Handelsbanken Latin-Amerika Impact Tema

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.

For a company to be defined as a sustainable investment, the investment must not only contribute positively to the attainment of an environmental or social goal, the investment must also not cause significant harm to any other environmental or social objective and the company must follow good governance practices. To ensure compliance with the do no significant harm principle, the Management Company applies the following principles:

In the context of taking into account the PAI indicators, the Management Company conducts engagement work through dialogue and active corporate governance so that the issuing companies manage their sustainable risks and any principal adverse impacts on sustainability factors.

Regarding the Management Company's assessment methodology for sustainable investments, including the assessment of “do no significant harm” principle, and the Management Company's PAI tool, read more in the document SFDR - Definitions and description of methodology within sustainability, which is published on our website at www.handelsbankenfonder.se.

The fund is an actively-managed equity fund. The fund applies the following investment strategy to meet the sustainable investment objective:

Sustainability analysis: The fund is managed through a thematic process with focus on companies that contribute to the attainment of the Sustainable Development Goals in Agenda 2030 or alternatively companies that contribute to the transition to a world with low carbon emissions. Companies in the fund can be divided into three categories:

Dialogue 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 range 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.

Exclusion strategy: The fund applies sustainability criteria in the form of an exclusion strategy. The strategy includes companies 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 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 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. 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 good governance practices. The Management Company ensures this through the application of the Exclusion and Inclusion strategies. By excluding companies with verified violations of international norms and conventions linked to, for example, taxes, labor 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. A company analysis is conducted for each investment decision in which sustainability dimensions as well as financial dimensions are factored into the decision. This analysis includes issues related to the companies' governance, such as relationships with employees, remuneration, sound management structures, as well as compliance with tax regulations. 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 SFDR - Definitions and description of methodology within sustainability, which is published on our website at www.handelsbankenfonder.se. The Policy for shareholder engagement and responsible investment is also available on this website.

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 is an actively-managed equity fund that normally only invests directly in equities. The fund may hold cash for its liquidity management. The stated asset allocation is based on the fund's investment strategy and its objective of making investments in companies whose economic activities support the attainment of the Sustainable Development Goals in Agenda 2030.

The fund's sustainable investments will be made in investments with environmental and social objectives. Given that the fund is actively managed and the share of investments towards environmental and social objectives can vary over time, the information related to the minimum proportion of sustainable investments for each objective is intentionally set at a conservative level in light of the rules applicable to the fund's management. However, the planned asset allocation is expected to exceed the stated minimum proportions. This also applies to the information regarding the minimum proportion of sustainable investments at the total level, i.e., the minimum proportion of sustainable investments irrespective of the investments having an environmental objective or a social objective. The result of the actual allocation in the fund will be reported in the fund's annual report.

The Management Company's risk control function monitors compliance on a daily basis with regard to the fund's sustainable investment objective, the exclusion strategy and the share of the fund where the holdings can be classified as impact. The control relates to the share of the fund's investments that are considered to be a sustainable investment. The control relates to the sectors we exclude and that we consider risk impeding a sustainable development. We also follow up to ensure that the fund does not invest in companies that are in violation of international norms and conventions. For additional information, refer to the "Methodologies" section below.

The Management Company regularly applies follow up at the holdings level to ensure that investments are made in companies that comply with the sustainable investment requirements, pursuant to the assessment method applied by the Management Company. In a corresponding manner, a regular follow up occurs 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).

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 alcohol. 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 to the greatest extent possible through conservative assessment processes and continuous further development to enhance the information for screening and ensure the data quality.

The Management Company regularly takes into account the principal adverse impacts for sustainable development in the management of all of its investment decisions. The Management Company's website, www.handelsbankenfonder.se, provides a description of the Management Company's due diligence routines for identifying and prioritizing principal adverse impacts and general information about the indicators used for sustainable development. The website also provides a description of the principal adverse impacts for sustainable development within the Management Company's business activities and a report of the actions taken in relation to these. The description also includes information about how the Management Company engages companies on behalf of the funds through dialogue and active corporate governance.

A control is conducted for all the investments made in the fund upon investment and on an ongoing basis to ensure that a company can be categorized as a sustainable investment, pursuant to the assessment methodology applied by the Management Company, together with a control against the Management Company's exclusion criteria to ensure that there are no companies involved in activities considered by the Management Company to be inconsistent with a sustainable development. This applies to activities regarding the production and distribution of controversial weapons, nuclear weapons, weapons and military equipment, alcohol, tobacco, cannabis, pornography, commercial gambling, fossil fuels, as well as companies that violate international norms and conventions related to human rights, the environment, employee rights or anti-corruption and anti-bribery. Any deviations are managed through exclusion.

In addition to the exclusion strategy, indicators are used within the areas of greenhouse gas emissions, energy efficiency, biodiversity, water, waste, social and employee rights issues, human rights, the environment, anti-corruption and anti-bribery to identify and prioritize the principal adverse impacts. The Management Company addresses adverse impacts through engagement dialogues and active corporate governance and uses both internally-developed analyses as well as external analyses as the basis for decisions on how the Management Company should vote at shareholders' meetings. 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 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 linked to 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 is conducted on behalf of the index funds and other passively-managed funds through company dialogues as well as corporate governance work and investor networks.

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 document “Policy for Shareholder Engagement and Responsible Investment” at handelsbankenfonder.se.

The fund does not use an index to attain the fund's sustainable investment objective.

Updated text regarding the fund's alignment with the EU taxonomy.

Implementation of EU Regulation 2020/852 on the establishment of a framework to facilitate sustainable investment and changes to the EU Regulation 2019/2088, the EU Taxonomy.

Implementation of Regulation (EU) 2019/2088 of the European Parliament and of the Council on sustainability-related disclosures in the financial services sector, SFDR.