Principal adverse sustainability impacts statement

Summary

This principal adverse sustainability impacts statement relates to Qblue Balanced A/S.

Principal adverse sustainability impacts are considered across all our investment products, and integrated into our Sustainability, Engagement and Investment policies as described in the sections below. In brief, principal adverse sustainability impacts are identified and prioritized using both quantitative and qualitative measures. International treaties and standards play an important role in guiding our assessments along with our proprietary Sustainability Cube™ Score.

We are still in the process of collecting relevant data and indicators related to principal adverse impacts on sustainability factors. Relevant indicators will be published under section “Description of principal adverse impacts” when sufficient data have been collected.

Description of principal adverse impacts

Reporting of indicators related to principal adverse impacts on sustainability factors has not yet been released.

Description of policies on the identification and prioritization of principal adverse sustainability impacts

Related policy: Sustainability policy (current version approved March 3, 2021)

Identification of Principal Adverse Sustainability Impacts

In identifying principal adverse sustainability impacts, Qblue considers adverse impacts on a broad range of environmental, social and governance issues. The methodology used follows a three step procedure:

  • Identify material adverse sustainability impacts caused by material breaches of the international treaties and standards applied by Qblue in the areas of human rights, labor conditions, environment and bribery.
  • Identify industries or sub-sectors with unwanted inherent sustainability risks and severe principal adverse sustainability impacts where mitigation is deemed insurmountable.
  • Identify the measures in the Sustainability Cube™ Score associated with a principal adverse sustainability impact in all dimensions of sustainability. This includes a broad variety of different measures covering e.g., social standards, environmental standards, climate impact and governance issues. The methodology used in this area is quantitative.

All three methodologies described above comes with a certain margin of error. Step 1 and 2 focus on a relative limited number of companies with identified severe material adverse impacts, which is helpful in relation to dealing with these companies, but do not take hand of the larger number of companies with still material but not necessarily severe adverse impacts. This is handled in step 3 where a very large number of companies are scored based on quantifiable indicators and measures.

Even though a broad range of current and forward looking measures are used in order to identify not only realized adverse impacts, but also potential adverse impacts, the method comes with a certain margin of error, partly due to the fact that some green washing in company reported statements and goals are hard to avoid, partly due to the facts that data are often incomplete and noisy, and partly just because forecasting potential i.e. future adverse impacts comes with a certain risk margin.

Prioritization of Principal Adverse Sustainability Impacts

Qblue does take principal adverse sustainability impacts into consideration across all financial products managed. The adverse impacts identified in step 1 and 2 presented above has to be taken into consideration across all products managed, and integrated into the investment procedures for all products, in accordance with the decisions made by the Sustainability Committee regarding exclusions and engagement.

In relation to the adverse impacts identified under step 3, the Investment Committee is, for each financial product managed, responsible for deciding how to take these adverse impacts into consideration, and how to integrate this into the investment process for each product, depending of the type of product considered. The Sustainability Committee can in some cases decide to engage or exclude, based on information identified under step 3. In this case the decisions have to be taken into consideration across all products managed, and integrated into the investment procedures for all products.

In order to prioritize the effort regarding the large number of adverse sustainability impacts identified, Qblue takes into consideration two principles:

  • When considering the severity of an adverse impact, we give higher priority to companies with a multitude of adverse impacts in a certain area, than to companies with a single issue.
  • Regarding the prioritization between different indicators covering different areas of sustainability, the starting point is the weights, assigned by the Sustainability Committee to each area in the Sustainability Cube™.

Engagement policies

Related policy: Engagement policy (current version approved March 3, 2021)

Company Dialogue

Company dialogue is an important part of our sustainability framework. We believe that engagement is generally the best strategy for contributing to improving sustainability and responsible behaviour in companies. Therefore, Qblue engages in dialogue with a selected number of investee companies.

Criteria considered for selecting companies for engagement:

  • Importance of the sustainability issue in question likelihood of achieving a positive impact or improvement by engaging, and size of Qblue’s investment in the company.

In determining the importance of an issue in point 1, the extent to which the issue forms a sustainability risk and/or has a material adverse environmental or social impact is taken into account. In the recent years the areas of focus for company engagements has been (i) breaches of UN Global Compact principles in relation to environmental issues, human rights issues and labour rights issues (ii) carbon emissions and (iii) Tax Avoidance/lack of tax transparency.

The Sustainability Committee is responsible for:

  • Taking decisions on which companies to engage with evaluating the outcome of ongoing engagements/dialogues.
  • Deciding on themes for future engagements (e.g., high carbon emissions companies, severe breaches of UN Global Compact principles, poor gender equality standards, poor labour protection standards, and tax avoidance).
  • Deciding on the selection of outsourcing partners to conduct the engagements/dialogue reporting on the activities and outcomes of the company engagements/dialogue.

Voting in Investee Companies

As a general rule, Qblue intends to exercise its voting rights in investee companies.

The aim of Qblue is to protect and grow the value of investments managed by Qblue by ensuring that the portfolio companies diligently mitigate risks and have the lowest possible capital costs, by acting responsible, and at the same time encouraging companies to grow earnings by pursuing sustainable opportunities that support the goals of society and the global community. This forms the basis for the principles for exercising the voting rights. Proposals fostering long term sustainable growth in earnings, ensuring good corporate governance and mitigating adverse environmental or social impacts will in general be supported by Qblue in exercising voting rights.

Reference to adherence to responsible business conduct codes and internationally recognized standards

Our process for identifying principal adverse sustainability impacts involves material breaches of the United Nations Global Compact and/or OECD Guidelines for Multinational Enterprises.

The United Nations Global Compact is a principle-based framework promoting sustainable and socially responsible business in the area of human rights, labor, the environment and anti-corruption. The Global Compact principles lay a foundation for achieving the United Nations Sustainable Development Goals.

The OECD Guidelines for Multinational Enterprises are a set of recommendations addressed by governments on responsible business conduct for multinational enterprises. The Guidelines cover business ethics on a range of issues, including: employment, human rights, environment, information disclosure, combating bribery, consumer interests, competition, and taxation.

The OECD Guidelines and the UN Global Compact principles are based on complementary foundations. The Global Compact principles are general and broad. Their breadth and simplicity are part of their appeal. In many cases, the OECD Guidelines provide more detail. They also cover topics – e.g. taxation and competition — which are not addressed in the Global Compact’s ten principles.

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