DISLCAIMER: There is no guarantee that the investment objective of the Sub-Fund will be achieved and investment results may vary substantially over time.

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Summary:

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Following the adoption of the EU Sustainable Finance Disclosure Regulation, Ledbury SICAV Plc & its sub-fund, the Hanson Sustainable Income Fund (the “Sub-Fund” or “HSIF”), are required under EU regulation 2019/2088 to make certain sustainability related disclosures.

Ledbury SICAV plc has appointed Arlington Capital Limited (“Arlington”), which is authorised and regulated by the UK Financial Conduct Authority, as the investment manager of the Hanson Sustainable Income Fund.

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HSIF’s investment policy and sustainable objective is, and the Sub-Fund aims to, invest in companies which have embraced sustainability in the areas of Environment, Society & Governance and to support companies that have embraced this agenda. In summary, HSIF will support those businesses which are making a net positive contribution to sustainability and those which are undergoing rapid change. As a result, HSIF has a broad sustainable objective. In order to achieve this, each holding in the Sub-Fund should make a ‘net positive contribution to sustainability’. This is measured according to Arlington’s sustainable scoring system. This system is a series of 24 tests which quantitively measures a company’s sustainable output.

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The Sub-Fund measures the attainment of the sustainable investment objective annually through Arlington Capital’s Sustainable Scoring System. Each investment and therefore the fund overall must have a positive score out of a possible range of -24 to +24 to ensure that the Sub-Fund can make a net positive contribution to Sustainability. External benchmarks are not used.

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In summary, HSIF will support those businesses which are making a net positive contribution to sustainability and those which are undergoing rapid change. As a result, HSIF has a broad sustainable objective. In order to achieve this, each holding in the Sub-Fund should make a ‘net positive contribution to sustainability’. This is measured according to Arlington’s sustainable scoring system. This system is a series of 24 tests which quantitively measures a company’s sustainable output. The measuring system is holistic, with tests developed in the following areas: climate, resource efficiency, social, and governance, as well as areas of undesirable activities. The tests combine to form a score for each company which must be net positive, i.e., above zero, for the stock to be included in HSIF. The aim is that HSIF’s sustainable goals will be met if the portfolio as a whole will make a net contribution to sustainability based on these scores. 

During the due diligence phase, Arlington evaluates the ESG-related risks to identify any principal adverse risks that could damage a company’s operations and reputation, while also thoroughly analysing the operating history to highlight any ESG-related defaults and losses. Arlington’s sustainable scoring system is an ESG checklist to identify potential ESG-related issues and risks from a company. The checklist consists of a standard set of environmental, social and governance questions for all investments, regardless of sector. The system scores a company’s ESG / sustainable performance and the tests are scored qualitatively and quantitively using positive and negative factors. These are in the following areas: climate tests, resource efficiency tests, undesirable activity tests, social tests and governance tests.

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The main limitation to the data sources that have been identified is in the nonstandard nature of ESG reporting. During the due diligence phase, Arlington evaluates the ESG-related risks to identify any principal adverse risks that could damage a company’s operations and reputation, while also thoroughly analysing the operating history to highlight any ESG-related defaults and losses. Engagement is not part of the Sub-Fund’s sustainable investment objective. No index has been designated as a reference benchmark for the Sub-Fund. The Sub-Fund does not have a reduction in carbon emissions as an objective.

  

 

No significant harm to the sustainable investment objective:

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HSIF’s investment policy and sustainable objective is, and the Sub-Fund aims to, invest in companies which have embraced sustainability in the areas of Environment, Society & Governance and to support companies that have embraced this agenda. The Sub-Fund will generally invest in those businesses seeking to make a ‘net positive contribution to sustainability’, as assessed using Arlington Capital’s ESG scoring system.

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The ESG scoring system is applied to each investment annually which must have a net positive score to be included in the fund. This ensures that there is no significant harm to the sustainable investment objective. Article 39(a) requires the disclosure to also include information as to how the indicators for adverse impacts are taken into consideration:

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Table 1 of Annex 1:

Greenhouse gas emissions are taken in two ways by looking at if an investee company is reducing its overall carbon footprint and GHG emissions. In both cases the outcomes are positively scored if a company is reducing its emissions and negatively scored if they are increasing. Exposure to companies in the fossil fuel sector are also closely monitored and any investments from this sector attract an extra penalty on the scoring system.

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Share of non-renewable energy consumption and production is monitored in that we require investee companies to purchase more than 50% of their energy needs from renewable sources to gain a positive score. Specific energy consumption is not measured, but companies must make a commitment to become more energy efficient. Biodiversity is scored by looking at whether a company’s products or services directly contribute to improved biodiversity and or natural habitats in their operations. Water and waste factors are also taken into account.

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For social and employee matters the sustainable investment objective is not specifically aligned with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights. However, the UN Sustainable Development Goals, were adopted by the United Nations do form part of the ESG scoring system which is used. Specific factors the scoring system considers are a gender pay gap, board gender diversity and exposure to controversial weapons. The adverse sustainability indicators in Environmental, Social, Fossil fuels and Energy Efficiency are all considered by the scoring system.

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Table 2 of Annex 1:

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The table of additional climate set out in Table 2 of Annex 1 and other environmental related indicators are not measured using specific metrics by the scoring system beyond what is summarised above in the disclosure for Table 1.

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Table 3 of Annex 1:

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The additional indicators for social and employee, respect for human rights, anti-corruption and anti-bribery matters set out in Table 3 of Annex 1 specifically monitored are as follows, lack of supplier code of conduct, lack of human rights policy, lack of processes and measures for the prevention of trafficking in human beings, child labour, forced labour, lack of corruption and anti-bribery policies. The Sub-Fund does not make investments in sovereigns or supernationals.

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Sustainable investment objective of the financial product:

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HSIF has a sustainable mandate and, as a result, the Sub-Fund has broad sustainable objectives which Arlington implements on the Sub-Fund’s behalf. Arlington’s investment philosophy believes in the importance of being a responsible investor, and that Environmental, Social and Governance (‘ESG’) and sustainable factors are an important value-adding components of successful investing. Arlington recognises the need to incorporate ESG & climate related investment risks as part of the investment process of its liquid investments. The Sub-Fund will generally invest in those businesses seeking to make a ‘net positive contribution to sustainability’, as assessed using Arlington Capital’s ESG scoring system.

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Investment Strategy:

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The investment decision making process for HSIF is outsourced by Ledbury SICAV plc to Arlington Capital. The investment objective of HSIF is to seek to invest in dividend paying companies which have embraced sustainability in the areas of ESG. By embracing the sustainable agenda, companies should be able to build more resilient business models and at the same time make a vital contribution in the transition to a green economy.

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In summary, HSIF will support those businesses which are making a net positive contribution to sustainability and those which are undergoing rapid change. As a result, HSIF has a broad sustainable objective. In order to achieve this, each holding in the Sub-Fund should make a ‘net positive contribution to sustainability’. This is measured according to Arlington’s sustainable scoring system. This system is a series of 24 tests which quantitively measures a company’s sustainable output. The measuring system is holistic, with tests developed in the following areas: climate, resource efficiency, social, and governance, as well as areas of undesirable activities. The tests combine to form a score for each company which must be net positive, i.e., above zero, for the stock to be included in HSIF. The aim is that HSIF’s sustainable goals will be met if the portfolio as a whole will make a net contribution to sustainability based on these scores. 

In managing HSIF, Arlington recognises that certain companies, industries and countries with weak ESG structures present additional business risks. As part of the diligence process, Arlington will be aware of where and how such risks exist. During the due diligence phase, Arlington evaluates the ESG-related risks to identify any principal adverse risks that could damage a company’s operations and reputation, while also thoroughly analysing the operating history to highlight any ESG-related defaults and losses. Arlington’s sustainable scoring system is an ESG checklist to identify potential ESG-related issues and risks from a company. The checklist consists of a standard set of environmental, social and governance questions for all investments, regardless of sector. The system scores a company’s ESG / sustainable performance and the tests are scored qualitatively and quantitively using positive and negative factors. These are in the following areas: climate tests, resource efficiency tests, undesirable activity tests, social tests and governance tests.

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It is clear that a strong corporate culture demands a high level of employee satisfaction, and is unlikely to tolerate exploitative labour, uneconomic wages, negligent or dangerous business practices. Similarly, the end consumer of goods or services is a powerful arbiter and therefore a company must consider the reputational and commercial consequences of not pursuing this agenda. If a company compromises on raw material quality, abuses their supply chain, or underinvests in their workforce, product and/or service quality is likely to suffer. The consequences of these actions can turn consumers away from the product, damage the brand, and lower future growth prospects. Such considerations are central to HSIF’s investment process in avoiding, as far as possible, the associated risks. 

 

 

 

Proportion of Investments:

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The Sub-Fund measures the attainment of the sustainable investment objective annually through Arlington Capital’s Sustainable Scoring System. This is a qualitative and quantitative scoring system which gives each investment a score. Each investment must have a positive score out of a possible range of -24 to +24 to ensure that it can be included in the Sub-Fund. Therefore overall if each investment has a positive score, then the fund can make a net positive contribution to Sustainability and remain compliant with its investment objective. External benchmarks and specific quantitative targets are not used.

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Monitoring of Sustainable Investment Objective:

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As highlighted, Arlington Capital has identified a sustainable scoring system which quantitively scores each test. These are in the following areas: climate tests, resource efficiency tests, undesirable activity tests, social tests and governance tests. In summary, HSIF will support those businesses which are making a net positive contribution to sustainability and those which are undergoing rapid change. As a result, HSIF has a broad sustainable objective. In order to achieve this, each holding in the Sub-Fund should make a ‘net positive contribution to sustainability’. This is measured according to Arlington’s sustainable scoring system. This system is a series of tests, applied at least annually which quantitively measures a company’s sustainable output. The measuring system is holistic, with tests developed in the following areas: climate, resource efficiency, social, and governance, as well as areas of undesirable activities. The tests combine to form a score for each company which must be net positive, i.e. above zero, for the stock to be included in HSIF. The aim is that HSIF’s sustainable goals will be met if the portfolio as a whole will make a net contribution to sustainability based on these scores. 

More broadly identifying companies with sustainable business models & returns is essential to HSIF’s investment process. For example, an emphasis on corporate culture demands a high level of employee satisfaction, and is unlikely to tolerate exploitative labour, uneconomic wages, negligent or dangerous business practices. Similarly, the court of public opinion on goods or services can be a powerful arbiter. If a company compromises on raw material quality, abuses their supply chain, or underinvests in their workforce, the product and/or service quality and reputation is likely to suffer. This may have the effect of turning consumers away from the product, damaging the brand, and lowering future growth prospects.

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Methodologies:

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The methodologies used to measure the attainment of the sustainable investment objective and how the sustainability indicators to measure the attainment of that sustainable investment objective are set out below. During the due diligence phase, Arlington evaluates the ESG-related risks to identify any principal adverse risks that could damage a company’s operations and reputation, while also thoroughly analysing the operating history to highlight any ESG-related defaults and losses. Arlington’s sustainable scoring system is an ESG checklist to identify potential ESG-related issues and risks from a company. The checklist consists of a standard set of environmental, social and governance questions for all investments, regardless of sector. The system scores a company’s ESG / sustainable performance and the tests are scored qualitatively and quantitively using positive and negative factors. These are in the following areas: climate tests, resource efficiency tests, undesirable activity tests, social tests and governance tests.

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For a company to be included as part of the portfolio of the Sub-Fund, it must make a net positive contribution to sustainability according to Arlington Capital’s ESG scoring system, i.e. the net score for a potential investment must be above zero. The potential range according to the scoring system is -24 to +24. The tests are then subsequently carried out annually.

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Data Sourcing and Processing:

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1. the data sources used to attain the sustainable investment objective of the financial product

        The data sources used are public company statements, reports, regulatory filings etc.

 

   2. the measures taken to ensure data quality

        External data checks are not carried out.

 

   3. how data are processed

       Data is processed by the investment Manager, Arlington Capital.

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   4. the proportion of data that are estimated

       The investment manager only utilises relevant data and reports such as a company’s Sustainability Report.

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Limitations to methodologies and data:

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Any limitations that are identified as part of the ESG scoring system in the methodologies would be noted as part of the process and the results. The main limitation to the data sources that have been identified is in the nonstandard nature of ESG reporting. However any company not achieving a positive score would not be included in the Sub-Fund, hence such a limitation does not affect the attainment of the sustainable investment objective.  

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Due Diligence:

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During the due diligence phase, Arlington evaluates the ESG-related risks to identify any principal adverse risks that could damage a company’s operations and reputation, while also thoroughly analysing the operating history to highlight any ESG-related defaults and losses. Arlington’s sustainable scoring system is an ESG checklist to identify potential ESG-related issues and risks from a company. The checklist consists of a standard set of environmental, social and governance questions for all investments, regardless of sector. The system scores a company’s ESG / sustainable performance and the tests are scored qualitatively and quantitively using positive and negative factors. These are in the following areas: climate tests, resource efficiency tests, undesirable activity tests, social tests and governance tests.

 

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Engagement Policies:

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Engagement is not part of the Sub-Fund’s sustainable investment objective.

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Attainment of the sustainable investment objective:

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No index has been designated as a reference benchmark for the Sub-Fund. The Sub-Fund does not have a reduction in carbon emissions as an objective.