No sustainable investment objective
This financial product promotes environmental or social characteristics, but does not have as its investment objective sustainable investment
Environmental or social characteristics of the financial product
The financial product promotes environmental and social and characteristics by investing in funds that have been categorised as Article 8 or 9 products under SFDR. The financial product does not use a reference benchmark to attain the environmental or social characteristics promoted by the financial product.
Investment strategy used to meet the environmental and social characteristics of the financial product
The portfolio management team invests in funds and Exchange Traded Fund (ETFs) that fall within the scope of:
- Article 8 of SFDR – i.e. funds that promote environmental and/or social characteristics, provided that the companies in which the investments are made follow good governance practices; or
- Article 9 of SFDR – i.e. funds with “sustainable investment” as their objective. Under SFDR, this means “an investment in an economic activity that contributes to an environmental objective … or an investment in an economic activity that contributes to a social objective … provided that such investments do not significantly harm any of those objectives and that the investee companies follow good governance practices …”.
The policy to assess good governance of the investee companies
- As noted previously, the portfolio does not invest directly in investee companies but rather only in Article 8 and 9 funds. These Article 8 and 9 funds are themselves required under SFDR to invest in companies which follow good governance practices, including with respect to sound management structures, employee relations, remuneration of staff and tax compliance
Proportion of investments
The financial product commits to a minimum proportion of 80% of investments to attain the characteristics promoted by the financial product, in accordance with the binding elements of the investment strategy. The remaining portion of the investment of the financial product consists of cash and cash equivalents, including securities issued by money market mutual funds, held for the purposes of efficient portfolio management.
Monitoring of environmental or social characteristics
We undertake an annual review of the financial product’s underlying fund holdings to ensure that the underlying funds continue to be categorised as Article 8 and Article 9 funds.
Methodologies for environmental or social characteristics
- The investment process uses a positive screen to define an investment universe for the financial product by identifying funds categorised as Article 8 or Article 9 under SFDR
- We identify the SFDR fund categorisation (as Article 8 or Article 9) using and relying on data provided by a third party data provider who obtains the SFDR fund categorisation directly from the underlying fund manager.
Data sources and processing
(a) the data sources used to attain each of the environmental or social characteristics promoted by the financial product
We identify the SFDR fund categorisation (as Article 8 or Article 9) using data provided by Morningstar, a third party data provider, who obtains the SFDR fund categorisation information directly from the underlying fund managers.
(b) the measures taken to ensure data quality
In order to ensure we use appropriate data from creditable sources, Citi has and internal vendor review and approval process where we review the vendors approach to data management, their coverage, and their methodologies before they are approved for use. Our vendor review process also monitors and refreshes relevant information about the data provider on an ongoing basis.
(c) how data are processed
Fund managers provide details of their funds’ SFDR classification to Morningstar and we access that information from Morningstar.
(d) the proportion of data that are estimated
None as we rely on the SFDR categorisation of the funds communicated by the underlying fund managers.
Limitations to methodologies and data
The underlying fund managers may have different approaches, eligibility criteria or frameworks to determine whether an investment is aligned with specific environmental / social characteristics or themes, or should be regarded as a “sustainable investment” (as defined in the SFDR). They may also have different approaches, eligibility criteria of frameworks for categorising their funds under Article 8 or 9 of SFDR. Accordingly, different managers may classify the same investment, or funds with similar strategies, differently under their framework.
As the SFDR rules and guidance have confirmed that fund managers may use a variety of strategies to meet the requirements of Article 8 or 9 of SFDR, we consider that we are still able to appropriately meet the characteristics promoted by the financial product.
We evaluate and select third-party traditional fund managers via a proprietary methodology. This includes assessing the ESG-related information provided by the fund managers to assess their investment processes.
Engagement is not directly part of the environmental or social investment strategy promoted by the financial products. We do not have any procedures applicable to sustainability-related controversies in underlying funds.
Information provided in periodic reports
The extent to which environmental and/or social characteristics are met
In the period running from 10 March 2021 to 31 December 2021 (the “reference period”), the environmental and/or social characteristics promoted by these products, as set out in the pre-contractual disclosure made for the purposes of Article 8(1) of SFDR, and characteristics were met as follows:
- The investment process used a positive screen to define an investment universe for the respective portfolios by identifying funds that have a comprehensive ESG analysis framework integrated tightly into their overall investment process.
- More specifically, the funds selected were UCITS funds categorized as Article 8 or 9 under SFDR. The model portfolios were reviewed on a quarterly basis.
In the reference period, there were no breaches and/or exceptions to any of the binding elements set out above. The investment process of the underlying funds was reviewed on a quarterly basis, except for passive ETFs which are reviewed annually.
Disclosure under the Taxonomy Regulation
The investments underlying these portfolios do not take into account the EU criteria for environmentally sustainable economic activities.
This page was last updated on 30th December 2022