Handelsbanken Global Pienyhtiöt Indeksi Criteria

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.

The fund is reported as an Article 9 fund pursuant to SFDR.

In order to qualify as sustainable investments, companies whose economic activities contribute to the achievement of an environmental or social objective must also not counteract sustainable development through other parts of their value chain (the “do no significant harm” principle). For this fund, which has a reduction in emissions of carbon dioxide and other greenhouse gases as its objective at the fund level, the Management Company ensures this by following a Paris Aligned Benchmark where the sustainability requirements in the index guarantee that the companies in the fund and the index are selected and weighted in such a way that the index portfolio’s emissions of carbon dioxide and other greenhouse gases are adapted to the long-term global warming targets of the Paris Agreement (i.e. the goal of limiting global warming to 1.5 degrees Celsius). In addition, the index methodology involves the application of the following exclusion criteria when selecting companies to include in the fund and its index:

Within the scope of considering the PAI indicators, the Management Company conducts engagement through dialogue and active asset stewardship in order to encourage the companies to manage their sustainability risks and any potential principal adverse impacts on sustainability factors.

The fund is an equity index fund that aims to follow the performance of the Solactive ISS ESG Screened Paris Aligned Developed Markets Small Cap Index NTR as closely as possible. The index constitutes a registered EU benchmark for alignment with the Paris Agreement (a so-called Paris Aligned Benchmark) pursuant to Regulation (EU) 2016/1011 (the Benchmark Regulation), and aims to reflect equity markets in developed markets, taking into account specific sustainability requirements.

The sustainability requirements of the index aim to reduce emissions of carbon dioxide and other greenhouse gases. The companies in the fund and the index are selected and weighted in such a way that the index portfolio's greenhouse gas emissions are adapted to the long-term global warming targets aligned with the Paris Agreement. The Management Company reports the fund in accordance with Article 9.3 of Regulation (EU) 2019/2088 of the European Parliament and of the Council on sustainability-related disclosures in the financial services sector (SFDR).

More information about the index that the fund tracks can be found at https://www.solactive.com/indices/?index=DE000SL0C1W3. Note that it is the fund as a whole that, according to Article 9.3 SFDR, has a reduction in emissions of carbon dioxide and other greenhouse gases as its objective.

The fund is an equity index fund managed with the aim of generating returns over time that correspond as closely as possible to the returns of the index. The fund applies the following investment strategy to meet the sustainable investment objective:

Target of reducing carbon emissions: The fund is managed in line with an index that is a registered EU benchmark for alignment with the Paris Agreement (a so-called Paris Aligned Benchmark), pursuant to Regulation (EU) 2016/1011 (the Benchmark Regulation).

The fund and the composition of its index aim for reduced emissions of carbon dioxide and other greenhouse gases. The companies in the fund and the index are selected and weighted in such a way that the index portfolio's greenhouse gas emissions are aligned with the long-term global warming targets of the Paris Agreement. This means the following:

Dialogue and asset stewardship: Active engagement is an essential strategy for influencing companies in a more sustainable direction. The Management Company and the fund manager do this through company dialogues, asset stewardship and engagement in investor networks. Company dialogues are conducted both directly between the fund manager and the company, as well as together with other investors or within the scope of investor networks and other collaborations. The dialogues cover a wide range of sustainability issues. Through representation on nomination committees and voting at shareholders' meetings, the Management Company conducts active and responsible asset stewardship. The basis for this is our Policy for Shareholder Engagement and Responsible Investments as well as our guidelines for nomination committees.

Exclusion strategy: The fund applies sustainability requirements in the form of an exclusion strategy. The strategy applies to companies that produce or distribute controversial weapons, military equipment, alcohol, tobacco, cannabis, pornography, commercial gambling, fossil fuels, as well as companies with confirmed violations of international norms and conventions related to human rights, the environment, employee rights or anti-corruption and anti-bribery. Furthermore, companies are excluded if they cause significant harm to one or more environmental objectives linked to climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, prevention and mitigation of environmental pollution, protection and restoration of biodiversity and ecosystems. The index also excludes companies operating in controversial sectors.

The fund and its index are able to invest in companies in transition. Companies in transition refers to power generation companies that are deemed to be in the process of transforming their operations in a way that is expected to contribute to, rather than counteract, the fulfilment of the Paris Agreement. Exceptions are made from the 5% criterion regarding "fossil fuel – power generation" in the index methodology if all of the following criteria are met:

According to the regulation, a company must comply with corporate governance best practices in order for the fund to invest in the company. The Management Company ensures this through the strategies for exclusion.

By excluding companies with confirmed violations of international norms and conventions linked to, for example, tax, employee rights, corruption and bribery, it is ensured that the companies the fund invests in live up to best practice in terms of sound corporate governance. Examples of relevant principles and guidelines are the UN Global Compact Principles 1, 3, 6 and 10, the OECD Guidelines for Multinational Enterprises, and conventions such as the UN Convention against Corruption and ILO Convention 111, Discrimination in Respect of Employment and Occupation. Learn more about the Management Company's methods and principles for good corporate governance in the document "Policy for Shareholder Engagement and Responsible Investment" at handelsbankenfonder.se.

The fund invests directly in the securities included in the fund's index. However, indirect investments in the form of index-based financial instruments (such as futures) may be used in the fund's management of liquidity and risk.

The stated asset allocation is based on the fund's investment strategy and its objective to reduce emissions of carbon dioxide and other greenhouse gases by following the index as closely as possible. The information on the minimum proportion of sustainable investments only refers to investments with environmental objectives and relates to the objective of reducing emissions of carbon dioxide and greenhouse gas at the fund level (the fund as a whole). The minimum proportion is set with consideration for the rules that apply to the fund's management, and the result of the actual allocation in the fund is reported in the fund's annual report. It is important to note that the information about the minimum proportion of sustainable investments refers to the fund level and does not provide an indication of whether an individual company in the fund constitutes a sustainable investment.

On a daily basis, the Management Company's risk control monitors compliance with the target of reducing carbon dioxide and other greenhouse gases. This is done by monitoring whether the fund is following its Paris Aligned Benchmark. Furthermore, the minimum proportions set out in the Prospectus – found in the annex containing sustainability-related disclosures for the fund regarding the proportion of sustainable investments, pursuant to the requirements of Regulation (EU) 2020/852 – are complied with. The Management Company's risk control also follows up on whether the fund complies with its provisions on the exclusion of companies. This verification concerns sectors we exclude and which we believe risk counteracting sustainable development. The Management Company's risk control also monitors that the investee companies in the fund do not violate international norms and conventions. For further information, refer to the heading “Methodologies” below.

The Management Company regularly conducts follow-up at the holdings level to ensure that companies with activities in sectors excluded by the fund and/or companies that violate international norms and conventions are not included in the fund. All of the fund's requirements for exclusion are built into in the fund's index methodology. This means that no companies with activities in sectors excluded by the fund and/or companies that violate international norms and conventions are allowed to be included in the index and thus neither in the fund. The assessment is made by the ESG provider specified in the index methodology and the result cannot be reviewed by the fund management. In the event of a change in the assessment of a company, an exit or entry into the index and the fund takes place at the next index rebalancing.

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 by the 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 alcohol. This is an acceptable limitation since the principal effect 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 assess positive and adverse impacts, since an estimate does not necessarily correspond to reality. The use of estimated data can, however, still be beneficial, given that it is done conservatively and only in cases when it can be done reliably. It may then be possible, for example, to identify companies with an unwanted exposure to fossil fuels, even if the company does not report the exposure themselves. There are also limitations because a significant amount of data is reported with a lag in companies’ annual reports. This is managed by making use of the most recently available information. Some limitations related to data accessibility and data quality are inevitable but are reduced to the greatest extent possible through conservative assessment processes and continuous development to increase coverage and secure data quality.

The Management Company has due diligence procedures in place to ensure that sustainability risks and the sustainability requirements set for each fund are accounted for in investment decisions. Depending on the management approach, these procedures differ.

For passive management, where the integration of sustainability risks is embedded in the index methodology, efforts related to due diligence mainly involve selecting the index and index provider. In this work, the Management Company ensures that the sustainability requirements set for the product are encompassed within the index methodology. Furthermore, the party that delivers sustainability data to the index provider, as well as the quality of this data, are assessed. TheManagement Company's index is provided by index providers who are registered as administrators with ESMA under the Benchmark Regulation (BMR).

For the Management Company's funds, the risk department also conducts daily assessments of the funds' underlying assets to monitor whether these are in line with the sustainability requirements set for each fund. For more information, see the document "Due diligence routines" at www.handelsbankenfonder.se.

As a significant investor, the Management Company has a responsibility and an opportunity to engage with companies to influence them to act responsibly and conduct their business in a sustainable manner, in addition to promoting the development of sustainability efforts in the asset management industry. The  Management Company engages through company dialogues, asset stewardship 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 aspects of a company's risks, opportunities and impact linked to sustainable development. Through our corporate governance efforts, we influence companies by participating in nomination committees and voting at shareholders’ meetings. Networking and collaboration with other shareholders and stakeholders contribute to collective learning, development and making an impact through engagement. The engagement is carried out on behalf of the index funds and other passively managed funds through company dialogues, as well as through corporate governance efforts and investor networks.

Additional information on the principles and methodologies applied by the Management Company in its engagement efforts and asset stewardship, as well as how this work is structured within the Management Company, is available in the Management Company’s document “Policy for Shareholder Engagement and Responsible Investment” at www.handelsbankenfonder.se.

The objective of the fund is to reduce emissions of carbon dioxide and other greenhouse gases, in accordance with Article 9(3) SFDR. The fund has the following index as its benchmark: Solactive ISS ESG Screened Paris Aligned Developed Markets Small Cap Index NTR

The fund is an index fund that follows a Paris Aligned Benchmark, pursuant to the Benchmark Regulation, and the fund's index therefore considers the same environmental and social characteristics as the fund's investment objectives (however with some extended sustainability requirements compared to the requirements of the Benchmark Regulation, see the fund's Prospectus under the heading "Sustainability requirements in index").

Updated text pursuant to EU Regulation 2022/1288.

Classified as a fund pursuant to Article 8 instead of Article 9.3 of Regulation (EU) 2019/2088 of the European Parliament and of the Council on sustainability-related disclosures in the financial services sector (SFDR).