Sustainable, Responsible &/or ESG Policy:

The Fund aims to provide an income with the potential for capital growth over the long term (5 years or more).

The Fund seeks a responsible approach to investing in UK companies by incorporating ESG factors in investment decisions and avoiding companies that the investment manager considers to be involved in business activities and behaviours that may be environmentally and/or socially harmful.

The Fund is managed by Andrew Jones, with the support of the Janus Henderson Global Equity Income Team (the ‘team’). Andrew has been the portfolio manager since the beginning of 2012 and has been managing retail income portfolios for the past 18 years.

Key differentiators

• The experience and track record of the portfolio manager in applying his investment approach.
• A flexible and pragmatic investment process capable of achieving outperformance in a variety of market conditions *. The portfolio manager’s bottom-up stock selection process combines fundamental analysis with a strong valuation discipline. This enables the portfolio manager to identify companies with good long-term prospects that are trading at reasonable valuations.
• A long-term approach to investment. Stocks undergo a rigorous selection process and are typically held for three to five years.
• A clear ESG proposition. A Fund/strategy focused on UK companies with ESG factors incorporated in investment decisions.

*Past performance does not predict future returns.

In order to minimise exposure to business activities and behaviours that may be environmentally and/or socially harmful, the Fund/strategy seeks to avoid businesses that have products or operations directly associated with alcohol, animal testing (for non-medical purposes), armaments, chemicals of concern, contentious industries, fossil fuel extraction and refining, fossil fuel power generation, fur, gambling, genetic engineering, nuclear power, pornography, and tobacco (subject to de minimis limits – full details are available in the portfolio’s Investment Principles document which can be found on www.janushenderson.com.

Over the long-term, the portfolio manager believes there are two key factors that drive stock prices:

• The returns a company generates
• The valuation given to those returns

Stocks will go up or down if either the company’s returns are better or worse than the market anticipates, or the valuation of those returns changes. Short-term market inefficiencies allow the manager to exploit opportunities where the long-term returns or value of a company are misjudged.

Responsible investment

In 2006, Janus Henderson became a founding signatory of the Principles for Responsible Investment (PRI) publicly demonstrating its commitment to including environmental, social and governance factors in investment decision making. The PRI defines responsible investment as:

   ‘a strategy and practice to incorporate ESG factors in investment decisions and active ownership.’

This definition is reflected in the Fund’s responsible investing approach with an ethos of strong avoidance criteria and a focus on integrating ESG factors. The portfolio manager’s investment approach is not static; as the science and knowledge of ESG issues evolves, the manager will look to adapt and refine the approach.

The Fund is actively managed with reference to the FTSE All Share Index, which is broadly representative of the companies in which it may invest, as this can provide a useful comparator for assessing the Fund's performance. The investment manager has discretion to choose investments for the Fund with weightings different to the index or not in the index.

As an additional means of assessing the performance of the Fund, the IA UK Equity Income sector average, which is based on a peer group of broadly similar funds, may also provide a useful comparator.

Process:

The investment approach of the Fund is primarily one of bottom-up stock selection. The fundamental positions of companies are examined, and an evaluation made of whether they are well placed to generate good cash flow to ensure that dividends may be sustained and increased over time.

The strategy will typically outperform when markets are driven by a focus on valuation and the strength of underlying businesses in terms of their ability to pay a dividend, grow the dividend, maintain a robust balance sheet, and generate good levels of cashflow.

Conversely, the strategy may struggle to outperform in highly speculative, momentum driven markets in which valuation and fundamental analysis is focused on less. Additionally, due to the Fund’s avoidance criteria, a market which is led higher by carbon intensive sectors such as oil and gas and mining may also be challenging for performance.

Investment screens

The first stage is screening to ensure that the securities are eligible for purchase given the Fund has clear avoidance criteria that it must adhere to as part of its responsible investment approach.

Investible universe

Environmental and social avoidance criteria
To minimise exposure to business activities and behaviours that may be environmentally and/or socially harmful, the Fund seeks to avoid businesses that have products or operations directly associated with the certain criteria, subject to de minimis limits.

De minimis limits: Where possible we will seek to achieve zero exposure in respect of the negative criteria. However, there may be instances when we will apply a de minimis limit. A de minimis limit is a threshold above which investment will not be made and relates to the scope of a company’s business activity; the limit may be quantitative (eg, expressed as a percentage of a company’s revenues), or it may involve a more qualitative assessment. De minimis limits exist because sometimes avoiding an industry entirely may not be feasible given the complex nature of business operations.

In such instances we will invest in a company only if we are satisfied that the ‘avoided’ activity forms a small part of the company’s business, and when our research shows that the company manages the activity in line with best practice.

When the activity relates to a company’s revenues, we will use a 10% threshold. When the activity relates to a company’s operations, we will seek to gain comfort that the company is taking action to improve its performance or is managing it in an exemplary fashion. Any company with a persistent record of misconduct, where such activity relates to company operations, will be excluded unless there is clear evidence of significant progress.

We seek to avoid businesses that have products or operations directly associated with the following

criteria 1:

Alcohol: We avoid companies involved in the production and sale of alcoholic drinks.
Animal testing: We avoid companies that manufacture vitamins, cosmetics, soaps or toiletries unless they make it clear that their products and ingredients are not animal tested. We allow animal testing for medical purposes only where the company employs best practices in accordance with the ‘3Rs’ policy of refinement, reduction and replacement.
Armaments: We avoid companies involved in the direct production or sale of weapons. We will not invest in companies involved in the direct production of land mines, cluster munitions, biological/chemical weapons, and nuclear weapons.
Chemicals of concern: We avoid companies that manufacture or sell chemicals or products containing chemicals subject to bans or severe restrictions in major markets around the world. This includes ozone-depleting substances, microbeads, persistent organic pollutants, and the manufacture of any other substances banned or restricted under international conventions.
Fossil fuel extraction & refining: We avoid companies engaged in the extraction and refining of coal, oil and gas.
Fossil fuel power generation: We avoid companies engaged in fossil fuel power generation; however, investment in companies generating power from natural gas may be allowed in cases where the company’s strategy involves a transition to renewable energy.3
Fur: We avoid companies involved in the sale or manufacture of animal fur products.
Gambling: We avoid companies with activities related to gambling.
Genetic engineering: We avoid companies involved in the deliberate release of genetically modified organisms (eg. animals or plants). Investment in companies where genetic technologies are used for medical or industrial applications may be acceptable providing high environmental and social standards can be demonstrated. Companies that use or sell products that make use of such technologies may be acceptable providing genetically modified organism (GMO) ingredients are clearly labelled.
Nuclear power: We avoid companies that are involved in the uranium fuel cycle, treat radioactive waste, or supply specialist nuclear related equipment or services for constructing or running nuclear plant or facilities.
Pornography: We avoid companies that are involved in producing or distributing pornography and adult entertainment materials or services.
Tobacco: We avoid companies that engage in activities related to the production and sale of tobacco products.

Source: Janus Henderson Investors, as at 31 March 2024.

1. We also seek to avoid companies operating in contentious industries which have a high degree of negative environmental or social impact unless the company is taking action to mitigate negative impacts. Examples of contentious industries include cement, mining, and timber.
2. 3Rs: Refine experiments to ensure suffering is minimised. Reduce the number of animals to a minimum. Replace animals with alternative techniques.
3. For a company to be transitioning to renewables, the carbon intensity would need to be aligned with a below 2ºC scenario - (limiting global warming to 2ºC from pre-industrial levels). Where carbon intensity cannot be determined, a 10% threshold for energy production from natural gas is used.

In addition to the avoidance criteria, all holdings in the Fund are compliant with the UN Global Compact and the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises. The UN Global Compact’s ten principles cover human rights, the International Labour Organisation’s declaration on workers’ rights, corruption, and environmental pollution, while the OECD guidelines cover employment and industrial relations, information disclosure, combating bribery, consumer interests, science and technology, and competition. More detail can be found in the Fund’s Investment Principles document on www.janushenderson.com.

Janus Henderson has appointed specialist companies, MSCI and Vigeo EIRIS, to provide the environmental and social avoidance criteria screening of potential investments. An investee company must pass the MSCI/Vigeo EIRIS screens or be approved by the ESG Oversight Committee to be eligible for the Fund.

Fundamentals

Once the avoidance criteria have been applied then fundamental analysis is carried out on securities. The portfolio manager aims to understand what will drive a company’s earnings and profitability over the long term, and then assesses how the market currently values the company relative to its potential.

ESG integration *
Analysing ESG issues is an important part of the analysis of a company’s business fundamentals. Environmental factors consider a company’s impact on the environment, social factors consider the way businesses treat and value people, and governance factors focus on corporate policies and how companies are governed.

* ESG integration is the practice of incorporating material ESG information or insights in a non-binding manner alongside traditional measures into the investment decision process to improve long term financial outcomes of portfolios. This product does not pursue a sustainable investment strategy or have a sustainable investment objective or otherwise take ESG factors into account in a binding manner. ESG related research is one of many factors considered within the investment process and in this material we seek to show why it is financially relevant.

We believe companies with sound governance practices and strong stakeholder relations, that manage relevant environmental and social risks responsibly, have a greater propensity to create long-term value for shareholders. Key ESG issues considered as part of the investment process include corporate governance, human capital and diversity, climate change, controversies, disclosure, transparency, and business ethics.

MSCI, an external ESG rating provider, provides an ESG quality score which measures the ability of the underlying holdings to manage key medium to long term risks and opportunities that arise from ESG factors. These ratings are supplemented with Janus Henderson research and analysis as well as engagements with companies when appropriate. It is expected that the Fund’s ESG quality score, as measured by MSCI will be superior to its benchmark, the FTSE All-Share index.

To make informed investment decisions, a wide range of specialist tools and information are made available to the portfolio manager and broader investment teams. The firm subscribes to and uses a number of specialist ESG research and data providers including: MSCI, Sustainalytics, Vigeo EIRIS, ISS, Bloomberg, RepRisk, and Institutional Voting Information Services (IVIS). These providers are selected and monitored by the central Janus Henderson Responsibility Team.

Company engagement and voting
Company engagement forms an important part of the investment process. Meetings incorporate a wide range of topics including ESG issues where relevant. We take an active approach to communicating our views to companies and seeking improvements in performance where necessary, including appropriate standards of corporate responsibility.

Our analysis of the portfolio against key ESG performance indicators helps us identify topics for engagement, together with the controversies, scientific advances, and actions taken by companies. These topics for engagement are not fixed and are subject to change depending on the activities of the company and their materiality.

Janus Henderson’s Proxy Voting Policy and Procedures document, which can be found on www.janushenderson.com, sets out the firm’s proxy voting policy.

Ultimate voting authority rests with the portfolio manager, who is responsible for ensuring that votes are exercised in the best interests of clients, with ESG factors an important consideration where relevant. The portfolio manager is supported by the in-house Responsible Investing and Governance Team, who work closely with investment teams to help analyse voting-related issues. With regard to voting and company engagement, the portfolio manager considers certain core principles such as disclosure, transparency, board composition, shareholder rights, audit and internal controls, and remuneration. A key element of the approach to proxy voting is to support these principles and practices and foster the long-term interests of shareholders.

Given the Fund’s responsible investment process incorporates environment, social, and governance factors in investment decisions, there will be relatively few shareholder proposals on ESG issues for the companies held in the Fund. We aim to support shareholder proposals on ESG factors for portfolio holdings following our approach to voting and engagement outlined within this document.

The Quarterly Voting and Engagement Report for the underlying fund within the portfolio can be found on UK Responsible Income Fund - Janus Henderson Investors.

Financial discipline and valuation

Valuation discipline
The bottom-up stock selection process is grounded in fundamental analysis that aims to gain a clear understanding of specific companies and their markets, together with a valuation discipline that encompasses a wide range of valuation techniques. Rather than applying a prescribed valuation metric, the portfolio manager uses relative and absolute valuation measures that are relevant to each company’s business and the industry or sector in which they operate.

As well as dividend yield, other factors such as dividend growth, free cash flow yield, cash flow growth, balance sheet strength, and profitability-based metrics such as price/earnings ratios are also considered. The Fund will also consider metrics such as Net Asset Value, EV/Sales and EV/EBITDA. There is a strong emphasis on identifying companies that have good and growing levels of free cash flow with the aim of identifying stocks with the potential for income growth and capital returns. Robust balance sheets are also favoured within the process.

While fundamental analysis may suggest a company has good prospects, the valuation discipline focuses on assessing whether a company is attractively priced. This valuation-driven approach favours temporarily unpopular stocks, resulting in a moderately contrarian portfolio.

Buy/sell discipline
Objective and timely buy and sell decisions are a crucial element in the investment process. While many Investment processes work hard at identifying attractive companies for inclusion in a portfolio, the team’s investment process places equal emphasis on monitoring the progress of existing holdings and applying dispassionate, objective criteria to assess whether a stock should continue to feature in the portfolio. In particular, the portfolio manager’s assessment of company valuations provides a key discipline for making objective sell decisions.

When a stock is bought a target valuation will be set based on the most relevant metric (eg, Free-Cash-Flow Yield, Dividend Yield, P/E, NAV based etc.) and stocks will be reviewed when the valuation target is reached.

Once the target has been reached and if there is no new information and the stock has therefore become more expensive, the position will be sold. If there is additional information and the stock continues to have upside on this basis then a new target may be set, and the position can be retained.

Conversely:

• If the stock falls and becomes cheaper in the absence of any new information – the team will add to the position.
• If the stock falls as a result of new information, but the lower share price more than discounts this news and still results in an attractive upside – the team will look to add to the position.
• If the stock falls due to a deterioration in the company’s fundamentals affecting the outlook or valuation, or if the portfolio manager becomes aware of a flaw in his original investment rationale, the stock will be sold.
• If MSCI / Vigeo Eiris research finds that the Fund’s ESG criteria is no longer met, then the position will be sold.

Further information of third-party data and analytical tools used to support investment and screening process can be found in the Investment Principles document for the underlying fund within the portfolio at www.janushenderson.com.

An investee company must pass the MSCI / Vigeo EIRIS screen or be approved by the ESG Oversight Committee to be eligible for the Fund.

Long-term investment
The Fund takes a long-term approach to investing and will tend to hold individual names for at least five years. Past results from this investment process suggest that the Fund will have single-sided turnover of around 25% to 35% per annum.

Resources, Affiliations & Corporate Strategies:

As at 31 March 2024, Janus Henderson has 26 Responsibility Team resources. This centralised team are our ESG subject-matter experts who partner with our investment teams on ESG. On our investment teams, we have 11 dedicated ESG experts embedded within numerous investment teams. Additionally, we have 17 portfolio managers* on Janus Henderson’s Brighter Future (ESG-focused) Funds. Our portfolio managers are further supported by our central research functions and/or investment team analysts.

Source: Janus Henderson Investors, as at 31 March 2024.

ESG investment policy

ESG considerations are a key component of the active investment processes employed by our investment teams. These teams operate and are structured in ways most suited to their respective asset classes. Aside from expectations outlined under our ESG investment principles, the precise approach to and depth of ESG integration is down to the discretion and judgement of our investment teams, who apply their differentiated perspectives, insight and experience to identify sustainable business practices that can generate long-term value for investors. While the evaluation of our implementation of ESG criteria is carried out at the strategy level, our central Responsibility team supports each team in their ESG integration with data, tools, stewardship, and ESG research.

Stewardship is an integral and natural part of Janus Henderson’s long-term, active approach to investment management. Strong ownership practices such as management engagement can help protect and enhance long-term shareholder value.

We support a number of stewardship codes, such as the UK Stewardship Code, and broader initiatives around the world including the UN-supported Principles for Responsible Investment. We are pleased that the PRI has recognised the significant progress we’ve made in advancing our responsible investment capabilities over the last three years, and particularly in 2023. In 2023, we successfully remained a signatory to the Financial Conduct Authority’s UK Stewardship Code, regarded as a benchmark in investment stewardship.

In 2023, we implemented our revised ESG Investment Policy, which sets out our approach to ESG investing and ESG Governance and Oversight. The ESG Investment Policy highlights our core stewardship themes of climate change; diversity, equity, and inclusion; and corporate governance, and details baseline exclusions that apply on a firmwide basis.

Engagement policy

The Responsible Investment and Governance Team supports the investment teams on relevant ESG issues and developing themes. As long-term active investors, we regard voting and engagement as a means of promoting strong corporate governance, accountability and management of relevant ESG issues. The team proactively partners with investment desks to coordinate thematic engagements around our core sustainability themes of climate change, diversity, equity and inclusion (DE&I), and corporate governance. The team also engages on themes, such as land use, deforestation, human rights, and access to medicines.

Janus Henderson’s investment teams engage on a broad range of environmental issues that are most material to the companies and sectors in which they invest. In 2023, we recorded more than 1,000 company engagements with a distinct ESG component. Amongst other industry engagement networks in which we are involved, our relationship with Climate Action 100+ focuses on collective engagement on climate-related issues rather than divestment, and we’ve committed to the goal of ensuring the largest corporate greenhouse gas emitters take necessary action on climate change through our thematic engagements.

At Janus Henderson, we believe in the critical importance of diversity, equity and inclusion (DEI) both within our company and in the way we invest. As a result, DEI is embedded in our engagement process with companies, where we hold issuers accountable for their progress on DEI metrics.
Further information on our stewardship approach can be found in our most recent Impact Report and FRC UK Stewardship Report on the Janus Henderson ESG Resource Library.

Firmwide exclusions policy
Our firm-wide exclusions policy is to apply baseline exclusions for current manufacturer, or minority shareholding of 20% or greater in a manufacturer of:

• Cluster munitions
• Anti-personnel mines
• Chemical weapons
• Biological weapons

This policy is underpinned by our firmwide commitment to addressing sustainability issues through the support of our CEO, and existing engagement activities which have seen us drive change through active ownership.

Responsibility Team

The central Responsibility Team is a specialised in-house group focused on ESG data analysis and research, governance, ESG company and thematic engagement, and proxy voting and advisory services that serves as a resource for all our investment desks. They play a leading role in working with investment desks to enhance their ESG integration processes and externally leading our active participation in numerous ESG initiatives. The team also provides support to investment desks on understanding ESG and climate data and tools and occasionally presents to the wider investment floor on relevant topics such as climate change or culture. The team sits on the investment floor and is easily accessible to investment professionals.

In December 2022, we appointed Michelle Dunstan, an experienced leader in ESG strategy and investing, as Chief Responsibility Officer (CRO) to oversee our Responsible Investment strategy. To emphasise the importance of our responsibility efforts and embed them across our entire firm, the CRO reports directly to the CEO, provides quarterly reports to our Board of Directors on established metrics and targets, and sits on the firm’s Strategic Leadership Team.

In 2023, we added specialist resources to our central Responsibility team to better align our resourcing with our strategic priorities. The Responsibility team is centred around three focus areas:

Our ESG Strategy and Operations pillar supports our investment and non-investment teams in four areas - Strategic Initiatives (including responsible investing strategy, policy, and partnerships), ESG Data and Analytics, Content and Learning (including the development of training, reports, client responses, external communications, and ESG thought leadership), and Regulatory/Operations (collaborating with Regulatory, Risk, Compliance, and Legal).

Our Responsible Investment and Governance pillar provides direct support to our investment teams. The focus of this partnership is on equipping and supporting our analysts and portfolio managers to do what they do best: research industries and securities to select the most attractive candidates for inclusion in our portfolios. Our team will partner with the investment teams to deliver ESG training, support on developing frameworks to identify financial material ESG issues, planning and conducting engagements, supporting research on ESG issues that can impact cash flows or valuation, and advising on proxy voting.

Our ESG Solutions pillar focuses on partnering with our product, distribution, and investment teams to enhance existing portfolios and deliver new portfolios to clients across varying levels of ESG needs, from robust integration to ESG-focused strategies. They also partner with investment desks to continuously evolve our ESG capabilities, including developing and refining integration frameworks that inform research, stewardship, and portfolio construction. Furthermore, the team also contributes to thought leadership content and conducts training on various technical ESG topics.

Our Diversity and Community Relations pillar focuses on diversity, equity, and inclusion (DEI) and community relations. They are committed to fostering inclusion, promoting cultural awareness, and establish equitable policies, benefits, and training that support our people, and our DEI goals.

In Feb 2024, JHI’s ESG commitment level rating was upgraded by Morningstar from Low to Basic, where many of our peers are ranked. This is a very important development as many clients look to these ratings as evidence of our ESG capabilities. Furthermore, any individual fund’s ESG rating cannot be more than one notch higher than the firm-wide rating, so this will enable ESG rating upgrades to ‘Advanced’ for some of our strategies.

Investment Team Resources Dedicated to ESG Investment Research Analysis

Name - Job title
Alice Branagan - Portfolio Analyst - ESG
Artee Khiatani - Credit Analyst – ESG
Elizabeth Harrison - Fixed Interest Strategist – ESG
Jigar Pipalia - Portfolio Analyst
Kimberley Pavier - Sustainability Analyst
Michael Mullin, CFA - Jr Credit and ESG Analyst
Olivia Vernall - Research Analyst - ESG
Pauline Chrystal, CFA - Portfolio & ESG Manager
Soline Poulain - Credit Analyst
Suney Hindocha, CFA - Research Analyst
Taylor Conley - Junior ESG Research Analyst

Source: Janus Henderson Investors, as at 31 March 2024.

Responsibility Team

Name - Job Title
Michelle Dunstan - Chief Responsibility Officer
Antony Marsden - Global Head of Responsible Investment and Governance
Blake Bennett, PhD - Responsible Investment and Governance Analyst
Ruchi Biyani - Corporate Governance Lead
Olivia Gull - Responsible Investment and Governance Analyst
Charles Devereux, CFA - Responsible Investment and Governance Analyst
Charlotte Nisbet - Responsible Investment and Governance Analyst
Olivia Jones - Responsible Investment and Governance Analyst
Phoebe Lei - Responsible Investment and Governance Analyst
Xiaoyi Luo Tedjani, FRM - Responsible Investment and Governance Analyst
Catherine Boyd - Global Head of ESG Strategy & Operations
Onon Wedum - Responsibility Marketing & Communications Analyst
Jesse Verheijen - Head of ESG Data and Analytics
Evelyn Lin - ESG Data Analyst
Tom Nutton - ESG Data Analyst
Priyanshu Sinha - ESG Data Analyst
Nitin Mehta - Head of ESG Operations & Regulatory Change
Nicole Wong - ESG Risk and Controls Lead
Somya Gupta - Reporting Analyst
Sunniva Droenen - ESG Regulatory Business Analyst
Stewart Gillespie - JHI ESG Brighter Future Fund Equity Specialist
Adrienn Sarandi - Global Head of ESG Solutions and Strategic Initiatives
Henrik Jeppesen, CFA, CAIA, CIPM - ESG Implementation Director
Jonathan Lloyd - ESG Solutions Engineer
Demesha Hill - Head of Diversity & Community Relations
Ferhana Jameel - Diversity & Inclusion Advisor

Source: Janus Henderson Investors, as at 31 March 2024.

ESG governance and oversight

Governance and risk management process and participants
To reflect the increasing importance of sustainability and climate issues both to Janus Henderson as a corporate and as an asset manager in our investment process, we are continually enhancing the governance and oversight of these considerations.

Board of directors
While our Board of Directors has received updates on sustainability, climate and ESG issues in the past, formal oversight of these issues was formally put under the remit of the Governance and Nominations Committee in 2023. Our Chief Responsibility Officer is establishing tangible metrics with the Committee and will be providing quarterly updates on progress against those metrics. These metrics and discussion will encompass both Corporate Responsibility and Responsible Investing.

ESG oversight committees
Our ESG Oversight Committee, chaired by our Chief Responsibility Officer, provides oversight for a range of issues at a portfolio and security level, including monitoring of issuer-level positions for investments identified as having outsized sustainability, climate, or ESG risks. Its remit includes:

• Review of ESG-related metrics and commitments for new funds and mandates and changes to ESG related commitments to existing mandates
• Review of ESG-related processes, systems and resources in place for funds and mandates
• Review of the effectiveness of controls relating to sustainability
• Monitoring of key ESG-related metrics and exceptions

Risk management functions
Our Financial Risk team is an independent function reporting directly to the Chief Risk Officer, tasked with ensuring funds are managed in line with client expectations, and ensuring any exposures are appropriate. Its activities include market risk oversight, liquidity risk monitoring and counterparty credit risk management.

Beginning in 2023, the Financial Risk team further supports the investment desks in providing portfolio-level oversight of sustainability, climate, and ESG risks, using the Sustainability Risk Dashboard. Risk oversight meetings are held with investment desks regularly, with an agenda item to ensure climate-related portfolio risks have been identified.

ESG data management
At Janus Henderson, we continue to invest in leading ESG data and tools. Investment teams have access to a range of third-party data from providers including on ESG ratings, risks and controversies, business involvement, Climate Value at Risk (CVaR), climate risk reports, United Nations Sustainable Development Goals-alignment, and principal adverse indicators.

Janus Henderson makes third party and proprietary ESG data available directly to the investment teams.

Sources of ESG research, data and tools from providers, include:

• Sustainalytics
• MSCI
• Vigeo EIRIS
• ISS Climate Impact
• Institutional Voting Information Service (IVIS)
• RepRisk
• ISS Quality Score
• ISS Proxy Voting Research
• FTSE Russell Beyond Ratings
• TPI, CDP, IFRS Sustainability Alliance* (formerly SASB), CBI, SBTi
• GRESB
• Other specialist broker research

They also have access to climate data from our strategic data provider, MSCI, including:

• Carbon metrics
• Physical and transition risks assessments through climate scenario analysis
• Implied temperature rise
• Low carbon transition score

Our firm-wide proprietary portfolio ESG & Climate Dashboard shows portfolio-level analytics for the sustainability factors we believe to be most material for all sectors and companies. These factors include for corporates: environmental (inc. Scope 1, 2, and 3 carbon emissions and weighted average carbon intensity), social and governance (inc. board gender diversity), and those related to global norms (UN Global Compact violators). For sovereign issuers, we analyse a separate set of E, S, and G indicators, including those on greenhouse gas intensity, and scores on income inequality, freedom of expression, human rights, and corruption. It also identifies leader and laggard issuers to help uncover underappreciated risks and opportunities for the companies in which we invest. The new ESG Explore proprietary data solution will provide interactive, drill-down climate information to investment teams at both portfolio and security levels.

In collaboration with our fixed income and central equity research teams, we are in the process of creating an internal financial materiality map across sectors focused on environmental and social issues. Utilising existing materiality frameworks from SASB (Sustainable Accounting Standards Board) and MSCI, our research analysts, together with Responsible Investment team have identified 12 sustainability categories within environmental, human capital and social capital, which can materially influence the financial performance of companies across all sectors (not all companies nor sectors are influenced by every sustainability category). For each sector, we are developing a KPI page to be launched on our ESG Explore platform in the coming quarters. The KPI pages will include the selected financial material indicators by company or fund with the ability to compare to sector index averages and to other individual companies.

We continue to refine the integration of ESG into our investment processes, leveraging a wide range of data and tools, as well as well-respected initiatives such as the International Financial Reporting Standards (IFRS)* (formerly known as Sustainability Accounting Standards Board (SASB)), Science Based Targets initiative (SBTi) and the Transition Pathway Initiative (TPI), in addition to multiple ESG data vendors and artificial intelligence-based news platforms.

While our analysts and portfolios managers will be the primary users of these tools, they will also be used by our oversight functions, including risk, and for client reporting. These tools will enable our investment teams to conduct analysis of financially material ESG issues in a way that aligns with their current research process and in a similar way to how they access non-ESG issuer and portfolio data.

*Upon the Value Reporting Foundation’s consolidation into the IFRS Foundation, the IFRS Foundation’s International Sustainability Standards Board (ISSB) assumed responsibility for the SASB Standards. The ISSB has committed to build on the industry-based SASB Standards and leverage SASB’s industry-based approach to standards development. The ISSB encourages preparers and investors to continue to use SASB Standards.

Equipping our investment teams

We are enabling our analysts and portfolio managers to better identify and manage ESG risks and opportunities:

1. Enhancing data and analytics on ESG and climate risks and opportunities at security and portfolio levels
   We have augmented the range and quality of ESG data available to our investment teams and risk teams. We launched a proprietary dashboard that shows portfolio-level analytics for the most material sustainability factors. It also identifies leader and laggard issuers to help uncover underappreciated risks and opportunities for the companies in which we invest.
2. Supporting investment teams with expert resources and training
   We embarked on a campaign to upskill ESG knowledge and expertise. Over 90% of client-facing Distribution personnel have obtained an external ESG certification. All investment personnel associated with Funds in scope of the European SFDR took over four hours of mandatory ESG training, including on ESG metrics and financial materiality, climate data and scenario analysis, diversity, equity and inclusion, and human capital management. Specialised training on climate data and tools is available on demand. Janus Henderson continues to address ESG regulatory change. Requirements for the EU Sustainable Finance Disclosure Regulation and UK Task Force on Climate-related Financial Disclosure regulation have been implemented. We are currently working on addressing new regulations, including UK Sustainability Disclosure Requirements and the EU Corporate Sustainability Reporting Directive, and preparing for future regulations such as the US Securities and Exchange Commission Climate Disclosure rules and the European Securities and Markets Authority Fund Name rules.
3. Partnering with investment teams on proprietary ESG research, engagements, and insights
   Our Responsibility team partnered with our investment teams to develop thematic ESG research covering a wide range of topics, including nuclear energy, cybersecurity, regulation of internet mega caps, climate stress tests, and physical climate risks/renewable energy opportunities in real estate. Through close collaboration, we also significantly increased our engagement with issuers; 2023 saw over 1,000 documented ESG engagements across a variety of topics. For more information on our collaborative engagements, please see our UK Stewardship Code report (pgs. 50-52). We also voted on almost 64,000 proposals across almost 6,000 meetings.

ESG product strategy

Our ESG Product Strategy Team provides a centralised function to support all business functions with respect to ESG. This team partners with investment teams on content creation, client enquiries, and aligning our ESG product development and investment capabilities.
Additionally, our Head of Client Experience partners with ESG teams to develop detailed ESG reporting that satisfies the needs of our clients.

ESG research capabilities
Our central Responsibility team consists of ESG subject-matter experts and partners with the investment teams on research and engagement. This partnership leads to enhanced research and decision-making – marrying the sector and industry expertise of the Investment Teams with the ESG skills of the Responsibility Team.

In 2023, the Responsible Investment and Governance team conducted a series of thematic engagements covering a wide range of sectors and topics. These include water risks in the mining, beverage and semiconductor industries, methane/flaring from oil & gas industry, circular economy, and conduct and ethics of artificial intelligence.

ESG insights – Knowledge Shared

As part of our commitment to advancing the industry dialogue around ESG, we seek to make the thinking of our investment teams widely available to our clients, shareholders, and other stakeholders through a variety of content, including white papers, articles, podcasts, videos, and panel debates.

In 2023, we generated 28 thought leadership and educational pieces on ESG topics. The insights included our recent conference event hosted by Janus Henderson in October 2023, where analysts from Janus Henderson’s Responsible Investment and Governance team discussed their research of water-intensive sectors and the impact of growing water scarcity on businesses.

Our investment teams also produced broader papers and debates on ESG investment approaches, climate investing, the water crisis, natural capital and biodiversity loss, deforestation, methane emissions in the oil & gas sector, and the outlook for ESG investing.

JHI Brighter Future Funds

In 2023, product development work focused on strengthening Janus Henderson’s existing ESG product suite by delivering on product commitments and setting a foundation for future innovation. Driven by ongoing client interest, Janus Henderson continued to align products with the European Union’s Sustainable Finance Disclosure Regulation (SFDR). We converted 38 funds to Article 8 and 9 status as at the end of 2023.

Aside from delivering on regulatory-based product commitments, the Product and the Responsibility Teams conducted foundational work to define our ESG product suite in alignment with the investment objectives set out by the Responsibility Team and Chief Responsibility Officer, Michelle Dunstan. From a product perspective, we are committed to leveraging research-driven, materiality-focused ESG integration, alongside fundamental investment factors. This type of ESG integration is reflected in over 80% of Janus Henderson products.

Beyond ESG integration, we also understand that many clients are looking to pursue environmental or social outcomes, alongside targeted financial outcomes. For these clients, we continue to develop our suite of JHI Brighter Future Funds which aim to deliver superior financial outcomes as well as environmental or social outcomes aligned to long-term sustainability themes. Future developments for ESG-focused products will be based around understanding ESG opportunities across asset classes and key themes – with a particular focus on developing tools to understand how investment opportunities relate to the economy-wide climate transition.

Participating in select ESG industry initiatives

We have a strong heritage of involvement with sustainability-related organisations and initiatives. As part of our commitment to responsible investment, Janus Henderson is involved in a wide range of ESG-related initiatives as a member, supporter or in an advisory capacity.

In 2023, we joined Nature Action 100, a global investor-led initiative working to drive the necessary corporate action to reverse nature loss.

In 2023, we also participated in roundtables for the Assessing Sovereign Climate-related Opportunities and Risks (ASCOR) Project, which aims to develop a tool that assesses sovereign exposure to climate risk and how governments plan to transition to a low-carbon economy.

ESG affiliations, memberships, initiatives and certifications

In addition to being a founding signatory of the United Nations-supported Principles for Responsible Investment (PRI), Janus Henderson is involved in a wide range of ESG-related initiatives and working groups as a member, supporter or in an advisory capacity.

Our participation in industry working groups along with our sharing of insights and knowledge of ESG through our published materials reflects our status as an active proponent of sustainable investing.

For the full list of our ESG Affiliations, Memberships and Certification details please refer to the Affiliations section in our website.

https://www.janushenderson.com/en-gb/investor/about-us/esg-environmental-social-governance/esg-corporate/

In addition, we publicly support standard setters and industry groups who work with governments to implement stronger sustainability standards in the investment management industry. Where possible, we contribute to ESG policy and regulatory discussions through our response to consultations.
Thought Leadership

As part of our commitment to advancing the industry dialogue around ESG, we seek to make the thinking of our investment teams widely available to our clients, shareholders, and other stakeholders through a variety of content, including white papers, articles, podcasts, videos, and panel debates. As with our ESG research, we aim to publish content that contains thoughtful, practical, research-driven, and forward-looking insights.
In 2023, we generated 28 thought leadership and educational pieces on ESG topics. The insights included portfolio manager-specific views related to sustainable investment themes, with key contributions from our Global Sustainable Equities, Global Natural Resources, and Global Technology Leaders teams.

In terms of specific themes and topics, we produced broader papers and debates on a variety of ESG issues, including methane emissions from the oil & gas industry, deforestation, the role of metals in decarbonisation, renewable energy, and electric and autonomous vehicles. We also published articles outlining our approach to ESG and natural capital investing.

Dialshifter

This fund is helping shift the dial from brown to green by...

The fund seeks a responsible approach to investing in UK companies by incorporating environmental, social and governance (ESG) factors in investment decisions and avoiding companies that the investment manager considers to be involved in business activities and behaviours that may be environmentally and/or socially harmful.

Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by…

We have embedded climate change, including many aspects of the NZAMI framework, within our investment processes including the following:

• Maintaining Janus Henderson Carbon Neutral Status since 2007
• Founding signatory of the UN Principles for Responsible Investment in 2006.
• Signatory to the Paris Pledge for Action, announced prior to COP21
• Member of the Global Impact Investing Network, and the US, UK and European Sustainable Investment Forums
• Active engagement with portfolio companies on climate issues, including as a participant in Climate Action 100+, a five-year collaborative initiative led by investors to engage with the world’s largest corporate greenhouse gas emitters.

SDR Labelling: Unlabelled with sustainable characteristics

• Consumer Facing Disclosure