Sustainable, Responsible &/or ESG Policy:

The Fund is actively managed and has the flexibility to invest across a wide range of credit assets, while focusing on long-term business sustainability. Using a diversified approach, the Fund seeks to add value through a dynamic allocation to investment grade and high yield corporate bonds, asset-backed securities (ABS) and emerging markets debt (EMD). The team will also make use of credit derivative markets to take targeted investment risks and the strategy has a structural exposure to credit derivative structures to limit downside when credit market tone is poor. The investment team allocates assets to different markets according to views on the global and regional macroeconomic environment, as well as forecasts for different markets.

The Fund seeks to take ESG factors into account when making investment decisions, with some exclusions and sustainability restrictions subject to a materiality analysis. It seeks to obtain exposure to issuers which the portfolio manager believes have stronger ESG profiles.

Aim
To generate a return through a combination of income and capital returns, while taking ESG factors into account.

Investment universe
Majority in sterling-denominated or sterling-hedged assets; universe includes investment grade credit, EMD, ABS and high yield.

Performance comparator
Investment Association Sterling Strategic Bond Sector.

ESG criteria
ESG-optimised universe: Only investing in issuers that meet a range of criteria that focus on climate and societal norms. As described in detail below.

• Positive allocation themes: Targets companies with better Prime corporate ESG rating (discussed in detail later in this submission) than the global credit market (Bloomberg Global Credit index).
• Climate risk: Aims for carbon intensity at least 25% below the global credit market (Bloomberg Barclays Global Credit index).

Sustainable bonds
Minimum 10% of NAV in green or other impact bonds where all those bonds pass Insight’s Impact Bond Assessment Framework, or ‘positive impact issuer’ bonds (bonds issued by companies with a high level of alignment to the United Nations (UN) Sustainable Development Goals).

Process:

We follow a responsible investment approach for all our credit mandates, regardless of whether they include specific ESG exclusions, constraints or targets. This is because we believe that delivering superior investment solutions depends on the effective management of the risks and opportunities presented by both financial and non-financial factors. The focus for this integration is on identifying material downside risks.

However, we recognise that many clients increasingly wish to adopt solutions that move beyond a focus only on materiality of ESG risks to also focus on moral/ethical characteristics and indeed, positive impact allocations. Whilst the sustainable aspects of the strategy are significant, it is important to stress that the core investment process followed by the Fund is the same well-established process we follow for other credit solutions. adopt a four-step process as follows:

• Optimised universe
• Core process (including ESG integration)
• Positive allocations
• Engagement

We detail each of the ESG related components of these steps below.

Optimised universe

The investment universe is adjusted by excluding:

• All issuers with a worst-in-class Prime Corporate ESG Rating, and all corporate issuers with a worst-in-class Prime Climate Risk Rating (discussed in detail later in this submission).
• All companies in breach of widely accepted global conventions such as the UN Global Compact principles.
• All companies materially involved in the following socially sensitive industries: tobacco production, gambling, adult entertainment, cannabis production, controversial weapons and alcohol production.
• All companies with over 5% of revenues from coal mining and power generation, or unconventional oil and gas extraction, and utilities with over 30% in their fuel mix – unless the exposure is achieved via a green bond that passes Insight’s Impact Bond Assessment Framework for such issuance, and Insight believes the issuer has a clearly defined, long-term plan to address its environmental impact.
• All companies with worst-in-class carbon intensity (over 2,000 tonnes per US$1 million sales).
• Impact bonds rated ‘red’ by Insight’s Impact Bond Assessment Framework.
• Issuers that fail a Principal Adverse Impacts (PAI) screen – unless alternative mitigating action is deemed appropriate.

Further details on our exclusion policy can be found using the following link: Exclusions Policy

ESG Integration

To assist with our ESG assessment, we use our proprietary risk-centric, corporate Insight ESG score, Prime. Prime Corporate ESG Ratings are based on separate ESG ratings, which in turn rest on 35 separate scores for a wide range of key issues.

This quantitative framework effectively integrates our analysts' research, and supplemented with data from multiple third-party data providers, generates the Prime Corporate ESG Rating which is designed to indicate an issuer’s performance relative to its peers.

Where there are gaps in external data coverage, we will assess whether to send our proprietary, in-house survey to harvest specific data points. Once completed, the data is used to assign a Prime Corporate ESG Rating.

Climate-related risks form an inherent part of our Prime Corporate ESG Ratings methodology. Alongside this, Prime also contains data points on the carbon reserves and the carbon intensity of the individual issuers we invest in.

Separate to this, we have developed our own proprietary Prime Climate Risk Ratings tool which ranks thousands of issuers according to how they manage climate change-related risks. Prime encompasses both transition and physical risk factors within its framework and is paired with a broad-based dataset designed to inform beyond the specific Task Force on Climate-related Financial Disclosures (TCFD) ‘recommended disclosures’. Prime is analytical in nature and generates climate risk ratings, that include forward-looking scenario analysis, which in turn rest on key performance indicators we have curated, weighted and scored.

Positive allocations
Our Impact Bond Assessment Framework provides guidance for how impact bonds are assessed and rated. We assess impact bonds on a bond-by-bond basis. These include Green, Social and Sustainability bonds. Impact bonds are bonds with specific green and social use-of-proceeds for example renewable energy projects. Each impact bond will be given a Red, Light Green, Dark Green rating. There are three main areas that impact bonds are assessed against:

• ESG Performance
• Bond Framework Principles
• Bond Impact

This is aligned with the International Capital Market Association (ICMA) Green Bond Principles, Social Bond Principles and Sustainable Bond Principles, as well as the European Green Bond Standards.

ESG performance
As part of the assessment we will review the Prime Corporate ESG Rating and Prime Climate Risk Rating associated with an issuer, check for controversies in the last 12-months and consider the materiality of the risks associated with it. We will also consider the company’s overall sustainability strategy and compare it against peers as we expect the impact bond financing to be part of the wider long term sustainability strategy, for example, for a green bond we would focus on science-based net zero targets.

Companies deemed to exhibit inadequate performance will not be eligible for investment Responsible Horizons strategies and may not be eligible for other sustainability-focused mandates. Analysts pay close attention to companies with:

• high-profile negative events
• weak history of ESG activities
• lagging performance versus peers
• sustainability strategy, commitments and targets such as net zero targets

Bond Framework Principles
As a base we consider the overall framework associated with the bond, this is based on the ICMA green, social and sustainability bond principles. We aim to take this a step further to encourage best practice and ensure a positive impact is being achieved. In their framework we require an impact bond issuer to have sufficient information in the following categories:

Use-of-proceeds: At a minimum, we expect categories, and a description of what projects would be considered within each category, to be provided. To strengthen the framework, we would expect there to be appropriate minimum levels/thresholds for these categories and information as to whether they are aligned with any official or market-based taxonomies. We typically look for the use of proceeds to be aligned with the ICMA Principles’ project mappings to ensure the validity of projects. Sector-specific considerations will be taken into account.

Project evaluation and selection: At a minimum, a robust and independent process should be noted as part of the framework, including a description of the steps taken to evaluate and select eligible projects along with set criteria for exclusions or management of risks, where applicable. There should also be a process for reinvestment if the use of proceeds is no longer eligible, or if the duration of eligible projects is less than the life of the bond.

Project evaluation committee: To manage the selection and monitoring of projects, we would prefer issuers to have a working group or separate committee to effectively manage the process.

Financing/refinancing: Our preference is for an impact bond’s proceeds to be used for new financing projects, but we recognise that certain projects may require refinancing. Fully refinanced projects will be considered alongside the impact associated with the use of proceeds, but typically will lead to a light green rating. If it is full refinancing or if the split is unknown, attention will be paid to the maximum lookback period. Issuers that state proceeds can be used to pay back debt will automatically be downgraded from a dark green rating.

Reporting: At a minimum, issuers must provide complete transparency on the use of an impact bond’s proceeds and the associated impact through reporting. Our preference is for independent verification and for impact reporting to be aligned with the ICMA Harmonised Framework for Impact Reporting.

Key performance indicators (KPIs): Issuers should note or indicate potential KPIs that would be provided as part of impact reporting. These should be relevant and appropriate to the eligible categories.

A Second Party Opinion must be provided by all issuers in order to be considered to ensure the overall bond framework has had independent verification under the ICMA principles.

Bond impact

Analysts consider the positive impact of the bond. This is a qualitative and quantitative assessment. A qualitative assessment will consider:

• tangible change in strategy and the 'ambitions' of the issuer
• links to organic growth versus business-as-usual
• if the bond will increase impact-related revenue, capital expenditure would be preferred over operating expenditure
• comparison to sector peers and is the framework appropriate for the sector
• whether processes are in place to mitigate any material ESG risks to ensure the green bond is aligned with ‘do no significant harm’ criteria

A quantitative assessment will consider:

• business synergies, capital increase from green activities
• positive sustainability activity, including efficiencies and appropriateness of individual metrics
• negative sustainability activity, including individual metrics

Engagements

Philosophically, financial materiality has always been at the core of why we have engaged with institutions. A financially material factor is one that is deemed relevant and likely to have a positive or negative impact on the financial value of that investment. It is a core part of our process to engage with issuers on such factors which include, but are not limited to, strategy, capital allocation and competitive positioning. ESG factors can also drive engagement where our analysts believe them to have financial relevance. In this sense they are part of the mosaic of factors that we believe are relevant for effective financial analysis.

Increasingly, however, our clients would like us to use our influence, which is generated by their capital, to go beyond engaging solely on financially material issues with shorter-term time horizons and to seek, where possible, to mitigate potential externalities by engendering more sustainable practices. In most circumstances more sustainable behaviours are fully aligned to better long-term risk/return profiles of investments and therefore we also engage on ESG issues where we think we can influence improved behaviour, providing it is not detrimental to the return potential of the investment we make. These two rationales drive why we engage and lead, broadly, to conducting two types of engagement:

• Fundamental engagements – focus on financial materiality and business fundamentals. Typically, these engagements may include ESG issues where they are deemed to be relevant to the investment case, but they do not necessarily involve a longer-term, structured programme.
• ESG engagements – focus on addressing an issuer’s performance or impact relating to one or more ESG issues. Typically, such engagements will be longer term, structured around measurable objectives, and may be influenced by our thematic priorities on behalf of our clients.

Classical financial analysis organically leads to fundamental engagements as analysts seek to gain full understanding of all the risk factors that may impact an investment. However, systematic analysis of ESG factors requires the consideration of additional data and themes which may be outside of an analyst’s normal investigative skillset. To help frame the nature of an engagement we look to categorise ESG themes to understand if they fall under a standard fundamental engagement process or if they would benefit from a specific ESG engagement.

Responsible Horizons strategies incorporate a clear escalation policy for engagement: we make a specific commitment that if a company exhibits deteriorating ESG performance such that it graduates to be outside of the acceptable tolerances set by our ESG parameters, we will engage with the company with a view to correcting the behaviour causing this. In this sense, we hope to actively influence management behaviour. If, within one year of the breach being identified, no improvement is observed and our concerns are not addressed, we commit to selling these holdings.

Stewardship activity is tracked on internal systems and every engagement with a corporate issuer is captured within a template. These engagements help form our investment professionals’ views of issuers and provide a platform for ongoing influence to change company behaviour where appropriate.

We set objectives for our engagement, usually consisting of a wide range of issues grouped into thematic priorities, specific to each entity. This is done on a case-by-case basis based on materiality and issuer performance.

Resources, Affiliations & Corporate Strategies:

At Insight, we believe that delivering superior investment solutions depends on the effective management of the risks and opportunities presented by ESG issues, as well as other long-term value drivers. As such, Insight's approach to stewardship and responsible investment is the responsibility of all investment teams and decision-makers, supported, championed and overseen by our dedicated Responsible Investment Team and governance structure.

Insight Responsibility Oversight Committee (IROC)
The Insight Responsibility Oversight Committee (IROC) is the principal governance group with oversight and accountability for responsible investment across investment (covering all Insight’s investment activities), commercial development and communications activities, and corporate social responsibility programmes.
The purpose of the IROC is to set the strategic priorities and apply appropriate oversight to help ensure responsible investment and corporate social responsibility performance aligns with Insight’s organisational objectives. The IROC’s focus includes overseeing investment and operational activities as well as climate change, including oversight and accountability for climate strategy and policy.

Responsible Investment Team
The Responsible Investment Team, led by Robert Sawbridge, Head of Responsible Investment, is embedded within Insight’s investment management team, reporting to Lucy Speake, Co-Head of Fixed Income.

Robert, as Head of Responsible Investment, guides and oversees the overall responsible investment programme at Insight across asset classes and investment teams. Robert’s primary focus is on ensuring effective integration of responsible investment across investment teams as well as defining and implementing the investment strategy and parameters of our responsible investment solutions. Such solutions are subject to discussion and approval by dedicated fixed income implementation groups, whose members consist of investment desk heads, for the various asset classes in which we invest.

The Responsible Investment Team's focus is broadly split into three key areas: stewardship, investment and quantitative analysis.

Fixed income implementation group
There are two dedicated internal fixed income implementation groups that meet each quarter to discuss stewardship and responsible investment themes; the ESG Fixed Income Group (Corporate) and the ESG Fixed Income Group (Sovereign). These report directly to the Responsible Investment Group (RIG), which aims to ensure that that Insight’s responsible investment strategy is implemented across all asset classes and by all investment teams. Individuals from across the investment desks are members of these groups, and/or will present proposals and updates as necessary. Both groups aim to effectively apply the responsible investment strategy across corporate/sovereign fixed income.
Our credit analysts are responsible for making recommendations to portfolio managers, following the analysis of the industries and sectors that they cover. This includes regular dialogue with issuers. Insight’s investment professionals are also equipped with information and tools to assess ESG and financial practices to support effective stewardship.

Insight’s proprietary ESG ratings: Prime
Insight is focused on precision investment and risk management (including LDI) and aims to help our clients achieve their goals. Information on material ESG risks can be crucial for effective investment decisions, but ESG data providers often disagree, and there are gaps in available information. ESG data providers are also often equity-centric in their views.

We decided to apply our years of experience in analysing ESG risks in taking data from multiple inputs, selected and adjusted for relevance and materiality using our in-house expertise, to generate ESG ratings that we believe more accurately and reliably reflect material risks.

This led us to create Prime: Insight’s proprietary ESG ratings, with ESG and climate risk ratings, and now net-zero alignment categorisation, focused on corporate issuers, and ESG risk and impact ratings for sovereign issuers.

Prime ratings are generated using inputs from numerous ESG data providers, adjusted for quality and relevance by Insight’s credit and data experts. Our proprietary methodology aggregates, weights and maps these adjusted inputs, according to their significance for different sectors, geographies, etc. Proprietary systems are in place to feed ‘Prime’ data, in a consistent way, with the aim of helping our analysts and portfolio managers consider material ESG risks, informing their decision-making and engagement, and to enable tailored portfolios for clients requesting specific sustainability criteria.

The relevant Prime ratings are as follows:

• Prime Corporate ESG Ratings: First launched in 2019 with a number of enhancements since, our Prime Corporate ESG Ratings tool assesses issuers’ ESG risk. This quantitative framework effectively integrates our analysts’ materiality assessments, supplemented with data from multiple third-party data providers. The tool generates a Prime ESG Rating and Prime ESG Momentum Signal for more than 3,000 investment grade, high-yield and emerging market issuers.
• Prime Climate Risk Ratings: First launched in 2017 with a number of enhancements since, the Prime Climate Risk Ratings are structured around the Task Force on Climate-related Financial Disclosures (TCFD) framework and use physical and transition risk analysis to generate a precise comparison of 16,000 issuers using raw data.
• Prime Sovereign ESG Risk Framework: First launched in 2018 with a number of enhancements since, the Prime Sovereign ESG Risk Framework is a quantitative proprietary assessment of more than 120 countries’ sustainability performance, focusing on ESG risks and countries’ alignment with the United Nations Sustainable Development Goals (UN SDGs). Overall and momentum scores capture performance using open-source data inputs.

Collaborative initiatives

Insight supports a number of responsible investment initiatives as paying members/supporters and non-paying members/supporters. Initiatives are categorised by Insight as focusing on four areas:

• Efforts towards creating a sustainable financial system
• Efforts towards improving stewardship
• Efforts to promote specific themes by endorsing letters
• Efforts to work with other investors on a sustainable financial topic

Detail of the specific memberships can be found with the following link:

https://www.insightinvestment.com/investing-responsibly/responsible-investment-initiatives/

Green finance prize
The Insight Investment – University of Oxford Prize for Greening Finance awards research which explores the impact of ESG on finance and investment, in addition to understanding how economic and financial systems can contribute to achieving global environmental sustainability".

More information can be found with the following link: Greening Finance Prize 2024 | Sustainable Finance at Oxford

Dialshifter

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

having:
1) an ESG-optimised universe: ensuring we only invest in issuers that meet a range of criteria that focus on climate and societal norms
2) following a positive allocation theme
3) reducing climate risk as the Fund aims for a carbon intensity at least 25% below the global credit market.
4) ensuring a minimum of 10% is invested in green or other impact bonds that meet Insight’s Bond Framework Assessment or ‘positive impact issuer’ bonds which are aligned to the UN Sustainable Development Goals.
5) actively engaging and monitoring companies to improve their ESG credentials

Our organization is helping to support the Paris Climate Agreement and the Race to Net Zero by...

...signing the Net Zero Asset Managers initiative and agreeing to:

• Work in partnership with asset owner clients on decarbonisation goals, consistent with an ambition to reach net-zero emissions by 2050 or sooner across all assets under management
• Set an interim target for the proportion of assets to be managed in line with the attainment of net-zero emissions by 2050 or sooner
• Review its interim target at least every five years, with a view to ratcheting up the proportion of assets under management (AUM) covered until 100% of assets are included

SDR Labelling:

Unlabelled with sustainable characteristics

SDR Literature:

• Consumer Facing Disclosure