Sustainability-related Disclosure

(Status 23.05.2023, first publication 10.10.2022)

1. Information on its strategies for incorporating sustainability risks into investment decision-making processes and statement on due diligence strategies related to the main adverse impacts of investment decisions on sustainability factors pursuant to Art. 3 (1) and Art. 4 (3) of the Regulation
   
   The sustainability methodology of Marcard, Stein & Co (hereinafter "MSC") is based on a transparent, multi-stage process in which both exclusion criteria and minimum requirements for companies and states are defined. We source the underlying data from MSCI ESG Research, one of the world's leading providers of sustainability analysis and globally recognized indices and indicators. We are convinced that the use of our sustainability methodology is another building block that enables us to better meet our responsibility to our customers and society.
   
   Our minimum standards
   The minimum standards form the basis for asset management. A quantitative screening process is used to exclude companies from the investable investment universe that do not meet the minimum environmental, social and ethical standards we have set. This includes equities and bonds of companies that are active in the field of controversial weapons or nuclear weapons, or that have strong corporate controversies ("red flag" as defined by the MSCI methodology / violation of the UN Global Compact). This is understood to mean serious misconduct in the areas of environmental, social and employee concerns, human rights and the fight against corruption and bribery. In addition, companies that exceed certain sales thresholds in the area of thermal coal mining or energy generation from thermal coal are excluded. We hereby pay particular attention to reducing the carbon footprint of our investments with regard to the assessment of environmental damage.
   
   With the exception of the results from the "controversial weapons" area, which immediately lead to a direct exclusion from the investment universe, the quantitative result in the subsequent qualitative consideration is assessed by an ESG committee of the Warburg Group, whose membership combines the expertise of the portfolio management of various Group companies and in which MSC is represented by its Chief Investment Officer. Additional insights (such as from direct company discussions) on the companies can be added. In this way, all exclusions are continuously reviewed and adjusted if necessary. Active dialog is sought with selected companies in order to make sound assessments of the severity of controversies.
   
   Focused sustainability strategies
   Beyond the minimum standards, we also offer focused sustainability strategies, which have a much more comprehensive methodology in terms of ESG criteria.
   
   MSC portfolio management looks at the sustainability performance of a country or company using the MSCI ESG rating. This aggregates environmental, social and ethical aspects together into a rating on a scale of AAA to CCC. Countries or companies with a rating lower than BBB are excluded from the sustainability universe.
   
   The assessment of sovereigns is based on various criteria. We refer to globally recognized institutions such as Freedom House, the UN or Transparency International. Important criteria include climate protection, corruption, money laundering, military spending and the death penalty.
   
   The sustainability methodology for selecting companies is set up as a multi-stage filter process. Absolute and relative exclusion criteria for business activities are combined with minimum ratings and quality standards for dealing with controversies. The absolute exclusion criteria include controversial business activities such as the production of tobacco products, controversial weapons and the generation of electricity from nuclear energy. In addition, companies are excluded from an investment if they are rated as below average in terms of sustainability by the MSCI ESG rating in a sector comparison. If a company violates accepted conventions such as the UN Global Compact, it will also not be invested in.
   
   
2. Information on our strategies for incorporating sustainability risks into our investment advisory activities pursuant to Art. 3 (2) of the Regulation
   
   Within the scope of investment advice, we offer and recommend suitable and - if requested - also sustainable financial instruments and take sustainability risks into account in our investment advice.
   
   The consideration of sustainability risks in investment advice is primarily carried out through the selection of financial instruments that we recommend to our customers as suitable for them. In this context, the minimum standards described under I. form the basis for investment advice and exclude products from the investable investment universe that do not meet the minimum requirements set by us in environmental, social and ethical terms. This is to reduce the risk that an environmental, social or governance event or condition, the occurrence of which could have an actual or potential material adverse effect on the value of an investment.
   
   The exclusions include stocks and bonds of companies engaged in controversial weapons or nuclear weapons activities or that have strong corporate controversies. This is understood to mean serious environmental, social and corporate governance misconduct. In addition, companies active in thermal coal mining or energy production from thermal coal are excluded. We hereby place particular emphasis on reducing the carbon footprint of our investments with regard to the assessment of environmental damage. If a company violates accepted conventions such as the UN Global Compact, this company is also not recommended for investment.
   
   
3. Information on the consideration of the main adverse impacts on sustainability factors in our investment advice, given its size, the nature and scope of its activities and the types of financial products that are the subject of its advice according to Art. 4 (5) lit. a) of the Regulation
   
   The sustainability performance of a country or company is considered using the MSCI ESG rating. This aggregates environmental, social and ethical aspects into a rating on a scale from AAA to CCC.
   
   The investor is informed about the characteristics of the respective sustainability aspects and the associated sustainability risks. This is done comprehensively in the advisory discussion by the advisor and - if available - the printing of the respective characteristics on product-specific information sheets (marketing communications).
   
   
   1. Transparency of adverse sustainability impacts at the level of the company
      Art. 4, Regulation (EU) 2019/2088
      

      
      MSC observes minimum sustainability standards throughout the entire investment process. Both in investment advice and in financial portfolio management, companies and countries are selected on this basis, excluded from the investable investment universe if they do not meet our minimum environmental, social and ethical standards. This reduces sustainability risks in investment decisions.

      With the help of this minimum standard, sustainability risks arising from investments in companies that entail significant negative external effects due to environmental and/or social risk factors and thus increase the general risk parameters of a securities investment, such as market price or counterparty default risks, are reduced for our client portfolios and asset management mandates.

      With this concept, individual so-called Principal Adverse Impact Indicators (PAIs) are already taken into account in MSC's investment decisions, which are specifically regulated in the DELEGATED COMMISSION REGULATION (EU) 2022/1288 supplementing REGULATION (EU) 2019/2088 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 November 2019 (EU Disclosure Regulation).

      PAIs ("most significant adverse impacts") are the most significant impacts of investment decisions that have a negative impact on the sustainability drivers (i.e. in the areas of environmental, social and labour concerns, respect for human rights and combating corruption and bribery). MSC has chosen to consider certain PAIs at the corporate level. With the concept of global minimum standards, the PAIs listed below are taken into account in investment advice as well as in all investment decisions made by Financial Portfolio Management / Warburg Navigator:
      
      4. fossil fuel investments: implementation through exclusion criteria
      10. serious violations of th UN Global Compact: implementation through exclusion criteria
      14. investing in controversial weapons: implementation through exclusion criteria

      In addition to the PAIs that are firmly considered via the aforementioned exclusion criteria, further PAIs are taken into account as part of the investment process. A different assessment of the individual PAIs in comparison to other assessment criteria of the investment process is not necessarily carried out.

      The PAIs taken into account at company level as a result of the global minimum standards are reviewed on a monthly basis. The review is followed by an update of the exclusion list provided for the investment advice and financial portfolio management service, which is relevant for investment advice and investment decisions in financial portfolio management.
      
      

4. Disclosure on remuneration policy and inclusion of sustainability risks pursuant to Art. 5 (1) of the Regulation
   
   Our remuneration policy is consistent with the consideration of sustainability risks, in particular the avoidance of incentives for misconduct. As part of our remuneration policy, we ensure that the performance of our employees is not remunerated or evaluated in a way that conflicts with our duty to act in the best interests of customers. In particular, compensation does not create incentives to recommend a financial instrument that is less appropriate to customers' needs. Our compensation structure is based on collective bargaining agreements or individual employment contract provisions and our compensation principles. It does not encourage excessive risk-taking with regard to the sale of financial instruments with high sustainability risks.
   
   

   1. Participation policy according to Art. 3g of Directive 2007/36/EC Art. 4 (2), Regulation (EU) 2019/2088
      

      The exercise of voting rights at general meetings within the meaning of § 134b para. 1 no. 1 AktG shall not be carried out by MSC. This is generally done by MSC's clients in both investment advice and financial portfolio management. MSC does not monitor the exercise of voting rights by its clients. In the case of investment funds advised by MSC, the exercise of voting rights is the responsibility of the respective capital management companies. MSC neither gives instructions to the respective capital management company nor monitors the exercise of voting rights. MSC does not have a participation policy according to Article 3g of Directive 2007/36/EC of the European Parliament and of the Council.

      The background to this is the trade-off between effort and benefit. Exercising voting rights involves a great deal of effort, especially in the case of foreign public limited companies, and is therefore not always in the interest of our clients. In particular, due to the small shareholding in a public limited company, the voting result at a general meeting is hardly influenced significantly.
      
      

5. Overview of the changes, Art. 12, Regulation (EU) 2019/2088
   
   According to Article 12 of Regulation (EU) 2019/2088, information pursuant to Article 3,5 or 10, Regulation (EU) 2019/2088 shall be reviewed regularly and changes shall be documented and published. Corresponding changes are listed for MSC in the table below:
   
   

   Publication	Changes
   23.05.2023	Integration of the section on participation policy according to Article 3g of Directive 2007/36/EC Article 4 (2), Regulation (EU) 2019/2088
   23.05.2023	Integration of the section on transparency of adverse sustainability impacts at the company level Article 4, Regulation (EU) 2019/2088

    

   Status: 23.05.2023

   First publication: 10.10.2022