SFDR requires that information provided in a pre-contractual disclosure in respect of a portfolio which promotes environmental and/or social characteristics be published on a website.
This disclosure is made for these purposes by the CIM division of Citibank Europe plc, in relation to clients of its Luxembourg branch.
This disclosure relates to the Citi MACS ESG Core Model Portfolios.
The model portfolios promote environmental or social characteristics but do not have a sustainability investment objective. They use a reference benchmark appropriate to the market and segment of investments selected by the portfolio manager, but the benchmarks are not designated for the purpose of attaining the environmental or social characteristics promoted by the portfolios.
What are the environmental and/or social characteristics promoted by the portfolios?
- They invest in funds and 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 investmentas 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
How are those characteristics met?
- The investment process uses 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. CIM’s Investment Manager Research (IMR) Team are responsible for the identification of such funds through their due diligence process.
The model portfolios are reviewed on a quarterly basis by the CIM Portfolio Management team to ensure that only Article 8 and Article 9 funds and ETFs are selected for, and held in, the portfolios.
What policy does CIM use to assess the good governance practices of investee companies?
- The portfolios only invest in funds that are UCITS funds. The good governance requirement applies to such funds to the extent that they take the form of a body corporate, and it is assumed that the requirement is met given the authorised and highly regulated nature of this type of fund structure.
- Beyond this, it is noted that Article 8 and 9 funds are themselves required to invest in companies which follow good governance practices, including with respect to sound management structures, employee relations, remuneration of staff and tax compliance. This provides additional comfort in respect of good governance.