Several of the company’s funds make sustainable investments in accordance with Article 2.17 of the SFDR.

A sustainable investment, as defined in Article 2.17 of the SFDR, is an investment in an economic activity that contributes to an environmental or social objective, provided that the investment does not cause significant harm to any of these objectives and that the investee follows good governance practices. Simplicity applies uniform criteria to determine whether an investment qualifies as a sustainable investment in the funds.

Contribution to Environmental and Social Objectives

The company has set thresholds to determine whether an investment makes a meaningful contribution to an environmental or social objective. At least one of the criteria listed below must be met. Depending on the nature of the funds, some criteria may be more or less applicable.

Contribution to the EU Taxonomy Environmental Objectives. Refers to investments in companies where at least 10% of the company’s revenues are reported or estimated as environmentally sustainable under the EU Taxonomy Regulation.

Contribution to the UN Sustainable Development Goals. Refers to investments in companies where at least 10% of the company’s revenue comes from activities that are considered to contribute to one or more of the UN’s 17 Sustainable Development Goals.

Contribution to the Paris Agreement and the UN Global Compact. Refers to investments in companies with climate targets verified by the Science Based Targets initiative (SBTi) and that are signatories to the UN Global Compact. These investments support UN Sustainable Development Goal 13 (Climate Action) and contribute to achieving the climate targets of the Paris Agreement, while also promoting responsible business practices.

Specific Securities with Sustainability Related Objectives. Refers to investments in green, social, sustainable, and sustainability-linked bonds. In the case of green and social bonds, the proceeds are specifically allocated to projects expected to generate positive environmental or social impacts. Sustainability-linked and sustainable bonds are linked to different sustainability objectives.

Indirectly Through Funds with Sustainable Investments. Refers to the share of sustainable investments held in other funds.

Do No Significant Harm

To ensure that Simplicity’s sustainable investments do not cause significant harm to any environmental or social objective, principal adverse impact indicators (PAI factors) are assessed using two main approaches: exclusion and norm-based screening. Investments that meet Simplicity’s defined thresholds for exclusion and norm-based screening are considered to comply with the “do no significant harm” criterion.

As a first step, Simplicity implements its exclusion criteria to remove companies deemed to have particularly negative characteristics from the funds. The funds exclude fossil fuels (PAI factor 1.4), companies with more than 25% of energy production based on fossil fuels (PAI factor 1.5), and controversial weapons (PAI factor 1.14). Additional types of activities are also excluded, although these are not directly linked to any specific PAI factor.

Norm-based screening is used to identify potential violations of international standards, 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). Simplicity’s funds do not invest in companies that systematically breach international norms and conventions without a demonstrated willingness to change (PAI factor 1.10).

Other PAI factors are assessed based on both the likelihood of a negative impact occurring and its potential severity. Substantial negative impacts associated with these PAI factors may lead the company to conclude that an investment does not comply with the “do no significant harm” criterion, even in cases where no specific thresholds have been set for these factors.

Good Governance Practices

The company applies norm-based screening to ensure that good governance practices are met. Simplicity expects companies, at a minimum, to comply with laws and international standards and conventions, such as the UN Global Compact, the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines for Multinational Enterprises. Companies are also expected to maintain an appropriate level of performance regarding other environmental, social, and governance-related incidents. All holdings in Simplicity’s funds are regularly screened to verify that no violations have occurred.