The BFI Positive Impact Select has a clear sustainable investment objective: it contributes positively to the environment and society, especially to the achievements of the 17 UN Sustainable Development Goals. Besides having a precise investment selection process, the fund demonstrates how its sustainable investment objectives are met.
No significant harm to the sustainable investment objective
The BFI Positive Impact Select has a fund-of-fund structure. The Baloise selection process ensures that all target funds have strong methodologies in place to fulfil the “no significant harm” principle.
Sustainable investment objective of the financial product
The BFI Positive Impact Select has as sustainable investment objective to have a positive impact on environment and society.
The investment selection process determined by the investment strategy consists out of 2 steps:
1. Contribution to a social & environmental objectives
The BFI Positive Impact Select intends to invest its assets in units of target funds which (i) generate a measurable, beneficial social and environmental impact alongside a financial return and (ii) that meet minimum environmental, social and governance (ESG) standards. Therefore, funds that have a positive impact on the environment and society are selected. These are preferably oriented on the United Nations Sustainable Development Goals (“UN SDGs” available at https://sustainabledevelopment.un.org/?menu=1300). For the individual fund categories, target funds that are selected are characterized by a high impact on one or more of the 17 UN SDGs.
2. Exclusion/Negative Screening
Additionally, target funds are excluded from the investment universe that, according to data from MSCI, have stakes in assets that invest more than 10% in fossil fuel reserves, such as coal, oil sands or shale oil, as well as target funds of issuers that derive more than 10% of turnover from coal. In addition, a maximum of 5% of the companies in the target fund may belong to the MSCI ESG Low Carbon Transition Score Category “Stranded Assets”.
Furthermore, because of the BFI Positive Impact Select fund-of-fund structure, the selection process ensures that all target funds have methodologies in place to follow minimum Good Governance Criteria.
Additionally, Baloise follows good Governance criteria when applying its Baloise Responsible Investment policy.
Proportion of investments
The BFI Positive Impact Select fund has a fund-of-fund structure. The Baloise selection process ensures that all target funds belong mainly to Article 9 of the Sustainable Finance Disclosure Regulation (SFDR), and only the minority belongs to Article 8 of the SFDR. Baloise will communicate in a transparent manner how the proportion of the different categories looks like (e.g. ESG Portfolio Reporting, Fund Factsheet).
Monitoring of sustainable investment objective
To determine its investment universe, the fund orients itself on three main indicators during the analysis of target funds: the UN SDGs, fossil fuel involvement, and the MSCI ESG Low Carbon Transition Score. First, alignment with and positive contribution to the 17 UN SDGs is mandatory for a fund to be considered as a potential investment. Target funds must clearly demonstrate how they aim to have a strong positive impact on at least one of the UN SDGs. Second, fossil fuel involvement is considered as an additional indicator during the investment analysis. Exclusions are applied based on specific thresholds, namely assets that derive more than 10% of their revenues from coal and assets that invest more than 10% in fossil fuel reserves are excluded from the investment universe. The third indicator used during the investment analysis is the MSCI ESG Low Carbon Transition Score. Target funds are allowed to only be invested in a maximum of 5% of companies that belong to the “Stranded Assets” category of the MSCI ESG Low Carbon Transition Score.
The BFI Positive Impact Select fund will ensure that the alignment with the investment strategy is monitored on an ongoing basis. This includes an assessment of investments regarding their alignment with at least one of the UN SDGs on a regular basis (at least once a year). The specific thresholds specified in sections “D. Investment strategy” and “F. Monitoring of sustainable investment objective” are assessed on a regular basis (at least once a year) and if needed, appropriate action will be taken.
In order to monitor, measure and assess the specific impact of the target fund on one or more of the SDGs, the BFI Positive Impact Select looks at revenue exposure to Sustainable Impact Solutions that reflects the extent to which companies’ revenue is exposed to products and services that help solve the world´s major social and environmental challenges. It is calculated as a weighted average, using portfolio weights and each issuer´s percent of revenue generated from Sustainable Impact Solutions. Because of the fund-of-fund structure Baloise aggregates this information for the portfolio level.
Data sources and processing
The fund applies ESG data from MSCI Inc. in order to implement its 2-step investment selection process. On the one hand BFI Positive Impact Select uses the MSCI ESG Sustainable Impact Metrics to identify target funds which (i) generate a measurable, beneficial social and environmental impact alongside a financial return and (ii) that meet minimum environmental, social and governance (ESG) standards. On the other hand the fund applies the MSCI ESG Fund Screens to assess the fossil fuel involvement and the company categorization according to the MSCI ESG Low Carbon Transition Score (aggregated on the target fund level) to ultimately attain the sustainable investment objective.
Limitations to methodologies and data
The BFI Positive Impact Select fund uses the data of MSCI and relies on the methodology applied by MSCI. Baloise is aware that the data might be biased and that the rating agencies individual subjective assessment influences the final assessment of the companies, aggregated on fund level.
The BFI Positive Impact Select fund has a fund-of-fund structure. The Baloise selection process ensures that all target funds have strong methodologies in place to fulfil the required conditions and criteria.
Our Portfolio Management is in direct and very regular contact with all fund managers of the target funds. Therefore Baloise discusses on a regular basis the general investment process, and on an ad-hoc-basis specific ESG irregularities as they arise.
Attainment of the sustainable investment objective
No index has been designated to measure the attainment of the sustainable investment objective which is achieved by following the investment strategy described above.