Sustainable, Responsible &/or ESG Policy:

Healthcare is a large and growing market, but rising costs are putting pressure on healthcare systems globally. We believe the approach to tap this growing, but resource-constrained market is to focus on what is life changing to patients. By investing in companies with solutions that meaningfully improve patients’ experience of healthcare, we believe we can increase the probability of investing in commercial success with higher barriers to future competition. Over time, this should drive performance for investors.

The Strategy is long-only, typically focused on 40-60 global stocks from across the market capitalisation spectrum. When compared to an index such as MSCI AC World Health Index, Beta would typically be 1.0-1.1, while Active Share would be >60%. While North America would typically represent the largest country exposure, the Strategy has exposure to multiple regions globally including Europe, the UK and Emerging Markets. The Portfolio Manager aims to diversify across different subsectors of healthcare, including pharmaceuticals, biotech, medical technology, managed care and life science tools.

To aid security selection, the Portfolio Manager has identified three core themes that contribute to life changing results for patients: life changing drugs; health system strengthening; and life changing care. These top-down themes help guide bottom-up security selection as the investment team categorise each holding by its theme and sub-theme to define the impact a company’s solutions have on patients.

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Life changing drugs – we believe drugs that make a meaningful difference to patients’ lives have a higher probability of commercial success. Within the theme of life changing drugs, we include:

• Drugs that are changing medical practice today, such as immunotherapy.
• Next-generation drugs, which are still in clinical trials, but have shown early and strong evidence of practice-changing potential, this could include cell and gene therapy.
• Drugs that can tackle global health priorities such as Alzheimer’s disease and antimicrobial resistance.

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Health system strengthening – sometimes, even when treatments are available, other barriers prevent or delay a patient from getting optimal care. We believe companies tackling issues around access to care will be valued by key stakeholders in healthcare and create additional growth opportunities for companies throughout the healthcare sector. In this theme we include:

• Companies that improve access to care, particularly in low- and middle-income countries. For example, increasing hospital bed capacity in underserved regions.
• Enabling new innovative research tools that allow researchers to develop the next generation of life changing treatments.
• Improving diagnosis, which reflects the fact that the quicker medical professionals can diagnose a patient, the quicker the patient can receive the care that they need.

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Life changing care – focuses on patient needs that aren’t fully addressed with pharmaceuticals and includes:

• Improve efficiency of care delivery, e.g., through more efficient patient management software or remote monitoring.
• Delivery of care outside of traditional care settings, such as in the home or outpatient surgery instead of traditional inpatient procedures.
• Medical devices, which could include continuous glucose monitoring or heart replacement valves.

We believe that the life changing treatments strategy benefits from having a sustainable objective and a financial objective. As part of our stock analysis process, we consider whether an issuer contributes positively to the United Nations Sustainable Development Goals (UN SDGs), particularly SDG 3: Good Health and Wellbeing. UN SDG 3 is to “ensure healthy lives and promote well-being for all at all ages” (source: https://www.globalgoals.org/goals/3-good-health-and-well-being/; accessed on: 02/02/2024) we believe using this goal to help guide stock selection improves our focus on patients and because we believe focusing on patients helps us identify more commercially successful healthcare companies the sustainable objective is positively supportive of the strategy’s financial objective.

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Exclusions

 The Team complies with SFDR’s Article 9 disclosure requirements.

Hard exclusions are applied, calculated using third-party data to ensure issuers are disqualified from investment if they:

• Engage in the production of tobacco.
• Generate 10% or more of revenue from the distribution of tobacco.
• Engage in the production or distribution of controversial weapons.
• Generate 10% or more of revenue from military contracting.
• Generate 10% or more of revenue from thermal coal extraction.
• Generate 10% or more of revenue from thermal coal power generation.
• Are non-compliant with the UN Global Compact.
• Are in violation with the OECD guidelines for Multinational Enterprises.
• Are non-compliant with the UN Guiding Principles on Business and Human Rights.

No Redwheel strategy will invest in securities issued by corporates involved in the manufacture of cluster munitions, landmines, or bio/chemical weapons (together defined as Controversial Weapons). In determining whether a company issuing listed securities is involved in controversial weapons technologies, our assessment will be informed primarily by the research of Sustainalytics, a third party specialist sustainability data provider. However, Redwheel reserves the right to use additional information sources as deemed appropriate.

Process:

The life changing treatments strategy has the objective of capital growth and a sustainable investment objective to support the United Nations Sustainable Development Goals (SDGs) by investing in companies that contribute to targets defined by one or more SDGs with a focus on good health and well-being. The portfolio manager believes incorporating sustainability and ESG criteria into the stock selection process can increase the probability of identifying successful investments and improve risk management.

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The UN defines SDG 3: good health and well-being as to “ensure healthy lives and promote well-being for all at all ages”. Therefore, the portfolio manager believes focusing on the UN SDGs, particularly SDG 3, increases the focus on patients when assessing investments and, in the portfolio manager’s view, a core focus on solutions that make a positive contribution to patients helps identify commercially successful companies.

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All issuers considered for inclusion in the portfolio must be determined to be sustainable investments. The assessments are conducted by the investment team and final approval is agreed with Redwheel’s sustainability committee.

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The following criteria are used to determine if an issuer’s revenue is considered sustainable:

• Positive revenue contribution to one or more the UN SDGs (exceptions may be made for pre-revenue companies, in which case an investment may still be considered sustainable if research and development expenses and/or capital expenditure can be clearly linked to prospective future revenue that would positively contribute to one or more UN SDGs.
• No significant revenue contribution from products or services that negatively contribute to any of the UN SDGs.
• No significant revenue contribution from products or services that negatively contribute to an environmental or social objective.

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The Portfolio Manager also utilises third-party data to apply Do No Significant Harm (DNSH) criteria to disqualify issuers that do significant to either an environmental or social objective. The following criteria are included:

• Material negative contribution to an environmental or social objective from its products and services will not qualify as a sustainable investment. Issuers with greater than 10% of revenues negatively contributing to environmental and/or social objectives will not qualify as sustainable investments.
• ESG Risk Rating and Controversy scores, as provided by Sustainalytics or an equivalent third-party sustainability provider. Thresholds are not set, but the Investment Manager will look for an improving outlook when a concern exists.
• Principal adverse impact (PAI) indicators, as detailed below.

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The PAIs considered to be of particular relevance include:

• Greenhouse gas emissions (GHG intensity of investee companies)
• Biodiversity (natural species and protected areas)
• Social and employee matters (lack of a supplier code of conduct)

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In the absence of data from third-party providers, the investment team will undertake reasonable steps to conduct an assessment of the relevant criteria, this may include both quantitative data and qualitative judgements.

Resources, Affiliations & Corporate Strategies:

Our investment teams and wider business are supported and challenged by specialists split across three sustainability verticals:

• The Strategy, Governance and Policy team is led by Olivia Seddon-Daines and is responsible for policy design, sustainability strategy setting, building and operating governance processes, communication and advisory with investment teams, and communication with a range of internal and external key stakeholders. Olivia is supported by Djolan Captieux who joined Redwheel in January 2024.
• The Stewardship and Regulatory Change team is led by Chris Anker who supports investment teams with engagement and proxy voting and, working closely with our Legal and Compliance teams, monitors and evaluates global regulatory initiatives relating to responsible investment
• The Thematic Sustainability Research team, Greenwheel, is led by Stephanie Kelly. This team’s remit is to produce thematic sustainability research commissioned by Redwheel investment teams and support Redwheel’s responsible, transition and sustainable investment strategies at each stage of the product life cycle. Stephanie is supported by a team of specialists with experience from within and outside the asset management industry. Her team includes Jessica Wan who leads social research and Paul Drummond who leads climate and environment research both of whom joined in 2023. The final member of the team, Anna Polise, joined in 2022 as Climate Research Analyst.

Olivia, Chris and Stephanie report directly into our Head of Investments Arthur Grigoryants who is executive level sponsor for our firm's activities relating to responsible investment. His regular interactions with investment team heads ensures frequent reflection on evolving client interests.

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All investment teams are encouraged to actively engage and participate in the work of Redwheel’s Sustainability Forum, whose principal aim is to support debate and discussion on ESG integration approaches. The forum meets on a monthly basis and provides a key mechanism for our business and our investment teams to:

• develop and improve - through collaboration - organisation level and Team level policies and practices with respect to sustainability.
• share knowledge and understanding of current best practices in respect of company ESG risk management, ESG integration, engagement activities, voting, dealing with client expectations, reporting etc.
• monitor and agree current priorities for engagement and collaboration activities.
• develop and implement education programs for the investment Teams. This could include updates on regulatory frameworks, insights into client expectations, thematic topics (climate, biodiversity etc.)
• leverage Redwheel level membership in organisations/initiatives

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Governance and oversight is provided via the Redwheel Sustainability Committee. Standing committee members in addition to Heads of sustainability functions include CEO Tord Stallvik and Head of Investments Arthur Grigoryants, who are both members of Redwheel’s Executive Committee. The Sustainability Committee meets formally on a quarterly basis to review sustainability issues both in a corporate sense and in terms of the delivery of responsible investment in practice by our investment teams.

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Redwheel are a signatory or a supporter of the following organisations and initiatives:

• UN Principles for Responsible Investment (2020)
• Investor Forum (2020)
• ClimateAction100+ (2021)
• NatureAction (2023)
• Institutional Investors Group on Climate Change (IIGCC, 2021)
• Investment Association – Sustainability & Responsible Investment Committee (2021)
• Corporate Governance Forum (2021)
• Pensions and Lifetime Savings Association - Stewardship Advisory Group (2021)
• Sustainability Accounting Standards Board (SASB) (2021)
• CDP (2021)
• UN Global Compact (2022)
• UK Stewardship Code (2022)
• Financing a Just Transition (2022)
• Access to Medicines Index (2023)

SDR Labelling:

Not eligible to use label