SFDR article 8

Detailed disclosure of services promoting environmental and social characteristics (according to SFDR Art. 8) – International Sustainable Model Portfolio Service.

The financial service holds investment that align to LGT Wealth Management's sustainable investment philosophy, which encompasses four sustainable investment pillars "healthcare and societal wellbeing", "financial inclusion and education", "circular economy and resources" and "climate and environmental action".

The characteristics promoted by the financial service consist of fixed income and equity holdings with a best-in-class approach to sustainability. To ensure alignment to a best-in-class approach, the framework for this product assesses the sustainability of an investment from three key perspectives: intentionality, integration and impact.

Intentionality: we want to ensure the mission behind the allocation of capital aligns with our sustainable investment philosophy. We implement a best-in-class approach, and look to invest in sustainable leaders, as well as companies delivering impactful solutions to our world's environmental and social challenges.

Integration: we look to understand the environmental, social and governance practices of businesses. We do this by using the LGT Wealth Management Sustainability Rating tool. This helps us understand how integrated the ESG factors are within a company's operations and strategy.

Impact: many of the product's holdings look to deliver positive impact, and to quantify the impact generated. These impact metrics enable investors to understand, at holding level, the extent to which capital is being invested for social and environmental good and include metrics such as waste recycled, water recycled, renewable energy generated, carbon emissions saved, social houses funded, and access to clean water or education.

The service also excludes exposure to certain industries tobacco, oil majors, as well as LGT Group controversial weapons and thermal coal exclusions).

All holdings within the portfolio (excluding the neutral assets) align to one or more of LGT Wealth Management's four sustainable investment pillars: "healthcare and societal wellbeing", "financial inclusion and education", "circular economy and resources" and "climate and environmental action". This assessment is made through analysis of the targeted themes and exposures of the investments, or the alignment of the direct investment. Some of the investments are categorised as impact investments, in the case that the holdings are quantifying the impact generated, e.g. amount of renewable energy generated, water recycled, waste recycled.

The sustainability indicators used to measure the attainment of the environmental or social characteristics promoted by the product are applied sector specific from the following sets of indicators:

  1. Corporate: environmental (carbon emissions, carbon transition, water stress, biodiversity and land use, waste management), social (labour conditions, human rights, product safety, health & safety) and governance (board independence and expertise, compensation policy, ownership structure, accounting practices, anticompetitive practices, business ethics)
  2. Sovereign: environmental (air quality, agriculture, biodiversity and resources, water/waste/energy, impact on climate change, multilateral environmental treaties), social (standard of living, health, education, equality, employment and labour rights, human rights), governance (political systems and rights, civil rights and press freedom, stability and security, competitiveness and innovation, corruption and business climate, multilateral treaties, international sanctions).

The investment strategy is focused on the investment objective of this financial product: positive contribution to a sustainable future – for the environment, society and the economy. Ecological, social and economic sustainability have the same importance in the investment strategy of this financial product. We believe this reflects that for businesses and governments, these three factors are very closely intertwined, and will continue to be so in the future.

The binding elements of the investment strategy used to select the investments are 1) adherence to the exclusions as previously mentioned (2) alignment to the LGT Wealth Management sustainability framework as per the intentionality, integration and impact assessment, utilising the LGT Wealth Management Sustainability Rating to assess this.

All holdings in the portfolios (both direct investments and collective investments, on a look through) are assessed on a quarterly basis, systematically. The holdings are assessed to understand the sustainable characteristics (ESG and ESG controversies) each quarter in order to capture any changes that occur, and to conduct fresh ESG analysis for new holdings. We utilise LGT Wealth Management's proprietary sustainability rating tool for this assessment.

The policy to assess good governance practices is to apply the governance-related sustainability indicators to every corporate investment (fixed income and equity):

1) sound management structures are checked through metrics such as board independence and ownership structure;

2) employee relations are checked via corporate behaviour;

3) remuneration issues are checked via compensation policy;

4) tax compliance issues are checked via tax transparency and accounting practices;

To find further details on the investment strategy please click here

All investments in the financial service used to attain the environmental or social characteristics promoted by the financial service are in accordance with the binding elements of the investment strategy (i.e. clear intentional allocation of capital to sustainable businesses, integration: best in class approach to ESG, if impact, measuring it), excluding "neutral assets". For a medium risk product denominated in GBP, this equates to 91.5%. "Neutral assets" include G7 government debt which we do not apply a sustainable assessment to, and are used to manage volatility of the overall product. The macroeconomic asset allocation of the product is aligned to LGT Wealth Management's investment house view, which is assessed dynamically on a monthly basis.

Indicators for adverse impacts on sustainability factors taken into account are the same that are taken into account for assessing positive impact - with the logical differentiation that they are scoring in negative territory. We consider for instance the following non-exhaustive list of adverse impact indicators: GHG emission (Scope 1, Scope 2, and Total), exposure to companies active in the fossil fuel sector, energy consumption, board gender diversity and exposure to controversial weapons.

Potential investors can see here for the precontractual disclosure for financial products referred to as Article 8 and here for the financial products referred to as Article 6. Clients invested in the iSMPS models can see the ongoing periodic disclosure reporting here.

Further information can be found on the website.

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