Sustainable, Responsible &/or ESG Policy:

The 7IM Responsible Balanced Fund is an actively managed fund with a balanced risk profile, invested in a range of global equities, bonds and funds managed within a sustainable investment framework. The investment strategy for the fund encompasses detailed screening for sustainability using both negative screening to exclude investments which are significantly involved in unacceptable business areas and positive selection process to select investments with sustainable characteristics as set out in the prospectus. The Fund assesses environmental, social and governance (ESG) factors in determining what assets to invest in. For company shares, corporate bonds and other funds, the Fund employs a two-stage process. The inputs together measure:

• Environmental issues, including supporting and managing climate change mitigation (i.e. reduction of greenhouse gases) and adaptation, waste and water management or land management;
• Human capital issues, including fair labour practices, health and safety practices or supply chain management; and
• Social capital issues, including access to healthcare or finance, privacy and data security or consumer protection

We will invest at least 70% of the fund's value in collective investment vehicles and other assets that demonstrate sustainability characteristics.

Key sustainability metrics can be found in the latest CFD: https://www.7im.co.uk/media/kmgfb01b/7im-responsible-balanced-fund-consumer-facing-disclosure.pdf

Stewardship Report

Process:

1. Negative screening

We apply specific exclusions on company shares, corporate bonds and other funds to keep exposure to controversial activities to a minimum. These controversial activities are outlined below:

• Adult entertainment
• Alcohol
• Armaments
• Gambling
• Genetically modified organisms (GMOs) in agriculture
• Nuclear power generation
• Tobacco

In respect of company shares and corporate bonds, the maximum revenue limit for any company is 10%. In respect of investments in other funds, there may be differences in the revenue limits. Further details are provided in Section 4. In any event, we limit the total exposure to companies linked to the excluded activities to 1%. If the aggregate portfolio exposure to the exclusions outlined above breaches this 1% tolerance, we will resolve any issue as soon as is practicably possible. Further details of the exclusion list are provided in Section 4.

1. Positive selection

The Positive Selection Process further defines how the Fund can select company shares, corporate bonds and other funds that are considered to have sustainability characteristics. The process assesses the management of the following issues: • Environmental issues, including supporting and managing climate change mitigation (i.e. reduction of greenhouse gases) and adaptation, waste and water management or land management; • Human capital issues, including fair labour practices, health and safety practices or supply chain management; and • Social capital issues, including access to healthcare or finance, privacy and data security or consumer protection.

For investments in company shares:

For companies to be considered as having sustainable characteristics, they must meet at least one of the following considerations:

• a key issue score that is above the global equity index “average”; or
• a carbon intensity that is below the global equity index “average”.

For investments in collective investment vehicles:

For third-party funds to be considered as having sustainability characteristics, they must demonstrate the following:

• having a key issue score that is above the global equity index “average”; or
• having a carbon intensity below the global equity index “average”; and
• complies with at least one of the following criteria for selection:
  • the fund must systematically integrate ESG factors into investment decisions, or
  • the fund must analyse ESG materiality before and after investment decisions, or
  • the fund must act as good stewards and implement responsible investment and engagement practices.

The purpose of the fund selection process at 7IM from an ESG perspective is to identify an investment that has the people, process and expertise in place to invest sustainably. We explain this below and use a number of third-party data tools to validate this due diligence.

• We screen the asset class universe for funds which follow a sustainable benchmark or systematically integrate ESG factors into investment decisions
• We screen these investments based on size, date of launch and key performance metrics
• We meet with managers to discuss how they integrate ESG into their investment process, firm culture and how they engage with companies that they are invested in
• We then do a deep dive into their investment process, how they generate value and how they manage risks.

When conducting due diligence for investment in a new fund, we follow a rigorous review process whereby the investment manager and the sector specialist with responsibility for the asset class at 7IM meet the fund managers of the fund. At that point, we explore the fund investment process and philosophy, strength of the team managing the fund, years of experience, etc., research resources, risk analysis and performance attribution. Post-investment, the performance is monitored fortnightly, using style-adjusted benchmarks at our Portfolio Management Committee. We also meet with the managers at least once a year, or on an ad hoc basis if there is an issue that needs to be explored.

1. Government Bonds Selection Process

We assess government bonds on a periodic basis through a country level ESG analysis which entails consideration of governmental policies relating to social and environmental issues and overall governance. The analysis is composed of three publicly available indices covering country-level ESG factors.

1. Exclusions

The intention when looking for company shares, corporate bonds, and collective investment schemes managed by third parties is to keep exposure to controversial activities to a minimum. These controversial activities are outlined below. During the due diligence process, we ask what exclusions the manager applies and at what thresholds these are enforced. We also try to understand how these have changed over time and what activities they are planning to exclude in the future. Using a third-party data provider, we screen the underlying fund holdings for the following activities using the thresholds below:

The underlying exclusion policies for each third-party fund are unlikely to be the same, meaning there may be residual exposure that breaches the thresholds above. We will only invest in other funds where we judge that this will not be in conflict with the Fund’s objective, investment policy and strategy. In any event, the Fund’s total exposure to companies linked to the excluded activities set out above is limited to 1%. If aggregate portfolio exposure to the exclusions outlined above breaches this 1% tolerance, the Manager will resolve any issue as soon as is practicably possible following its identification in accordance with its ongoing monitoring and stewardship processes.

Resources, Affiliations & Corporate Strategies:

At the end of 2024, the corporate governance framework was as follows:

Stewardship and Responsible Investing

7IM underwent ownership and senior leadership changes over the course of 2023 and this was finalised in early 2024. Ontario Teachers’ Pension Plan Board (“Ontario Teachers’” or “OTPP”) has acquired a majority stake in 7IM, from Caledonia Investments plc (“Caledonia”). The strong cultural alignment between the two entities under our updated ownership structure has reinforced our dedication to responsible business practices and facilitate positive outcomes for clients. A key focus for us is to strengthen the functions of committees to ensure the full integration of ESG considerations across the business and investments. Revisions to sustainability governance within 7IM were approved and implemented in early 2024. The below highlights the structure of our Sustainability Committee as of December 2024. The Sustainability Committee was set up in 2020 and reports to the 7IM ExCo. The objective of the Committee remains the same. The Committee is held accountable for pulling together and embedding our commitments within our culture and related groups and activity and includes people from across the whole business.

The Committee comprises of the Committee Chair and representatives from the following: 

• Investment Management team;
• People and Culture team;
• Charity Committee;
• Risk and Compliance team;
• Operations team;
• Finance team;
• Client Experience and Transformation team;
• Private Client team;
• Intermediary team;
• Partners Wealth Management; and
• Platform team.

The Sustainability Committee is chaired by Russell Lancaster (Managing Director, Platform & Intermediary Partnerships, ExCo member). The Sustainability Committee’s responsibilities include: i) to act as guardian of the 7IM Stewardship Code and the Sustainability Framework; ii) to review and recommend changes to 7IM’s sustainability strategy and policy, to ensure that standards of business behaviour are up to date and reflect best practice; iii) to introduce to 7IM best practice thinking and ongoing awareness of global developments in sustainability and Corporate Social Responsibility (CSR); and iv) to make sure the 7IM culture is respected and advanced across the firm. Through 2024, we refined 7IM’s Sustainability Framework & Strategy, explained further on p. 33. Investment stewardship and ESG integration at 7IM are managed by the ESG Investment Committee, also set up in 2020. It reports to the Sustainability Committee and to the Investment Committee, which is the senior decision-making body for all 7IM’s investments and is ultimately responsible for investment performance. The ESG Investment Committee is based in the Investment Management team and has five members. It includes representatives from every stage of the investment process at 7IM: Strategic Asset Allocation, Tactical Asset Allocation, Portfolio Management and Investment Risk. A member of the Investment Committee also sits on the ESG Investment Committee.

Stewardship governance

We reviewed and upgraded our stewardship governance framework in 2020 to support 7IM’s stewardship more effectively and explicitly. At the corporate level, as noted earlier, the Sustainability Committee is responsible for stewardship and related issues. The Sustainability Committee is chaired by a member of ExCo. At the investment level, the ESG Investment Committee ensures full integration of stewardship through our investment processes, overseen by the Investment Committee. As discussed in our previous report, much thought went into the design of 7IM’s current governance structure and the underlying processes. We believe they support our targets and ambitions with regard to stewardship in two ways. First, the roles and responsibilities of these two committees have been formalised. Second, stewardship metrics have been incorporated into the objectives and reviews of the key people involved. We continue to monitor our stewardship governance to ensure it remains fit for purpose and adequately covers both 7IM’s stewardship objectives and the full suite of potential harms to which it and our clients are exposed. Enhancements were made to the Risk Management Framework and systems to support key risk management processes, explained in our 2022 and 2023 Stewardship Report with further information later on in this year’s Stewardship report.

Stewardship Report

SDR Labelling:

Unlabelled with sustainable characteristics

SDR Literature:

• Consumer Facing Disclosure