematic research specialist, our ESG consultant and through the use of third party data providers. The Rize Sustainable Future of Food UCITS ETF rebalances semi-annually in March and in September. At each rebalance (every 6 months) we re-evaluate all the companies within the thematic universe addressing their ‘revenue purity score’, any new companies that may be eligible to enter into the index/ETF, and screen each company against our exclusion criteria.

We are committed to encouraging companies to improve their management with respect to ESG issues as outlined above. We however recognise that engagement and voting do not always lead to desired changes in a portfolio company’s behaviour or product involvement. Where this is the case, will be able to place a company on the Rize Future First Exclusion List which would lead to a divestment of the company at the following semi-annual rebalance of the applicable index.

Screens, Themes & Policies

Theme / Positive Selection Criteria

 Within the Industry Universe, companies are classified according to the 8 sub-sectors of the Sustainable Future of Food thematic classification (the “Sustainable Future of Food Classification”).

The Sustainable Future of Food Classification is a global market segmentation taxonomy which has been designed for the investment and research communities with the objective of identifying the companies, subsectors and business activities of companies whose commercial models stand to benefit from the shift towards a sustainable food system, i.e., more sustainable production and consumption throughout the global food value-chain.

Within the Sustainable Future of Food Classification, companies are identified, classified and selected according to whether they fit within one of the following sub-sectors:

• Plant Based Foods and Organic Foods Plant based foods
• Ingredients, Flavours and Fragrances
• Food Safety and Testing
• Precision Farming Companies
• Agricultural Science Companies
• Water Technology
• Supply Chain Technology
• Sustainable Packaging

If a company has exposure to more than one of the sub-sectors, it will be scored by reference to its collective exposure to all applicable sub-sectors but its subsector classification shall reflect the sub-sector that comprises the largest percentage of its reported revenue or operating profit.

It is possible that the sub-sector definitions may evolve over time and that additional sub-sectors may be added in future as the Sustainable Future of Food Classification adapts in line with the transition to a more sustainable food system.

For more detail and information about the Sustainable Future of Food Classification please see the following link: https://rizeetf.com/wp-content/uploads/2020/09/Tematica-Research-Sustainable-Future-of-Food-Global-Classification-September-2021.pdf 

Key Sustainability Features

The following features are incorporated into the Sustainable Future of Food Classification:

• Plant based - Avoidance of meat and other animal products

The objective of the “Plant Based Foods and Organic Foods” sub-sector of the thematic classification is to identify and select the companies developing and producing plant-based foods and plant-based alternatives to animal products, including novel food & beverage formulations. In the process of identifying these companies, the classification process aims to exclude companies involved in animal products (meat, fish, dairy and eggs), as evidenced by their product sets and public disclosures. Why is this important? Total emissions from global livestock production equate to 7.1 Gigatonnes of CO2-equiv per year, representing 14.5% of global anthropogenic greenhouse gas (GHG) emissions. 44% of livestock emissions are in the form of methane (CH4), the remaining part attributable to Nitrous Oxide (N2O, 29 percent) and Carbon Dioxide (CO2, 27 percent). Cattle alone represent about 65% of the livestock sector’s total emissions. Cattle production is also one of the biggest causes of global deforestation, which is itself a huge cause of GHG emissions. In the Amazon region, cattle production accounts for approximately 80% of current deforestation. Beyond forest conversion, cattle pastures increase the risk of fire and are a significant degrader of riparian and aquatic ecosystems, causing soil erosion, river siltation and contamination with organic matter.

• Avoidance of commercial fishing and fish farming

Companies engaged in commercial fishing are excluded due to the prevalence of unsustainable commercial fishing practices around the world and the challenges associated with distinguishing between sustainable and unsustainable fisheries and fishing methods. Fish farming is also currently excluded due to the direct negative environmental impact of sea-based firm farms on the marine ecosystems where they are located and the impact on wild fish populations caused by the use of fishmeal derived from wild-caught fish as feed for the farmed fish.

• Avoidance of GMO seeds or Genetically Engineered seeds

Companies engaged in the genetic modification of crop seeds are excluded, but companies only involved in the genetic editing of crop seeds are not excluded. Genetic modification involves the insertion of genes from other organisms whereas genetic editing does not involve the insertion of genes from other organisms and is limited to the alteration of the genes that already exist within the crop.

• Focus on Bio-based Stimulants and Crop Protection Products

While companies in the “Agricultural Science” sub-sector are scored against their exposure to agri-science as a whole, companies engaged in the production of nitrogen, phosphate and/or potassium fertilisers and chemical-based crop protection products are only included if they are also engaged in the transition to bio-based solutions, noting that the foregoing typically dominate revenues for the time being. Accordingly, a company’s public disclosures are assessed for clear statements confirming the company’s involvement in the research, development and commercialisation of bio-based crop protection products and bio-stimulants which are considered to have more favourable environmental outcomes.

• Focus on Sustainable, Reusable and Recyclable Packing

The “Sustainable Packaging” sub-sector is designed to capture companies engaged in the production of food packaging that is both sustainable and either reusable, recyclable or compostable. This would include companies engaged in fibre-based packaging derived from sustainable forestry, companies producing packaging materials out of aluminium and glass, which are both infinitely recyclable, and companies producing packaging materials from recycled organic matter that is compostable.

Forest Risk Commodity exclusions specific to the Rize Sustainable Future of Food UCITS ETF

A number of companies engaged in the production of organic and/or plant based foods and companies that produce fibre-based packaging have exposure to Palm Oil, Soybean, Cattle and/or Timber within their supply chains. These commodities are generally considered to be the most damaging “Forest Risk Commodities” (“FRCs”) in global supply chains contributing to increasingly alarming rates of deforestation in some of the most bio-diverse places on earth. However, the consumption and use of FRCs can be sustainable where companies responsibly manage their supply chains.

Accordingly, we exclude companies that refuse (or ignore requests) to engage in CDP’s annual independent questionnaire and review of their procurement and use of Palm Oil, Soybean, Cattle and Timber. We also exclude companies who do engage in the annual independent review but which cannot demonstrate that they are managing the deforestation risk associated with their use of Palm Oil, Soybean, Cattle and Timber (as assessed by CDP) will be excluded. The Rize Sustainability Committee and ESG Working Group take a pragmatic to the approach to the application of the FRC exclusions, and may choose to put a company on a watchlist for a certain period of time to encourage a company to improve their behaviours.

Separately, Rize ETF is one of CDP’s “Forest Risk Champions” and actively involved in the annual collective engagement process with companies targeted for completion of CDP’s climate, water and forest risk commodity questionnaires.

Through engagement we encourage all companies with exposure to the FRCs in our thematic universe to engage in the annual CDP review. We are seeing companies gradually improving their scores and more companies engaging each year.

Standard Exclusion Criteria prescribed by the Rize Future First Policy (applicable to all Article 8 and 9 ETFs)

In addition to the above thematic classification, key sustainability features and Forest Risk Commodity exclusions, we apply a suite of standard exclusion criteria (see list below) which are designed to protect against a range of ESG-related risks, including the risk of significant harm being caused by any individual companies. For greater detail on the exclusion criteria, please visit the Rize Future First Policy which is published on our website here.

Any companies in the thematic stock universe which contravene one or more of the standard exclusion criteria set out below are placed on the Rize Future First Exclusion List, which is updated semi-annually in March and September and published under the heading “Exclusion List” on https://rizeetf.com/documents/. The exclusions are incorporated by reference into the Foxberry Tematica Research Sustainable Future of Food Index which the ETF is designed to track/replicate.

• Thermal Coal

Direct involvement: Outright exclusion of companies who have any revenue exposure from their direct involvement in Coal Mining or Coal Power Generation (i.e. there is no acceptable % of revenue exposure).

Indirect involvement: Exclusion of companies deriving >10% of their revenue from their indirect involvement / participation in Coal Mining or Coal Power Generation.

• Oil & Gas

Direct involvement: Outright exclusion of companies who have any revenue exposure from their direct involvement in Fossil Fuel Production (i.e. there is no acceptable % of revenue exposure), including Arctic drilling, Fracking and Tar Sands.

Indirect involvement: Exclusion of companies deriving >10% of their revenue from their indirect involvement / participation in Fossil Fuel Production.

• Nuclear

Direct involvement: Outright exclusion of companies who have any revenue exposure from their direct involvement in Nuclear Energy Generation (i.e. there is no acceptable % of revenue exposure).

Indirect involvement: Exclusion of companies deriving >10% of their revenue from their indirect involvement / participation in Nuclear Energy Generation.

• Controversial Weapons and Firearms

Outright exclusion of companies who have any revenue exposure, direct or indirect, to Controversial Weapons and Firearms, including civilian firearms and/or production (i.e. there is no acceptable % of revenue exposure).

• Military Contracting

Exclusion of companies deriving >10% of their revenue from their direct or indirect involvement in Military Contracting.

• Gambling

Exclusion of companies deriving >10% of their revenue from their direct or indirect involvement in Gambling.

• Alcohol

Exclusion of companies deriving >10% of their revenue from their direct or indirect involvement in Alcohol.

• Tobacco

Direct involvement: Outright exclusion of companies who have any revenue exposure from their direct involvement in Tobacco Production (i.e. there is no acceptable % of revenue exposure).

Indirect involvement: Exclusion of companies deriving >10% of their revenue from their indirect involvement / participation in Tobacco.

• Adult Entertainment

Exclusion of companies deriving >10% of their revenue from their direct or indirect involvement in Adult Entertainment.

• UNGC and OECD Guidelines

Where a company is determined to violate the UN Global Compact (“UNGC”) and/or OECD Guidelines for Multinational Enterprises (“OECD Guidelines”), it will be placed on the Rize Future First Exclusion List applicable to the relevant theme/ETF. However, whilst a company may be flagged by one or more ESG data vendors as being (or having previously been) a violator of the UNGC or OECD Guidelines, it may, depending on the relevant circumstances, be appropriate to conduct further research and engage with the company directly before making a final determination as to whether to place the company on the Rize Future First Exclusion List.

• Bribery and Corruption

Where a company is determined to be engaged in acts of bribery or corruption, it will be placed on the Rize Future First Exclusion List applicable to the relevant theme/ETF. However, whilst a company may be flagged by one or more ESG data vendors as being (or having previously been) engaged in bribery or corruption, it may, depending on the relevant circumstances, be appropriate to conduct further research and engage with the company directly before making a final determination as to whether to place the company on the Rize Future First Exclusion List.

• Controversies

Where a company is determined to be engaged in controversial behaviour, it will be placed on the Rize Future First Exclusion List applicable to the relevant theme/ETF. However, whilst a company may be flagged by one or more ESG data vendors as being (or having previously been) engaged in controversial behaviour, it may, depending on the relevant circumstances, be appropriate to conduct further research and engage with the company directly before making a final determination as to whether to place the company on the Rize Future First Exclusion List.

• Poor Governance Practices

Where a company is determined to be engaged in poor governance practices, it will be placed on the Rize Future First Exclusion List applicable to the relevant theme/ETF. However, whilst a company may be flagged by one or more ESG data vendors as being (or having previously been) engaged in poor governance practices, it may, depending on the relevant circumstances, be appropriate to conduct further research and engage with the company directly before making a final determination as to whether to place the company on the Rize Future First Exclusion List. We do not aim to exclude all companies that have been flagged by one or more ESG data vendors as having poor governance practices, especially where the number of information sources is limited. Rather, we typically seek to (i) exclude the worst offenders (by placing them directly on the Rize Future First Exclusion List) and (ii) engage with the remainder of the companies with apparent governance deficiencies to better understand their issues and encourage them to improve before placing them on the Rize Future First Exclusion List.

• Armed Conflict / Other

A company may also be placed on the Rize Future First Exclusion List if it is based in (or otherwise significantly exposed to) a country engaged in significant domestic and/or international armed conflict, human rights abuses, corruption or other significant controversies, even if the company itself is not (or cannot be determined to be) directly linked to the activities of the relevant government. Any such determinations would be made by the Sustainability Committee.

• Environmental values

As investors, we are committed to addressing climate change. We believe that companies across all sectors have a duty to adapt their business models for a sustainable future.

To address the climate crisis, the world has committed to limiting global warming to well below 2°C compared to the pre-industrial era, as part of the international Paris Agreement. This means that emissions of carbon dioxide – which are the leading cause of global warming – must eventually reach net zero over the next few decades. Therefore, it is essential that companies are encouraged to reduce their carbon emissions. Conversely, companies that are not taking action might represent an investment risk, as technological, regulatory and consumer pressures intensify.

If the food system and its inefficient production levels as we know it today, were to remain the same until 2050, then feeding the planet would require clearing most of the world’s remaining forests, wiping out thousands more species, and releasing enough greenhouse gas emissions (GHGs) to exceed the 1.5°C and 2°C warming targets outlined in the Paris Agreement, even if emissions from all other human activities were entirely eliminated.

• Carbon emissions intensity

It is widely understood that the meat industry accounts for nearly 60% of all greenhouse gases from food production[1] [2]. The global production of food is responsible for a third of all greenhouse gases (“GHGs”) emitted by human activity, with the use of animals for meat causing twice the emissions of producing plant-based foods. The agricultural production process and changes in land-use are the largest contributors to global GHGs.

Accordingly, we exclude animal agriculture, meat, eggs, dairy, commercial fishing and fish farming from the Fund at the index level thereby avoiding carbon emissions intensity from these sector. For the companies we do invest in (agricultural companies, sustainable packaging in the food supply chain, plant-based food production companies), whilst some may be carbon intensive by nature, we believe it is important to invest in these companies so that they are able to invest in better practices and alternative methods of production. We will consider the carbon emissions that companies produce both directly (‘Scope 1’) or indirectly through its purchased energy (‘Scope 2’) but carbon emissions are not currently a selection criteria of the Fund. Data on indirect emissions from companies’ supply chain and use of sold products (‘Scope 3’) is not used in company selection. However, a company’s emissions profile will be relevant to our shareholding voting activities (i.e. where the company is in the ETF’s portfolio).

• Carbon reserve intensity

Carbon reserves are reserves of fossil fuels (oil, coal and gas). Companies owning such reserves present investors with two long-term risks. First, if all known fossil fuel reserves were burnt, the associated carbon emissions would lead to a dramatic rise in global temperatures and extreme weather events. This would cause unprecedented disruption for companies’ operations and supply chains, in addition to the significant human costs from forced migration, water stress and pressures on global food supply. The second risk, which is partly a reaction to the first, is that the value of fossil fuel assets may significantly reduce, due to the ongoing energy transition accelerated by policy and technological trends.

This Fund does not have any direct involvement in oil and gas, coal or nuclear. We operate an outright exclusion of companies who have any revenue exposure from their direct involvement in Fossil Fuel Production, Coal Mining or Coal Power Generation, or Nuclear Energy Generation (i.e. there is no acceptable % of revenue exposure). Indirect involvement: Exclusion of companies deriving >10% of their revenue from their indirect involvement / participation in Fossil Fuel Production, Coal Mining or Coal Power Generation, or Nuclear Energy Generation.

• Supply Chain

We exclude any company dealing or producing single-use plastic packaging.

Social values

Whilst this is not a requirement of the Fund, we believe that companies that are representative of their employees and society, which bring together a diversity of views, backgrounds, values and perspectives, have a better track record of innovation, decision-making and culture. Having diverse companies also has macroeconomic benefits, as all talent within an economy is effectively utilised.

• Bribery and Corruption

Where a company is determined to be engaged in acts of bribery or corruption, it will be placed on the Rize Future First Exclusion List applicable to the relevant theme/ETF. However, whilst a company may be flagged by one or more ESG data vendors as being (or having previously been) engaged in bribery or corruption, it may, depending on the relevant circumstances, be appropriate to conduct further research and engage with the company directly before making a final determination as to whether to place the company on the Rize Future First Exclusion List.

• Controversies

Where a company is determined to be engaged in controversial behaviour, it will be placed on the Rize Future First Exclusion List applicable to the relevant theme/ETF. However, whilst a company may be flagged by one or more ESG data vendors as being (or having previously been) engaged in controversial behaviour, it may, depending on the relevant circumstances, be appropriate to conduct further research and engage with the company directly before making a final determination as to whether to place the company on the Rize Future First Exclusion List.

• Armed Conflict

A company may also be placed on the Rize Future First Exclusion List if it is based in (or otherwise significantly exposed to) a country engaged in significant domestic and/or international armed conflict, human rights abuses, corruption or other significant controversies, even if the company itself is not (or cannot be determined to be) directly linked to the activities of the relevant government. Any such determinations would be made by the Sustainability Committee

Governance values

Where a company is determined to be engaged in poor governance practices, it will be placed on the Rize Future First Exclusion List applicable to the relevant theme/ETF. However, whilst a company may be flagged by one or more ESG data vendors as being (or having previously been) engaged in poor governance practices, it may, depending on the relevant circumstances, be appropriate to conduct further research and engage with the company directly before making a final determination as to whether to place the company on the Rize Future First Exclusion List. We do not aim to exclude all companies that have been flagged by one or more ESG data vendors as having poor governance practices, especially where the number of information sources is limited. Rather, we typically seek to (i) exclude the worst offenders (by placing them directly on the Rize Future First Exclusion List) and (ii) engage with the remainder of the companies with apparent governance deficiencies to better understand their issues and encourage them to improve before placing them on the Rize Future First Exclusion List

[1] The Guardian, Milman, O., (2021), Meat accounts for nearly 60% of all greenhouse gases from food production, study finds, at:   https://www.theguardian.com/environment/2021/sep/13/meat-greenhouses-gases-food-production-study#:~:text=6%20months%20old-,Meat%20accounts%20for%20nearly%2060%25%20of%20all%20greenhouse,from%20food%20production%2C%20study%20finds&text=The%20global%20production%20of%20food,major%20new%20study%20has%20found

[2] United Nations, UN News Global Perspective Human Stories, Climate and Environment, (2021), Food systems account for over one-third of global greenhouse gas emissions, at: https://news.un.org/en/story/202

Please note: Whilst we have a specific exclusion for the fund that does exclude all meat and fish related products, we do not have a specific exclusion policy around animal testing. 

Process:

The Rize Sustainable Future of Food UCITS ETF is an Article 9 Fund and seeks to invest in companies that potentially stand to benefit from the accelerating transition to more sustainable food production systems and consumption patterns and thereby safeguarding our nature and ecosystems, promoting transparency and safety, and encouraging plant-based consumption in order to help reduce greenhouse gas emissions.

We are a thematic ETF investment specialist and therefore, the scope and potential for ESG risks within our portfolios is significantly narrower than that of traditional asset managers who invest broadly across the global equity market and other asset classes. Rize ETF has established a fully integrated framework for responsible investing to strengthen long-term returns. This is based on stewardship with impact and collaborative, active research across publicly listed equity markets. Together, these activities enable Rize ETF to engage with companies in order to drive positive change and deliver ESG-integrated solutions to clients.

We have a narrow investment universe of c.800 listed-companies, and each ETF replicates our different custom-built thematic indices. We work with a reputable industry expert, Tematica Research LLC (“Tematica Research”), for the Rize Sustainable Future of Food UCITS ETF, where we built 8 sub-themes and a taxonomy within the index/ETF. We operate a revenue purity scoring system that is applied to each company identified within the investment universe of the ETF. This purity score (between 1-5) is generated and based on how correlated a company is with the sub-themes of the ETF. The weighting of the company in the ETF is then based on how highly its revenue purity score is.

Within the Industry Universe, companies are classified according to the Tematica Research Sustainable Future of Food Global Classification. The Classification is a global market segmentation which has been designed for the investment and research communities with the objective of identifying the companies, sub-sectors and business activities of companies whose commercial models are benefiting from the structural shift towards more sustainable production and consumption within the food value chain globally.

Within the Classification, companies are classified according to whether they fit within one of the following sub-sectors:

• Plant Based Foods and Organic Foods: Companies producing and delivering plant-based foods and plant-based alternatives to meat and dairy in the form of novel food and beverage formulations
• Ingredients, Flavours and Fragrances: Companies engaging in addressing the increasing demand for natural and organic ingredients in the production of both flavours and fragrances
• Food Safety and Testing: Companies engaging in providing food safety solutions such as cleaning and sanitation systems and anti-microbial products utilised in the processing of food and beverages
• Precision Farming: Companies engaging in agricultural innovation through new technologies which are principally aimed at increasing the quantity and quality of crops produced on the same amount of land, improving efficiencies in the use of input resources, reducing the negative impact of external / environmental risk factors and reducing the environmental footprint of agriculture.
• Agricultural Science: Companies engaging in the maximisation of crop yields and the optimisation of input resources through science and technology, including seed science (gene editing and breeding technologies, but not gene modification), fertilizers and crop protection products.
• Water Technology: Companies engaging in the provision of irrigation technologies aimed at minimizing the use of water in agriculture, including the development of advanced precision irrigation systems and IOT technologies that facilitate variable rate irrigation, wireless irrigation and the use of GPS positioning and guidance, which can be controlled remotely on smart devices.
• Supply Chain Technology: Companies engaging in the development of food processing technologies, such as cleaning, peeling, sorting and packing technologies that are supplied to food and beverage producers and grocery retailers. This sub-sector also captures companies that provide logistics technologies to the companies operating throughout the food value chain, such as automated warehouse logistics solutions.
• Sustainable Packaging: Companies engaging in the production of food packaging that is both sustainable and either reusable, recyclable or compostable.

As thematic ETF investors in publicly listed companies our scope for our investable universe is naturally smaller. Thematic investing is exactly what it sounds like: making investment decisions based upon enduring themes. There are an estimated 47,919 publicly-traded companies across the world[1]. Our thematic stock universes collectively add up to only 1,145 publicly-traded companies[2], which is only 2% of the total.

For the Rize Sustainable Future of Food universe is comprised of a total of 198 companies. Our thematic industry expert for our Food Fund maintains a database of individual stocks that have been thematically scored against the investment theme. This thematic universe of companies is compiled using screening tools and is updated twice per annum. Included are global publicly listed companies trading on major international exchanges.

Data Gathering Process

As part of its data gathering process, our thematic industry expert (Tematica Research) determines each company’s exposure to an investment theme by using publicly available data provided by the company through 10-Ks, 10-Qs, 20-Fs, 8-Ks and other SEC or similar filings, quarterly earnings reports, company presentations or official earnings conference call transcripts, and if need be, through direct engagement with the company should clarification be required with respect to publicly-disclosed information. Tematica Research primarily utilise Factset and another platform called Sentieo. They also have proprietary Python based back test capabilities as well as a wide array of applied data management automation.

To qualify for inclusion into the Industry Universe, a company must:

• be a public company; and
• be domiciled in a jurisdiction where public filings and disclosures of its business activities are required, accessible and transparent.

Sustainable Food Score

Within the Industry Universe, each company is given a thematic (i.e. purity) score by reference to its exposure to the Sustainable Future of Food investment theme (i.e. the “Sustainable Food Score”). A company’s thematic exposure is measured by the percentage of financial metrics, such as operating profit, or operating metrics influenced by the tailwinds or headwinds generated from each theme. If operating profit isn’t available, reported net sales data, either through official filings, transcripts or company presentations, is utilized as a proxy for exposure. If, in analysing a company’s public materials, it is clear that its operations are benefiting from a theme, but no specific revenue or operating profit data is reported that can verify the extent to which the company is benefiting from the theme, the company receives a Level 1 score for its thematic exposure. Each company’s thematic score is determined by reference to its economic exposure to one or more of the 8 sub-sectors of the Classification.

For further information and detail, please refer to the Rize Future of Food Global Classification: https://rizeetf.com/wp-content/uploads/2020/09/Tematica-Research-Sustainable-Future-of-Food-Global-Classification-September-2021.pdf

Classification

The Index offers exposure to stocks in the Sustainable Future of Food sector as determined by the Thematic Industry Expert, which are listed on an Eligible Exchange and have a minimum free-float market capitalisation and 3-month average daily trading value. The index is a semi-annually rebalanced net total return index denominated in USD with constituents selection based on a minimum Sustainable Food Score of 2 (out of 5) provided by the Thematic Industry Expert. The index excludes companies flagged in the Rize Future First Exclusion List. The index applies a score-weighted methodology to assign weights to companies, with a final liquidity adjustment.

The Index Rules can be found at the following link: https://rizeetf.com/wp-content/uploads/2020/09/Foxberry_Tematica_Research_Sustainable_Future_of_Food_Index_Rules.pdf

The Rize Sustainable Future of Food UCITS ETF is an index-replicating fund and, as such, is managed to replicate the composition and performance of the corresponding Index. The Index Rules set out the respective selection criteria and weighting methodologies employed at the point of each semi-annual rebalancing of the indices. At present, the Rize Sustainable Future of Food UCITS ETF is designed to have a global exposure but with exposure to the food sector.

The selection of stocks for each Index is conducted with respect to each Selection Day in accordance with the below process in which each step more and more stocks are potentially excluded (See section 3.2.2 (Selection) of the Index Rules):

• all stocks in the Underlying Universe are considered further for inclusion;
• stocks which are listed on a Eligible Exchange are considered further for inclusion;
• Companies that derive less than 20% of their revenues from the theme are excluded so that only companies that derive a significant proportion of their revenues or operating profits from the Sustainable Future of Food theme are included. Stocks with a Sustainable Food Score lower than 2 (or a missing Sustainable Food Score) are excluded, so that only companies that derive a significant proportion of their reported operating profits or revenue from the Sustainable Future of Food theme are included;
• stocks which are flagged in the Rize Future First Exclusion List are excluded; and
• stocks with a minimum free-float market capitalisation as of the Selection Day of at least USD 500mm and a 3-month average daily trading value of at least USD 2mm equivalent are selected. Following the Live Calculation Date, for an existing Constituent to be removed from the index, the thresholds to keep the Constituent are lowered to a minimum free-float market capitalisation of USD 250mm and a 3-month average daily trading value of USD 1mm equivalent

The weighting of each Constituent is calculated in accordance with the below methodology:

• The Initial Weight for each Constituent is equal to its Sustainable Food Score divided by the sum of all Sustainable Food Scores of all of the Constituents.
• The Liquidity Cap is calculated for each Constituent as the 3-month average daily trading value USD equivalent divided by USD 400mm, such that a hypothetical USD 100mm change in notional of Index units would correspond to a maximum of 25% of the daily trading value of such Constituent.
• The Final Weight will be calculated for each Constituent by redistributing any Initial Weight which is larger than the corresponding Liquidity Cap to the other Constituents proportionally in an iterative manner.

The “Rize Future First Exclusion List” has been created and is maintained by Rize ETF Limited (“Rize”). The purpose of the Rize Future First Exclusion List is to act as a non-exhaustive screen for companies that are non-compliant with the environmental, social and governance principles of Rize. We believe we have a responsibility to consider and factor in environmental, social and governance risk factors that could affect the outcome of any thematic investment strategy or negatively impact the environment or society. Accordingly, we incorporate a suite of exclusion criteria in order to ensure that companies with substantial ESG risk profiles are excluded from the index selection.

In addition to the core exclusion list, for the Rize Sustainable Future of Food UCITS ETF we also avoid all companies with direct involvement in animal agriculture, meat, eggs, dairy, commercial fishing, fish farming, genetic modification or engineering, single-use plastic packaging, and synthetic or chemical-bases crop protection products. Companies in the thematic stock universe which contravene one or more of the applicable exclusion criteria are placed on the Rize Future First Exclusion List. For this Fund we also collaborate with CDP. Through our own analysis and that of industry experts, we understand that many companies in the food value chain are lagging in disclosure on forest risks (Timber, Soy, Cattle, Palm Oil), water and climate change themes. Given that food companies have exposure to water and forest-related risks and are significant GHG emitters, water users, and land users, we know that getting these companies to disclose their activities to CDP across all relevant themes is necessary to put them on a path towards the mitigation of these risks.

The exclusion criteria are periodically reviewed to ensure that emerging and evolving ESG risks are sufficiently captured and integrated into the screening process.

Please find the following link to the Rize Future First Exclusion Criteria for the Rize Sustainable Future of Food UCITS ETF: https://rizeetf.com/wp-content/uploads/2021/12/Rize_Future_First_Policy-Short-Index-Consultation.pdf.

The “Rize Future First Policy” formally documents the process and governance associated with the construction and maintenance of the Rize Future First Exclusion List and is available here: www.rizeetf.com.

As per the rules of the UCITS Regulations, a UCITS that seeks to track/replicate a financial index may have exposure of up to 20% of its NAV in single companies and this limit may be raised to 35% for a single issuer in exceptional market conditions (e.g. where an issuer occupies a dominant market position). Accordingly, irrespective of what happens at the index level, the foregoing applies to any UCITS tracking/replicating an index and are required to be adhered to by the Manager. The indices are structured with target constituent weights (i.e. which are applied at each semi-annual rebalance) that are quite a lot more conservative than the foregoing UCITS limits with the aim of reducing the possibility of a situation where the Manager is forced to diverge away from a perfect replication of the Index in order to comply with the UCITS rules.

Review frequency, Oversight & Governance

During each semi-annual scoring session, Tematica Research will review a company’s Classification and Sustainable Food Score in March and September. The Classification is maintained by the Tematica Research Classification Committee. The Tematica Research Classification Committee also engages in regular dialogue with the Tematica Research Strategic Advisory

We have also integrated a steering committee dedicated to Sustainability and ESG which is made up of 6 members  (Rize ETF employees and an independent third party) who meet periodically (no less than quarterly), to review, establish and agree the Rize Future First Policy, as well as other matters linked to sustainability.

In addition to our Sustainability committee, we have an internal ESG/Sustainability working group at Rize ETF which  is responsible for the curation and maintenance of the Rize Future First Policy and Exclusion Lists and is supported by an independent/external ESG research firm, Sustainable Market Strategies, who provide ongoing research and consultative support to the team relating to ESG policy and integration (they act as an extension to our internal capabilities).

Both of these groups, provide an added level of review, oversight and Governance to the Rize ETF product suite.

Integration of Sustainability Risks - Rize Sustainable Future of Food UCITS ETF

ETFs that track/replicate an index will invest in the same companies (and in the same proportions) as such companies are represented in the corresponding index. As the strategy of each of our ETFs is to track or replicate an index, changes to the portfolios of the ETFs will be driven by changes to the corresponding indices in accordance with the published index methodologies. The overall methodology of how we integrate ESG and sustainability criteria into the Fund(s) is formally reviewed on an annual basis by the Rize Sustainability Committee. Any changes to the methodology will be subject to a formal overview and approval by our Boards.

The consideration and integration of sustainability risks happens:

• at the point at which the thematic classification system is developed for a new theme in partnership with the relevant thematic research partner, where sustainability features and/or objectives might be incorporated into the thematic classification for the theme;
• at the point at which the index itself is developed in partnership with the index provider (benchmark administrator), where ESG characteristics might be incorporated into the index selection process by way of the Rize Future First Exclusion List (typically, our Article 8 and 9 ETFs); and
• on an ongoing basis as part of the ongoing curation and maintenance of the Rize Future First Exclusion List, which is heavily informed by the stewardship activities outlined above.

The Manager of the ICAV has a permanent risk management function with policies and procedures appropriate to the nature, scale and complexity of the ICAV. Day to day risk management of the portfolio is carried out by the Manager.  The systems currently used by the Manager to manage the Funds and to monitor and value of all the assets and liabilities of the Funds is Paladign Portfolio System. In addition the Investment Management team utilises Bloomberg as part of its risk monitoring processes, Bloomberg trading monitoring tools are programmed to monitor trades to seek to ensure adherence with Investment Policy and UCITS rules accordingly. Using the systems set out above the exposures are monitored and verified by the Risk Management Team.  Most recent reporting prepared in relation to Risk Oversight for the ETFs is available if required. With respect to the integration of sustainability risk primarily takes place in its consideration of the index proposed to be used by a new ETF and the application of the stewardship policy. The Manager does not exercise any active discretion in the investment decision process for the ETFs, outside of seeking to passively-manage the ETF through the replication and tracking of the relevant index and its involvement in stewardship activities such as voting on portfolio company shareholder resolutions.

See below for our step-by-step process (data March 2022):

• From the 47,919 publicly listed companies, Rize ETF & Thematica Research (sector specialist) create the Sustainable Future of Food taxonomy.
• 198 companies make it into the Sustainable Future of Food universe
• The Rize Future First core and theme-specific exclusion criteria are applied
• Following the filters applied, 140 companies make the cut (58 companies are screened out from this process)
• The CDP Forest Risk Commodity screens are applied
• Further companies are then excluded based on Forest Risk Commodities
• The Universe file and Rize Future First Exclusion List are sent to the Administrator and Index provider
• The ETF tracks the index following the rebalance

This process allows for consistent and repeatable ESG approach. Our Sustainability Committee provides oversight over the exclusions which delivers accountability and good governance structures.

Through this Fund, companies are incentivised to operate more sustainably allowing clients to go further in integrating ESG factors into their own investment strategy. The Rize Sustainable Future of Food UCITS ETF captures how we view our responsibilities as an asset manager and a steward of our clients’ investments, by considering ESG factors. It incorporates how we engage with companies, develop innovative products, evolve our investment process and manage risk to deliver sustainable long-term value. The Rize Sustainable Future of Food UCITS ETF is for clients who want to express their conviction on targeted ESG themes, depending on their investment styles.

Overall, we believe integrating ESG considerations into investment processes can help mitigate risks and has the potential to improve long-term financial outcomes. The carefully curated and concentrated composition of this index/ enables the investment team to build upon the breadth of Rize ETF’s ESG analysis to provide a comprehensive and forward-looking assessment of companies’ ESG performance.

[1] Source: World Federation of Exchanges. Data sourced from https://www.world-exchanges.org/ on 07 March 2022.

[2] Source: Rize ETF, 2022, March 2022.

Resources, Affiliations & Corporate Strategies:

We apply a multi-pronged approach for ESG matters. Externally, our thematic industry experts carry out all of the research on the universes of companies that feed into our indices and support our ESG exclusions. For every index/fund that we build, we partner with a thematic industry specialist firm to design the classification system/taxonomy for the theme (which for the most part tends to be something new and unique in each case) and curate the stock universe of companies exposed to the relevant theme and sub-themes.

Rize ETF works in conjunction with Tematica Research LLC (“Tematica Research”), who are our thematic industry expert for the Rize Sustainable Future of Food UCITS ETF, and undertake a comprehensive bottom-up analysis into companies, incorporating company analysis and material ESG factors. Tematica Research provides us with equity research, economic insights, and investment ideas based upon its proprietary thematic perspective of the world and financial markets. Tematica Research’s investment themes are identified by looking at the intersection of shifting economics, demographics, psychographics and technologies, mixed in with regulatory mandates and other forces. Such thematic shifts cut across sectors and tend to result in major structural changes and disruptions to behaviours and business models. Further information about Tematica Research can be found on their official website at www.tematicaresearch.com.

In-house we leverage the expertise of our Head of ESG and Sustainability Analyst who carry out active engagement, with companies and their peers to help offer a unique insight to the long-term sustainability of companies. In addition, we work with an external ESG consultant who supports us by carrying out additional sustainability screens based on our exclusion criteria using third party ESG tools.

We also have a strategic partnership with Sustainable Market Strategies (“SMS”) who are an independent ESG advisory firm. SMS are appointed on a retained basis to act as an extension of our internal ESG working group (see below). SMS provide strategic support to Rize on all ESG and Sustainability matters, including the design and curation of the RFFP, company-specific research relating to potential exclusions and engagement as well as support on specific items and projects on an ad hoc basis.

Internally at Rize ETF, we curate and maintain the Rize Future First Policy and Exclusion List, the data and insights. We receive both components from our thematic industry partners for each theme and we leverage our own research and engagement with companies, the research carried out by SMS (see above) and external ESG databases (including Sustainalytics) to provide us with the data and insights required to conduct our screening process for the Rize Future First Exclusion List.

The Index/ETF builds upon Rize ETF’s quantitative ESG analysis to frame engagement activity with companies held. This approach allows us to prioritise the most material ESG issues for each company, and take a forward-looking view of the financial impact.

In addition to our Sustainability Committee, we have an internal ESG/Sustainability working group at Rize ETF comprised of Stuart Forbes (one of the Founders), Olivia Hillgarth (Sustainability Analyst), Danelle Jordan (Legal Counsel and SFDR lead). The working group is responsible for the curation and maintenance of the Rize Future First Policy and Exclusion Lists and is supported by our  ESG consultant, who provides ongoing research and consultative support to the team relating to ESG policy and integration (they act as an extension to our internal capabilities).

Our Fund(s) are rated by MSCI and Morningstar. MSCI have given the Rize Sustainable Future of Food a AA rating. Morningstar has given the Fund three globes (https://www.msci.com/our-solutions/esg-investing/esg-fund-ratings/funds/rize-sustainable-future-of-food-ucits-etf-usd-acc/68613386).

We are signatories of the UN PRI, CDP, FAIRR, Rise Up For the Ocean, and SME Climate Hub.

Through our collaboration with CDP, the Fund incorporates a screening process to avoid companies that are heavily linked to the key forest risks (Timber, Soy, Cattle, Palm Oil), water and climate change themes, and/or choose not to disclose their activities in relation to these themes. Food companies typically have exposure to water and forest-related risks and are therefore significant GHG emitters, water users, and land users.  Getting these companies to disclose their activities to CDP across all relevant themes is necessary to put them on a path towards the mitigation of these risks. We look to engage with companies that choose not to disclose in the first instance rather than omitting them from the Fund so that they have a period of time to implement necessary changes. However, we will exclude companies who continuously refuse to engage or disclose on their forest risks, water and climate change impact, and they will be put on the Rize Future First Exclusion List for the Fund.

We actively participate in collective engagement campaigns, such as the annual climate, water and forest campaigns led by CDP in respect of which we act as lead investor or co-signatory, even though the companies being targeted are not necessarily portfolio companies of our ETFs. Even if we do not invest in many of these companies, we believe it is nonetheless vital to engage with them and we want to have a wider impact on the much needed transition to a greener, more conscientious and sustainable economy.

Separately, Rize ETF is one of CDP’s “Forest Risk Champions” and actively involved in the annual engagement process with companies targeted for completion of CDP’s climate, water and forest risk commodity questionnaires.

We have also recently become a signatory of FAIRR (Farm Animal Investment Risk and Return). Working in collaboration with FAIRR we will be participating for the first time in their Sustainable Proteins Engagement program as well and their Working Conditions, and Aquaculture – Biodiversity and Climate Risk programs. This will form part of our collective engagement campaigns where we will be engaging and asking leading food companies to adopt a global, evidence-based approach to diversify protein sources away from an over-reliance on animal proteins. Whilst we exclude companies with direct involvement in animal agriculture, meat, eggs, dairy, commercial fishing and fish farming from the Rize Sustainable Future of Food UCITS ETF, we understand that protein diversification has the potential to transform a food company’s core business and value proposition: its growth, profitability, risk exposure and ability to compete and innovate.

Engagement supports research and helps to drive improved management of relevant ESG issues for assets of the ETFs. Experience suggests that engagement has the strongest impact, increasing the likelihood of meaningful change. The ETFs seek to follow a structured engagement process based on issues which arise during the thematic research process or as highlighted by the research of ESG service providers.

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Please note: We have not ticked the suitable for vegetarians/vegans filter as, whilst we have a specific exclusion for the fund that does exclude all meat and fish related products, we do not have a specific exclusion policy around animal testing. 

Dialshifter

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

...Investing in companies that are innovating across the food value chain to build a more sustainable, secure and fair food system for our planet. More specifically, companies that are

• advancing agri-science and digital and precision farming and water management technologies to produce food more efficiently, with less input resources and a reduced environmental impact and carbon footprint;
• addressing the demands of conscious consumers for plant-based foods which have a much reduced impact on forests, biodiversity and carbon emissions than animal protein; or (3) innovating in food and ingredient safety and testing and sustainable, reusable and recyclable packaging solutions.

We incorporate positive and negative screening criteria that address greenhouse gas (“GHG”) emissions and carbon reserve intensity. Global food production is responsible for a third of total human-caused GHG emissions. Agriculture occupies 50% of the Earth’s habitable land, 77% of which is used for livestock and growing animal feed. Meat production accounts for nearly 60% of all GHGs related to the food system.

We exclude animal products (meat, eggs, dairy, commercial fishing and fish farming) from the Fund thereby avoiding the bulk of methane and carbon emissions arising from these sectors. This Fund also excludes exposure to the fossil fuel industry.

SDR Labelling:

Not eligible to use label