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 actively-managed fixed income fund, whereby the management of sustainability risks is an integral part of the analysis that serves as the basis for the investment decisions. This analysis uses sustainability data from external providers, together with an internal sustainability analysis.
An internally-developed country model is used for investments in government bonds. This tool is used to evaluate how well countries perform within the areas related to environmental sustainability, social issues as well as governance and management of the state. The tool is used particularly for investments in so-called use-of-proceeds-bonds to ensure that the financing relates to important sustainability areas for the country. The Management Company concludes that the management of sustainability risks through the inclusion of bonds issued by issuers that have been evaluated by our internally-developed model will provide higher risk-adjusted returns over time.
Consideration of principal adverse impacts on sustainability factors
The fund manager takes into account the principal adverse impacts on sustainability factors (PAI). This is conducted through the PAI tool developed by the Management Company and specifically designed for government bonds, which identifies and analyses any adverse impacts. 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. Holdings that are considered to have unacceptable risks linked to PAI are managed through exclusion and corporate governance in the form of dialogue, wherever possible. 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.