Consideration of sustainability risks and potential impact on returns
Article 8
Applies to financial products Fondita European Micro Cap, Fondita Finland Micro Cap and Fondita Nordic Micro Cap
Definition
Sustainability and ESG risks are defined under the SFDR Regulation (Article 2) as an environmental, social or governance event or circumstance which, if it were to occur, would have a significant actual or potential negative impact on the value of the investment. If sustainability risks materialize, the value of an individual investment may be negatively affected. For the financial product, sustainability risks may therefore also reduce the financial products’ return in the long term. Sustainability risks are considered as part of the investment decision-making process together with more traditional investment risks such as market and liquidity risks.
Sustainability and ESG risk integration
First and foremost, Fondita excludes sectors that we believe are associated with high risk from an ESG perspective. There is a high risk of increased regulation, taxation and political opposition in these activities. Public opinion also tends to become more negative towards such activities. These factors make companies in the sectors operate in an uncertain and unfavorable environment. In addition, the activities can easily be considered questionable from an ethical perspective. The sectors in which we do not invest are nuclear power, tobacco, controversial weapons, adult entertainment, fossil fuels, uranium, gambling, recreational cannabis, and payday loans. The exclusion applies to companies that are directly active in these sectors (>5% of turnover) or that are suppliers to these sectors (>5% of turnover). We also exclude companies that have violated the UN Global Compact’s 10 principles, OECD guidelines for multinational enterprises and EU Taxonomy Do No Significant Harm, because Fondita associates violators of these international norms with high risk from an ESG perspective.
In European Micro Cap, Finland Micro Cap and Nordic Micro Cap, Fondita pays special attention to PAI indicators relevant to the investment strategy (e.g. PAI 1-5 and 10-13) and if anomalies are identified it increases the sustainability risk therefore also the potential negative impact on the investment value and return. Additionally, we monitor the MSCI ESG ratings of the companies, lower than BB increases sustainability risk and therefore also the potential negative impact on the investment value.
An increased sustainability risk relevant in these financial products is the low level of coverage of sustainability related data in our third-party databases (MSCI & Bloomberg), which average around 50%. Fondita retrieves relevant sustainability related information on a best effort basis to be able to assess relevant sustainability risks in the holdings which are not covered by our external databases.
Action and monitoring
The purpose of our monitoring during the holding period of investments is to ensure the holding continues to operate within an acceptable ESG and sustainability risk level. We conduct monthly screenings of our holdings in MSCI ESG Research to ensure they continue to operate within our ESG risk assessment throughout the holding period. In practice this means, if a company is found to be in violation of an international norm such as UN Global Compact through screening, we take a dialogue with the holdings’ investor relations to verify the failure, to ensure the trustworthiness of the flag by MSCI ESG Research, and if verified we divest from the holding. The process is documented as part of our escalation process.
Internal risk management function performs risk monitoring quarterly and the ESG controller provides oversight and escalation on the sustainability integration process in the investment process.
Applies to financial products Fondita Global Megatrends, Fondita Global Small Cap and Fondita Nordic Small Cap.
Definition
Sustainability and ESG risks are defined under the SFDR Regulation (Article 2) as an environmental, social or governance event or circumstance which, if it were to occur, would have a significant actual or potential negative impact on the value of the investment. If sustainability risks materialize, the value of an individual investment may be negatively affected. For the financial product, sustainability risks may therefore also reduce the financial products’ return in the long term. Sustainability risks are considered as part of the investment decision-making process together with more traditional investment risks such as market and liquidity risks.
Sustainability and ESG risk integration
First and foremost, Fondita excludes sectors that we believe are associated with high risk from an ESG perspective. There is a high risk of increased regulation, taxation and political opposition in these activities. Public opinion also tends to become more negative towards such activities. These factors make companies in the sectors operate in an uncertain and unfavorable environment. In addition, the activities can easily be considered questionable from an ethical perspective. The sectors in which we do not invest are nuclear power, tobacco, controversial weapons, adult entertainment, fossil fuels, uranium, gambling, recreational cannabis, and payday loans. The exclusion applies to companies that are directly active in these sectors (>5% of turnover) or that are suppliers to these sectors (>5% of turnover). We also exclude companies that have violated the UN Global Compact’s 10 principles, OECD guidelines for multinational enterprises and EU Taxonomy Do No Significant Harm because Fondita associates violators of these international norms with high risk from an ESG perspective.
In Global Megatrends, Global Small Cap and Nordic Small Cap, Fondita pays special attention to PAI indicators relevant to the investment strategy (e.g. PAI 1-5 and 10-13) and if anomalies are identified it increases the sustainability risk therefore also the potential negative impact on the investment value and return. Additionally, we monitor the MSCI ESG ratings of the companies, lower than BB increases sustainability risk and therefore also the potential negative impact on the investment value.
Action and monitoring
The purpose of our monitoring during the holding period of investments is to ensure the holding continues to operate within an acceptable ESG and sustainability risk level. We conduct monthly screenings of our holdings in MSCI ESG Research to ensure they continue to operate within our ESG risk assessment throughout the holding period. In practice this means, if a company is found to be in violation of an international norm such as UN Global Compact through screening, we take a dialogue with the holdings’ investor relations to verify the failure, to ensure the trustworthiness of the flag by MSCI ESG Research, and if verified we divest from the holding. The process is documented as part of our escalation process.
Internal risk management function performs risk monitoring quarterly and the ESG controller provides oversight and escalation on the sustainability integration process in the investment process.
Article 9
This section considers our financial products which comply with SFDR article 9. The disclosures are per financial product accordingly to the product specifications in the start of each section.
Applies to financial product Fondita Sustainable World
Definition
Sustainability and ESG risks are defined under the SFDR Regulation (Article 2) as an environmental, social or governance event or circumstance which, if it were to occur, would have a significant actual or potential negative impact on the value of the investment. If sustainability risks materialize, the value of an individual investment may be negatively affected. For the financial product, sustainability risks may therefore also reduce the financial products’ return in the long term. Sustainability risks are considered as part of the investment decision-making process together with more traditional investment risks such as market and liquidity risks.
Sustainability and ESG risk integration
First and foremost, Fondita excludes sectors that we believe are associated with high risk from an ESG perspective. There is a high risk of increased regulation, taxation and political opposition in these activities. Public opinion also tends to become more negative towards such activities. These factors make companies in the sectors operate in an uncertain and unfavorable environment. In addition, the activities can easily be considered questionable from an ethical perspective. The sectors in which we do not invest are nuclear power, tobacco, weapons, adult entertainment, fossil fuels, uranium, gambling, recreational cannabis, and payday loans. The exclusion applies to companies that are directly active in these sectors (>5% of turnover) or that are suppliers to these sectors (>5% of turnover). We also exclude companies that have violated the UN Global Compact’s 10 principles, OECD guidelines for multinational enterprises and EU Taxonomy Do No Significant Harm because Fondita associates violators of these international norms with high risk from an ESG perspective.
In Sustainable World, Fondita pays special attention to PAI indicators relevant to the investment strategy (e.g. PAI 1-5 and 7-11) and if anomalies are identified it increases the sustainability risk and therefore also the potential negative impact on the investment value and return. Additionally, we monitor the MSCI ESG ratings of the companies, lower than BB increases sustainability risk and therefore also the potential negative impact on the investment value.
Increased sustainability risks related to the sustainable investment objective of the financial product are regulatory complexity within the climate and environmentally smart solutions and lower financial incentives towards green investment opportunities, which can potentially have an increased sustainability risk of the investment universe of the financial product.
Action and monitoring
The purpose of our monitoring during the holding period of investments is to ensure the holding continues to operate within an acceptable ESG and sustainability risk level. We conduct monthly screenings of our holdings in MSCI ESG Research to ensure they continue to operate within our ESG risk assessment throughout the holding period. In practice this means, if a company is found to be in violation of an international norm such as UN Global Compact through screening, we take a dialogue with the holdings’ investor relations to verify the failure, to ensure the trustworthiness of the flag by MSCI ESG Research, and if verified we divest from the holding. The process is documented as part of our escalation process.
Internal risk management function performs risk monitoring quarterly and the ESG controller provides oversight and escalation on the sustainability integration process in the investment process.
Applies to financial product Fondita Healthcare
Definition
Sustainability and ESG risks are defined under the SFDR Regulation (Article 2) as an environmental, social or governance event or circumstance which, if it were to occur, would have a significant actual or potential negative impact on the value of the investment. If sustainability risks materialize, the value of an individual investment may be negatively affected. For the financial product, sustainability risks may therefore also reduce the financial products’ return in the long term. Sustainability risks are considered as part of the investment decision-making process together with more traditional investment risks such as market and liquidity risks.
Sustainability and ESG risk integration
First and foremost, Fondita excludes sectors that we believe are associated with high risk from an ESG perspective. There is a high risk of increased regulation, taxation and political opposition in these activities. Public opinion also tends to become more negative towards such activities. These factors make companies in the sectors operate in an uncertain and unfavorable environment. In addition, the activities can easily be considered questionable from an ethical perspective. The sectors in which we do not invest are nuclear power, tobacco, weapons, adult entertainment, fossil fuels, uranium, gambling, recreational cannabis, and payday loans. The exclusion applies to companies that are directly active in these sectors (>5% of turnover) or that are suppliers to these sectors (>5% of turnover). We also exclude companies that have violated the UN Global Compact’s 10 principles, OECD guidelines for multinational enterprises and EU Taxonomy Do No Significant Harm because Fondita associates violators of these international norms with high risk from an ESG perspective.
In Fondita Healthcare, Fondita pays special attention to PAI indicators relevant to the investment strategy (e.g. PAI 10-13) and if anomalies are identified it increases the sustainability risk and therefore also the potential negative impact on the investment value and return. Additionally, we monitor the MSCI ESG ratings of the companies, lower than BB increases sustainability risk and therefore also the potential negative impact on the investment value.
Increased sustainability risks related to the sustainable investment objective of the financial product are regulatory complexity within the healthcare industry in general, including high demands for quality of product and production, which can potentially have an increased sustainability risk of the investment universe of the financial product.
Action and monitoring
The purpose of our monitoring during the holding period of investments is to ensure the holding continues to operate within an acceptable ESG and sustainability risk level. We conduct monthly screenings of our holdings in MSCI ESG Research to ensure they continue to operate within our ESG risk assessment throughout the holding period. In practice this means, if a company is found to be in violation of an international norm such as UN Global Compact through screening, we take a dialogue with the holdings’ investor relations to verify the failure, to ensure the trustworthiness of the flag by MSCI ESG Research, and if verified we divest from the holding. The process is documented as part of our escalation process.
Internal risk management function performs risk monitoring quarterly and the ESG controller provides oversight and escalation on the sustainability integration process in the investment process.
Fondita