Citi Sustainable Multi-Thematic Equity Portfolio

Portfolios Which Promote Environmental and/or Social Characteristics

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 following portfolios:

  • Citi Sustainable Multi-Thematic Equity Portfolio (Citi SMT)
  • Tailored Discretionary Portfolios utilizing the investment process from the Citi SMT

The Citi SMT promotes environmental or social characteristics but does not have a sustainable investment objective. It uses a reference benchmark appropriate to the market and segment of investments selected by the portfolio manager, but the benchmark is not designated for the purpose of attaining the environmental or social characteristics promoted by the portfolio.

Whilst the Citi SMT portfolio’s name includes the word ‘sustainable’, it is not an Article 9 SFDR product, nor does it commit to making SFDR compliant ‘sustainable investments’.

What are the environmental and/or social characteristics promoted by the portfolio?

  • The Citi SMT invests in companies that have meaningful exposure to one or more sustainability themes selected by CIM. These themes are aligned to one or more UN Sustainable Development Goals.
  • The sustainability themes are highlighted in the Citi SMT sales deck.

How are those characteristics met?

  • The investment process utilizes top-down thematic analysis,
    bottom-up fundamental research and engagement to identify companies eligible for this SMT portfolio.
  • The portfolio management team identifies global publicly traded companies with a minimum of 30% revenue for their last completed fiscal year attributed to one or more of the Citi SMT themes. Any companies that do not meet this threshold, but where the portfolio management team have sufficient conviction that they may meet the threshold within three years, can be taken to a dedicated SMT investment forum, where a team of investment professionals will consider whether to hold the company on an exception basis. Exceptions based on this criterion can comprise up to 20% of the portfolio’s value, measured quarterly, as part of the CIM Implementation Review Meeting (IRM).
  • The investment process uses negative screening to further define the investment universe;
  • The portfolio excludes companies that are ‘non-compliant’ with UN Global Compact Principles or UN Global Compact Violators. This is assessed by a third party data provider. The vendor is used to identify companies flagged as non-compliant based on their proprietary screening module. Specifically, the third party data provider assesses whether a company is violating, or is at risk of violating, one or more of the UN Global Compact principles and related international norms and standards and assigns one of the following three statuses to the company: Non-Compliant, Watchlist or Compliant. The third party data provider methodology is subjective and as such, proprietary analysis is also applied and if an exception is required, it can be taken to the dedicated SMT investment forum. Exceptions based on this proprietary analysis can comprise up to 20% of the portfolio’s value measured quarterly, as part of the IRM. The percentage of the portfolio covered by the exception will be measured before each exception and reviewed at the quarterly IRM.
  • The following exclusions as defined by the UN Global Compact are applied by the third party data provider:
    • Derive revenue from the production, sale and/or transfer of antipersonnel landmines or cluster bombs.
    • Derive revenue from the production and/or manufacturing of tobacco.

The investment strategy is implemented through a robust investment and review process that periodically refreshes the ESG data upon which CIM makes its investment decisions. 

What policy does CIM use to assess the good governance practices of investee companies?

  • The good governance practices of the investee companies are considered in the investment due diligence process. CIM’s determination as to whether an investee company follows good governance practices is based upon a rating produced by a third party data provider.
  • The third party data provider has a methodology which is used to specifically evaluate the governance structures, practices, and behaviour of companies and their ability to build sustainable, long-term value that can be delivered to shareholders and other stakeholders in a fair and transparent manner.
  • The Corporate Governance Risk framework used by the third party data provider is structured into six key corporate governance issues:
  1. Board/Management Quality & Integrity;
  2. Board Structure;
  3. Ownership & Shareholder Rights;
  4. Remuneration;
  5. Audit & Financial Reporting; and
  6. Stakeholder Governance.

A rating is then applied by the third party data provider after analysing each of these issues.

  • There may be securities in the portfolio in respect of which the data provider does not provide a governance score for the company. Where this is the case, the CIM equity team will use the same scoring methodology as that used by the data provider to assess whether the investee company follows good governance practices.