PRIME VALUES Equity (EUR)

This financial product advertises environmental and social characteristics, but does not seek to make sustainable investments in accordance with the EU Taxonomy Regulation or Article 2(17) of the Disclosure Regulation.

The investment process is based on a proprietary evaluation process that evaluates each issuer based on exclusion criteria and five ethical perspectives. As part of this assessment, the most important adverse effects of investment decisions on sustainability factors are also taken into account (principal adverse impacts). Issuers must not violate exclusion criteria to a relevant extent and must achieve at least 50 points on a scale of 100 possible points in order to be included in the investment universe. Both the issuers’ annual and sustainability reports as well as ISS ESG data serve as the data basis. On this basis, Arete Ethik Invest AG’s research team first prepares a valuation proposal, which is then presented to an independent ethics committee for final evaluation. In order to be investable, the valuation proposal must be confirmed by the Ethics Committee with a minimum “acceptable” rating (at least 50/100 points). In its evaluation, the Ethics Committee is committed to the principle of prudence – in cases of doubt, securities are evaluated more cautiously. The members of the Ethics Committee have also committed themselves to integrity and quality criteria. The invested securities are permanently monitored for ESG controversies (alert system) and escalated to the Ethics Committee depending on the findings.

Engagement activities are a key component of the sustainable investment process. This includes company dialogs, the exercise of voting rights and the submission of motions to general meetings of companies.

The product is actively managed and no benchmark has been defined.

This financial product advertises ecological or social features, but does not aim to make sustainable investments.

This financial product invests in issuers with good environmental, social and governance ratings based on a proprietary analysis process. The evaluation is carried out in two steps: first, Arete Ethik Invest AG’s research team prepares a valuation proposal based on the criteria of the internal ethics analysis. The analysis first determines whether and to what extent exclusion criteria are affected by an issuer. It also assesses the issuer’s environmental and social standards with regard to the products and services offered and the company’s processes along the value chain. This includes efforts to protect the climate and ensure sustainable production as well as the fight against inequality. The principles of good corporate governance are assessed with regard to the transparency of corporate reporting as well as the issuer’s stated self-image. In this context, the structure of labor relations and efforts to achieve gender equality are also analyzed. The evaluation proposal of the internal research is then submitted to an independent ethics committee. In order to be investable, the evaluation proposal must be confirmed by the independent ethics committee with a rating of at least “acceptable”. If the Ethics Committee rates the security as “unacceptable”, it is excluded from the investment universe and cannot be invested in.

This product is actively managed. No reference benchmark has been defined and no taxonomy-compliant investments are made.

The selection of assets is based on a global approach that analyzes the contribution to environmental, social and corporate governance characteristics. To this end, an ethical analysis is prepared for each investment, which forms the basis for the investment decision

The analysis first determines whether and to what extent exclusion criteria are affected by an issuer (negative screening). In the next step, the issuer’s environmental and social standards are analyzed with regard to the products and services offered and the corporate processes along the value chain. The principles of good corporate governance are assessed with regard to the transparency of corporate reporting as well as the issuer’s stated self-image (positive screening). The resulting evaluation proposal of the internal research is then submitted to an independent ethics committee. In order to be investable, the evaluation proposal must be confirmed by the ethics committee with a rating of at least “acceptable”.

This financial product generally contains direct risk positions. At least 70% of the investments are geared towards environmental and social characteristics. The remaining investments in the financial product that are neither geared towards environmental or social characteristics nor classified as sustainable investments may include liquid assets such as cash positions, fixed-term deposits, forward exchange transactions or hedging instruments. These instruments are not strategic and are only used temporarily. They account for a maximum of 20% of total investments.

In principle, every issuer is evaluated by the ethics analysis before a new investment is made. The environmental and social characteristics of invested securities are monitored on the basis of a screening of the exclusion criteria or if new information makes this necessary (e.g. in the case of mergers or controversies in the media).

The ethics analysis forms the basis for the selection of any investment. The analysis process is as follows: Arete Ethik Invest AG’s internal ethics research team first prepares a valuation proposal.

In a first step, each issuer is checked to see whether any of the defined exclusion criteria are met (negative screening). Companies are excluded if they essentially violate the principles of the UN Global Compact, manufacture weapons of any kind or offer controversial products and services such as nuclear power or embryonic stem cell research. Companies that generate more than 5% of their turnover from tobacco or more than 10% of their turnover from products and services in the areas of gambling, adult entertainment or alcohol are also excluded.

Countries are excluded from the investment universe if, among other things, their military possesses nuclear weapons, the death penalty is part of the legal system, they have inadequate human rights standards, they have an above-average exposure to corruption or they have not signed the UN Convention on Biodiversity.

In the subsequent positive screening, the ethics analysis assesses each potential investment from five ethical perspectives, which evaluate the product and process level of the company’s activities, the active protection of natural resources, the understanding of responsibility and the transparency of corporate reporting on the basis of 25 individual criteria. Each individual criterion is weighted according to the sector to which the company belongs and assigned a score. The evaluation proposal is then submitted to an independent ethics committee, which uses its specialist expertise to re-examine whether the exclusion criteria have been violated, as well as the individual points of the detailed analysis and adjusts them if necessary. If exclusion criteria are not violated or only violated to an extent that is not relevant for exclusion, issuers can still be excluded by the Ethics Committee if critical activities add up. If the Ethics Committee does not consider any exclusion criteria to have been violated and the detailed assessment has been completed, the points for the individual criteria are added together to produce the company’s overall ethical score. An overall score of between 0 and 100 points can be achieved for each company, whereby a minimum score of 50 points must be achieved in order to remain in the investment universe.

The result of the process described is a documented ethics analysis of each issuer.

To evaluate the issuers, Arete Ethik Invest AG’s research initially looks at the issuers’ annual and sustainability reports as well as ESG profiles from the external data provider ISS ESG. In the final evaluation, the detailed knowledge of the experts on the independent ethics committee is also incorporated into the assessment. To ensure data quality, only the latest official publications of the issuers are used. If certain information cannot be found in the aforementioned documents and cannot be retrieved from the external data provider, an estimate based on third-party information (glassdor.com, payscale.com) can be made in individual cases. All data and the resulting analyses are stored in an internal database.

Arete Ethik Invest AG’s analysis method has been continuously adapted to changing requirements for more than 25 years and covers all relevant areas of the environmental, social and governance dimensions. The data used for the evaluation is always up-to-date and from verified sources. This is facilitated, among other things, by the fact that the financial product only invests in major issuers. However, despite great care, it cannot be ruled out that data may not be available or may be older than two years in individual cases. In such cases, the principle of caution of the independent Ethics Committee applies, which evaluates issuers more cautiously and, in case of doubt, can exclude issuers from the investment universe due to a systematic lack of information. This principle of caution can lead to companies fulfilling the minimum social and environmental requirements of the ethics analysis in reality, but due to a lack of data this cannot be included in the analysis and the company is therefore rated lower or even excluded. The reverse case, i.e. that companies do not fulfill the required social, environmental and governance requirements to a sufficient extent in reality, but are assessed as such by the Ethics Committee, is avoided by applying the precautionary principle.

The products only contain securities whose issuers have submitted an ethics analysis. Each investment is also reviewed by the independent Ethics Committee.

The members of the Ethics Committee have committed themselves to integrity and quality criteria based on the principles of independence, professionalism (application of transparent and credible research processes), accountability, objectivity (data on companies is assessed honestly and objectively), impartiality, equal treatment and the avoidance of self-interest.

The invested securities are permanently monitored for ESG controversies (alert system) and escalated to the Ethics Committee depending on the findings.

Companies and issuers in which the products are invested and which are excluded by the Ethics Committee due to new findings of unethical business activities must be sold within a maximum of 6 months in order to safeguard interests.

The fundamental ESG evaluation is subject to a continuous improvement process. As the independent Ethics Committee exchanges information with the Ethics Research team on a monthly basis and evaluates new companies, new ideas, comparisons, controversies and solutions are generated on an ongoing basis. The research process is therefore reviewed and scrutinized on a monthly basis.

No reference value has been defined for the product.