Status under the EU Sustainable Finance Disclosure Regulation (SFDR)

B. No Sustainable Investment Objective

This financial product promotes environmental or social characteristics but does not have as its objective sustainable investment.

C. Environmental or social characteristics of the financial product

The Fund promotes climate change mitigation, avoiding issuers with a high carbon intensity and which do not have a credible transition strategy based on the Investment Manager’s proprietary methodology nor meet the Investment Manager’s alternative criteria on engagement or ESG Rating, and support for the UNGC Principles (which cover matters including human rights, labour, corruption, and environmental pollution). The Fund also seeks to avoid investments in certain activities with the potential to cause harm to human health and wellbeing by applying binding exclusions.

The Fund does not use a reference benchmark to attain its environmental or social characteristic.

D. Investment Strategy

This Fund seeks a combination of capital and income returns through investment in pan European smaller companies equity markets.

The binding elements of the investment strategy described below are implemented as exclusionary screens which are coded into the compliance module of the Investment Manager’s order management system utilising a third-party data provider on an ongoing basis.

The exclusionary screens are implemented on both a pre and post trade basis enabling the sub investment advisor 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.

The companies in which investments are made are assessed by the Investment Manager to follow good governance practices.

The good governance practices of investee companies are assessed prior to making an investment and periodically thereafter in accordance with the JHI Responsible Investment Policy, which incorporates our Sustainability Risk Policy (“Policy”).

The Policy sets minimum standards against which investee companies will be assessed and monitored by the Investment Manager prior to making an investment and on an ongoing basis. Such standards may include, but are not limited to: sound management structures, employee relations, remuneration of staff and tax compliance.

The Policy can be found at www.janushenderson.com/esg-governance.

In addition, the Investment Manager is a signatory to the UN Principles for Responsible Investment (UNPRI). As a signatory, the good governance practices of investee companies are also assessed by having regard to the UNPRI principles prior to making an investment and periodically thereafter.

E. Proportion of investments

A minimum of 75% of the investments of the financial product are used to meet the environmental or social characteristics promoted by the financial product.

Other assets, which are not used to meet the environmental or social characteristics, may include cash or cash equivalents in addition to instruments held for the purposes of efficient portfolio management, e.g. temporary holdings of index derivatives.

F. Monitoring of environmental or social characteristics

The sustainability indicators used to measure the attainment of each of the environmental or social characteristics promoted by this financial product are:

• Carbon – Carbon Intensity Scope 1&2 - This represents the company's most recently reported or estimated Scope 1 + Scope 2 greenhouse gas emissions normalized by sales, which allows for comparison between companies of different sizes.
• Overall UNGC Compliance Status
• % issuers within the portfolio identified as having a credible transition strategy in accordance with the Investment Manager’s proprietary methodology or meets the Investment Manager’s alternative criteria on engagement or ESG Rating.
• ESG Exclusionary screens – see Section G below for details on the exclusions.
• Data Sourcing and Processing - as further described under Section H.

The Front Office Controls & Governance team provide ongoing assurance where required, that we can evidence investment products being managed in line with documented sustainability commitments where automated controls and/or 3rd party data are not available. Financial Risk review and challenge investment management in light of ESG-related risks, alongside traditional market risk metrics, and embed sustainability risk into the risk profiles. Investment Compliance implement exclusionary screening and monitor this on an ongoing basis in addition to elements of manual oversight where relevant.

G. Methodologies for environmental or social characteristics

The Investment Manager uses specific screens to help achieve some of the promoted characteristics. For example- to promote climate change mitigation, screens are applied to avoid investment in certain high carbon activities, and it is expected that this will result in the fund having a lower carbon profile. Another example is that to promote support for the UNGC Principles, screens are applied so that the Fund does not invest in issuers that are in breach of the UNGC Principles based on third party data and/or internal research.

The Investment Manager applies screens to exclude direct investment in issuers based on their involvement in certain activities. Specifically, issuers are excluded if they derive more than 10% of their revenue from oil sands extraction, arctic oil and gas, thermal coal extraction, or tobacco. Issuers are also excluded if they are deemed to have failed to comply with the UNGC Principles (which cover matters including human rights, labour, corruption, and environmental pollution).

The Fund also applies the Firmwide Exclusions Policy (see “Firmwide Exclusions” in the "JHI Responsible Investment Policy”), which includes controversial weapons.

The Investment Manager may invest in issuers with a high carbon intensity¹ (other than those excluded as described above) if it determines that such issuers have a credible transition strategy, based on its proprietary methodology described below or the Investment Manager’s alternative criteria on engagement or ESG Rating.

In accordance with the Investment Manager’s proprietary methodology, a company will only be considered as having a credible transition strategy if it has at least one of the following:

• a science-based emissions target or a verified commitment to adopt a science-based emissions target (approved or verified by SBT- https://sciencebasedtargets.org/ or equivalent); or
• a climate score of B or higher (score from CDP – https://www.cdp.net/en , or equivalent ); or
• 30% of future gross capital expenditure and/or research and development to sustainability aligned projects, in accordance with the Investment Manager’s methodologies.

If a company does not currently have a credible transition strategy in place, the Investment Manager may still invest if:

1. it believes that, through its engagement with the company, the company will adopt a science-based emissions target or carbon reduction goal*; or
2. it demonstrates superior ESG risk management by achieving an ESG rating of AA or higher (rating from MSCI – https://www.msci.com/, or equivalent).

^*If the company does not achieve a “pass” rating within 24 months, it will divest and screens will be applied to exclude the issuer.

Additional criteria may also be applied in assessing the validity of the transition strategy.

The Investment Manager may only invest in companies that would be excluded by the screens described above if the Investment Manager believes, based on its own research and as approved by its ESG Oversight Committee, that the third-party data used to apply the exclusions is 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.

¹High carbon intensity refers to the 10% of highest emitting companies in the Western Europe (INC UK) stocks below EUR11bn market cap and a lower bound of EUR1bn.

H. Data sources and processing

The Fund has chosen MSCI’s ESG Manager 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 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.

JHI has built a centralised proprietary research alignment process; The central research alignment process aligns data at three different levels:

1. Entity Level,
2. Position Level, and
3. Fund Level.

The research alignment and mapping capability is critical to JHI's ESG methodology, as we recognize a security could inherit the ESG information from the issuing legal entity, however, some ESG risks will be instrument specific.

JHI applies a series of Data Quality rules to ensure the integrity of the data being ingested into the central research alignment solution. JHI data that is not aligned correctly to the definition as provided by the data vendor is not ingested into the central cloud-based data warehouse and exceptions are raised. These exceptions are monitored and remediated by a central support team. Remediation includes challenging the data provider or internal operations supporting internally managed Systems of Records. Where appropriate the Data Owner responsible and accountable for the data is notified through the internal Data Governance process to resolve outstanding exceptions.

JHI receives weekly automated data feeds from external ESG Data vendors, which are ingested into a cloud-based data warehouse.

Some data used to support binding criteria as received from external providers may be estimated data. For positions not covered by the external data provider, proprietary research may be used. This could range from proprietary research alignment against the external data vendor to written confirmation from the issuing entity that it aligns to the binding criteria. The appropriateness of the evidence provided is assessed by an independent body at JHI.

I. Limitations to methodologies and data

Data coverage is directly driven by the coverage of the underlying ESG Data Provider.

JHI’s internal data structure provides sufficient flexibility to incorporate proprietary research or adapt evaluations to future requirements.

JHI is aware of data gaps in ESG Research for non-traditional asset classes compared to mainstream asset classes such as equities and debt instruments.

J. Due diligence

The JHI Responsible Investment Policy, which incorporates JHI’s Sustainability Risk Policy, sets out the firmwide approach to ESG Integration, including JHI’s Responsible Investment Principles for long-term investment success, our approaches to Stewardship and Engagement and Baseline Exclusions applied to investee companies. These exclusions are based on classifications provided by third-party data ESG data providers. This classification is subject to an investment research override in cases where sufficient evidence exists that the third-party field is not accurate or appropriate.

Each Investment desk completes their own due diligence processes ahead of making any investment decisions within their article 8 funds, using internal and external tools and research.

The Front Office Controls & Governance team provide ongoing assurance where required, that we can evidence investment products being managed in line with documented sustainability commitments where automated controls and/or 3rd party data are not available. Financial Risk review and challenge investment management in light of ESG-related risks, alongside traditional market risk metrics, and embed sustainability risk into the risk profiles. Investment Compliance ensure that ESG-related activities are managed in line with regulatory requirements and expectations and considered within our compliance framework.

K. Engagement Policies

In addition to the binding elements of the investment strategy described above, stewardship forms an integral and natural part of Janus Henderson’s long-term, active approach to investment management. Details of JHI’s approach to Engagement can be found in the 'ESG Resource Library’  published on the Janus Henderson website.

The Firm supports a number of stewardship codes and broader initiatives around the world and is a signatory to the UK Stewardship Code.

Janus Henderson has a Proxy Voting Committee, which is responsible for establishing positions on major voting issues and creating guidelines overseeing the voting process. The Committee is comprised of representatives of investments portfolio management, corporate governance, accounting, legal and compliance. Additionally, the Proxy Voting Committee is responsible for monitoring and resolving conflicts of interest with respect to proxy voting.

L. Designated Reference Benchmark

The Fund does not use a reference benchmark to attain its environmental or social characteristics.

Principal adverse impacts (PAIs)

As at the 3 December 2024, the Investment Manager considers the following principal adverse impacts on sustainability factors (“PAIs”) for this Fund:

Adverse Sustainability Indicator		Metric	How is PAI considered
Greenhouse gas emissions	GHG Emissions	Scope 1 GHG emissions	Exclusionary screens
		Scope 2 GHG emissions	Exclusionary screens
	Carbon footprint	Carbon footprint	Exclusionary screens
	GHG Intensity of investee companies	HG intensity of investee companies	Exclusionary screens
	Exposure to companies active in fossil fuel	Share of investments in companies active in the fossil fuel sector	Exclusionary screens
Social and employee matters	Violations of UNGC and OECD	Share of investments in investee companies that have been involved in violations of the UNGC principles or OECD Guidelines for Multinational Enterprises	Exclusionary screens
	Violations of UN Global Compact principles and Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises	Exposure to controversial weapons (anti-personnel mines, cluster munitions, chemical weapons and biological weapons)	Exclusionary screens

 

'Where the translated version of this disclosure text differs from the English version, the original English version prevails'