Sustainability

ESG – BACKGROUND AND PURPOSE

In recent years, there has been an increasing focus on and attention to ESG and sustainability in the financial markets. ESG means Environment, Governance and Social:

Environment is about sustainability goals related to established international goals stemming from the Paris Agreement and the UN’s sustainability goals.

Social is largely about requirements for working conditions, human rights, health, environmental and safety considerations, anti-discrimination etc.

Governance deals with good management practices and shareholder rights in companies to be invested in.

The EU has chosen to legislate this through changes in the sector legislation for regulated businesses in the financial sector and rules on the reporting of non-financial information for businesses, through the SFDR Regulation and the Taxonomy Regulation respectively. The changes in Norwegian law are carried out accordingly via the classification regulation and the publication regulation.

ESG IN PENSUM ASSET MANAGEMENT AS

Responsible investments and sustainability
Pensum Asset Management AS strives to take sustainability risks into account when performing portfolio management and in providing investment advice to clients.

Sustainability risk in this context means the risk of environmental, social, or governance-related events or circumstances that may have an actual, or potentially significant, negative impact on the investment’s value.

Sustainability factors mean environmental, social, and employee-related conditions, as well as conditions that concern human rights and the fight against corruption and bribery.

Pensum Asset Management AS seeks to invest in and to provide investment advice on companies that have high quality management and control and good quality operations and management. The companies should focus on ethical issues and have a value base for the business that matches the guidelines. The companies should focus on ethical issues and have a value base for the business that matches the guidelines. This means that Pensum Asset Management AS seeks to consider social conditions, including working conditions, human rights, health, environmental and safety concerns, anti-discrimination and good management practices when investment decisions are to be made and investment advice is provided, but is not bound by this when exercising asset management or advisory services.

Pensum Asset Management AS will take sustainability risk into account in its investment decisions without the company, portfolios or funds promoting environmental or social characteristics or having sustainable investments as a primary objective. Sustainability risk is assessed together with other types of risk related to the various investments that are made. The potential returns on the investments will be weighed against the risk taken, and the company will not choose sustainable investments over other investments with a better risk-adjusted return.

Pensum Asset Management AS does not currently take into account negative consequences of investment decisions for sustainability factors at enterprise level. Managed individual funds or individual portfolios can take into account negative consequences for sustainability factors at product level, but the company wants to monitor developments in the regulations and the availability of information before a decision on the possible inclusion of negative consequences for sustainability factors at company level. This position will be assessed at least annually.

Pensum Asset Management AS will take sustainability risk into account in its investment advice in the same way that other risks are assessed for the individual products. The company will map customers’ sustainability preferences in connection with portfolio management and investment advice and, as far as possible, take these preferences into account when performing investment services and selecting products for the individual customer.

Pensum Asset Management AS does not currently take into account negative consequences of investment advice for sustainability factors at company level and has not established independent sustainability criteria in the assessment of its product range.

Exclusion – investments
Pensum Asset Management strives to the greatest extent possible to exclude companies that contribute (or have contributed) to breaches of basic ethical norms, produce certain types of weapons or base their operations on coal production, tobacco production or similar (see list below for a comprehensive overview).
Pensum Asset Management looks at the exclusion list of the Government Pension Fund of Norway, which is decided
by the executive board of Norges Bank based on input from the Ethics Council to the fund, when excluding companies.

Pensum Asset Management shall seek to avoid and invest in companies that contribute to:

• Major or systematic violations of human rights
• Serious environmental damage
• Serious violations of individuals’ rights in war and conflict
• Corruption
• Other major violations of basic ethical norms
• Unacceptable greenhouse gas emissions
• Production of weapons of type; cluster munitions, nuclear weapons, and anti-personnel landmines
• Production of tobacco
• Sale of military equipment to certain states
• Production of pornography

Funds managed by Pensum Asset Management may have their own guidelines that are specific to each individual fund. Information about the funds’ guidelines can be found in the information material for each individual fund.

Sustainability and remuneration guidelines
Pensum Asset Management AS has guidelines for remuneration which will promote long term responsibility among the employees and in the company. The guidelines shall promote sufficient governance and control and shall counteract high risk-taking and conflicts of interest between Pensum and Pensum’s customers. Sustainability is an integral part of the guidelines for remuneration, and high risk-taking within sustainability must be countered in line with other risks the company is exposed to.

Follow-up and control of the guidelines
The board of Pensum Asset Management AS has the ultimate responsibility for the business, including the company’s strategy and guidelines for sustainability.

The compliance function in the company must control compliance with the guidelines for sustainability, including the necessary exclusion of companies.

More about the regulations and the sustainability
Sustainability is in focus and a key means of achieving the Paris Agreement’s goal of climate neutrality by 2050 is to move private capital to sustainable investments. As a measure to achieve this goal, the EU has adopted a comprehensive regulatory framework for sustainable finance. An important part of this regulation is referred to as the taxonomy. The purpose of the taxonomy is to establish a common understanding of which economic activities and investments can be considered sustainable in line with the EU’s long-term climate and environmental goals.

In order for an economic activity to be defined as environmentally sustainable according to the taxonomy,
it must:

• Contribute significantly to the achievement of at least one of the six environmental goals
• Not be significantly detrimental to any of the other environmental objectives
• Meet minimum requirements for social rights
• Meet further defined technical criterias

The six environmental goals are:

• Limitation of climate change (reduction of greenhouse gas emissions)
• Climate adaptation (taking measures to prevent/reduce damage in connection with climate change)
• Sustainable use and protection of water and marine resources
• Transition to a circular economy
• Prevention and limitation of pollution
• Protection and restoration of biological diversity and ecosystems