Our work as a responsible asset manager

At Simplicity, our investment philosophy is to focus on sustainable and well-managed companies, which we believe forms an important foundation for delivering strong risk-adjusted returns to our clients. A central part of this philosophy is ensuring that companies conduct their business responsibly and sustainably. Our responsible investing practices are integrated across our fund management, discretionary portfolio management, and investment advisory services.

The board of directors at Simplicity has established a Policy for Responsible Investments. This includes guidelines for integrating sustainability risks, a due diligence framework to address principal adverse impacts on sustainability factors, and a policy for assessing how investee companies adhere to good governance practices.The company has also adopted an Ownership Engagement Policy. For the funds these guidelines serve as guidance and set minimum standards for incorporating sustainability considerations into the investment process. Individual funds may apply additional, fund-specific requirements.

For discretionary mandates and investment advisory services, shareholder engagement, the integration of sustainability risks, and potential adverse impacts on sustainable development are addressed through the client agreement. This agreement reflects the client’s sustainability preferences and may, for example, apply specific guidelines from the policies mentioned above to individual discretionary mandates

Identification of principal adverse impacts on sustainable development

Investments in fund units expose investors to the underlying assets and, in turn, to the activities of the underlying companies. Any potential adverse impact for sustainable development is therefore linked to these companies’ operations. For this reason, a fundamental step in integrating sustainability risks involves identifying the potential adverse impacts for a sustainable development associated with an investment. Simplicity’s analysis begins by evaluating risks and opportunities at both the sector and company level. Company-specific risks are assessed based on their significance to the company’s overall operations, the likelihood of occurrence, and potential financial consequences. While sustainability risks may vary between funds, most of Simplicity’s investments are concentrated in Nordic companies, where the primary sustainability risks at the fund level have been identified as insufficient climate action, social and labor conditions in supply chains, and weaknesses in governance practices.

Sustainability-related disclosures 

Here you will find Simplicity AB’s most recent statement regarding principal adverse impacts on sustainability factors.

Measures to manage sustainability risks

Simplicity takes sustainability risks into account in all managed funds, discretionary mandates, and investment advisory services. The company believes that this approach supports sustainable, long-term value creation.

In discretionary portfolio management, each investment decision is evaluated against a range of material factors that may affect the financial performance of that investment. The analysis considers environmental, social, and governance factors to better manage sustainability-related risks and opportunities. In individual mandates, the integration of sustainability risks is guided by the client’s sustainability preferences.*

For fund management, sustainability risks are integrated through measures such as norm-based screening, engagement, exclusion, and inclusion.

More information on how each fund manages sustainability risks can be found in the respective funds’ information brochure.

Norm-based screening 

Investments in companies that do not operate responsibly constitute a sustainability risk. Simplicity therefore uses norm-based screening to identify potential violations of international standards, such as the UN Global Compact, the OECD Guidelines for Multinational Enterprises, and the UN Guiding Principles on Business and Human Rights (UNGPs), as well as other environmental, social, and governance-related incidents. All funds are screened on a regular basis.

If any company held by Simplicity’s funds is involved in an incident or violation, Simplicity will take appropriate action. Such measures may include engaging with the company to understand its perspective on the incident and the actions it has taken or intends to take to address the issue. The insights gained from this dialogue form the basis for deciding on further actions, which may include divesting the holding if the measures taken are considered insufficient. Simplicity’s funds will not invest in companies that systematically breach international standards and conventions without demonstrating a willingness to change.

We engage (engagement)

To promote and encourage companies to adopt more sustainable practices, engagement dialogues can be employed. These dialogues are generally divided into two types: reactive and proactive.

Reactive dialogues are initiated in response to an incident or similar event. The company’s portfolio managers will take the initiative to engage in dialogue whenever a company in which a fund has invested is found to have breached the international norms and conventions outlined above.

Portfolio managers may also initiate proactive dialogues, either individually or in collaboration with other investors, depending on what is most appropriate in each situation. In prioritizing these efforts, managers focus on where they are most likely to achieve a positive impact, particularly with companies facing elevated sustainability risks. The goal of a proactive dialogue might include encouraging a company to adopt climate targets verified by the Science Based Targets initiative or to join the UN Global Compact. Such initiatives are an integral part of the company’s ongoing work to meet its broader sustainability objectives.

As part of its engagement efforts, Simplicity has signed the Business Benchmark on Farm Animal Welfare (BBFAW) – Global Investor Collaboration. BBFAW works to enhance measurability, improve conditions, and increase transparency within the food industry and its value chains. Through their engagement, pressure is applied on companies within the sector to operate in a responsible and ethical manner. More information about BBFAW can be found on their website: www.bbfaw.com. Simplicity has also joined Tobacco Free Portfolios, an initiative dedicated to reducing financial exposure to the tobacco industry, with the overarching vision of a world entirely free from tobacco. Further information about Tobacco Free Portfolios is available on their website: www.tobaccofreeportfolios.org.

Ownership Policy

We exclude (exclusion)

Simplicity has identified a number of sectors where the sustainability risk is deemed significant enough to warrant the full exclusion of fund investments in these sectors. The excluded sectors are tobacco, cannabis, alcohol, pornography, commercial gambling services, weapons, fossil fuels, and GICS sector 10. The funds also have specific requirements for energy production using fossil fuels and nuclear power. In addition, Simplicity applies norm-based exclusions to companies subject to EU or UN sanctions. Thresholds are applied to determine whether a company is associated with any of the sectors or activities mentioned. Individual funds may impose stricter requirements.

More detailed information on Simplicity’s exclusion criteria can be found here: Exclusion Criteria

We include (inclusion)

Simplicity’s fund management integrates sustainability risks by selecting assets that inherently contribute to a more sustainable society. This may involve either companies whose operations support a sustainable transition or specific securities with characteristics aligned with sustainability objectives. Simplicity’s funds primarily apply the following inclusion criteria:

Promote the Paris Agreement. Simplicity aims for all fund holdings to have climate goals verified by the Science Based Targets initiative (SBTi) by 2040. Learn more here: Simplicity’s sustainability targets.

Promote responsible business practices. Simplicity aims for all investments through its funds to be aligned with the UN Global Compact by 2040. Learn more here: Simplicity’s sustainability targets.

Specific securities. Green, social, sustainable, and sustainability-linked bonds are subject to specific terms requiring that the capital raised is allocated to projects expected to generate positive outcomes in one of these areas. At least five percent of the capital in Simplicity’s fixed-income funds shall be invested in one or more of these bonds.

Sustainable investments under Article 2.17 of the Disclosure Regulation. Several of Simplicity’s funds make sustainable investments in line with Article 2.17 of the Disclosure Regulation. The criteria used to determine whether an investment qualifies as sustainable are outlined here: Sustainable investments.

Sustainability Committee

Simplicity has a Sustainability Committee that meets regularly to discuss ongoing matters. The committee includes all fund managers, the CEO, the Head of Sustainability, and the company’s Risk Manager. It provides guidance on handling specific issues,  incidents and exclucions, overseeing engagement activities, and addressing other related topics.

UNPRI

Simplicity is a signatory of the UN-supported Principles for Responsible Investment (UNPRI), which aims to enhance understanding and practice of responsible and sustainable investing. The framework is built on six voluntary principles, outlining what is expected from signatory organizations.

The six PRI principles for responsible investment are:

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

More information about UNPRI and their work can be found on their website: www.unpri.org.

SWESIF 

Simplicity is also a member of SWESIF (the Swedish Sustainable Investment Forum) and participates in its Sustainability Profile. SWESIF is an independent network for organizations engaged in sustainable investing in Sweden. The Sustainability Profile allows fund management companies to disclose the sustainability criteria applied in their fund management, making it easier for investors to compare different funds. Joining SWESIF reflects our ongoing commitment to further integrating sustainability and responsible practices throughout our investment process.

21-Point Initiative 

Simplicity participates in the 21-Point Initiative, which requires Nordic high-yield companies to respond to a series of sustainability-related questions.

Code of conduct for responsible entrepreneurship and international standards Description of the Principal Adverse Impacts of Investment Advice on Sustainability Factors

Simplicity is committed to operating as a responsible company. The firm has adopted Ethical Guidelines that govern how ethical matters are managed within the organization. In addition, Simplicity adheres to the ten principles of the UN Global Compact and, through its products as well as its broader operations, contributes to achieving the goals of the Paris Agreement.

Statement on Principal Adverse Impacts of Investment Advice on Sustainability Factors

When providing investment advice, the consideration of adverse impacts on sustainability factors is governed by the client agreement, which reflects the client’s expressed sustainability preferences.

Principal adverse impacts on sustainability factors refer to the ways in which a company’s operations may negatively affect the broader environment, labor conditions, and social standards. For example, a company’s activities may generate carbon emissions, impact biodiversity, or violate the OECD Guidelines for Multinational Enterprises. Clients who wish to avoid such negative impacts can instruct their financial advisor to take these factors into account when providing investment guidance.

Currently, it is not mandatory for all financial advisors and investment product providers to disclose information on principal adverse impacts or how they have been addressed for all products. As a result, this information may not always be available in the market.

Within the scope of our discretionary portfolio management and investment advisory services, we address principal adverse impacts by excluding companies operating in the fossil fuel sector and/or those exposed to controversial weapons. As data availability improves and EU sustainability regulations evolve, our list of selectable principal adverse impacts (PAI) will continue to expand.