Handelsbanken Prime Potential

This document provides an review of the fund's sustainability-related disclosures. More information can be found in the fund's prospectus and also under the respective sections below.

This fund promotes environmental and social characteristics but does not have sustainable investments as its objective. In promoting environmental and social characteristics, the fund takes into account the environment and climate, as well as human rights, employee rights and equal opportunity. In the promotion of environmental and social characteristics, the fund may also invest in sustainable investments, in accordance with the assessment method applied by the Management Company.

The fund’s sustainable investments are made in other funds, in sustainable bonds or in companies (as well as bonds issued by companies) whose economic activities are considered as having a positive impact on the attainment of one or several environmental or social objectives, alternatively, the company is involved in activities aligned with the EU Taxonomy. Environmental and social objectives are defined based on the Sustainable Development Goals in Agenda 2030.

Sustainable investments contribute primarily through investments made directly as well as indirectly through funds in companies or issuers that support the Sustainable Development Goals or activities aligned with the EU Taxonomy by exceeding a minimum level of revenue in the company in line with the Sustainable Development Goals or the EU Taxonomy or a combination thereof. In addition to company revenue, the capital expenditures or operational expenditures (CAPEX/OPEX) can be used to assess a company’s contributions to the objectives. Sustainable investments also contribute through investments in sustainable bonds in which the borrowed capital is used to finance projects with an environmental or social objective. Even so-called sustainability-linked bonds can be considered as contributing to the referenced objectives in the case in which the financial and/or structural characteristics of the fixed income instrument are linked in some manner to pre-defined sustainability objectives.

For a company to be defined as a sustainable investment, an investment must not only contribute to the attainment of an environmental or social goal, but the investment must also not cause significant harm to any of the environmental or social objectives in addition to the company following good governance practices. The control to ensure that the company does not cause significant harm to any of the environmental or social objectives is based on two components: taking into account the principal adverse impacts on sustainability factors (PAI), as well as ensuring that the company does not significantly obstruct any environmental or social objective through its products and services. The fund applies the following principles to ensure adherence to the do no significant harm principle:

With respect to the Management Company’s assessment methodology for sustainable investments, including the assessment of the “do no significant harm” principle, read more in the document “SFDR - Sustainability definitions and methodologies”, which is published on our website at www.handelsbankenfonder.se. A description of the Management Company’s PAI tool is also available on the website

The fund promotes environmental characteristics through:

The fund promotes social characteristics through:

Refer to www.handelsbankenfonder.se as well as the fund’s prospectus for more detailed information about the Management Company’s strategies regarding exclusion.

The fund is an actively-managed mixed fund. The fund applies the following investment strategy to attain the environmental and social characteristics promoted by the fund:

Sustainability analysis: Sustainability analysis is an integral part of the portfolio management’s investment analysis in which each investment is carefully analyzed based on relevant issues. For example, how the fund manager conducts its business, how fund management works with sustainability issues and integrates them into its portfolio construction are evaluated throughout the fund selection process. Analyses are also conducted of the fund’s strategy and risks, social and environmental impact, as well as engagement dialogues, for example. This includes an analysis of the fund’s sustainable investments, the policy for good governance, and consideration of adverse impacts on sustainability factors. The analyses are based on information from the Management Company, external sources and through in-house analyses.

Dialogues and Asset Stewardship: Active engagement is an essential strategy to influence companies in a more sustainable direction. The Management Company and the fund manager manage this through company dialogues, corporate governance work and work within investor networks. Company dialogues are conducted directly between the fund manager and the company, together with other investors or within the scope of investor networks and other collaborations. The dialogues include a broad spectrum of sustainability issues. The Management Company conducts an active and responsible corporate governance through representation in nomination committees and voting at shareholders’ meetings. The starting point for our efforts is based on our Policy for shareholder engagement and responsible investment, as well as our guidelines for nomination committee work.

Within the scope of the fund’s investment strategy, the fund manager conducts a dialogue with external fund management companies to ensure that the underlying funds regularly meet the exclusion criteria imposed for the fund. The fund manager also evaluates the external management company’s work relating to dialogues and active corporate governance within the scope of the fund’s evaluation process. Active engagement and corporate governance work through dialogue, voting at shareholders’ meetings and representation in nomination committees are carried out within the scope of the underlying fund for investments in funds managed by Handelsbanken Fonder.

Exclusion strategy: The fund applies sustainability criteria in the form of an exclusion strategy. The strategy includes direct and indirect investments through funds in companies or issuers with production and distribution of controversial weapons, nuclear weapons, weapons and military equipment, alcohol, tobacco, cannabis, pornography, commercial gambling, fossil fuels, as well as companies with verified violations of international norms and conventions related to human rights, the environment, employee rights or anti-corruption and anti-bribery. The revenue limits applied by the Management Company with regard to production and services are stated in the table for exclusion that is shown in the Appendix for sustainability-related disclosures in the fund’s prospectus.

The fund has the option of including, directly and indirectly through funds, so-called transition companies involved in power generation, transmission and distribution of electricity and with some exposure to fossil fuels. Transition companies refer to companies or bonds or other interest-bearing instruments issued by companies that have been considered by the Management Company’s sustainability committee as those that are in the process of transitioning business operations in a manner that is expected to contribute to, rather than counteract, the attainment of one or several of the Sustainable Development Goals. The company’s rate of transition is assessed based on the following dimensions: that the companies’ activities do not consist primarily of fossil power generation, that the company’s current investment rate supports the transition from fossil fuels to renewable energy, as well as that the company’s forecasted business development of the activities is in line with a global warming of a maximum of 2°C. Read more about our requirements for transition companies in "Inclusion of companies in transition", which is published on our website at www.handelsbankenfonder.se. The limits in the table referenced in the previous paragraph do not apply to so-called transition companies.

Pursuant to regulations, the fund may only invest in a company that meets practices for good governance. The Management Company ensures this through the application of the Exclusion and Inclusion strategies. By excluding investments both directly and indirectly through funds in companies with verified violations of international norms and conventions linked to, for example, taxes, employee rights, as well as anti-corruption and anti-bribery, the Management Company ensures that the fund’s investee companies comply with current practices related to good governance. An analysis is conducted for each investment decision in which sustainability dimensions as well as financial dimensions are factored into the decision. This analysis also includes issues related to the company’s or issuer’s governance, such as relationships with employees, remuneration, management and management structures, as well as compliance with tax regulations. The fund’s policy for assessing practices for good governance is controlled and evaluated for investments in other funds. Examples of relevant principles and guidelines include the Global Compact principles 1,3,6 and 10, OECD’s Guidelines for Multinational Enterprises as well as conventions such as the UN’s Convention against Corruption and ILO’s Convention 111, Discrimination in Respect of Employment and Occupation. Read more about the Management Company’s methodologies and principles for good governance in the document, "Policy for Shareholder Engagement and Responsible Investment", which is available at www.handelsbankenfonder.se.

The fund’s stated minimum proportion of sustainable investments and application of an exclusion strategy is a binding element for the Management Company in the management of the fund.

The fund invests in funds and other financial instruments with exposure to equities, fixed income and alternative investments. Within the scope of the fund’s investment focus, the fund makes indirect investments in derivatives to meet both short-term and long-term portfolio strategies. The fund’s asset allocation describes the proportion of investments in specific assets. The schematic description of the asset allocation shown below reflects the minimum proportion of the fund’s investments that are planned to fulfil the environmental or social characteristics promoted by the fund, as well as the total of the minimum proportion of sustainable investments in the fund. However, the asset allocation is expected to exceed the stated minimum proportions. The result of the actual allocation is reported in the fund’s annual report. The fund’s remaining investments, which neither promote the environmental or social characteristics, nor are considered as sustainable investments can consist of liquid assets, for example.

Read more about the Management Company’s definition of sustainable investments in the document titled ”SFDR – Definitions and description of methodologies within sustainability” which is available at www.handelsbankenfonder.se.

The Management Company’s risk control function monitors the environmental/social characteristics promoted by the fund on a daily basis to ensure compliance.

The Management Company invests in both internal and external funds after completing due diligence (see below under the heading “Due diligence”). The Management Company regularly conducts a screening of all of the fund’s underlying holdings to ensure that the sectors excluded by the fund and/or companies that violate international norms and conventions are not included in the underlying fund. In the event such a company is identified in an underlying fund, a dialogue regarding an action plan will be initiated with the fund manager. The fund regularly applies follow up at the holdings level for the fund’s direct investments to ensure that companies with activities in the sectors excluded by the fund and/or companies that violate international norms and conventions are not included in the fund. This means that information about each individual fund is obtained from external data providers, such as ISS ESG (issgovernance.com/esg) and Sustainalytics (sustainalytics.com). The fund applies the following monitoring safeguards:

Information about exposure to excluded operations and incidents that lead to violations of international norms and conventions is obtained from external data providers. The external data providers obtain information about the companies’ exposure to excluded operations from public presentations provided by the companies and/or through direct contact with the companies. Information about violations of international norms and conventions is obtained from ISS ESG. The EU taxonomy contributions are obtained from Sustainalytics and the SDG contributions are obtained from ISS ESG. In addition to this, the fund company conducts its own analysis regarding contributions to environmental or social objectives. The assessment is based primarily on data from the companies’ annual reports.

Sustainability data for various areas can be estimated when this can be reliably measured, and the estimate in this case is made in order to give a conservative estimate. For example, a company’s exposure to fossil-based operations or a company’s greenhouse gas emissions are estimated if the concerned company does not report this information in a reliable manner.

  

As of 31 December 2023 the distribution of reported and estimated data for greenhouse gas emissions was:

The proportion of the estimated data at the fund level changes continuously since the estimation is made for each investment and the fund’s exposure to each individual investment also changes.

The fund company conducts ongoing discussions with the external data providers to ensure high-quality data. Specific analyses are conducted when there is conflicting information. When questionable situations arise, the concerned company will be contacted and given the opportunity to provide its views.

The fund company analyzes and controls data in order to capture potential deficiencies or inaccurate  information. Data retrieved from external sources is primarily used in its raw format, provided that it is reliable data. Examples of data processing that are performed include aggregation and transformation, such as calculating the carbon footprint based on the separate data points for emissions as well as company value.  

Information about the companies’ exposure to excluded activities is limited to the information made available from companies themselves. Consequently, it is not always possible to ensure the exact exposure to these activities. The limitations are most prominent for companies with a smaller portion of the business involved in the excluded activities, such as a grocery store that also sells tobacco. This is an acceptable limitation since the principal impact of the fund’s strategy is attained by the exclusion of companies with significant exposure to the excluded activities.

There are also limitations linked to the use of estimated data to enable the assessment of positive and adverse impacts since an estimate may not necessarily be consistent with reality. The use of estimated data can still be beneficial, provided that it is calculated conservatively and only when it can be conducted reliably. It may then be possible to identify a company with unwanted exposure to fossil fuels, even though the company may not have reported the exposure themselves. There are also limitations due to the fact that a significant amount of data is reported with a lag in the annual reports of companies. This is managed by making use of the most recently available information. Some limitations linked to data accessibility and data quality are inevitable but are reduced where possible through conservative assessment processes and continuous further development to enhance the information for screening and ensure the data quality.

The Management Company has established routines for due diligence to ensure that sustainability risks and the sustainability requirements specified for each fund are taken into account in the investment decisions. These routines differ depending on the focus of the asset management. Within active allocation management, which invests in funds, including the Management Company’s own funds as well as funds from external service providers, an ODD (Operational Due Diligence) process and an IDD (Investment Due Diligence) process is completed for all of the service providers of products in which fund management invests. The sustainability efforts at the service provider and for the product (primarily funds) are evaluated in the ODD and IDD processes. The Management Company’s risk control function conducts controls on a quarterly basis to ensure that all of the fund investments have an ODD and an IDD.

The Management Company’s risk control function also conducts controls of the funds’ underlying assets for all of the Management Company’s funds on a daily basis to ensure that these are aligned with the sustainability requirements imposed for each fund. Refer to the document “Due diligence routines” at www.handelsbankenfonder.se for additional information.

As a significant investor, the Management Company has a responsibility and an opportunity to engage with companies to act responsibly and conduct their business activities in a sustainable manner, in addition to promoting the development of the sustainability efforts in the asset management industry. The Management Company engages through company dialogues, corporate governance work and investor networks. Our engagement efforts are based on Handelsbanken’s core values, our commitments, as well as the international norms and conventions supported by the Management Company. The company dialogues include overall strategic sustainability issues, as well as specific dimensions of a company’s risks, opportunities and impact on sustainable development.

Through our corporate governance work, we influence companies by participating in nomination committees and voting at shareholders’ meetings. Networks and collaborations with other shareholders and stakeholders contribute to collective learning, development and making an impact in the engagement work. The engagement work occurs in two dimensions for actively-managed allocation funds, which invest primarily in funds: dialogue directly with external fund management companies and portfolio managers, as well as engagement indirectly in the underlying funds in which the allocations funds invest. The engagement work in the underlying funds is conducted through corporate dialogues, as well as corporate governance work and investor networks. For investments in external funds, the engagement work occurs in the form of dialogues with external fund management companies and portfolio managers.

Additional information about the principles and methodologies applied by the Management Company in its engagement work and in its corporate governance, as well as how the work is structured within the Management Company is available in the Management Company’s "Policy for shareholder engagement and responsible investment" at www.handelsbankenfonder.se.