At Simplicity, responsible invesments and sustainability are important parts of our asset management.

Our work as responsible asset managers
In Simplicity’s funds, we choose not to invest in companies that produce or sell cluster munition, anti-personnel mines, chemical and biological weapons and nuclear weapons. All of our fixed income funds together with the majority of our equity funds have in addition to these industries chosen to exclude companies that produce or sell alcohol, tobacco, pornography, weapons and companies that provide commercial gambling services. Sometimes it can be difficult to draw a line between what’s ok and what’s not. An example of this may be a retail chain where the stores sell many different items, some of which belong to the categories of products we choose to exclude, such as cigarettes or beer. It can also be about which TV shows you can access in a particular channel range from a media company. In these cases, instead, an accepted share of the underlying company’s turnover from the product is acceptable. This is set at 5% of the company’s sales. In order to combat global climate change, all of our funds excludes companies that exploits fossil fuels. Our fixed income funds also invests in Green Bonds, which are bonds specifically earmarked to be used for climate and environmental projects.

We want companies to conduct their business in line with international standards and conventions on environment, human rights, working conditions and business ethics such as the UN Global Compact or the OECD principles for multinational companies. To ensure that, all fund portfolios are subject to continuous reviews by the consultant group Sustainalytics. In addition to our own selection process to sort out those companies that do not meet the ethical criteria we set, we also want the companies we invest in to conduct their business responsibly, regardless of the industry in which they operate. If we get an indication that a company in our portfolios has violated international conventions, we will initiate a dialogue in order to influence the company in a more sustainable direction. The responses and actions communicated back will then become part of the basis of the decision-making process if we are to remain in the company or whether it will be excluded from the portfolio.

Simplicity is a signatory of the UNPRI, UN´s directive for responsible investments. UNPRI works to increase the understanding of responsible and sustainable investments. The foundation of UNPRI are six non-binding principles that encorporates what is expected of the signatories. In implementing them, signatories contribute to developing a more sustainable global financial system. Globally there are more than 1750 signatories from over 50 countries.

UNPRIS:s six principles for responsible investments
Principle 1. We will incorporate ESG issues into investment analysis and decision-making processes.
Principle 2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
Principle 3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
Principle 4. We will promote acceptance and implementation of the principles within the investment industry.
Principle 5. We will work together to enhance our effectiveness in implementing the principles.
Principle 6. We will each year report on our activities and progress towards implementing the principles.

Company Dialogues
Whenever we receive indications that there is a risk of breaches of the UN Global Compacts principles, we act. As part of our ongoing sustainability initiative we reach out to companies that, either according to our sustainability consultants Sustainalytics, media or other organisations, are in breach of the UN Global Compact principles. For us it is important to verify the information and to inititate a dialogue with the company concerned. At this point, most companies are able to describe the incident and also the cause of the incident. In addition, the majority of the companies are able to give in-depth information regarding proactive measures taken to combat the recurrance of such incidents. If the incident is not of a recurring nature, and the affected company have taken clear measures to combat the issue, we can most times write off the case. However, if the nature of the incident is recurring, and the affected company shows clear flaws with regards to the UN Global Compact principles in combination with an unwillingness to change, we will ultimately sell our holdings.

Our starting point is always that we will be able to keep the companies in our portfolios after our dialogues have helped the companies develop in a more sustainable direction.

In our work with responsible investments we collaborate with consultant group Sustainalytics through employing their service Global Ethical Standard. This service aims to identify companies that conduts its business in conflict with internationl norms and standards regarding the environment, human rights, labour laws and corruption, no matter where in the world the company conducts its business. The screening and analysis of companies is conducted under the UN Global Compact framework, but also encompases the guidelines stipulated by UN PRI. Sustainalytics expertise in the area of responsible investments and breadth regarding the monitoring of international companies enables continuous control of all our holdings.

Exclusion method
We have chosen not to invest in companies that according to Sustainalytics analysis systematically or extensively, without indicating a will to change, violates the principles regarding the environment, human rights, labour laws and corruption as stipulated by the UN Global Compact framework.

Simplicity has also joined SWESIF (Sweden’s Sustainable Investment Forum) and their sustainability profile. SWESIF is an independent network forum for sustainable investment organizations in Sweden. In the sustainability profile, fund companies indicate the sustainability criterias that are included in the management of a fund, which facilitates comparisons between different funds for investors. The decision to accede to SWESIF is based on our continued work towards increased integration of sustainability and responsibility in our investment process.

Copyright Simplicity AB 2023