SUSTAINABILITY SELECT

Summary

This fund promotes environmental and social characteristics but does not have a sustainable investment objective.

The fund promotes environmental characteristics by investmenting in companies that contribute to the fulfillment of UN- sustainable development goal (12) sustainable consumption and production patterns. The fund promotes social characteristics by investmenting in companies that contribute to the fulfillment of UN’s sustainable development goals (3) good health and well-being, (5) gender equality and (8) decent work and economic growth.. The fund aims to annually increase the share of investments that contribute to the UN global goals stated above.

Furthermore, the fund excludes companies that are involved in the any of the following products and services:

cluster bombs, landmines,
chemical and biological weapons,
nuclear weapons,
weapons and/or military equipment,
alcohol,
tobacco,
pornography,
extraction of oil sands.

A maximum of five percent of the turnover in the investee company may relate to activities that are attributable to the product or service specified above. In terms of oil sands extraction, the exclusion threshold is 50 percent of the company’s turnover. Furthermore, companies that violate international standards are excluded, and companies that do not take sufficient measures to deal with identified problems or where ALCUR Fonder assesses that the companies will not deal with the problems for a time deemed reasonable in the individual case.

The fund management team continuously measures how the fund’s holdings correspond to the environmental and social characteristics that the fund is promoting. This is done for each portfolio and for the respective issuer, using data retrieved from external providers. In this way the management team can monitor how the fund’s existing holdings perform in relation to the indicators that are deemed relevant in relation to the characteristics that the fund promotes.

In the management of the Funds, Sustainability Risks are integrated into the investment decision-making process by the Company’s managers evaluating and analyzing the investment objects from a broad risk perspective, where Sustainability Risks constitute one of the components. Sustainability risks as such are analysed with the support of external data providers. The analyses are based on actual conditions of the portfolio companies, which are weighted according to materiality for each sector and region, with guidance from the Sustainability Accounting Standards Board (SASB). This model provides the management organization with a decision support that uses the portfolio managers’ analysis of the investment objects.

Principal adverse impacts on sustainability factors (“PAI”) are considered based on 18 different indicators including greenhouse gas emissions, biodiversity, water, waste, social conditions and employee matters. Of these, 14 indicators are mandatory. In addition to the mandatory indicators, ALCUR Fonder has chosen to specifically consider the following indicators:

Number of days lost to injuries, accidents, fatalities or illness,
Incident of discrimnation
Investments in companies without workplace accident prevention policies
Water usage and recycling

ALCUR Fonder measures the indicators of PAI through a quantitative PAI tool provided by an external provider. Information on how PAI have been considered will be published annually in the annual report.

No sustainable investment objective

This financial product promotes environmental and social characteristics but does not have a sustainable investment objective.

Environmental or social characteristics of the financial product

For more information regarding the fund’s exclusions please refer to the fund’s prospectus at www.alcur.se

Investment strategy

Investment strategy used to meet the environmental or social characteristics promoted by the financial product

The fund is an actively managed analysis-driven Swedish special fund (AIF), so-called equity long/short with the Nordics as an investment area. The fund mainly focuses on small and medium enterprises with an emphasis on Swedish companies. The fund’s objective is to generate a good risk-adjusted return over time, with appropriate risk diversification and vigilance. Over time, the fund has a high net exposure to the market, but also short-sells stocks and uses leverage in order to maximize risk-adjusted returns.

The management team applies the promotion of environmental and social characteristics by making investments that contribute to the following of UN’s sustainable development goals:

Good health and well-being (3), for example through investments investments aimed at healthcare, injury prevention and the production of medicines
Gender equality (5), for example through investments contributing to the fight against discrimination, violence and exploitation of women and ensuring the participation of women in leadership and decision-making,
Decent work and economic growth (8), for example through investments that contribute to boosting productivity, full employment and decent work, and the protection of workers’ rights,
Sustainable consumption and production patterns (12), for example through investments in companies that focus their operations on the efficient use of resources and responsible waste management.

In addition, the management team excludes certain specific operations associated with particularly high sustainability risk and negative consequences that do not reflect the development ALCUR Fonder wants to contribute to. For information on exclusions, please see the Fund’s prospectus.

Policy to assess good governance practices of the investee companies

ALCUR Fonder excludes companies that violate, or have insufficient mechanisms for monitoring and complying with, international norms and conventions regarding sound management structures, tax, workers’ rights, compensation and ownership structure, as well as corruption and bribery. This policy refers in particular to the UN Global Compact and the OECD’s guidelines for multinational companies.

Other aspects that may limit the possibility of creating shareholder value over time are also taken into account if relevant. If one of our funds turns out to be invested in a company or a conversion company that turns out to act deficiently in the above respect, ALCUR Fonder will contact the company in question and primarily influence. If this does not result, ALCUR Fonder will divest within a reasonable time.

In addition, ALCUR Fonder sets the following criteria for good governance in the investee companies:

The board is well composed with regard to relevant experience and competence and in other respects meets the requirements of the Swedish Code of Corporate Governance,
Any incentive plan is based on significant financial consideration (risk-taking) from the person participating in the plan and aim for long-term value creation,
There is a transparent policy regarding capital allocation, where investment in one’s own business is particularly desirable,
There is clear strategy work and the division of responsibilities between the board and company management is clarified in this part.

ALCUR Fonder places great value in the criteria stated above and continuously follows up on these, without portfolio companies necessarily having to be excluded if the criteria are not met.

Proportion of investments

Monitoring of environmental or social characteristics

The management team continuously measures how the fund’s holdings correspond to the environmental and social characteristics that the fund is promoting. This is done for each portfolio and for the respective issuer, using data retrieved from external providers. In this way the management team can monitor how the fund’s existing holdings perform in relation to the indicators that are deemed relevant in relation to the characteristics that the fund promotes.

Furthermore, the fund excludes companies that are involved in the any of the following products and services:

cluster bombs, landmines,
chemical and biological weapons,
nuclear weapons,
weapons and/or military equipment,
alcohol,
tobacco,
pornography,
extraction of oil sands.

ALCUR Fonder’s assessment of how environmental and social properties are promoted is also based on sustainability indicators corresponding to the 18 indicators for principal adverse impacts on sustainability factors that the Company has chosen to take into account. The indicators cover greenhouse gas emissions, biodiversity, water, waste, social and employee matters. In addition to the 14 mandatory indicators for principal adverse impacts on sustainability factors, ALCUR Fonder specifically measures progress regarding:

Number of days lost to injuries, accidents, fatalities or illness,
Incidents of discrimination
Investments in companies without workplace accident prevention policies
Water usage and recycling

Data regarding these indicators are provided by external providers, that are evaluated annually.

Methodology for environmental or social characteristics

ALCUR Fonder has chosen to operationalize and clarify the promotion of environmental and social characteristics by linking the investment decision-making process, in terms of sustainability-related considerations, to the UN’s sustainable development goals (SDG). This means that the fact that an investment object has undertaken to contribute to the fulfillment of one or more of the SDG’s that the Company has chosen to focus on, is taken into account as a factor in the management organization’s analysis of the object in question.

Data sources and processing

Information on how the Funds promote environmental and social characteristics as well as exposure to exclusionary activities and incidents that lead to violations of international norms and conventions is obtained from the data supplier DATIA and other external suppliers.

ALCUR Fonder conducts discussions with the data provider to ensure good data quality. Analysis is done in company cases where there is conflicting information. In doubtful situations, the company in question is contacted to have the opportunity to give its opinion.

Limitations to methodologies and data

The information on the investee companies’ contributions to SDG’s as well as exposure to excluded businesses is limited to information that is made available from the companies themselves. This means that it is not always possible to ensure the exact exposure to these businesses.

The requirements for companies to report investments and products level of sustainability have not yet come into force. Because of this, there may be a lack of data to measure the taxonomy, share of sustainable investments and negative consequences for sustainability factors.

Due Diligence

ALCUR Fonder has due diligence procedures in place to ensure that sustainability risks and the sustainability requirements set for each fund are taken into account in the investment decisions. The management team follows up the investments on a quarterly basis to ensure that the investments are in line with the funds investment strategy.

For more information on ALCUR Fonders due diligence, please refer to the Company’s sustainability policy.

Engagement policies

The company strives to be active owners who, through dialogue with companies and collaboration with other investors, contribute to sustainable value creation. An assessment of the governance process of portfolio companies and other investment objects is central to this work. As part of this effort, the Company engages in informal advocacy processes (preferably advocacy dialogues) as well as in formal ones, such as general meetings, nomination committees, etc.

In addition, the Company highlights sustainability issues in the Funds’ investments and makes it part of the investment process and encourages others to follow a similar approach.

The company meets with investors and discusses sustainability issues. The company follows developments and monitors changes in established views based on new facts. The company strives to encourage companies that the funds’ managers analyze and invest in to disclose how they handle sustainability issues and how they intend to improve in relevant areas. For further information, please refer to the Company’s stewardship policy.

Designated reference benchmark

No reference benchmark has been designated for the purpose of attaining the environmental or social characteristics promoted by the fund.