Polar Capital – Future Energy – Website Disclosures

 

Summary Document

A Summary document of the main features of the Fund is available to download from this page. Translations into the official language of the EU jurisdictions into which the Fund is distributed are also available.

 

No Significant Harm Statement –

The Investment Manager will apply screening, to assess whether the investment strategy has an adverse impact on the sustainable objective. Investee companies with very severe controversies will be excluded from consideration as a sustainable investment by the Investment Manager. This identifies companies in specific controversies that have very severe adverse impacts on the environment and society. These may include, by way of example, controversies related to energy and climate, biodiversity and land use, toxic emissions, human rights, child labour, employee health and safety, and product safety and quality.

As part of the do no significant harm assessment, consideration will be given to the mandatory Principal Adverse Impacts (PAI) indicators provided in Table 1 (and where applicable, Tables 2 and 3) of Annex 1 of Commission Delegated Regulation (EU) 2022/1288.

Only such sustainable investments are considered which are aligned with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. The Investment Manager will use third-party ESG controversy and global norms data and research as a starting point for assessing alignment of portfolio companies with these global norms, and where necessary, conduct further due diligence to determine compliance with these norms.

 

Sustainable Investment Objective

The Fund has sustainable investment as its objective by investing in companies that contribute positively to climate change mitigation. The Fund achieves its sustainable investment objective by investing in a portfolio of companies worldwide that support, through their technology solutions and services, the decarbonisation and electrification of the global energy sector.

Examples of investments that support the Fund’s sustainable investment objective are companies that address sustainability challenges related to the global rise in energy demand and the negative impact on the environment from unsustainable sources. The Fund invests along the whole clean energy value chain, ranging from renewable power generation, energy infrastructure and storage, to energy efficiency solutions.

Because of the Fund’s sustainable investment objective, the Fund will contribute to the following United Nations Sustainable Development Goals: Affordable and Clean Energy (SDG7), Industry, Innovation and Infrastructure (SDG 9), Sustainable Cities and Communities (SDG 11), Responsible Consumption and Production (SDG 12) and Climate Action (SDG 13). The UN SDGs are part of the United Nation’s 2030 Agenda for Sustainable Development, adopted by all UN member states in 2015, and comprise 17 goals which aim to tackle the world’s approach to the environmental and social matters. The full list of the 17 UN SDGs can be found at https://sdgs.un.org/goals.

 

The Investment Manager will use the research of third-party providers to provide deeper insight into investee companies’ compliance with norms and standards. However, given differing methodologies, tolerances and assessments of company behaviour, the Investment Manager retains discretion over the assessment of third-party conclusions on a case-by-case basis. Companies with very severe controversies will be excluded from consideration as a sustainable investment by the Investment Manager.

 

Investment Strategy – 

The Fund will invest to obtain long exposures in a global portfolio of equity and equity-related securities of selected publicly listed companies with exposure to the theme of smart energy (i.e. the targeting the decarbonisation of the global energy sector through technology solutions and services).  The Fund will at all times invest at least 51% of its gross assets in Equity Participations. The Fund may also hold up to 100% of the NAV in cash (including in currencies other than the Base Currency) or up to 10% of the NAV in money market funds (that are listed on a Regulated Market having a residual maturity of less than 12 months) on an ancillary basis. Up to 10% of the Net Asset Value of the Fund may additionally be invested, in aggregate, in one or more other  Collective Investment Scheme (CIS). Up to 10% of the Net Asset Value of the Fund may be invested in any one single CIS.

Except to the extent permitted by the UCITS Regulations, the securities in which the Fund will invest will be listed or traded on a Recognised Market located anywhere in the world. Where it is considered appropriate to achieve the investment objective of the Fund, the Fund may invest up to 10% of its NAV in securities which are not listed or traded on a Recognised Market and, further, the Fund may invest up to 10% of its NAV in recently issued securities which are expected to be admitted to official listing on a Recognised Market within a year.

The Fund will take a geographically diversified approach with a primary focus of investing in a globally diversified portfolio of companies with exposure to the theme of smart energy. There are no specified minimum limits on investing in any geographical region or in any industry.

The Investment Manager will assess the corporate governance structure of companies within the Fund’s eligible investment universe, or of investee companies, according to the good governance criteria as outlined in the SFDR (sound management structures, employee relations, staff remuneration, tax compliance). Where relevant, the Investment Manager may assess additional governance factors, such as business ethics, transparency, board independence, quality, diversity and accountability, shareholders’ rights, ownership structure.

The Investment Manager applies the following binding elements within the investment process to attain the Fund’s ESG characteristics:

  1. exclusion of companies in breach of the exclusion policy;
  2. DNSH assessment; and
  3. investment universe construction through application of the Investment Manager’s current/future revenue thresholds and positive alignment with sustainable investment objective of the Fund.

 

Proportion of Investments with the objective of Sustainable Investment –  

The minimum proportion of the investments of the Fund that will qualify as sustainable investments is 0%. All of the Fund’s sustainable investments shall contribute to environmental objectives.

The Fund is an actively managed strategy that has a sustainable objective to invest in a portfolio of typically 40 – 80 companies worldwide that provide technology solutions and services targeting the decarbonisation of the global energy sector. These companies address sustainability challenges related to the global rise in energy demand, and the negative impact on the environment from unsustainable sources.

In determining these companies, the Investment Manager applies specific exclusion criteria, excluding companies with revenue exposed to utilities with fossil-fuel sourced or nuclear power capacity, or where the company is involved in the exploration, production and distribution of oil or natural gas or first-generation biofuels, amongst others. Furthermore, the Investment Manager excludes companies from the Fund on the basis of controversial behaviour or controversial products pursuant to its commitment to the “no significant harm” principle under SFDR.

There will not be a decisive emphasis on any particular size of companies dominating the stock selection. Instead, the Investment Manager will invest in large, medium and small capitalisation issues depending on market liquidity and as it judges the available opportunities. The Investment Manager applies a disciplined investment process leading to consistency in the stock selection. The strategy is actively managed, flexibly seizing new investment opportunities in attractive growth areas of the clean energy market whilst taking into account general macroeconomic conditions such as inflation, interest rate developments, monetary policies and economic growth.

The Investment Manager undertakes a fundamental analysis entailing an assessment of the attractiveness of the clean energy market sectors, the drivers and trends underpinning them, and the solutions and technologies that contribute positively to these market sectors. A fundamental analysis aims to measure the intrinsic value of potential investments in order to identify their key attributes and assess their actual worth. This leads to the identification by the Investment Manager of certain companies with leading solutions that are best positioned to benefit from the future development of the clean energy market, which then become the subject of a detailed analysis process. An investment is most likely if a company offers strong growth potential and high barriers of entry, is run by an experienced management team, and appears underappreciated by the other market participants. Some of the resources and materials used to make company specific assessments include sustainability reports, annual filings, third party suppliers of ESG data and information on ESG controversies and engagement with the companies themselves.

The Investment Manager integrates a company’s sustainability performance in the overall fundamental analysis, which may impact its valuation, thereby influencing its attractiveness.

Although the Fund is permitted to invest in financial derivative instruments, the Investment Manager will not generally seek to invest in these instruments in order to achieve its sustainable investment objective. However, financial derivative instruments may be held by the Fund for risk management purposes or where they have been received from an investee company pursuant to a corporate action (e.g. an issue of warrants or share options).

Where equity derivatives are held by the Fund, as a result of being received from corporate actions of the investee company or otherwise, the underlying investee company will have been assessed in line with the Fund’s investment strategy and therefore the derivative will be aligned with the sustainable investment objective.

 

Monitoring of the sustainable investment objective – 

The Investment Manager will continually monitor the Fund’s alignment with the sustainable investment objective through a combination of the Investment Manager’s investment decision making process and through central compliance and risk monitoring.

During the period that the Fund holds a security, the Investment Manager will monitor the issuers exposure to sustainability risks, as well as any other sustainability risks that emerge during the holding period of the security and that the Investment Manager considers relevant to the issuer. Where, in the view of the Investment Manager, the issuer’s exposure to sustainability risks increases, this will cause a review of the Fund’s position in the security and potentially cause the Investment Manager to sell the security.

The Sustainability Risks relating to securities within the investment universe of the Fund are analysed throughout the Investment Manager’s whole investment process. This includes a fundamental investment analysis with the integration of sustainability, such as analysis of the company’s management of risks and opportunities associated with the Fund’s sustainable investment objective and of the sustainability criteria material to the relevant company. Factors that may be assessed by the Investment Manager as part of this fundamental analysis include, for example, a company’s supply chain management, human capital management, its capacity for innovation, its environmental and social impact, including any ESG controversies and its corporate governance structure. This analysis is supported by publicly available information, third party data providers ratings of the relevant issuer, and several analysis methods (exclusions policy, controversies analysis, fundamental analysis, etc).

 

 

Methodologies used to measure the attainment of the sustainable investment objective

The Investment Manager will measure the Fund’s attainment of its sustainable investment objective on a quantitative and qualitative basis.

The Investment Manager will assess alignment of the Fund’s investments within the Fund’s eligible investment universe, which only includes those companies that derive a significant portion of their current or future revenue from activities that are in line with the objective.

The Investment Manager will assess alignment of the Fund’s investments with the Investment Manager’s exclusion list for the Fund.

The Investment Manager will continually monitor the Fund’s alignment with the sustainable investment objective through a combination of the Investment Manager’s investment decision making process and through central compliance and risk monitoring.

As part of its do no significant harm assessment (“DNSH”) with respect to sustainable investments, the Investment Manager will consider the mandatory Principal Adverse Impacts (PAI) indicators provided in Table 1 (and where applicable, Tables 2 and 3) of Annex 1 of Commission Delegated Regulation (EU) 2022/1288. Where material, the Investment Manager will consider the principal adverse impacts of a company on the environment and society in the manner described below.

Unless subject to an exclusion, either as a result of the application of the exclusions policy or as a result of the principle adverse impact indicating that the company causes significant harm to a sustainable investment objective, the Investment Manager may seek to improve material adverse impacts of investee companies through active ownership activities such as engagement, voting or if necessary, divestment from the company within a reasonable timeframe, taking into consideration the best interests of the Fund and its Shareholders.

Factors considered when assessing a company’s impact on the environment include GHG emissions, including, but not limited to, indicators such as absolute emissions, carbon footprint, emissions intensity, energy consumption and/or production profile and carbon reduction initiatives. Revenues of investee companies attributed to the fossil fuel sector are considered by the Investment Manager. Where material revenues are flagged, the Investment Manager will assess the company’s carbon reduction policies or targets related to achieving net zero. Similarly, the Investment Manager will consider biodiversity impact, water use and hazardous waste generated by a company, if deemed material.

The Investment Manager will consider the board gender diversity and, where possible, gender pay gap of investee companies, and will, where it deems appropriate, use its tools of active ownership to encourage better practices.

The Investment Manager considers the standards of the United Nations Global Compact (UNGC), and the Organisation for Economic Co-Operation and Development’s (OECD) Guidelines for Multinational Enterprises. If a company is involved in severe controversies or norms violations, the Investment Manager will assess the severity of the incident and decide the appropriate action of whether to monitor, enter enhanced engagement, or divest from the company.

The Investment Manager will exclude any company involved in the manufacture and sale of controversial weapons such as cluster munitions and anti-personnel mines.

Information relating to these principal adverse impacts on sustainability factors for this Fund will be made available in the Fund’s annual report.

The Investment Manager applies norms-based screening and exclusion of investment in companies that are assessed by the Investment Manager to be in breach of global norms standards, such as the UN Global Compact, UN Guiding Principles on Business and Human Rights and International Labour Organisation conventions.

Companies involved in the exploration, production and distribution of oil, natural gas, coal, and the first generation of biofuels (derived from food crops) and palm oil producers are excluded. Also excluded are utilities with fossil fuel or nuclear power generation, as well as natural gas transmission and distribution utilities.

The Investment Manager excludes investment in companies involved in the production, distribution and/or sale of controversial weapons, such as cluster munitions and anti-personal mines. The Investment Manager excludes investment involved in the production, distribution and/or sale of nuclear weapons. Excluded also are companies that derive more than 5% of their revenues from conventional weapons production, components or systems.  A zero percent exclusion threshold is applied to companies active in the areas of civilian firearms, tobacco, alcohol, gambling and/or adult entertainment.

The Fund is actively managed by the Investment Manager with respect to the MSCI ACWI Net Total Return USD Index (the “Benchmark”). The Benchmark as currently constituted, is a free float-adjusted market capitalisation weighted index that is designed to measure the equity market performance of developed and emerging markets. For the avoidance of doubt, the Benchmark does not measure the sustainable performance of the Fund and the Investment Manager has not designated a sustainable reference benchmark against which to measure the sustainability performance of the Fund. The Benchmark is quoted in US dollars. Further information can be found on www.msci.com.

 

Data Sources and Processing

The Investment manager will primarily use third-part data inputs. These data inputs are embedded within the Investment Manager’s investment process. In circumstances where data quality or availability is insufficient to make a reasonable judgement on a quantitative basis with respect to any of the mandatory PAI indicators provided in Table 1, and where applicable Tables 2 and 3 of Annex 1 of the Commission Delegated Regulation ( EU) 2022/1288, the Investment Manager will use proxy indicators, such as controversy cases or norms violations related to negative impacts on the relevant sustainability indicator to assess harm caused by the company, and will assess the relevance and materiality of the principal adverse impact indicator to the company, using industry expertise and any data available.

Where, in the Investment Manager’s view, a company does not cause significant harm with respect to a specific PAI indicator but the Investment Manager feels there is room for material improvement, it will take the required steps to reduce or mitigate the PAI, such as engaging with the company, using the right to vote, seeking to improve disclosure of data by the company, or reducing exposure to the issuer where deemed appropriate or necessary.

Where, in the Investment Manager’s view, a company causes significant harm with respect to a specific PAI, the Investment Manager will exclude that company from the Fund.

 

 

Limitations to data and methodologies

The Investment Manager’s approach to evaluating the ESG profiles of issuers within its eligible investment universe may be constrained by the availability, quality and relevance of sustainability related data available to the Investment Manager.

The availability, quality and relevance of data relating to sustainability within the eligible investment universe may be limited, both in an absolute sense and in comparison to data on sustainability within other sectors or markets, due to a lack of sustainability related regulations and reporting standards in the countries that the Investment Manager can invest in, changes in sustainability related regulations and reporting standards in the countries that the Investment Manager can invest in, inconsistencies in sustainability related regulations and reporting standards between jurisdictions, a lack of historic information available on sustainability for issuers, low coverage on, or inconsistencies with respect to the evaluation of, particular issuers by third party research and data providers or material inaccuracies in the sustainability related information reported by issuers.

Limitations in the availability, quality and relevance of the sustainability related data outlined above may make it difficult for the Investment Manager to ascertain the sustainability profile of an issuer, to assess the progress of an issuer from a sustainability perspective over a certain time frame, to carry out consistent analysis on issuers from a sustainability perspective against its industry peers in the same or other jurisdictions or to verify the Investment Manager’s assumptions and calculations concerning a particular issuer. Where a prospective investment cannot be confirmed as a sustainable investment, the issuer will be excluded from the Fund’s portfolio

 

Due Diligence Process

The Investment Manager’s assessment of the governance practices of investee companies is carried out at the sustainability due diligence phase of the investment strategy outlined above and is monitored and reassessed after any perceived or real change to the company’s strategy, capital allocation, end-markets exposure, etc.

The Investment Manager will assess the corporate governance structure of companies within the Fund’s eligible investment universe, or of investee companies, according to the good governance criteria as outlined in the SFDR (sound management structures, employee relations, staff remuneration, tax compliance). Where relevant, the Investment Manager may assess additional governance factors, such as business ethics, transparency, board independence, quality, diversity and accountability, shareholders’ rights, ownership structure.

From an environmental perspective, the Investment Manager considers, among others, the potential impact of climate change on the issuer’s infrastructure and customer base, the issuer’s reliance on greenhouse gases as a source of fuel, the issuer’s reliance on materials that have a negative environmental impact, the issuer’s climate strategy, its lifecycle assessment, etc.

From a social perspective, the Investment Manager considers among others the issuer’s performance on social reporting, such as employee diversity reporting and pay gap reporting, the issuer’s historic interaction with its employees, the extent of policies and procedures the issuer has in place designed to ensure fair employee treatment (such as grievance or whistleblowing policies), health and safety track record and talent attraction and retention strategies, etc.

From a governance perspective, the Investment Manager will assess the corporate governance structure of companies within the Fund’s investment universe of companies with exposure to the theme of smart energy, or of investee companies within the Fund, according to the good governance criteria as outlined in the SFDR (sound management structures, employee relations, staff remuneration, tax compliance). Where relevant, the Investment Manager may assess additional governance factors, such as business ethics, transparency, board independence, quality, diversity and accountability, shareholders’ rights, ownership structure.

The Investment Manager will consider these risks in conjunction with the financial analysis it undertakes on the issuer and will take a balanced approach regarding the merits of investing in the relevant security.

The Investment Manager’s assessment of the governance practices of investee companies is carried out at the sustainability due diligence phase of the investment strategy outlined above and is monitored and reassessed after any perceived or real change to the company’s strategy, capital allocation, end-markets exposure, etc.

 

 

 

Engagement Policies

The Investment Manager may seek to improve material adverse impacts of investee companies through active ownership activities such as engagement, voting or if necessary, divestment from the company within a reasonable timeframe, taking into consideration the best interests of the Fund and its Shareholders. If a company is involved in severe controversies or norms violations, the Investment Manager will assess the severity of the incident and decide the appropriate action of whether to monitor, enter enhanced engagement, or divest from the company.

 

Benchmark 

The Fund is actively managed by the Investment Manager with respect to the MSCI ACWI Net Total Return USD Index (the “Benchmark”). The Fund is considered to be actively managed in reference to the Benchmark by virtue of the fact that it seeks to outperform the Benchmark. While certain of the Fund’s securities may be components of and may have similar weightings to the Benchmark, the Investment Manager will use its discretion to invest in securities or sectors not included in the Benchmark in order to take advantage of investment opportunities. The investment strategy does not restrict the extent to which the Fund’s holdings may deviate from the Benchmark and deviations may be significant. This is likely to increase the extent to which the Fund can outperform or underperform the Benchmark.

The list of benchmark administrators that are included in the Benchmark Regulation Register is available on ESMA’s website at www.esma.europa.eu. As at the date of this disclosure, the following benchmark administrator appear on the Benchmark Register in accordance with the requirements of the Benchmark Regulations: MCSI Limited.

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