Asset management. ESG Questionnaire. UBS (Lux) Equity Fund Global Sustainable

Transcription

1 Asset management 2015 ESG Questionnaire

2 1 The Fund Management Company 1.1 Provide the name of the fund management company managing the fund(s) to which this code applies. Fund management company: UBS Fund Management (Luxembourg) S.A. 33A avenue J.F. Kennedy L-1855 Luxembourg Portfolio manager UBS Global Asset Management (Americas) Inc One North Wacker Drive Chicago, IL Telephone: Describe the general approach of the fund management company with regards to how it takes environmental, social and governance (ESG) criteria into consideration. Is the fund management company approach towards ESG criteria aligned or inspired by its corporate social responsibility approach? Yes/No. If yes, insert a link to the company s CSR policy. If not, explain why not. Yes. UBS and its business groups are firmly committed to corporate responsibility and actively strive to understand, assess, weigh and address the concerns and expectations of the firm s stakeholders. This process supports UBS in its efforts to safeguard and advance the firm s reputation for responsible corporate conduct. In very direct ways, responsible corporate conduct helps create sustainable value for the company. Please refer to the UBS Corporate Responsibility website for further details: Has the fund management company signed the Principles for Responsible Investment? If yes, please insert the link to the answer to the PRI questionnaire. If not, explain why not. Yes. UBS Global Asset Management became a signatory to the United Nations Principles for Responsible Investment (UNPRI) in April We do not make our answers to the PRI questionnaire publicly available. However, the following document explains how we are implementing the Principles. Asset Management Page 2 of 19

3 Does the fund management company apply any exclusion in its general investment process, for example related to the manufacture, maintenance and trade of controversial arms? Yes. Under the UBS Sanctions Policy, business activities concerning certain countries, regimes or named individuals are restricted. All measures outlined in the UBS Sanctions Policy apply globally throughout the entire UBS Group irrespective of whether the local country has imposed any such sanctions. In addition, UBS complies with the revised Swiss Federal Act on War Materials, which bans the use, stockpiling, production and transfer of cluster munitions and anti-personnel mines. The Swiss law integrates and goes beyond the Oslo convention banning cluster munitions and antipersonnel mines (hereinafter referred to as controversial weapons ), to include the ban on direct and indirect financing of controversial weapons. In effect, the ban prohibits the range activities ranging from provision of credit facilities, capital market transactions, to the buying and holding of equity and/or bonds (including derivatives thereof) of companies that are involved in the development, production or purchase of controversial weapons. The ban does not prohibit business relationships with executives of such companies. Based on this regulation and awareness of the potentially significant damage to its reputation when supporting companies which are involved in Controversial Weapons, UBS will not directly or indirectly finance companies involved in the development, production or purchase of cluster munitions and anti-personnel mines of such companies determined to fall within the ban. This will include terminating the holding of any long or short positions in securities of such companies in its proprietary trading book or to include them in its actively-managed retail and institutional funds and in discretionary mandates. Is the fund Manager a signatory or a member of other international and/or national initiatives supporting SRI practices? Please answer if you deem this information to be useful. UBS has endorsed and signed several charters, including UN Global Compact, the UNEP Finance Initiative and the Wolfsberg Group. UBS is a member of further organizations that promote corporate responsibility and is actively engaged in their activities. Please refer to the UBS Corporate Responsibility webpage for more details. /further_commitments.html Asset Management Page 3 of 19

4 Has the fund management company established an ESG engagement policy? If yes, describe the policy by outlining its objectives and its methodology and/or, if it is public, insert a link to the policy. If not, explain why not. Yes, for our equity investments, our written corporate governance principles apply globally. We believe voting rights have economic value and should be treated accordingly. Where we have been given the discretion to vote on clients' behalves, we exercise our delegated fiduciary responsibility by voting in a manner we believe will most favourably impact the economic value of their investments. We vote globally so long as there is no conflict with the efficient management of client portfolios. On behalf of our clients, we aim to be supportive, long-term shareholders. We seek to develop both a long-term relationship and an understanding of mutual objectives and concerns with the companies in which we invest on behalf of our clients. Through regular meetings (around globally each year) we make an assessment of management performance and monitor development over time. In the year to 31 st December 2014, we voted at company meetings globally on a total of separate resolutions. We declined to support management on or some 7% of these resolutions. Engagement with company management on environmental, social and governance issues is undertaken by our own investment professionals to varying degrees according to local customs/regulations. Our Corporate Governance Director leads our governance engagement with companies and works closely with the in-house analysts and portfolio managers. We maintain a comprehensive database of our governance engagements, votes cast and the reasons for voting against management or abstaining. As a general rule we believe the effectiveness of such policies is considerably increased when we find common ground with other shareholders. We are thus willing to work with collective bodies, such as the ABI Investment Committee, or collaborate with other major shareholder groups if we believe this will increase the chance of success. We are also members of the Conference Board's Council on Corporate Governance, which brings together asset managers and companies for constructive debate. Asset Management Page 4 of 19

5 Has the fund management company established a voting policy? If yes, describe the policy by outlining its objectives and its methodology and/or, if it is public, insert a link to the policy. If not, explain why not. Yes. We believe voting rights have economic value and should be treated accordingly. Where we have been given the discretion to vote on clients behalves, we will exercise our delegated fiduciary responsibility by voting in a manner we believe will most favourably impact the economic value of their investments. Good corporate governance should, in the long term, lead towards both better corporate performance and improved shareholder value. Thus, we expect board members of companies in which we have invested to act in the service of the shareholders, view themselves as stewards of the company, exercise good judgment and practice diligent oversight of the management of the company. A commitment to acting in as transparent a manner as possible is fundamental to good governance. In serving the interests of our clients, some investment capabilities within UBS Global Asset Management may at times pursue differing approaches towards particular corporate governance issues, including how to vote or abstain on proposals. This reflects the diverse nature of our capabilities. However, in all cases the interests of clients will be paramount. Underlying our voting and corporate governance principles we have two fundamental objectives: We seek to act in the best financial interests of our clients to enhance the long-term value of their investments. As an investment advisor, we have a strong commercial interest that companies in which we invest, on behalf of our clients are successful. We promote best practice in the boardroom. To achieve these objectives, we have established a set of Principles to guide our exercise of voting rights and the taking of other appropriate actions, and to support and encourage sound corporate governance practice. These Principles are applied globally but also permit us the discretion to reflect local laws or standards where appropriate. Asset Management Page 5 of 19

6 While there is no absolute set of standards that determine appropriate governance under all circumstances and no set of values will guarantee ethical board behaviour, there are certain principles, which provide evidence of good corporate governance. We will, therefore, generally exercise voting rights on behalf of clients in accordance with the following principles: Board Structure Some significant factors for an effective board structure include: An effective Chairman is key. The roles of Chairman and Chief Executive generally should be separated. The Board should be comprised of individuals with appropriate and diverse experience capable of providing good judgment and diligent oversight of the management of the company. The non executive directors should provide a challenging, but generally supportive environment for the executive directors. Board Responsibilities Some significant factors for effective discharge of board responsibilities include: The whole Board should be fully involved in endorsing strategy and in all major strategic decisions (e.g., mergers and acquisitions) The Board should ensure that at all times: Appropriate management succession plans are in place. The interests of executives and shareholders are aligned. The financial audit is independent and accurate. The brand and reputation of the company is protected and enhanced. A constructive dialogue with shareholders is encouraged. That it receives all the information necessary to hold management to account. Describe how the fund management company or the group contributes to the promotion and the development of SRI. UBS has a company-wide commitment to leading-edge sustainability research and initiatives across all of its divisions. This includes the UBS Investment Bank s award-winning sustainability research unit, UBS Wealth Management s thematic research team and UBS Global Asset Management s Sustainability Equities team. In addition, UBS is a leader in advancing sustainability analysis with its membership in two key steering committees, the Sustainability Accounting Standards Board and the Global Initiative for Sustainability Ratings. Shawn Lytle, Head of UBS Global Asset Management in the Americas was recently added to the SASB (Sustainability Accounting Standards Board). Asset Management Page 6 of 19

7 1.3 Describe/List your SRI products and the specific resources allocated to your SRI activities. Briefly describe the SRI fund range (number, assets under management, strategies,..) In addition to the, we offer a number of other sustainable equity strategies: As at 31 March 2015, we managed a total of million USD in dedicated Sustainable / SRI strategies. Asset Management Page 7 of 19

8 Describe/Detail the resources allocated by the fund management company (organisation, ESG research internal/external, dedicated portfolio management team, ) and indicate where this information is available. Sustainable & Responsible Investments (SRI) team We have a dedicated Sustainable Investors team comprised of two portfolio managers and two equity strategists, who manage a range of strategies that integrate material sustainability factors with a rigorous fundamental investment process. The team is headed by Bruno Bertocci, who has 34 years of equity investing experience. Investment themes include energy efficiency, environment, social improvement and health care and demographics. The team is also supported by the wider Equities platform and is able to draw on the work of our sector analysts worldwide. Corporate Governance Ian Pitfield is Corporate Governance Director, responsible for setting and implementing UBS Global Asset Management s corporate governance and SRI policy, working closely with the investment teams. Ian has wide investment experience both as an analyst and portfolio manager, and has worked at UBS Global Asset Management since Ian leads our global voting team and the engagement on corporate governance with the companies in which UBS Global Asset Management invests on behalf of clients. Ian is a member of the ABI Investment Committee, the International Corporate Governance Network, the Conference Board s Council on Corporate Governance and the CFA Society of the UK. He was a member of the CFA Institute global corporate governance taskforce and chaired the NAPF Case Committee on Shell. Paul Clark, who joined UBS Global Asset Management in 1994, is Head of Corporate Governance Services, and is responsible for a team of three that handle the day-to-day aspects of voting and background research to company meetings. Paul has managed the team since 2000 and has been involved in portfolio services since He is also a member of the International Corporate Governance Network. The Corporate Governance team is part of our Equities investment area and is responsible for voting for all clients globally in all worldwide markets. The only exception to this will be locations where legal restrictions prevent us from either voting for clients, or do not allow voting powers to Asset Management Page 8 of 19

9 be exercised outside the local jurisdiction. This approach has enabled us to ensure that our corporate governance and voting service is integrated and closely aligned with our investment teams and ensures that we have a consistent, robust process when acting for our clients. Describe the content, frequency and resources allocated/used by the fund management company to inform investors about the ESG criteria taken into account. UBS strives to report openly and transparently about the firm's corporate responsibility strategy and activities both via a section in the UBS Annual Report and, in more detail, on the UBS corporate responsibility website. Additional relevant information is provided in an employees section in the annual report and on the UBS employees website. We use the Global Reporting Initiative (GRI) as the basis for our corporate responsibility reporting and apply a careful process weighing up the materiality and relevance of the information reported and the expectations of all our stakeholders. UBS's reporting has been reviewed by Ernst & Young Ltd (EY) against the GRI Sustainability Reporting Guidelines. The content has been prepared in accordance with the comprehensive option of GRI G4 as evidenced in the EY assurance report. This assurance was conducted by EY Provide the name of the fund(s) to which this Code applies and its (their) main Characteristics Describe the main characteristics of the fund(s): geographical focus, asset class, SRI strategy used (use the classification provided by Eurosif/EFAMA). The invests worldwide in companies that generate above-average environmental, social and governance performance and offer interesting growth potential. It is an all-cap strategy that seeks to access the full range of sustainable investment opportunities, allocating approximately 80% to large caps, up to 10% to mid-caps and 10% in small caps. These proportions will vary depending on our assessment of relative return opportunities. Asset Management Page 9 of 19

10 While the strategy is benchmark-aware, the sizing of positions is dependent on relative opportunity, which means that the largest positions in the portfolio are often small- or mid-cap stocks that we believe provide superior return opportunity. The full market cap universe allows investors to potentially benefit from broad diversification, strong fundamental analysis and valuation, as well as a thematic component. 1.5 What is (are) this (these) fund(s) trying to achieve through taking into account ESG criteria? For instance, financing a specific sector, reducing risks, support better CSR practices, develop new value creation opportunities, other objectives. If part of the fund(s) assets is invested in unlisted organisations with high social, community or impact investing relevance, please specify. The Global Sustainable Strategy is a positive screening portfolio. We have a negative screening process that excludes companies that have more than 5% of revenues in alcohol, tobacco, defence, nuclear, GMO, water bottles, gambling and pornography from the portfolio. But the most important screening is positive in nature, seeking companies that are fundamentally attractive, have superior valuation characteristics and that have a positive business model that can benefit from sustainability trends. We have four broad themes; energy efficiency, environmental, health care and social improvement in which we seek beneficiaries. All of the stocks held in the Global Sustainable Strategy are grouped into one of these four themes: energy efficiency (29.3%), environmental (22.1%), healthcare (15.0%) and social improvement (33.6%) data as at 31 March Our thematic weights are a result of our bottom-up stock opportunities and we are not trying to target a certain weight in each theme. Asset Management Page 10 of 19

11 2 Approach to ESG Evaluation of Companies 2.1 What fundamental principles underlie the ESG research methodology? Describe the principles, standards or norms on which the ESG analysis is based for each of the environmental, social/societal and governance dimensions. Include brief comments about how stakeholders are consulted, as appropriate. Our investment philosophy and process combine our bottom-up fundamental research with rigorous sustainability analysis. We actively look for companies that appear attractively valued and can benefit from secular themes, such as energy and water conservation, health care, demographics and other long-term trends. Sustainability has emerged as arguably the largest growing consideration as companies look to achieve long-term viability and profitability. Shareholders own much more than a company s financial statement - they have invested in management, buildings, employees culture, regulatory environment, governance and brand equity. We look at the whole picture when making investment decisions. Create impact and returns Create impact and returns Growth, social responsibility and ecological sustainability are elements of winning business models We believe that you can do good while you do well We believe that companies focusing on sustainability strengthen their competitive position and have superior business models We believe that sustainable growth trends are in their infancy and present investment opportunities We believe that companies offering sustainable solutions create value We believe that a deep focus on understanding value chains will deliver investment results We believe in bottom-up, high-conviction best ideas strategies Sustainable + Attractive + Portfolio valuation construction = Sustainable fundamentals Source: UBS Research Focus 2006 We use a company-wide valuation model to make our projections as comparable as possible. Through this process, we aim to identify the best investment ideas across sectors and geographies from a stock-specific standpoint. This component of the process provides strong traditional valuation support to our stock selection strategy. The portfolio management team integrates these inputs into a best ideas portfolio of stocks that we believe are attractively valued and that have a strong sustainability profile. In doing so, the team draws upon its members years of experience and utilizes the firm s proprietary risk management tools. 2.2 What internal and external resources are used to carry out this research? Describe the general information used to carry out the ESG research: internal analysis, ESG rating agencies, other external sources of information. The Sustainable Equities Team leverages the firm's global analyst research platform as well as portfolio construction and risk tools. In addition, our Sustainable Equities strategies benefit from the ongoing development of a proprietary database of fundamental sustainability metrics. This is a collaborative effort with our Applied Research Team and it provides the team with a significant competitive advantage. US-I 8 Asset Management Page 11 of 19

12 We also use industry surveys and glean information from external sources. Our team of investors also stress-tests sell-side broker financial models. The facts finding process, Sustainability checks, and fundamental analysis for the Global Sustainable strategy are performed internally. The team also has access to many external fundamental ESG data sources including rating services such as MSCI ESG, Sustainalytics, Sustainability, Reprisk, and Governance Metrics. In addition we have access to sustainability research from brokers and data providers such as Bloomberg ESG data. UBS Global Asset Management also has a regular dialogue with sustainability experts from many organizations including Deloitte Consulting, Accenture Consulting, the Sustainability Accounting Standards Board, NGOs, and other sustainability organizations. The strategy also benefits from a company-wide commitment to leading-edge sustainability research and initiatives across all of UBS's divisions. This includes the UBS Investment Bank's award-winning sustainability research unit as well as UBS Wealth Management's thematic research team. In addition, UBS is a leader in advancing state-of-the-art sustainability analysis through its membership in two key steering committees: the Sustainability Accounting Standards Board and the Global Initiative for Sustainability Ratings. 2.3 Which ESG analysis criteria are used? Indicate what the main criteria for each of the environmental, social/societal and governance dimensions are. Specify if these criteria differ according to sectors, the geographical zones, and the type of company If appropriate, provide an example. Socially Responsible Investing (SRI) is historically associated with negative screening. The most common screens (including ours) excludes companies with more than 5% in sales in defence, GMO, tobacco, alcohol, nuclear, gambling, adult entertainment and water bottles. Because these excluded companies are limited to about 7% of the ACWI universe, their exclusion does not materially affect investment results or our process. We believe that ESG factors are best assessed as part of the company research process. These factors are fundamental in nature and need to be analyzed as an integral part of the due diligence process, included in our estimation of cash flows and valuation metrics. Our proprietary analysis covers each of the environmental, social and governance dimensions to arrive at an overall ESG score for each company: Asset Management Page 12 of 19

13 While we do not have a check list approach, we have identified industry group-specific Key Performance Indicators (KPIs) which are weighted according to their importance for the sector. Please find below an example of the KPIs that we analyse for companies in the Auto industry: Each KPI is converted into a score using the weightings and a final score for the company is then calculated. In theory our scores would be 0 to 100, but in practice the maximum score is currently 87 and this will change over time as the scores get updated. The rankings are broken into deciles and it is important to note that these are industry group relative. So the breakdown of score ranges will be different for each industry group. Each decile or bucket will have about the same number of companies. This allows us to systematically focus on the most attractive stocks in our universe from a valuation and sustainability perspective at the same time. Asset Management Page 13 of 19

14 At this time UBS is working with several external organizations as well as its own quantitative teams to build a quantitatively-driven ESG framework. This framework will eventually assemble our internal data, external data from vendors and databases into a factor matrix that will allow us to develop and backtest ESG ratings and factors for investment effectiveness. We believe that this effort will further enhance our ability to have a proprietary and fundamental view of ESG factors at the company level. 2.4 What is your ESG analysis and evaluation methodology (how the investment universe is built, rating system )? Describe the ESG evaluation/rating system and how it is built by explaining how the various ESG criteria are articulated. If appropriate, provide an example. We have a negative screening process that excludes companies with more than 5% of revenues in alcohol, tobacco, defence, nuclear, GMO, water bottles, gambling and pornography from the portfolio. But the most important screening is positive in nature, seeking companies that are fundamentally attractive, have superior valuation characteristics and that have a positive business model that can benefit from sustainability trends. We do not rely on outside ratings although we consult a diverse set of external inputs to ensure that our own fundamental ESG assessment is reasonable. In some cases we have found that external databases are out of sync with forward-looking assessments, either maintaining a high rating when we believe the company is deteriorating in its ESG policy, or maintaining a low rating when the management has made significant changes in ESG policy. We therefore rely on our proprietary analysis which covers each of the environmental, social and governance dimensions to arrive at an overall ESG score for a company. Please refer to our response to question 2.3 for a more detailed description of this process. It is important to understand that we are not using the sustainability score as a single basis for decision making. Rather, we are comparing candidates for the portfolio that have both strong valuation and sustainability criteria and we are looking at the sustainability data in detail to compare the relative strength and weaknesses of companies. The sustainability score is a simplifying initial step that enables us to prioritize our entire research universe. UBS Global Asset Management s Applied Research unit in conjunction with outside experts has built a leading edge database of fundamental sustainability data at the company and industry group level that is used alongside valuation data from our analysts to rank the investment universe on both fundamental and sustainability attractiveness. The database parallels the approach taken by the Sustainability Accounting Standards Board in building its Materiality Matrix. We believe that this database is unique and gives us a significant proprietary edge in the incorporation of fundamental, material sustainability data in the investment process. This Sustainability KPI (key performance indicator) database is instrumental in ensuring that both valuation and sustainability factors are taken into account simultaneously and that both receive equal weighting in the decision making process. 2.5 How frequently is the ESG evaluation reviewed? Please briefly explain the methodology update process and who is involved. If appropriate, explain if the methodology has changed in the past 12 months and the nature of the key changes. The Sustainable Equity Team reviews the sustainability ratings on a weekly basis. The sustainability ratings are not changing on a weekly basis, but our valuation rankings may change frequently with price changes in the markets. That is why we review the ratings weekly at our team meeting. See also answer to question 2.4 above which explains that we have built out a leading edge database of fundamental sustainability data. Asset Management Page 14 of 19

15 3 Fund Management Process 3.1 How do you take into account ESG criteria when defining the universe of eligible investments? If appropriate, describe the eligibility threshold and the resulting level of selectivity. At the outset, we consider the full universe as defined by the MSCI ACWI index. We apply a negative screen excluding controversial companies with more than 5% of sales in defence, GMO, tobacco, alcohol, nuclear, gambling, adult entertainment and water bottles. These exclusions comply with the United States Conference of Catholic Bishop's (USCCB) Socially Responsible Investment Guidelines. These exclusions represent around 7% of the ACWI universe. We perform a positive screening, seeking companies that are fundamentally attractive, have superior valuation characteristics and that have a positive business model that can benefit from sustainability trends. Source: UBS Global Asset Management, How do you take ESG criteria into account into the portfolio construction? Describe how you link ESG selection with the financial analysis or with portfolio management. More precisely, describe how the results of the analysis of each of the dimensions (E, S and G) are integrated into the investment / divestment process. If applicable, state where you provide information on divestments occurred in the past year on the basis of ESG criteria? If appropriate, explain how potential ESG weightings are defined and describe your treatment of companies that are not subjected to an ESG analysis. Our objective is to invest in companies that meet three important criteria: First, the stock must be fundamentally attractive from a conventional valuation standpoint. Second, we invest in companies that have strong, above-average, forward-looking ESG profiles. We do not rely on outside ratings although we consult a diverse set of external inputs to ensure that our own fundamental ESG assessment is reasonable. In some cases we have found that external databases are out of synch with forward-looking assessments, either Asset Management Page 15 of 19

16 maintaining a high rating when we believe the company is deteriorating in its ESG policy, or maintaining a low rating when the management has made significant changes in ESG policy. Finally, we invest in companies that have strong business models that can benefit from Sustainability trends. We believe that companies with strong shared values with the surrounding community can achieve a meaningful long-term competitive advantage. This process is depicted in the graph below. We use Key Performance Indicators to score companies in our universe. In theory our scores would be 0 to 100, but in practice the maximum score is currently 87 and this will change over time as the scores get updated. The rankings are broken into deciles and it is important to note that these are industry group relative. So the breakdown of score ranges will be different for each industry group. Each decile or bucket will have about the same number of companies. This allows us to systematically focus on the most attractive stocks in our universe from a valuation and sustainability perspective at the same time. Generally speaking, we only invest in companies that are ranked in the 6 th decile or above, both in terms of valuation and sustainability. This allows us to systematically focus on the most attractive stocks in our universe from a valuation and sustainability perspective at the same time. Companies that no longer fulfil our ESG or valuation criteria are sold as soon as practical, depending on liquidity and trading volume. 3.3 Does (do) the fund(s) have a specific ESG engagement policy? Please explain what you mean by engagement. Describe how you select the companies/ themes for engagement activities and the impact on the portfolio management of the fund(s). Who undertakes engagement on behalf of the fund (internal and/or service providers)? We are actively engaged with companies across a wide range of issues including ESG. UBS Global Asset Management votes all of its shares across the firm except for those accounts that are client-directed. Our Global Director of Governance manages engagement on behalf of the firm and publishes an annual report on Governance activities. Please refer to our Annual Corporate Governance review on the following link: Asset Management Page 16 of 19

17 3.4 Does (do) the fund(s) have a specific voting policy integrating ESG criteria? Yes/No No. Our voting policy applies globally. Please refer to the description of our voting policy in question Does (do) the fund(s) engage in securities lending activities? If yes, (i) is a policy to recall the securities in place in order to exercise the voting rights? The fund may lend portions of its securities portfolio to third parties. In general, lending may only be effected via recognized clearinghouses such as Clearstream International or Euroclear, or through the intermediary of prime financial institutions that specialize in such activities and in the modus specified by them. Such transactions may not be entered into for longer than 30 days, however. If the loan exceeds 50% of the securities portfolio of the fund, it may only be affected on condition that termination of the loan contract is possible immediately. We believe that voting rights have economic value and should be treated accordingly. Our Corporate Governance team under Ian Pitfield is responsible for setting and implementing UBS Global Asset Management's corporate governance principles. As such, this team determines whether or not it is relevant to recall a stock from loan in order to exercise voting rights. If deemed relevant, the team will notify the Board of Directors of the fund. It is then for the Board of the fund to decide whether to recall the stock dependent on whether they believe that the issues being voted upon are of sufficient importance to offset the economic benefit of the loan. (ii) does the counterparty selection process integrate ESG criteria? UBS operates securities lending on the principal basis, i.e. for every lending transaction only UBS AG is the counterparty of the investment fund and guarantees all claims of the fund. As such, no research is conducted into the ESG characteristics of the counterparty. With regards to broker selection, this is primarily based on best execution criteria. Where multiple counterparties offer equivalent best execution, then consideration may be given to research provided and this may include work on ESG. However, ESG characteristics at the individual counterparty corporate level are not directly a factor in counterparty selection. 3.6 Does (do) the fund(s) use derivative instruments? If yes describe, (i) their nature (ii) the objective(s) (iii) the potential limits in terms of exposure (iv) if appropriate, their impact on the SRI quality of the fund The fund may, while observing the following investment principles, buy or sell futures and options on financial instruments or conduct transactions for non-hedging purposes involving options on securities. These market techniques and instruments will only be employed if they are in conformity with the investment policies and do not adversely affect their quality. The use of derivatives has no influence on the SRI quality of the fund. Derivatives are mainly used to manage cash holdings. For further details, please refer to the fund prospectus. 3.7 Is a share of the fund(s) invested in unlisted entities pursuing strong social goals? If yes, please provide a brief description of the objective(s) of this investment, in no more than one or two sentences. No. Asset Management Page 17 of 19

18 4 Controls and ESG Reporting 4.1 What internal/external control procedures are in place to ensure the compliance of the portfolio with the ESG rules defined in section 3 of this Code? State who is carrying out the controls, their frequency and within which timeframe the fund(s) have to comply should a breach be detected. Controls are carried out on an ongoing basis by the investment team. When a company faces controversy, we would analyse the event and then decide if we sell out of our position and if we engage with the company. The decision of which action to take depends on our assessment of how the stock price would be affected in the future. If we felt that the controversy is likely to deteriorate and the stock price will fall, then we may sell out of our position. 4.2 Please list all public media and documents used to inform investors about the SRI approach to the fund, and include URLs. This should include a link to the detailed, no more than 6 months old, list of holdings of the fund(s). Prospectus (semi-) Annual report Addendums KIID Fund Fact Sheet Dedicated SRI Web page(s) at company / fund level (if applicable) Engagement/voting policy/votes (if applicable) Link to Web page of ESG Analysis provider(s) (if applicable): We also get ESG ratings information from Bloomberg, Reuters, and Goldman Sachs. URL to the research findings that are available to investors (if appropriate) Not available Detailed fund holdings (no more than 6 months old) CSR Policy of the Company l (if applicable) Additional If applicable, specify what the amount of donations and the percentage of management fees that the fund gave to charities in the last year. Not applicable. Asset Management Page 18 of 19

19 T The present document is for information purposes and internal use only. This document has been prepared by CCR Asset Management, a public limited company (Société Anonyme) with capital of Euros, and registered offices at 44 rue Washington, Paris - France (registered under number of the Paris commercial register, RCS) authorised as a portfolio management company by the French financial markets authority (Autorité des Marchés Financiers) on 30 November 1992 under number GP CCR AM is the representative in France of UBS Global Asset Management. This document is intended for institutional investors and distribution partners. It in no way constitutes an offer, or a requestfor-proposal, and it does not constitute advice to buy or sell an investment or specific product in any jurisdiction. Although this document has been prepared with the greatest care using sources that CCR Asset Management esteems to be reliable, no guarantee can be offered as to the accurate and exhaustive nature of the information and evaluations contained within the document, which are of only purely indicative value. CCR Asset Management declines all responsibility regarding any investment or divestment decisions which may have been taken on the basis of data included in this presentation. Prior to any subscription, the legal information documents for each product should be consulted (full prospectus, latest annual report) as well as the latest periodic publication. This information can be obtained freely by accessing our Internet website: These documents, which include information concerning risks, commissions and costs, can also be obtained upon simple written request to the following address: CCR Asset Management - Washington Plaza - 44, rue Washington Paris - France. CCR Asset Management draws your attention to the fact that the value of a unit of an ICVC or a mutual fund unit is subject to financial market movements and recorded value therefore fluctuates. Any investment in UCITS incurs risk for the investor of a greater or lesser degree based on investment markets, including the risk of total and sudden loss of the investment. Past performances are not a guarantee of future performance. The present document has been established independently from any specific or future investment objectives, from any specific financial or fiscal situation, and from any experience or understanding of financial products or needs pertaining to any individual addressee. The SICAV / FCP is offered solely to investors that are not U.S. Persons (as defined in the US regulation and in the Prospectus of the SICAV / Fund) under the terms and conditions of the current prospectus of the SICAV / FCP. Unless prior authorisation has been obtained from CCR Asset Management: total or partial reproduction on any support; communication to third parties; use for any purposes other than private use; or alteration of brand names, logos, illustrations, analyses, distinguishing features, images, animations, graphs, photographs or texts which may be included in this presentation is not permitted and liable to prosecution. CCR Asset Management 44 Rue Washington Paris