Status under the EU Sustainable Finance Disclosure Regulation (SFDR)

B. No Sustainable Investment Objective

This financial product promotes environmental or social characteristics and whilst it does not have as its objective a sustainable investment, it will have a minimum proportion of 5% of sustainable investments with a social objective and an environmental objective in economic activities that do not qualify as environmentally sustainable under the EU Taxonomy.

The Investment Manager uses a pass/fail test meaning that each sustainable investment must meet all three of the requirements below:

1. based on revenue mapping to UN Sustainable Development Goals or having a carbon emissions target approved by the Science Based Targets initiative (SBTi), it contributes to an environmental or social objective;
2. it does not cause significant harm to any environmental or social sustainable investment objective; and
3. it follows good governance practices.

This Fund invests a minimum of 5% of its deployed capital in sustainable investments in pursuit of its investment objective. All sustainable investments will be assessed by the Investment Manager to comply with its sustainable investment methodology.

The sustainable investments held by the Fund may contribute to addressing a range of environmental and/or social issues set out in the UN Sustainable Development Goals. An investment will be determined to make a positive contribution to an environmental or social objective where its business activity or practices positively contribute to environmental and/or social objectives.

Sustainable investments meet the do no significant harm requirements, as defined by applicable law and regulation. Investments considered to be causing significant harm do not qualify as sustainable investments. The Investment Manager identifies investments which negatively impact sustainability factors and cause significant harm by using third party data and/or analysis, including the MSCI ESG Controversies methodology.

The Investment Manager uses third-party data and/or proprietary analysis, including the MSCI ESG Controversies methodology, to assess the principal adverse impacts on sustainability factors as set out in table 1 of Annex I of the Commission Delegated Regulation (EU) 2022/1288 as amended from time to time. Investments considered to have negatively impacted sustainability factors and cause significant harm are not considered as sustainable investments.

The MSCI ESG Controversies methodology aligns with certain principal adverse indicators to create specific exclusions. Whilst the principal adverse indicators do not provide specific thresholds for harm they can be leveraged in identifying potentially the most significant harm. This framework is subject to ongoing review, particularly as the availability, and quality, of the data evolves.

The Investment Manager uses third-party data and/or proprietary analysis, including the MSCI ESG Controversies methodology, to assess alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. Investments considered to have violated these principles are not considered as sustainable investments. This framework is subject to ongoing review, particularly as the availability, and quality, of the data evolves.

C. Environmental or social characteristics of the financial product

The Fund promotes 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 characteristics.

In addition, the Fund invests a minimum of 5% of its deployed capital in sustainable investments. Deployed capital for the purpose of this pre-contractual disclosure is defined as the combined net value of single stock exposures and market value of index derivatives, instruments held for the purposes of efficient portfolio management, cash and cash equivalents.

D. Investment Strategy

This Fund seeks a positive absolute return through global equity markets and specifically through a majority investment in the UK.

The binding elements of the investment strategy described below are implemented as exclusionary screens on the entire long position, both core (long-term, fundamentally driven positions) and tactical (short-term, trading oriented positions) long positions which 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 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 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 Investment Manager uses third-party data and/or analysis, including the MSCI ESG Controversies methodology, to assess good governance practices of the investee companies. Accordingly, an MSCI ESG Rating of BB or higher generally indicates good governance. 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 10% of the deployed capital of the financial product is used to meet the environmental or social characteristics promoted by the financial product. Generally, the expected range would be between 10 – 50% of the deployed capital, as both core (long-term, fundamentally driven positions) and tactical (short-term, trading oriented positions) long investment allocation that promotes sustainable characteristics will vary across economic and stock market cycles.

Other assets, which are not used to meet the environmental or social characteristics, may include cash or cash equivalents, instruments held for the purposes of efficient portfolio management, short term tactical positions, short equity positions or 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:

• Overall Global Compact Compliance Status of the entire long position (consisting of both the core and tactical long positions)
• ESG exclusionary screens applied to the core long book – see “G. Methodologies for environmental or social characteristics” 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 its entire long position, both core (long-term, fundamentally driven positions) and tactical (short-term, trading oriented positions) long positions 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 its entire long position, both core (long-term, fundamentally driven positions) and tactical (short-term, trading oriented positions) long positions 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 thermal coal extraction, shale energy extraction, oil sands extraction, or arctic oil and gas drilling or exploration. Issuers are also excluded if they are deemed to have failed to comply with the UN Global Compact Principles (which cover matters including human rights, labour, corruption, and environmental pollution).

The Investment Manager applies screens only to its core long positions to exclude ESG laggards.

The Investment Manager carries out its review from an ESG perspective (i.e. ‘extra-financial analysis’) on at least 90% of its entire long position, both core (long-term, fundamentally driven positions) and tactical (short-term, trading oriented positions) long positions.
Further, the Fund holds a minimum of 5% of its deployed capital in sustainable investments. The Investment Manager uses a pass/fail test meaning that each holding must meet all three of the requirements below:

1. based on revenue mapping to UN Sustainable Development Goals or having a carbon emissions target approved by the Science Based Targets initiative (SBTi), it contributes to an environmental or social objective;
2. it does not cause significant harm to any environmental or social sustainable investment objective; and
3. it follows good governance practices.

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 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.

H. Data sources and processing

The Fund has chosen MSCI 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 under the ‘ESG Resource Library’ 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)
PAIs are not considered for this product.

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