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Full name of the Article 8 (sub-) fund:
BRUMMER UMBRELLA ICAV - BRUMMER MULTI-STRATEGY UCITS

Legal entity identifier: 635400LSIB2KXQZMAD07

Date of review: 15 March 2024

Sustainability-related disclosures

Summary

Brummer Multi-Strategy UCITS (“BMS UCITS”) allocates to separate investment strategies managed by Sub-Investment Managers in the Brummer & Partners’ group. The objective is to build a well-balanced portfolio that can perform well in most scenarios. BMS UCITS does not have as its objective sustainable investment but promotes the environmental and social characteristics described below:

• Climate action (activities to combat climate change and its negative impacts);
• Compliance with international norms and conventions on human rights, labour rights, the environment and anti-corruption; and
• Consideration of the Sustainable Development Goals (the "SDGs").

Brummer Multi-Strategy AB (the “Investment Manager”) performs strategy-dependent evaluation of the Sub-Investment Managers on the quality in the research as well as of the investment and risk management processes, including the integration of sustainability risks/opportunities and the consideration of principle adverse impacts, based on ongoing monitoring and close dialogue with each Sub-Investment Manager. The analysis is both quantitative and qualitative on bottom-up and top-down aspects of each strategy and includes evaluation of their performance on several ESG indicators.

The evaluation of new Sub-Investment Managers and their investment strategy in advance of an initial investment follows the process described above. A pre-requisite for an allocation from BMS UCITS is that Brummer & Partners AB takes a minority share in the Sub-Investment Manager and has board representation (or similar function) and can perform risk control and sustainability related screenings. Also, the Sub-Investment Managers commit to comply with the investment manager’s responsible investment policy and to support the investment manager’s ambition to promote certain environmental and social characteristics.

In order to meet the environmental and social characteristics promoted by BMS UCITS, the investment manager has implemented certain investment governance tools, for example screening and monitoring of each Sub-Investment Managers’ portfolio, engagement with each Sub-Investment Manager, and by rating each portfolio and Sub-Investment Manager on their ESG performance in a proprietary ESG Matrix. The investment manager also participates in collaborative engagement activities with investee, and potential investee, companies to further improve companies’ compliance with international norms on human rights, labour rights, the environment and anti-corruption, as well as actions relating to climate mitigation. Further, the investment manager supports the Sub-Investment Managers with ESG research and data to ensure alignment of sustainability efforts and activities, and to facilitate dialogue and engagement on the promoted characteristics.

The investment manager has formed a Sustainability Working Group (“SWG”) with representatives from the portfolio management team, the risk management team and the sustainability team. The SWG meet quarterly (at minimum) to discuss and evaluate the Sub-Investment Managers’ ESG performance, such as their sustainability risk management processes and documentation, results of ESG screenings and measurements, outcomes of ESG stress tests and outcomes of dialogues with Sub-Investment Managers. The result of the evaluation is documented in the ESG Matrix. The investment manager has not designated a reference benchmark index to determine whether BMS UCITS is aligned with the environmental or social characteristics that it promotes.

To evaluate the attainment of climate action, the investment strategies', exposure to fossil fuels in general, and to thermal coal, oil sands, and arctic drilling more specifically, is measured, as is  their Weighted Average Carbon Intensity (WACI).

To evaluate the attainment of compliance with international norms and conventions on human rights, labour rights, the environment and anti-corruption, the investment strategies’ involvement in controversies in relation to these norms, is measured, as well as any involvement in controversial weapons.

To evaluate the attainment of consideration of the 17 SDGs, the Investment Manager measures the Sub-Investment Managers’ investee companies’ impact on the SDGs. In addition to the fossil fuel related exposures mentioned above, and which, amongst others, relate to  SDGs 13 'Climate action' and 15 'Life on land', the Investment Manager also measures exposure to companies involved in the production of tobacco, pornography, and cannabis intended for recreational use, that, amongst others, relate to SDG 3 'Good health and well-being'.

The investment manager has engaged a third party sustainability research and ESG data provider to supply the ESG data and research that the investment manager needs to measure the attainment of the promoted characteristics. The research subscribed to includes norms based research, controversial weapons research, energy and extractives data, carbon emissions data, and SDG Impact data. The research and data are integrated into a database and mapped against the Sub-Investment Managers’ portfolios and aggregated on a BMS UCITS portfolio level in the screening and due diligence process.

In terms of limitations of the data, the investment manager acknowledges that measurements that involve snap shot views using historical data and different reference time-frames, may limit accuracy and comparability. Further, the investment manager acknowledge that the third party’s methodologies affect the conclusion they make on for example involvement in controversies or exposure to certain sectors however, the investment manager always engage with the Sub-Investment Managers on any issues if identified in the screening to learn the Sub-Investment Manager’s view on the case, and may also engage with the third-party provider in case any differences in conclusions in their respective research and analysis processes need more clarification.

The investment manager’s Shareholder engagement policy outlines its active ownership activities including on voting for BMS UCITS and dialogue with investee companies by Sub-Investment Managers and by the investment manager itself. The investment manager is subscribing to proxy advisory research and voting recommendations that, among other things, take violations of international norms into account, and may inform voting decisions using this research. The investment manager encourages Sub-Investment Managers to be active in their own dialogue with investee companies on relevant ESG topics. Apart from engaging with Sub-Investment Managers, the investment manager also participates in collaborative engagement activities with investee, and potential investee, companies to further improve companies’ compliance with international norms on human rights, labour rights, the environment and anti-corruption, as well as on taking actions related to climate mitigation.

No sustainable investment objective

BMS UCITS promotes environmental and social characteristics, but does not have as its objective sustainable investment.

Environmental or social characteristics of the financial product

BMS UCITS promotes:

• Climate action (activities to combat climate change and its negative impacts);
• Compliance with international norms and conventions on human rights, labour rights, the environment and anti-corruption; and
• Consideration of the Sustainable Development Goals (the "SDGs").

Investment strategy

The investment manager allocates risk across separate investment strategies managed by Sub-Investment Managers within Brummer & Partners. The objective is to build a well-balanced portfolio that can perform well in most scenarios. This is achieved by allocating to investment strategies with low correlation to one another and where risk and return are primarily idiosyncratic (specific to that equity/company) and not market or factor driven. The investment manager seeks to limit any passive beta. Directional exposure should primarily come from trading-oriented strategies such as trend following or macro strategies.

Investment process
The investment manager continuously monitors the Sub-Investment Managers, the aggregated BMS UCITS risk and return profile as well as the overall market environment to form the basis of strategic and active tactical allocations.

Sub-Investment Manager level: Strategy-dependent evaluation of the quality in the research as well as of the investment and risk management processes, including the integration of sustainability risks/opportunities and the consideration of principle adverse impacts, based on ongoing monitoring and close dialogue with each Sub-Investment Manager. The analysis is both quantitative and qualitative on bottom-up and top-down aspects of each strategy and includes evaluation of their performance on several ESG indicators (BMS ESG Matrix), please see below.

Market environment: Identification and analysis of contextual factors that can create tail- or headwinds for different investment strategies, which can tilt the allocation in different directions.

Multi-Strategy level: Quantitative and qualitative analysis of the overall portfolio to identify and measure main risk exposure and contributors, including sustainability risk exposure. The risk and opportunity set are then evaluated vis-à-vis predefined tolerance levels and view of overall market environment. The investment manager is also engaging with the Sub-Investment Managers to raise awareness of risks and work with them to support development of their respective investment processes and responsible investment practices. Tactical, incremental adjustments around longer-term strategic allocations are performed to achieve the investment objectives: to build a well-balanced portfolio that can deliver competitive and sustainable alpha-driven risk-adjusted returns over time with limited drawdowns.

The evaluation of new Sub-Investment Managers and their hedge fund strategy in advance of the initial investment follow the description mentioned above. A pre-requisite for an allocation from BMS UCITS is that Brummer & Partners AB takes a minority share in the Sub-Investment Manager and has board representation (or similar function) and can perform risk control and sustainability related screenings. Also, the Sub-Investment Managers commit to comply with the investment manager’s responsible investment policy and to support the investment manager’s ambition to promote certain environmental and social characteristics.

In order to meet the environmental and social characteristics promoted by BMS UCITS, the investment manager has implemented certain investment governance tools, for example screening and monitoring of each Sub-Investment Managers’ portfolio, engagement with each Sub-Investment Manager, and by rating each portfolio and Sub-Investment Manager on their ESG performance in a proprietary ESG Matrix. The investment manager also participates in collaborative engagement activities with investee, and potential investee, companies to further improve companies’ compliance with international norms and good governance on human rights, labour rights, the environment and anti-corruption, as well as actions relating to climate mitigation. Further, the investment manager supports the Sub-Investment Managers with ESG research and data to ensure alignment of sustainability efforts and activities, and to facilitate dialogue and engagement on the promoted characteristics.

The investment manager has formed a Sustainability Working Group (“SWG”) with representatives from the portfolio management team, the risk management team and the sustainability team. The SWG meet quarterly (at minimum) to discuss and evaluate the Sub-Investment Managers’ ESG performance, such as their sustainability risk management processes and documentation, results of ESG screenings and measurements, outcomes of ESG stress tests and outcomes of dialogues with Sub-Investment Managers. The result of the evaluation is documented in the ESG Matrix.

Sub-Investment Strategies

Long/Short Equity
A long/short equity strategy uses fundamental analysis to take long and short positions on equity securities likely to appreciate or depreciate, respectively. BMS UCITS primarily allocates to market-neutral and sector-focused long/short equity strategies to ensure diversification and that risk and return are primarily idiosyncratic (specific to that equity/company) and not market or factor-driven.

Systematic Macro
A systematic macro strategy applies proprietary algorithmic models to a diverse range of liquid asset classes. The underlying factors driving market prices are analysed through, typically, econometric models that look at a broad set of macroeconomic or other fundamental data (including ESG related data). Rules-based trading systems are developed around the understanding of how fundamentals and markets interact, and position-taking is typically relative-value and cross-sectional based.

Systematic Trend
A systematic trend strategy applies proprietary algorithmic models with different characteristics to analyse markets (including new markets such as renewable energy markets) and take, typically, directional positions. A diversified set of trend-following approaches constitutes the main part of the strategies, using for example different mathematical techniques and historical look-back periods to analyse mainly price trends and fluctuations.

Proportion of investments

BMS UCITS allocates to investment strategies managed by Sub-Investment Managers in the Brummer & Partners’ group, covering different types of asset classes, methodologies and investment universes. BMS UCITS therefore has exposure to a wide range of asset classes in a great number of financial markets. As a multi-strategy investment vehicle, the planned asset allocation changes over time depending on the constituent Sub-Investment Managers and their portfolio exposures.

The direct investments made by the Sub-Investment Managers in equities, corporate bonds (or indirect investments in applicable derivative instruments such as call or put options, certificates or swaps where we can identify a company) should be aligned with and not obstruct the environmental and social characteristics that BMS UCITS strives to promote, or should be managed in accordance with the binding criteria described below. Some of these investments may also be considered to be sustainable, although BMS UCITS does not claim to make any sustainable investments intentionally. As such, no minimum proportion of sustainable investments is expressed.

Other investments, both direct and indirect, made by Sub-Investment Managers may not be aligned with the environmental and social characteristics that BMS UCITS strives to promote. The reason for this is that some investments cannot be screened for relevant ESG factors, for example interest rates, foreign exchange rates, cash, commodity derivatives and index based derivatives. BMS UCITS’ exposure to such investments depends on the Sub-Investment Managers’ investment decisions to deliver on BMS UCITS objective to generate sustainable, long-term, competitive risk-adjusted positive returns.

The screening, monitoring and promotion of environmental and social characteristics are only relevant for direct investments made into equities, corporate bonds (or indirect investments in applicable derivative instruments such as call or put options, certificates or swaps where we can identify a company), the aligned category. In certain cases, monitoring such as for example Weighted Average Carbon Intensity (WACI) and other principle adverse impact indicators are also relevant for sovereign issuers of bonds.

Due to the nature of the multi-strategy product allocating to Sub-Investment Managers with different investment strategies, the share of aligned assets and other assets, will fluctuate over time. However, as aligned assets can only include equities and corporate bonds (or applicable derivative instruments such as call or put options, certificates or swaps where we can identify a company), the share of aligned asset could, in theory, be 100 percent. In order to be conservative and not risk sharing misleading information, the investment manager has decided on 25 percent. As previously stated, BMS UCITS does not seek to invest in sustainable investments hence, the minimum proportion of such investments is also 0 percent.

Monitoring of environmental or social characteristics

BMS UCITS promotes:

• Climate action (activities to combat climate change and its negative impacts);
• Compliance with international norms and conventions on human rights, labour rights, the environment and anti-corruption; and
• Consideration of the Sustainable Development Goals (the "SDGs").

To measure the attainment of climate action, the investment strategies’ exposure to fossil fuels in general, and to thermal coal, oil sands and arctic drilling specifically, is measured, as is theirWeighted Average Carbon Intensity (WACI).

To measure the attainment of compliance with international norms and conventions on human rights, labour rights, the environment and anti-corruption, the investment manager measures the Sub-Investment Managers’ investee companies’ involvement in controversies in relation to these norms as well as any involvement in controversial weapons.

To measure the attainment of consideration of the 17 SDGs, the Investment Manager measures the Sub-Investment Managers’ investee companies’ impact on the SDGs. In addition to the fossil fuel related exposures mentioned above, that,  amongst others, relate to SDGs 13 'Climate action' and 15 'Life on land', the Investment Manager also measures exposure to companies involved in the production of tobacco, pornography, and cannabis intended for recreational use, that, amongst others, relate to SDG 3 'Good health and well-being'.

In order to meet the environmental and social characteristics promoted by BMS UCITS, the investment manager has implemented certain investment governance tools, for example screening the Sub-Investment Managers’ portfolios to ensure compliance with investment restrictions, the measurements of the attainment of the promoted characteristics described above, as well as engagement with the Sub-Investment Managers on relevant ESG topics, such as the promoted environmental and social characteristics. The investment managerBMS AB has formed a Sustainability Working Group (“SWG”) with representatives from the portfolio management team, the risk management team and the sustainability team. The SWG meets quarterly (at minimum) to discuss and evaluate the Sub-Investment Managers’ ESG performance, such as their sustainability risk management processes and documentation, results of ESG screenings and measurements, outcomes of ESG stress tests, and outcomes of dialogues with Sub-Investment Managers. The result of the evaluation is documented in the ESG Matrix and feeds into the investment manager’s analysis and allocation decisions.

Apart from engaging with Sub-Investment Managers, the investment manager also participates in collaborative engagement activities with investee, and potential investee, companies to further improve companies’ compliance with international norms on human rights, labour rights, the environment and anti-corruption, as well as actions relating to climate mitigation. Further, the investment manager supports the Sub-Investment Managers with ESG research and data to ensure alignment of sustainability efforts and activities, and to facilitate dialogue and engagement on the promoted characteristics.

Methodologies for environmental or social characteristics

The investment manager has engaged a third party sustainability research and ESG data provider to supply the ESG data and research that the investment manager needs to measure the attainment of the promoted characteristics. The research subscribed to includes norms based research, and controversial weapons research, energy and extractives, sector exposures, and carbon emissions data, as well as SDG Impact data. The research indicates severity of involvement in a controversy or in controversial weapons according to a traffic light system and provides information on what norm or convention has been violated, or an absolute or interval percentage on revenue share from products or services provided in relation to emissions or extractives, for example. The data relating to sector exposures considers the amount of revenues generated from different activities, for example production of tobacco.

The ESG data is, amongst other things, used for the quarterly updates of the investment restrictions lists distributed to all Sub-Investment Managers, and in the screening performed to identify any unwanted exposure in the Sub-Investment Managers’ portfolios.

Therefore, research and data are inserted in a database and mapped against the Sub-Investment Managers’ portfolios and aggregated on a BMS UCITS portfolio level. BMS UCITS exposure is expressed as share of investments, in relation to the Net Asset Value (“NAV”), that is as a percentage exposure to for example controversial weapons or a norms based violation. Carbon emissions however, are aggregated using carbon intensity (carbon emissions expressed in relation to a company’s revenue) and is measured as a weighted average across the long and short books respectively, resulting in two figures (+ and -) as well as an aggregated net number. Results can then be compared and analysed over time. Also, SDG impact ratings are calculated for both the long and the short books, as well as aggregated and are used in the dialogues with Sub-Investment Managers to raise awareness and for educational purposes.

The investment manager uses the output from the process described above as follows:

Climate action
The investment manager requires the Sub-Investment Managers to avoid long exposure to companies that generate more than 5 percent of their revenues from production of thermal coal, oil sands, or arctic drilling, or that derive more than 30 percent of their revenues from electricity production based on coal. In addition to causing greenhouse gas emissions, the production of oil sands and arctic drilling also risks harming the nature and biodiversity due to the sensitive environment in which such operations are typically performed.

Further, the investment manager measures the Weighted Average Carbon Intensity (WACI) and general fossil fuel exposures (by measuring their exposure to companies involved in fossil fuels).

The investment manager engages with Sub-Investment Managers on the results of the measurements to raise awareness and share insights and to collaborate on interpreting the numbers from an alternative, absolute return, multi-strategy perspective. As it relates to thermal coal, a portfolio may be invested in an issuer that exceeds the thresholds above, if the Sub-Investment Manager determines that the relevant company is making (or will do so in the future), a significant contribution to the transition towards renewable energy sources.

The investment manager also participates in thematic collaborative engagement activities with investee and potential investee companies on climate action activities, such as for example net-zero initiatives and alignment with the Paris Agreement.

Compliance with international norms and conventions on human rights, labour rights, the environment and anti-corruption
The investment manager, and the Sub-Investment Managers avoid long exposure to companies involved in violations of international norms on human rights, labour rights, the environment, and anti-corruption, and long and short exposure to companies directly involved in controversial weapons.

To further promote compliance with the international norms and conventions mentioned above, the investment manager participates in collaborative engagement activities with companies that allegedly or verifiably are involved in violations of international norms, whether these companies are in a portfolio or not.

Consideration of the Sustainable Development Goals
The investment manager has asked the Sub-Investment Managers to identify which SDGs that are relevant for their respective investment strategy. Sub-Investment Managers are expected to be aware of the SDGs’ part in the sustainability mega-trend. Awareness of the SDGs and the role they play may help identify investment opportunities both for long books but also for short books as some companies fail to adapt to a more sustainable future.

The Sustainability and Risk teams measures the investment strategies’ exposure to companies which positively or negatively impact on the 17 SDGs (including SDGs 13 ‘Climate Action’ that relates to the activities on climate action mentioned above) and the results are taken into account in the dialogue between the investment manager and each Sub-Investment Managers.

In addition to the fossil fuel exposures mentioned above, the investment manager and the Sub-Investment managers also avoid long exposure to companies that generate more than 5 percent of their revenues from production of pornography, tobacco, and cannabis for recreational use, that, amongst others, relate to SDG 3 ‘Good health and well-being’. Exposure to such companies may also involve sustainability risks that the investment manager strives to avoid.

Investment restrictions

The investment restriction list is updated quarterly and distributed to the Sub-Investment Managers along with their respective quarterly screening results. As the investment restrictions are based upon the research provider’s methodology and analysis, there may be cases where a specific company’s involvement in certain activities need further research and analysis. In such cases, the Sustainability team may recommend the investment manager’s Responsible Investment Committee to remove (or add) the company from (to) the restrictions list.

The Sustainability and Risk teams review the screening results and engage with the relevant Sub-Investment Manager on any exposure to a company on the restriction list. If an exposure to a company in violation of the investment restriction list is identified, the Sub-Investment Manager is requested to divest unless the Sub-Investment Manager provides rationale for why the company should not be restricted and an action plan in compliance with the Sub-Investment Manager's policies and procedures.

If it is finally determined that a company is involved in a business activity and/or a violation of international norms mentioned above, BMS will require the Sub-Investment Manager to divest from such exposure.

Data sources and processing

The investment manager subscribes to ESG data and research from a third party sustainability research and ESG data provider and uses their data for screenings and measurements of the Sub-Investment Managers’ portfolios. The research and data include norms based research and norm based engagement, controversial weapons research, energy and extractives data sets, SDG impact ratings, carbon emissions data and involvement in controversial business areas such as alcohol, tobacco, gambling and military equipment (sector based screening). The sector based screening as well as the energy and extractives screening is based on revenue and involvement type thresholds and definitions. The data subscribed to also includes EU taxonomy alignment and principle adverse impacts data. Apart from the ESG data and research acquired by the investment manager, the Sub-Investment Managers may also choose their own data sources as needed for their own analysis and investment decision making processes.

The investment manager has selected a provider that is well renowned, has global presence, and who is responsive to feedback as well as supportive when the investment manager questions data outliers or coverage issues. The third party specialist has documented its research methodologies and the methodologies used to calculate exposures or impacts and they are available to the investment manager upon request. However, as companies' disclosure of the data required to calculate principle adverse impacts and EU taxonomy alignment is limited, a substantial (but not quantifiable in terms of proportion as it depends on the portfolio construction at any given point in time) amount of the data is estimated. The same challenges exist also for carbon emissions data, SDG impact data and sector based data that requires information on company revenue shares and product sales that are relatively limited in relation to any company’s general business exposure (please see Limitations to methodologies and data for detailed examples). As companies’ disclosures and transparency improve, and more ESG data becomes verifiably audited and reviewed by companies themselves, the data availability should improve over time and the need for estimates will hopefully be reduced. Estimates are however not typically an issue for norms based research and controversial weapons research that is based on information in public reports and in public statements and communication.

The data acquired is integrated in a proprietary SQL data-base and used in proprietary analysis and calculation models. The output may be exported in excel or to Microsoft Power BI.

Limitations to methodologies and data

To assess company involvement in different activities and to estimate revenue shares as accurately as possible, the third-party provider strives to obtain information directly from companies and issuers. Sources of data include annual reports, regulatory filings, sustainability reports, press releases, investor presentations, company websites, and other company disclosures. External information such as government sources, industry databases and reputable newspapers, are cross-referenced to complement company disclosures. While part of the data, such as some principal adverse impact data, can be mapped back to sovereign issuers, the investment manager acknowledges that the vast majority of the data covers companies. This is a significant limitation, as the Sub-Investment Managers invest in many different asset classes and markets and not only to equities and corporate bonds.

In terms of limitations of the data and the use of the data, the investment manager acknowledges that measurements that involve snap shots, such as the principal adverse impact indicators disclosed in the investment manager’s principal adverse impact statement, can have different reference time-frames, and are measured as the average of the four (4) quarters of the calendar year in terms of portfolio exposure. Due to point in time assessments of, for example, previous fiscal year revenues on an individual issuer, or statements made from such an issuer that has been subject to further qualitative analysis from the third-party provider, the calculation of the principal adverse impact indicators therefore results in a non-quantifiable margin of error. Similarly, for revenue-based exposures or metrics that use specific thresholds, a company’s reported revenue shares may not be detailed or granular enough to identify for example contribution to the SDGs or exposure to coal, and therefore may not be included in the data used by the investment manager to screen the Sub-Investment Managers portfolios or to measure their exposures or impacts. Lack of granularity in the data sources used in combination with using historical data published in, for example, annual reports means that there is both a significant time lag in snap shot metrics as well as challenges to data quality to the extent that estimates of revenue exposures are the only available pieces of information.

Carbon data is slightly different. Historically, company disclosures have been voluntary and the data provider has developed proprietary methodologies to capture outliers and in cases of non-disclosed data to use estimates. Estimates facilitate portfolio level assessments, but limits accuracy of company level assessments. Carbon emissions data quality is essential to the calculation of weighted average carbon intensity (WACI), and the use of estimates on companies’ intensity or emissions may affect aggregated portfolio level data.

Limitations to norms based research, controversial weapons research, and other sector exposure research are related to the differences in methodologies rather than lack of or quality of data as they use publicly known alleged or verified incidents or controversies, such as violation of labour rights reported in the media or supply of key equipment and services to a cluster munitions weapons programme. Different research providers have different methodologies for collecting this type of information and also for how that information is assessed and rated. The investment manager’s research provider’s methodology includes reaching out to companies to get their view on the issue, any action plans or other plans in relation to the controversy or any other relevant information. Also, the involvement is graded according to a pre-defined scale which facilitates comparability of different controversies. For example, a company with a seemingly low or almost irrelevant revenue share from the production or sale of key components of controversial weapons, can be defined to be involved in controversial weapons to the same grade as a company that identifies as a defense industry company. Limitations may occur however when comparing one research provider’s rating with another’s as they use different methodologies which may result in different conclusion on whether a company is in violation or degree of involvement in a controversy.

While the limitations above are relevant to the management of the BMS UCITS, the investment manager believes that it receives sufficient data, as outlined above, in order to manage the BMS UCITS in a manner which is aligned with the environmental and social characteristics promoted by the BMS UCITS.

Due diligence

The investment manager allocates to Sub-Investment Managers and their investment strategies and therefore performs due diligence both in the search for new Sub-Investment Managers, and as part of the ongoing monitoring that supports the monthly allocation decisions to existing Sub-Investment Managers.

When deciding on whether to allocate to a Sub-Investment Manager, the investment manager will evaluate the policies and internal documented processes that the Sub-Investment Manager has in place and will analyse the Sub-Investment Manager’s approach to integrating sustainability risks and opportunities into the investment process, and the management of Principle Adverse Impacts in respect of the relevant portfolio. The Investment Manager also supports the Sub-Investment Managers with ESG research and data to ensure alignment of sustainability efforts and activities, and to facilitate dialogue and engagement on the promoted characteristics outlined in previous sections. In many cases, Sub-Investment Managers draft and implement the required sustainability related documentation during the onboarding process.

The due diligence or ongoing monitoring of existing Sub-Investment Managers strives to ensure compliance with their respective Responsible Investment policies as well as the investment manager's own Responsible Investment policy. The screening covers exposure to companies in violation of international norms, thermal coal, oil sands, arctic drilling, other fossil fuels, and controversial weapons. The screening process also includes other key areas that required to either promote certain environmental or social characteristics, such as WACI and SDG impact ratings, or such measurements that relate to management of Principal Adverse Impacts or the EU Taxonomy alignment, as well as ethical screening for information purposes and investor communication. The results are then subject to dialogue and engagement with each Sub-Investment Manager. As each Sub-Investment Manager is a member of the Brummer & Partners group, Brummer & Partners is represented on the board of directors (or equivalent body) of each Sub-Investment Manager and accordingly, has the ability to influence board agenda items with respect to sustainability risk and other ESG considerations that may be identified.

The investment manager's evaluation of (i) the Sub-Investment Managers’ policies and processes for the integration of sustainability risks and opportunities in investment decisions; (ii) the results of the screening described above; and (iii) the attentiveness of the Sub-Investment Managers and their willingness to engage and improve on sustainability matters, are all included in a proprietary BMS ESG Matrix which is maintained by the Sustainability Working Group (“SWG”) which includes representatives of the portfolio management team, the risk management team and the sustainability team. In the event that the investment manager is not satisfied with the results of the evaluation of a Sub-Investment Manager or its investment strategy, the investment manager may take this into account as part of its ongoing allocation process and may require the Sub-Investment Manager to take appropriate measures as a result of sustainability risk considerations.

Engagement policies

The investment manager’s Shareholder engagement policy outlines its active ownership activities including on voting for BMS UCITS and dialogue with investee companies by Sub-Investment Managers and by the investment manager itself. The investment manager subscribes to proxy advisory research and voting recommendations that, among other things, take violations of international norms into account, and may inform voting decisions using this research. The investment manager also encourages Sub-Investment Managers to be active owners and engage with investee companies on relevant ESG topics. Apart from engaging with Sub-Investment Managers, the investment manager also participates in collaborative engagement activities with investee, and potential investee, companies to further improve companies’ compliance with international norms on human rights, labour rights, the environment and anti-corruption, as well as on taking actions related to climate mitigation.

The investment manager’s Shareholder engagement policy is available here.

Designated reference benchmark

No specific index is designated as a reference benchmark to determine whether BMS UCITS is aligned with the environmental or social characteristics that it promotes.