The product promotes environmental and/or social characteristics.  It invests almost exclusively through UCITS (Undertakings for the Collective Investment in Transferrable Securities) and the majority of its investments are directed to funds that have a sustainable investment as an objective or in funds that promote, among other characteristics, environmental or social characteristics, or a combination of both. These funds are classified as Article 8 or 9 in accordance with the European Sustainable Finance Disclosure Regulation (SFDR).

The environmental and social characteristics promoted by this financial product depend on the successful integration of sustainability factors in the investment processes followed by the investment funds that are part of the product’s portfolio. This integration is reflected in practices such as tilting their investment towards companies that best manage environmental, social and governance (ESG) risks within their peer group or that exclude companies that operate in controversial sectors or that are involved in activities that are likely to generate negative environmental and social impacts.

The selection of investment funds for the product’s portfolio undergoes a thorough due diligence process that takes into account social, environmental and governance characteristics. The process involves several key steps: (i) the exclusion of funds that present the worst sustainability metrics, (ii) an assessment of the current and historical sustainability risks of the funds’ portfolios and (iii) the analysis of the information requested from the management teams on how sustainability risks are incorporated into their investment decisions, the process for assessing the principal adverse impacts of these decisions and the planned measures or objectives established to reduce these impacts.

The portfolio construction process also takes into account the sustainability criteria, namely by investing a majority of the assets in funds that have a sustainable investment as their objective or in funds that promote, among other characteristics, environmental or social characteristics, or a combination of both. Additionally, the financial product strives to achieve an overall sustainability score that surpasses the average for the global product category (peer group) with similar risk profile.
The monitoring of the product’s environmental or social characteristics is an ongoing process that involves a regular examination of the investment funds in which the product invests. This monitoring aims to assess the investment funds’ risk management practices and their sustainability impacts.  Management companies are requested to share their internal policies on this matter. At the product level, there is a regular control of the overall portfolio sustainability score and of the exposure to investment funds classified as Article 8 or 9.

To evaluate the extent to which the investment funds in which the product invests promote environmental and social characteristics it is used information provided by specialized firms. In particular, in this case it is utilized information from Morningstar's Sustainalytics which assigns environmental, social and governance ratings to companies and, at an aggregate level, to the portfolios of funds. In addition, the management companies of the investment funds also provide further information, namely on the incorporation of sustainability criteria into their investment process, on the existing control mechanisms in place to ensure compliance with those criteria and, more generally, on the commitments endorsed by the management company on this regard.

The use of information provided by specialized firms in assessing the sustainability profile of companies and investment funds encompasses several challenges and limitations associated with the process and data used. Some of these include:  (i) lack of standardization for classifying companies in terms of their sustainability profile, (ii) subjectivity often associated with the analysis and incorporation of ESG factors from an investment point of view and also (iii) the possibility that the information is incomplete, outdated, insufficient or inaccurate. With the aim of ensuring that the data available is reliable, the suppliers of external data are thoroughly evaluated beforehand in several dimensions including their competencies, methodologies, resources and service costs.

At the same time, the process of assessing the compliance with the environmental and social characteristics promoted by the product can have certain limitations resulting from the fact that the investment in the companies is made indirectly through the mutual funds. As an example, this investment strategy may limit the product´s ability to tilt investments towards the promotion of a specific environmental or social objective and to impose investment restrictions to specific sectors or economic activities.

A key aspect of this investment strategy is a rigorous process of selection of investment funds. This process involves several stages of analysis of quantitative and qualitative aspects across multiple dimensions, including sustainability factors.
The engagement policies are not part of the investment strategy given that the product invests through investment funds. Nevertheless, it is important to note that as part of their investment process the management companies of these funds promote interactions with companies in which they address the alignment with sustainability goals and sustainability-related controversies, among other issues.

No reference index has been designated for the purpose of attaining the environmental or social characteristics promoted by this product.

Summary - pdf document

This financial product promotes environmental and social characteristics but does not have a sustainable investment objective.

The product promotes environmental and social characteristics as it invests the majority of its assets in investment funds that have a sustainable investment as their objective or in funds that promote, among other characteristics, environmental or social characteristics, or a combination of both. The environmental and social characteristics promoted by this financial product depend on the successful integration of sustainability factors in the investment process followed by the portfolio’s investment funds.

Accordingly, most funds in which the product invests incorporate sustainability considerations into their investment processes, which typically translates into an investment bias towards companies that best manage ESG risks within their investment universe and towards the exclusion of companies that operate in controversial sectors or that are involved in activities likely to generate negative environmental and social impacts.

The reduction of greenhouse gas emissions, the adoption of renewable energy, the reduction of air and water pollution, the protection of human rights and the promotion of diversity and inclusion, are among the environmental or social characteristics promoted by some of the investment funds.

The product invests in investment funds selected through a process based on a comprehensive due diligence process. The funds are managed by companies specialized in specific asset classes. The diversity of managers, investment geographies and asset classes contribute to a greater level of diversification that mitigates financial and sustainability risks associated with the investments made by each of the funds.

Investments made by this product are subject to a selection process that incorporates, at several stages, the analysis of the environmental and social characteristics of the funds representing each of the classes/subclasses of assets, namely:

• Exclusion of investment funds that display the worst sustainability metrics in their peer/category;
• Assessment of the current and historical sustainability risks of the fund’s portfolio;
• Analysis of the information provided by the management companies, regarding how sustainability risks are incorporated into their investment decisions, the method for assessing the principal adverse impacts of these decisions and the planned measures or objectives established to reduce these impacts.

When an investment fund exhibits a high sustainability risk, additional analysis is required to substantiate its selection for the product portfolio. This analysis involves comparing the fund's sustainability profile with the average sustainability profile of funds within the same category and with a similar risk profile.

The portfolio construction phase also incorporates principles linked to sustainability factors. First, it intends to ensure that the majority of assets are allocated to investment funds that have a sustainable investment as their objective or in funds that promote, among other characteristics, environmental or social characteristics, or a combination of both. Second, there is a stated goal of achieving a better overall sustainability score than the average sustainability score of the global product category (peer group) with similar risk profile.

Since the product invests indirectly through investment funds, the responsibility for assessing the good governance practices followed by the companies primarily lies with the fund’s management teams and support teams. The fund selection and monitoring process focus on assessing whether the funds have established robust methodologies and whether they have adequate resources to comply with this objective.

This product will have an allocation of at least 51% to investment funds that have a sustainable investment as their objective or in funds that promote, among other characteristics, environmental or social characteristics, or a combination of both, provided that the companies in which the investments are made follow good governance practices.

Investments aligned with environmental and social characteristics include funds classified as Article 8 or 9 under the European Sustainable Finance Disclosure Regulation (SFDR).

The use of derivatives is limited to hedging market risks and does not have any contribution to the attainment of the product’s environmental or social characteristics.

The monitoring process of the selected investment funds involves a regular assessment of the risk management practices and of the impacts on sustainability factors. An update of internal policies on these issues is requested. Changes to the investment process or style, as well as to the management and integration of sustainability impacts may ultimately lead to disinvestment in a given fund.

At the product level, the promotion of environmental and social characteristics is also assessed. This requires regular monitoring of the product’s overall sustainability score and measurement of the proportion of assets allocated to funds classified as Article 8 or 9 under the European Sustainable Finance Disclosure Regulation (SFDR).

The investments made by this product are subject to an initial selection process which incorporates, at several stages, the analysis of environmental and social characteristics of the funds representing each of the asset classes/subclasses. First, there is an exclusion of funds which, among other characteristics, have a low Morningstar Sustainability Rating. Specifically, funds that fall within the lowest decile of their respective category in terms of their investments' sustainability are excluded. Following this exclusion, the current and historical sustainability risks of the remaining funds' portfolios are assessed by reviewing the Corporate Sustainability Score and Sovereign Sustainability Score sourced from Morningstar. This analysis could lead to the exclusion of funds that prove to be unsuitable within its universe. As part of the due diligence process, management companies are asked to detail how sustainability risks are incorporated into their investment process, the method for assessing the principal adverse impacts and the measures planned or objectives established to reduce these impacts. If a selected fund displays a Corporate Sustainability Score above 30, meaning it has a high sustainability risk, a complementary analysis is carried out to validate the selection, which includes a comparison between the fund's sustainability profile and the average of funds in the same category and with a similar risk profile.

In portfolio construction, sustainability-related criteria are considered at two levels. First, ensuring that the majority of the assets are allocated to investment funds classified as Article 8 or 9 under the European Sustainable Finance Disclosure Regulation (SFDR). Second, ensuring that the portfolio's overall Corporate Sustainability Score obtained through Morningstar is better, i.e. lower, than the average sustainability score of the category with a similar risk profile. The evaluation of compliance with these two criteria is an ongoing and continuous process, with its evolution also being regularly assessed over time. Additionally, the environmental, social and governance characteristics of the product are monitored using information sourced from Morningstar.

To evaluate the extent to which the investment funds in which the product invests promotes environmental and social characteristics, we rely on information provided by external specialised companies. In this case it is used Morningstar's Sustainalytics which attributes environmental, social and governance scores to companies and, at an aggregate level, to the funds’ portfolios. The score indicator captures the environmental, social or governance unmanaged risk of the companies or issuers that are part of the funds' portfolios. Unmanaged risk includes environmental, social, and governance (ESG) risks that cannot be mitigated through the intervention of the company's management and those that are not properly managed by the companies, including carbon emissions and the use of resources within the scope of the operation itself or in the production chain, business ethics, respect for human rights and governance at product and company level.

This data is complemented with information provided by the management companies, namely on the incorporation of sustainability criteria in the investment process, on the existing control mechanisms in place to ensure compliance with those criteria and, more generally, on the commitments endorsed by the management company on this regard.

Information is compiled internally and critically evaluated within the context of the fund selection and monitoring process. The purpose of this evaluation is to identify cases in which the apparent incorporation of ESG criteria does not effectively translate into a relevant percentage of investments that promote environmental and social objectives or which are considered unsatisfactory compared with peers. This assessment also makes it possible to reconcile any discrepancies between information obtained from the different sources and to identify possible limitations to the quality and quantity of the data provided.

An investment fund may be excluded if the available information is considered insufficient or incomplete and does not allow a proper assessment of the alignment of the product with the environmental and social characteristics promoted. In all circumstances, the intent is that the information is as objective as possible. For this reason, estimated data is not used although this may occur in the assessment carried out by the investment teams of each selected fund, especially for the calculation of proprietary indicators.

External information providers are evaluated beforehand, considering their capabilities, resources and costs of the service. Updates to the sustainability methodology used by external parties are closely monitored, since they may arise from more detailed ESG metrics disclosed by corporates in which the funds are invested.

Regarding the methodology used to measure compliance with the environmental and social characteristics promoted by the product, there are limitations arising from the fact that the investment in the companies is made indirectly through mutual funds in which the product invests. As such, the responsibility for the analysis of financial or sustainability indicators specific to each company is delegated to the managers of each fund who, within their mandate, have the power to exclude sectors or economic activities that are not aligned with the environmental or social characteristics promoted or to direct a percentage of the portfolio for the promotion of a specific environmental or social goal.

The investment strategy underpinning this product limits its ability of tilting the investment towards the promotion of a specific environmental or social objective and of imposing investment restrictions to certain sectors or economic activities.

The use of external sources to measure the integration of environmental or social characteristics of each fund and at the overall product level can present challenges to the ESG analysis. On the one hand, each external supplier uses different criteria and classification systems for evaluating companies, so a certain degree of subjectivity persists. On the other hand, the available information may be incomplete, insufficient, inaccurate or outdated. While efforts are made to ensure that data provided by external companies is reliable, it is not possible to guarantee the accuracy and completeness of that information. Ultimately the quality of information depends on the cooperation and transparency of companies in disclosing their environmental or social indicators.

The product invests in investment funds selected through a rigorous process comprising eight steps before the final selection. The process aims to select funds that generate value above an index representative of the market and above its peers, taking into consideration the social, environmental and governance characteristics of the assets in which it invests.
The process begins by creating a sample of eligible funds framed in the desired asset class. This sample is subjected to exclusion criteria, which filters out funds that do not meet predefined indicators, namely those that have a track record of less than 3 years, a small amount under management and a low Morningstar Sustainability Rating, i.e., that are in the lowest decile of their category in terms of the sustainability of their investments.
Next, a quantitative analysis is carried out in order to assess the consistency of the performance, market risks and sustainability of each of the funds within the defined universe. Qualitative aspects are also evaluated in order to judge the fund's investment process, the return targets and investment guidelines, the managers' approach to the principal adverse impacts of investment decisions on sustainability factors, the experience of the manager/management team, the bias towards a certain type of instrument, market, sector or management style, the current and historical indicators of sustainability risks and their comparison with the Morningstar category average. Funds deemed unsuitable would be excluded from the selection process.
A short-list of funds that have met the above criteria is prepared, and a more in-depth due diligence process is initiated. Also, additional information is gathered from the management company covering the following aspects:

• Management Entity - amount of assets under management, experience in the market or strategy used, corporate reputation, shareholder structure, among others;
• Assets under management - evolution of the fund's assets under management and the investment strategy;
• Team - number of analysts allocated to management and individual experience, number of companies followed by each analyst, existence of manager risk, remuneration policy and employee incentive system;
• Investment Process - detailed description of the investment process and guidelines;
• How sustainability risks are incorporated into investment decisions - assessment of the principal adverse impacts of these decisions and of the measures they plan to take or the goals they have set in order to reduce these impacts;
• Portfolio characteristics: turnover, types of instruments used, investment universe;
• Market risk management - risk management process and control, portfolio construction and diversification rules, description of how and when the management team uses derivatives, and counter-party risk assessment;
• Execution process - description of how and by whom transactions are executed for the fund;
• Performance - detail of the absolute, relative and attribution performance of the last 5 years, with an indication of the allocation and investment decisions in assets with the biggest and smallest contributions to relative performance;  
• Customer service and reporting - access to managers and quality of information provided.

Additionally, a meeting is held with the managers of each fund, in order to detail specific points or issues that may have raised doubts and to validate the information that has been collected in writing.
At the end of this process, the final selection is made, taking into consideration all the information gathered. If the fund selected has a Morningstar Corporate Sustainability Score greater than 30, which means it has a high sustainability risk, an additional analysis is performed to substantiate the selection. This analysis takes into consideration the comparison of the sustainability profile of the investment fund with the average of funds in the same category and with a similar risk profile.

Not applicable at the product level given that the investments are made indirectly through mutual funds. The funds in which the product invests follow active management principles, and as a result promote interactions with companies not only with the purpose of increasing returns, but also to encourage the improvement of ESG practices, to learn their sustainability challenges and opportunities and to control and assess any controversies.

No reference index has been designated for the purpose of attaining the environmental or social characteristics promoted by this product.