LEADERS UNIVERSE SUSTAINABLE FIXED INCOME

Our purpose is to provide excellent investment performance to our clients through active management and responsible stewardship. The way we invest is changing, driven by a fundamental shift in how companies are being viewed and valued. We believe that considering risk, return and impact together can help us assess an asset’s real value and make better investment decisions for our clients. We have been considering ESG factors for over 20 years and since end of 2020*, fully integrate ESG across our managed assets. We have a team of over 50 dedicated sustainability professionals, were founding members of the Net Zero Asset Managers Initiative and were among the first financial institutions to have their climate targets formally validated by the SBTi.

The way we assess impact in our investments is through our suite of award-winning tools which help our investment teams quantify the sustainability risks and impacts of assets we invest in and understand the ‘impact-adjusted profits’. They enrich our research process and enable our fund managers to ask questions about how a company is managing its business and the impact it has on society and stakeholders.

Our commitment to active ownership is integral to our investment principles and encompasses engagement and voting activities. It is about understanding how prepared companies are for a changing world, helping them to take necessary action and holding them to account. We do this because we believe it makes companies stronger in the long term and ultimately helps us deliver better outcomes for our clients.

* For certain businesses acquired recently we have not yet integrated ESG factors into investment decision-making. There are also a small number of strategies for which ESG integration is not practicable or possible, for example passive index tracking or legacy businesses or investments in the process of or soon to be liquidated, and certain joint venture businesses are excluded.

Our commitment builds on five decades of responsible investing through our parent company, TIAA. We recognize that our clients expect us to be good stewards of their investments. We, therefore, implement a set of principles that support well-functioning markets in order to preserve financial, social and environmental capital. We believe our philosophy and approach of considering environmental, social, and governance (ESG) factors in investment research, due diligence, portfolio construction and ongoing monitoring enables us to better assess potential risks and opportunities in our investments. We believe that by driving transparency, innovation, and global adoption of RI best practices wherever possible, we have the opportunity to provide enduring benefits for clients.

We implement our RI commitment through capabilities developed at the enterprise level as well as through asset class specific activities based on a set of core principles: (1) stewardship, (2) ESG integration and, when consistent with client mandates, (3) driving positive impact across our portfolios. While each investment affiliate may implement a tailored approach specific to their investment strategies, we believe these mutually reinforcing principles are increasingly relevant and applicable across all asset classes. Through our participation in industry coalitions, we contribute to setting global standards and norms around responsible investing. As practices change over time, our activities will continue to evolve to align with market trends and business needs in order to pursue best outcomes for our clients. Additionally, we remain committed to transparency on our responsible investing activities to our clients and other stakeholders.*

BNP Paribas Asset Management (BNPP AM) is BNP Paribas Group’s dedicated asset management arm. It has EUR 488bn assets under management and around 3000 staff in 30 countries.

In a fast changing world, our aim is to achieve long-term sustainable returns for our clients by placing sustainability at the heart of its strategy and investment decision-making.

BNP Paribas Asset Management’s investment approach to sustainability began in 2002 with the launch of our first sustainable fund and the creation of our dedicated environmental, social and governance (ESG) research team – the precursor of our Sustainability Centre. In 2006, we were a founding signatory to the UN-supported Principles for Responsible Investment (PRI). Since then, we have continued to strengthen our commitments.

Our sustainability expertise is driven by the Sustainability Centre (around 30 experts).

Our ‘Global Sustainability Strategy’ (GSS) details our sustainable approach, setting clear objectives and commitments, and focusing on three key sustainability themes: Energy transition, Environmental sustainability and Equality and inclusive growth (the ‘3Es’).

Our firm wide sustainable approach is based on 6 pillars:

1. ESG* Integration
2. Stewardship
3. Responsible Business Conduct (“RBC”)
4. Forward-looking perspective (the ‘”3Es”)
5. Investment solutions for sustainability
6. CSR** – Walking the Talk

It reinforces our commitment to invest for the long-term, engage with companies and regulators to promote best practice, and raise awareness of the role that finance can play in achieving a sustainable world.

We report on our approach annually in our sustainability report available here.

Responsible Investing (RI) lies at the heart of NN IP’s investment beliefs. It is key to enhancing risk-adjusted returns while contributing to society as a whole. ESG factors are integrated into the investment process for all of our fixed-income strategies enabling us to consider factors which have a significant impact on long-term performance. Material ESG risks and opportunities are integrated into the fundamental analyses of companies and sectors, as well as into portfolio construction. Our materiality framework identifies these factors for each sector and the results of this analysis are added to the company scorecards. ESG considerations are very relevant for our relative value discussions.

Furthermore, we have been managing dedicated sustainable credit portfolios for well over a decade. These portfolios apply positive selection criteria and a stricter view on controversies in their investment approach. They have shown consistent outperformance throughout market cycles, outperforming its traditional counterparts as the impact of the coronavirus hit markets.

Our impact range includes the Green Bond strategy which invests in projects making a measurable positive contribution to the UN SDGs, particularly climate change mitigation and adaptation. This strategy is a market leader both from a volume and performance perspective, with a diversified offering including short-duration, corporate bond and blended variants.

Engagement forms an important part of our responsible investing approach. This includes controversy and thematic engagement led by the centralized RI team, as well as investment dialogues carried out by portfolio managers and analysts.

Over the last 30 years, we have built a comprehensive responsible investment approach consisting of three pillars:

• ESG integration
  Incorporating financially material ESG factors into the investment decision-making process to help mitigate risk and potentially uncover opportunities.
• Active ownership
  Addressing ESG issues by actively engaging with issuers and investee companies and exercising shareholder rights.
• Solutions
  Providing focused responsible investment strategies including exclusions, best-in-class ESG, sustainability-themed and impact investments.

 Our research framework:

ESG factors are systematically integrated into our bottom-up research process for fixed income and equity issuers. We aim to develop our own holistic house view of issuers’ ESG profiles. By integrating ESG considerations with economic factors, and drawing from specialized ESG research sources, the research teams seek to identify financially material ESG factors and arrive at an independent, comprehensive view of the investment.

We seek to answer three key questions:

• What are the potential economic impact of the ESG issue and its associated effect on the issuer’s long-term growth potential, profitability or creditworthiness?
• Are ESG risks and opportunities accurately reflected in valuations?
• Is engagement beneficial to generate long-term economic value?

We view ESG analysis as a risk management tool and a potential alpha source. By integrating ESG factors into the traditional financial analysis framework, we aim to identify financially material factors which could affect the issuer’s long-term growth potential, profitability, or creditworthiness, and to assess if they are appropriately priced.

Our ESG integration process focuses on managing financial risks and identifying opportunities by including additional information in investment analysis to help inform our decision making. ESG integration does not seek to make ethical judgements and imposes no ESG-related restrictions on the investment universe. It seeks to systematically uncover ESG risks and opportunities to ensure they are appropriately priced in the investment being considered.

For further details please download our Responsible Investment Report 2020 here.

Allspring considers ESG issues and sustainability themes in our investment strategies and stewardship activities because we believe they contribute to our number one priority: generating positive outcomes for our clients.

We believe that an organization of specialized investment teams is the optimal structure to achieve consistent outperformance and risk-adjusted returns. Our investment offering is broad, with capabilities spanning equity, fixed income, alternatives, and multi-asset solutions, and deep, with fundamental and systematic strategies. Our diverse investment teams integrate material ESG considerations into their investment processes in ways that are consistent with their asset classes and strategies, where appropriate. We outline examples of specific approaches below.

Fixed income: ESG analysis helps improve our understanding of risk, and our analysts have long considered ESG issues as part of ex-ante fundamental credit research, especially governance issues and management quality. Allspring’s Global Fixed Income Research (GFIR) team is at the heart of the fixed-income platform. Teams using credit research draw upon this resource to provide insight and analysis for a wide range of global issuers. The GFIR’s rigorous, proprietary research incorporates a comprehensive analysis of quantitative and qualitative factors, including catalysts, drivers of change, ESG, and climate risk exposure and management of these risks through our in-house risk assessment framework, ESGiQ, and other processes.

Please refer to Allspring’s approach to ESG and sustainable investing for further information.

Founded in 1931, Capital Group is one of the oldest and largest active investment managers in the world, managing US$2.5 trillion in long-term assets across equity, fixed income and multi asset strategies¹.

Deep fundamental research has guided our investment decisions since our foundation. We believe that ESG risks and opportunities can affect investment returns and are important considerations in pursuing superior long-term results for our clients.

We have developed a global approach to integrating ESG into our investment process, which comprises three parts:

• Research & Investment Frameworks: Built by our equity, credit and ESG analysts, these distil our proprietary perspectives on the most relevant, material and long-term ESG issues, brought to life by 290+ metrics from 50+ data sources;
• Monitoring Process: This identifies external views of potentially material ESG risks for further review and research²;
• Engagement & Proxy Voting: In partnership with our ESG team, our investment professionals engage with issuers on material ESG issues and vote in the best interest of our clients.

In Europe and Asia, we offer specific products with ESG characteristics, such as sector and norms-based screens and carbon targets.

Sustainable investing at Capital Group

Leveraging our deep fundamental research and ESG integration, our range of sustainable strategies, available in Europe & Asia, take a global, multi-thematic approach, investing across seven sustainable investment themes that we have developed, mapped to the United Nations Sustainable Development Goals (UN SDGs)³.

We believe companies whose products and services are currently majority-aligned to the UN SDGs⁴, or are transitioning their business to higher positive alignment⁵, can deliver long-term attractive risk-adjusted returns. We have developed a rigorous, research-driven proprietary eligibility process to help identify these companies.

Visit capitalgroup.com/sustainable to find out more.

Invested capital is at risk. Capital Group’s sustainable capabilities are not available to US investors.

1. All data as at 31 December 2023, and attributed to Capital Group unless stated otherwise. Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.

2. Monitoring applies to corporate and sovereign holdings.

3. References to the UN SDGs do not imply the endorsement by the UN of Capital Group, its products or services, or of its planned activities.

4. Aligned companies have 50%+ business alignment. Capital Group typically use revenue to assess business alignment but will leverage other metrics if there are more sector relevant financial metrics for a company and its industry (e.g., energy production mix for utilities).

5. While business alignment may be low, the expectation would be to see material positive change in the near-to-medium term (3-5 years).

M&G Investments is a global asset manager with a long history investing and innovating across both public and private markets. We’re part of M&G plc, an international savings and investment business with the ambition to deliver long term value for our investors while working together to create a more positive future. We recognise that clients are increasingly looking to align their investments with their environmental and social values. This is why our investment decisions are underpinned by our commitment to investing responsibly. Considering material environmental, social and governance (ESG) factors is an integral part of our investment approach. Combining market-leading research with our own proprietary data, we believe this helps us make more informed investment decisions. We also pro-actively engage directly with the businesses we invest in to help drive positive change. M&G has committed to reducing our own carbon emissions to net-zero by 2030 and to achieving carbon net-zero investment portfolios by 2050.

Firstly and most importantly, we do not believe that there is a trade-off between ESG analysis and the delivery of strong investment performance. We integrate ESG analysis into our investment process because we expect it will lead to better results.

We consider ESG factors to be a critical part of the investment process and build the analysis of these into our research. As credit investors, we are focused on managing the downside risk of the Fund’s investments and we consider ESG factors in this context. Specifically, we assess environmental and social factors alongside other risks, which include operational, legal and political/regulatory risks. Governance is incorporated into a broader analysis of the shareholder structure and the management. While shareholders are often aligned with management, creditors are not necessarily so, and so it is vital that we consider governance alongside the particular incentives faced by management and the shareholders. These include the management’s compensation structure and any known aims of the shareholders.

One of the core foundations of our credit process is the search for sustainable cashflow with which to repay our investment. Factors that endanger the cashflow profile of a company, be they traditional or ESG factors, are equally important in assessing risks to an investment. As such, we do not seek to separate the assessment of more traditional economic factors and ESG; they are one and the same.

We do not outsource our ESG assessment to third-party scoring services. We believe that the analysis of ESG factors – as with the assessment of other non-financial risks – is inherently a qualitative judgement and not something that can be credibly simplified to an alpha-numerical score. Given that we treat ESG factors as an integral part of the credit research process, it is not something we feel can be successfully sub-contracted to a third party.

We recognize that environmental, social, and governance (ESG) issues may create both opportunities and risks for our clients’ portfolios. We address ESG factors through our investment process to better understand their potential impact on current asset values and future performance. Throughout our decades of experience managing equity, fixed income, multi-asset, and alternative investment portfolios, we have followed these processes.

By integrating ESG factors into our investment process, we are able to better fulfil our mission of partnering with clients to achieve their specific investment objectives.

We believe that business models that improve upon their sustainability create value for society and investors in those businesses. Moreover, as active managers, we are able to advocate for, and hasten, change in the select companies we invest in. To achieve this, we take an analytical approach that considers how companies seek to improve upon ESG issues. Our approach considers ESG factors from both an investment return and risk mitigation perspective over the medium to long term.

Learn more about our integrated approach across our investment platform.

PineBridge is a signatory of the Principles for Responsible Investment (PRI), which provides a framework for reporting and assessing ESG factors.

We view the PRI as an additional tool to help us pursue our primary objective as an asset manager: to improve and preserve our clients’ financial interests across our global investment platform by optimizing economic returns for a given level of risk.

PineBridge has been awarded an A+ score for our strategy and governance efforts in the most recent UN Principles for Responsible Investment (PRI) assessment.

Founded in 1924, MFS is a global, active investment manager guided by a single purpose: to create value by allocating capital responsibly for clients. Through a powerful investment platform, MFS combines collective expertise, thoughtful risk management and long-term discipline to uncover what we believe are the best investment opportunities in the market.

At MFS, the term sustainable investing encompasses our ESG integration processes, proxy voting activity and issuer engagements. We believe that owning and engaging with companies to improve their ESG performance can sometimes be a more effective path to positive outcomes for all stakeholders than exclusion and divestment.

Our investment teams rely on deep fundamental research and a long-term perspective to select securities that can produce sustainable returns throughout an economic cycle. Although our overall approach to investing has always been well aligned with a sustainability-oriented mindset, in 2009 we formed the MFS Responsible Investing Committee to ensure that financially material ESG topics were being systematically integrated into our equity and fixed income investment processes. We believe collaboration results in better insights, which is why our investment team has always been integrated across asset classes. As a result of that long-held belief, our ESG analysts are expected to drive collaboration on sustainability-related topics, not create an internal ESG outsourcing group. For us, integration means each of our analysts and portfolio managers are considering these topics throughout the entire investment decision-making process.

Visit www.mfs.com/sustainability for more information including ESG videos and thought leadership.