Our work as a responsible asset manager

At Simplicity, our investment philosophy is to invest in sustainable and well-managed companies, which we believe is fundamental for creating strong risk-adjusted returns for our clients. A central element of this is ensuring that companies operate in a responsible and sustainable way. Our commitment to responsible investing is reflected in our fund management, discretionary portfolio management, and investment advisory services.

The board of directors at Simplicity has adopted a Policy for Responsible Investments, which includes a policy for integrating sustainability risks, a due diligence policy addressing principal adverse impacts on sustainability factors, and a policy for assessing how investee companies adhere to good governance practices. The company has also established an Engagement Policy. For the fund operations, these guidelines serve as both guidance and minimum requirements for how sustainability matters are to be incorporated into the investment process. Individual funds may apply more extensive, fund-specific requirements.

For discretionary mandates and investment advisory services, shareholder engagement, the integration of sustainability risks, and the consideration of adverse impacts on sustainable development are regulated in the client agreement, which is based on the client’s stated sustainability preferences. This may, for example, mean that certain guidelines set out in the policies mentioned above are applied to individual discretionary mandates.

Identification of principal adverse impacts on sustainable development

Investments in fund units expose investors to the underlying assets and, consequently, to the activities of the underlying companies. Any adverse impacts on sustainable development are therefore linked to the operations of these underlying companies. For this reason, a central element in integrating sustainability risks is to identify the potential adverse sustainability impacts that an investment may entail. Simplicity’s analysis is based on an assessment of the risks and opportunities associated with a specific industry, as well as the risks and opportunities relevant to each individual company. The risks identified for individual companies are evaluated in relation to their significance for the company’s overall operations, the likelihood of occurrence, potential financial consequences, and other relevant factors. Sustainability risks may vary between funds. However, as the investment focus for Simplicity is primarily on Nordic companies, the Company has determined that the most material, general sustainability risks at the fund level relate to insufficient climate action, social conditions and labour issues within supply chains, and shortcomings 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, several material factors that may affect the financial performance of an investment are evaluated at each investment decision. The analysis integrates environmental, social, and governance (ESG) factors to better manage sustainability-related risks and opportunities. The integration of sustainability risks in individual mandates is also guided by the choices made by each client within the framework of their sustainability preferences.

For fund management, the integration of sustainability risks is carried out through the following methods: norm-based screening, engagement, exclusion, and inclusion.

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

Norm-based screening 

Investments in companies that do not operate responsibly constitute a sustainability risk. Norm-based screening is used to identify potential violations of international norms, such as the ILO Conventions, 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 types of environmental, social, and governance (ESG) incidents. All funds are screened on a regular basis.

If any company held by Simplicity’s funds is found to have been involved in an incident or violation, the Company shall take action. Such actions may include initiating an engagement dialogue to understand the company’s perspective on what occurred, what measures have been taken, and what actions are planned to address the issue. The dialogue and other information collected by the Company shall form the basis for decisions on whether the company remains investable or whether the holding should be divested. Simplicity’s funds shall not invest in companies that systematically violate international norms and conventions without demonstrated willingness to change and/or without having compensated third parties who have suffered verifiable serious harm as a result of the violation.

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 categories: reactive and proactive.

Reactive dialogues are initiated in response to an incident or similar event. The Company’s portfolio managers shall initiate a dialogue if a portfolio company is deemed to have breached the international norms and conventions mentioned above..

The Company’s portfolio managers may also initiate proactive dialogues. This can be done individually or together with other investors, depending on what is considered most appropriate in each case. When prioritizing engagement dialogues, managers shall primarily consider the likelihood of achieving positive change and whether the company is exposed to elevated sustainability risks. The objective of a proactive dialogue may, for example, be to minimize sustainability risks by encouraging the company to adopt science-based climate targets verified by the Science Based Targets initiative or to join the UN Global Compact. This forms part of the work to achieve the Company’s own goals as described above.

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)

The Company has identified a number of sectors where sustainability risks are considered so significant that fund investments in these sectors are fully excluded. The funds exclude investments in the following sectors: tobacco, cannabis, alcohol, pornography, commercial gambling services, weapons, fossil fuels, and GICS sector 10. In addition, certain forms of energy production based on fossil fuels and nuclear power are also excluded. Furthermore, norm-based exclusions are applied to companies subject to applicable EU or UN sanctions. To determine whether a company falls within any of the above sectors or activities, thresholds established by the Company are used. Individual funds may apply stricter criteria.

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

We include (inclusion)

Fund management integrates sustainability risks by including assets that, by their nature, contribute to a more sustainable society. This includes both companies whose activities promote a sustainable transition and securities with specific sustainability-related characteristics. The Company’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.