Sustainability risks are integrated into the investment decisions, but the fund does not promote environmental or social characteristics or have sustainable investments as its objective.
How are sustainability risks integrated into the investment decisions?
Pursuant to regulations, a sustainability risk is an environmental, social or corporate governance event or condition that, if it occurs, could cause an actual or a potential significant adverse impact on a company's value. The fund is an exchange-traded index fund and integrates sustainability risks into the investment decisions through its index selection, in which the underlying assets (government and municipal bonds, as well as covered mortgage bonds) fulfil the exclusion criteria applied by the Management Company. The assessment of companies in the index is conducted based on data from an external ESG service provider, and a country model developed internally by the Management Company is applied in relation to the Swedish government. The sustainability risks are managed primarily by regularly controlling that the underlying assets meet the exclusion criteria applied by the fund, as well as through active stewardship through engagement dialogue. Ultimately, the management of sustainability can mean that the Management Company chooses to change the index. The Management Company concludes that the management of sustainability risks through its index selection that meets the applied exclusion criteria, as well as engagement in the form of dialogue will provide higher risk-adjusted returns over time.
Consideration of principal adverse impacts on sustainability factors
The portfolio management takes into account the principal adverse impacts on sustainability factors (PAI). This is conducted through the PAI tool developed by the Management Company, which identifies and analyses any adverse impacts in relation to the companies included in the fund as well as in relation to the Swedish government. The measurement values for a number of different key figures are controlled based on defined rules and give an indication of their risk relevance and severeness. The analysis can result in the management of potential adverse impacts through engagement in the form of dialogue or, as a final measure, through an index change. The quality and accessibility of the data also currently affects the integration of principal adverse impacts on sustainability factors in fund management, and this is managed by escalating a greater number of issues for a more in-depth manual analysis.
Disclosures on the principal adverse impacts on sustainability factors will be reported in the fund's annual report, which is available on the Management Company's website.