Status under the EU Sustainable Finance Disclosure Regulation (SFDR)
Janus Henderson Horizon Japan Opportunities Fund
Legal entity identifier: 2138002J1166S4JQFP14
A. Summary
The Fund is categorised as one which meets the disclosure provisions set out in Article 8 of SFDR as a product which promotes environmental and/or social characteristics and invests in companies with good governance practices, but does not have as its objective sustainable investment.
The Fund promotes the following environmental and/or social characteristics:
- Avoidance of investments in certain activities with the potential to cause harm to human health and wellbeing by applying binding exclusions.
- Promotes climate change mitigation.
- Support for UNGC principles (which cover matters including human rights, labour, corruption and environmental pollution.
- Avoidance of corporate issuers with the worst ESG ratings.
- Engagement with corporate ESG laggards to improve their practices and/or ESG ratings.
The Fund does not use a reference benchmark to attain its environmental or social characteristics.
This Fund seeks capital growth through investment in Japanese equity markets.
The binding elements of the investment strategy described below, that are implemented as screens are coded into the compliance module of the Investment Managers order management system utilising third-party data provider(s) on an ongoing basis. The exclusionary screens are implemented on both a pre and post trade basis enabling the Investment Managers to block any proposed transactions in an excluded security and identify any changes to the status of holdings when third-party data is periodically updated.
One of the binding elements criteria referenced below are not available as automated data points within the order management system, and are evidenced by external or in-house research:
- Engagements with issuers held with a UNGC Principles status of “fail”.
Engagement plans are agreed and periodically reviewed for engagement activity including progress against the engagement plan during the 24 month period.
The Investment Manager will:
- Apply screens to exclude direct investment in corporate issuers based on their involvement in certain activities. Specifically, issuers are excluded if:
- they derive 10% or more of their revenue from Gambling, military contracting, small arms, or tobacco;
- they derive 5% or more of revenue from adult entertainment.
- Apply screens to exclude investment in issuers if they derive more than 10% of their revenues from thermal coal.
- Engage with issuers in breach of UNGC Principles and will only invest or continue to be invested if it considers through such engagement that they are on track to improve. If the issuer does not achieve a “pass” rating within 24 months, it will divest and screens will be applied to exclude the issuer.
- Apply screens to ensure that of the portfolio invested in corporate issuers of equities, at least 80% have an ESG risk rating of BB or higher (by MSCI – https://www.msci.com/, or equivalent).
- Consider corporate issuers of equities with a rating of B or CCC to be ESG laggards. It will engage with such issuers and will only invest or continue to be invested if it considers through such engagement that they are on track to improve and that the rating of the issuer will be upgraded. If the issuer’s rating is not upgraded within 24 months, it will divest and screens will be applied to exclude the issuer.
The Fund also applies the Firmwide Exclusions Policy (see “Firmwide Exclusions” in the "JHI Responsible Investment Policy”), which includes controversial weapons.
For the purposes of the AMF doctrine, the extra-financial analysis or rating is higher than:
- 90% for equities issued by large capitalisation companies whose registered office is located in "developed" countries, debt securities and money market instruments with an investment grade credit rating, sovereign debt issued by developed countries.
- 75% for equities issued by large capitalisations whose registered office is located in "emerging" countries, equities issued by small and medium capitalisations, debt securities and money market instruments with a high yield credit rating and sovereign debt issued by "emerging" countries.
The Investment Manager may include positions in the Fund that, based on third-party data or screens, appear to fail the above criteria, where the Investment Manager believes that the third- party data may be insufficient or inaccurate.
The Investment Manager may consider that the data is insufficient or inaccurate if, for example, the third-party data provider research is historic, vague, based on out of date sources, or the investment manager has other information to make them doubt the accuracy of the research.
If the Investment Manager wishes to challenge the third-party data, then the challenge is presented to a cross-functional ESG Oversight Committee who must sign off on the “override” of the third-party data.
If a third party data provider does not provide research on a specific issuer or excluded activity, the Investment Manager may invest if, through its own research, it is satisfied that the issuer is not involved in the excluded activity.
JHI has chosen MSCI’s as its primary data source for ESG (Environmental, Social and Governance) research.
Where coverage gaps are identified, specialist ESG Data vendors or inhouse research may be used to complement the ESG research. This ensures helps ensure that consistent data and methodologies are used given an ESG measure per security type and hence can be compared correctly in the portfolio construction process.
The JHI Responsible Investment Policy, which incorporates JHI’s Sustainability Risk Policy, sets out the firmwide approach to ESG Integration Principles, including JHI’s Responsible Investment Principles for long-term investment success, our approaches to Stewardship and Engagement and Baseline Exclusions applied to investee companies.