ESG Approach

UNPRI Signatory

Accunia became a UNPRI signatory in February 2018. By signing the internationally recognized UNPRI principles, Accunia is committed to supporting a more sustainable financial system. UNPRI is the United Nations Principle for Responsible Investment, and the six principles that Accunia has signed up to are:

Principle 1: We will incorporate ESG issues into our investment analysis and decision-making processes.

Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.

Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.

Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.

Principle 5: We will work together to enhance our effectiveness in implementing the Principles.

Principle 6: We will each report on our activities and progress towards implementing the Principles.

Upon signing the UNPRI principles, Accunia agrees to periodically produce a report on our responsible investment activities. The purpose of this is to improve international transparency with regards to our investments.

The PRI is the world’s leading proponent of responsible investment. It works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.

The PRI is truly independent. It encourages investors to use responsible investment to enhance returns and better manage risks but does not operate for its own profit. It engages with global policymakers but is not associated with any government. It is supported by, but not part of, the United Nations.

ESG Screening

Accunia decomposes its investment universe into three categories: Direct Investments, Indirect Investments and Indexes. Direct Investments comprise companies and entities we directly invest in. Investments in actively managed funds, such as third-party managed CLOs, are denoted Indirect Investments. Lastly, investments in passive indexes are categorised as Indexes. As shown in Exhibit 1, currently roughly 95% of Accunia’s assets under management are ESG screened.

Accunia does not invest in companies (Direct Investments) or with investment managers (Indirect Investments), which participate in systematic and gross violations of the environment, labour conditions, human rights or participates in corruption.

 

Exhibit 1: Accunia’s Investments February 2021

Sustainability Risk

Sustainability risk is the risk to the value of the investment that is related to ESG factors. Accunia takes sustainability risk into account as part of its general investment due diligence. Accunia has policies in place to integrate sustainability risk explicitly in its investment decision making process.

It is not part of Accunia’s investment strategy to take undue sustainability risk nor aim to explicitly avoid sustainability risks. Sustainability risk, like any other type of identifiable risk, should be reflected in the risk premium of the investment. Hence, we do not expect sustainability risks to affect returns substantially in any direction.

For Direct Investments, Accunia considers sustainability risk as part of the fundamental credit risk analysis of each investment. For Indirect Investments, Accunia considers the sustainability risk policies of the investment manager and may screen the underlying portfolios from time to time as well. For Index Investments with cash collateral, Accunia considers the sustainability risk of the collateral in the same manner as for Direct Investments and Indirect Investments.

Accunia informs potential clients about our investment due diligence, hereunder the way in which we consider sustainability risk as a part of our investment decision making process.

Accunia’s remuneration policy seeks to incentivise long term value creation for Accunia clients and investors. Accunia does not reward taking undue sustainability risk.

Principal Adverse Impact

Accunia does not currently consider adverse impacts of investment decisions on sustainability, as it is understood under applicable EU regulation. Our ESG policy has general exclusions with regard to gross and systematic violations of the environment, labour conditions, human rights, and corruption. These general restrictions are aimed at reducing adverse sustainability impacts. Accunia follows the development in applicable regulation and market standards closely and intends to update our policy accordingly.

Promotion of Environmental and Social Characteristics

Accunia seeks to promote environmental and social characteristics in its Direct Investments and Indirect Investments by adhering to the standards and restrictions set out in Accunia’s own ESG policy. Accunia uses all information available to assess the investments relative to the ESG policy including but not limited to: offering documents and prospectuses, company webpages, public registrars and regulator websites, and third party data providers vetted by Accunia.

Exhibit 2: Overview of Accunia’s products in relation to Accunia’s ESG policy and investment type

ESG Screening Direct Investments

Accunia does not invest in companies or entities generating most of their income from:

a) thermal coal mining or the generation of electricity using coal;

b) the production of or trade in controversial weapons;

c) the production of or trade in tobacco; or

d) the provision of services related to gambling.

Taking into account the abovementioned general restrictions of gross and systematic violations and restricted product/industries, we then categorise all Direct Investments according to the system shown in Exhibit 3.

Exhibit 3: ESG rating of Direct Investments

For Direct Investments, each obligor company is measured against the criteria in Accunia’s ESG policy prior to investing. We count listed debt or equity of the obligator or the obligor’s group to be sufficient to ensure good governance. In case there are no such listed instruments, a good governance analysis is undertaken ahead of investing.

ESG screening Indirect Investments

For Indirect Investments where external managers make the direct investment decision, Accunia’s analysis is based on the ESG approach of that manager. The ESG analysis relies of the six ESG factors outlined in Exhibit 5. Upon analysing the six factors, we decide whether each manager can make our ESG white list or not. Accunia only invests in managers on our white list.

Accunia’s ESG scoring methodology for Indirect Investments is based on the six ESG factors outlined in Exhibit 5. External managers are analysed via the six ESG factors, ultimately providing each manager with a score on a scale from 1-10.

Exhibit 4: ESG Scoring of Indirect Investments

The managers are given a score of 1 or 10 for each of the six factors. The final score is calculated as the average of the total ESG performance. If an external manager is a UNPRI signatory, it is provided with a minimum score of 5. Exhibit 4 outlines the scale in relation to investment decisions and reviews.

Exhibit 5: ESG Analysis of Indirect Investments

For Indirect Investments, the ESG policy and related conduct of the CLO manager is assessed as part of the due diligence on the CLO manager. If the CLO manager is in gross violation of the principles in Accunia’s ESG policy, Accunia will not invest in the CLOs of that manager. CLO managers are regulated by their local financial authorities which ensures good governance.

ESG Committee

The ESG Committee meets at least quarterly to discuss ESG investment issues, update business procedures, and make recommendations to the board to change the ESG policy from time to time.

The members of Accunia’s ESG Committee are:

Henrik Nordby
Chief Executive Officer

Christian Grane, CFA
Portfolio Manager

Klaus Runge
Chief Compliance Officer

Caspar Møller
Head of Risk Management

Jacob Jensen
Chief Business Officer, Partner

Magnus Bruun Jacobsen
Head of Structuring