SFDR product disclosure Ambienta X – Public Market Investments - long/short equity strategy

Summary

The sustainable investment objective of the Fund, classified as Art. 9, is to generate attractive risk-adjusted absolute returns by primarily investing in environmentally sustainable (ES) assets related to Resource Efficiency and Pollution Control. The investment strategy involves equities and equity-related securities of companies exposed to environmental trends.

The Fund aims to maintain a minimum share of sustainable investments at 60% of its net asset value. The Ambienta Sustainability Index (ASI) methodology is employed by Ambienta’s dedicated Sustainability & Strategy team to assess the environmental sustainability of targets. Data sources for such methodology are diverse, with an emphasis on transparency and accuracy. Any limitations are addressed through rigorous analysis.

Additionally, the integration of Environmental, Social, and Governance (ESG) factors into the investment process, pre-deal and during holding period, ensures respect of minimum safeguards, good governance principles, and the management of potential negative effects on ESG objectives. A defined engagement and escalation process are in place to manage and mitigate risks.

Sustainable investment objective of the financial product

The investment objective of the Fund is to generate attractive risk-adjusted absolute returns by investing primarily in environmentally sustainable (ES) investments.
ES investments relate to Resource Efficiency encompassing the entire spectrum of natural resources, and/or Pollution Control, including all types of pollution affecting water, air, soil and human health.
The investment strategy involves the Fund investing primarily in equities and equity-related securities of companies worldwide which are exposed to environmental trends and are considered, based on the Ambienta’s proprietary methodology, sustainable investments.

Investment strategy

The investment strategy foresees investments primarily in equities and equity-related or linked securities of companies worldwide which are exposed to environmental trends and are considered, based on our proprietary methodology, sustainable investments. In seeking to identify environmentally sustainable investments, Ambienta employs a disciplined and uncompromising fundamental bottom-up investment research process, leading to a high conviction, concentrated portfolio of long and short securities of companies exposed to ES trends. Ambienta believes that ES acts as a powerful engine of ideas generation: i) as a rigorous filter to highlight ES investment opportunities in attractive companies (potential Core Longs), and ii) a disruptive force impacting incumbent franchises or overvalued green-washed companies lacking sustainable competitive advantages (potential Core Shorts). The methodology adopted to implement the investment strategy is explained in detail below.

To assess investee good governance practices, the ESG in Action programme is employed both in due diligence and, after investment, through monitoring. This takes place through governance ratings provided by third party data providers, or by analysis conducted on the relevant issuer by the investment management team in Ambienta, and through regular engagement with management. Through the support of a third party, we also engage in proxy voting which allows us to promote good governance practices.

Proportion of investments

The Fund aims at maintaining a minimum share of sustainable investments of 60% of its net asset value.

Monitoring of sustainable investment objective

Ambienta assesses and monitors the environmental impact of investments both in the selection and management phases, through the activity of the dedicated Sustainability and Strategy (S&S) team. The S&S team analyses how environmental trends shape industries and identifies sustainability hot topics that lead to the proposal of investment ideas. Potential investment opportunities are analysed together with the investment teams to understand how these companies contribute to improve Resource Efficiency and/or Pollution Control in their respective sector and this is assessed via the Ambienta Sustainability Index (“ASI”) methodology explained below. The ASI is assessed at least on an annual basis. To attain our sustainable investment objective at product level, the Sustainable Notional Value (“SNV”) of the product must be greater than the Delta Notional Value (“DNV”), ensuring that the net exposure to sustainability is larger than the net exposure to the market. The SNV is calculated as the weighted average of the individual scores (ASIs) of each holding in the portfolio. It provides the net sustainable value of the portfolio as an indication of its contribution to Resource Efficiency and/or Pollution Control.

Methodologies

To measure the achievement of sustainable objectives, the Fund will make use of Ambienta’s proprietary methodology, the ASI, our single holding indicator, which represents in one figure, between -100% and +100%, the contribution to Resource Efficiency and/or Pollution Control of each individual company and therefore the correlation of the value of a listed company to environmental sustainability and related trends. It is calculated as the average of the positive or negative environmental contribution of each division, weighted by its enterprise value. Among the long positions, the Fund invests in target issuers that meet the Ambienta Sustainability Index  threshold (≥25%), representing investments in companies that attain a positive environmental impact based on assessment of their single divisions.

Data sources and processing

The data and information useful for the application of the Ambienta Sustainability Index are collected during due diligence and periodically over the duration of the investment, by the Sustainability & Strategy team with the support of the investment team. The data and information necessary are obtained from a range of sources, with the aim of guaranteeing completeness and quality of information, including: documentation issued by the target companies, internal analysis, external data provider information, calls with experts and with the management. The data gathered is processed by the S&S team and the performance of the companies is assessed against the market. Within the limitation of available data and with a low share of estimates, the Sustainability & Strategy team always strives to assess the net environmental impact, after considering feedback loops and negative effects from technology evolution. The process is formalized in an internal policy to ensure transparency, homogeneity and accuracy in the application of the methodology.

Limitations to methodologies and data

Our approach is based on an internal proprietary analysis that is fed by research, company analysis and discussion with experts. The process is standardized, formalized in an internal policy and as transparent and detailed as possible. Some limitations are intrinsic in the nature of the analysis as it relies on third party information and target company’s disclosures that may in some cases be restricted and may affect the depth of the analysis. Nonetheless, such limitations do not affect the attainment of the sustainable investment objective, as data is verified against multiple sources or, where this is not viable, considered not sufficient and the investment process discontinued.

No significant harm to the sustainable investment objective

The ASI analysis allows to assess whether the prevailing contribution to environmental sustainability is positive or negative across multiple environmental issues and therefore represents a first test on do not significant harm to environmental objectives.

Furthermore, the integration of ESG assessment is an integral part of the investment process and contributes to the identification and control of the potential negative effects associated with investments, including social and governance ones. This takes place through Ambienta’s ESG in Action programme (a proprietary approach to the integration of non-financial factors into portfolio management) structured in two main phases: due diligence and engagement.

The analysis takes into account, across the different phases of the ESG in Action programme, through an internally defined process:

• the principal adverse impact indicators (i.e. mandatory and relevant additional indicators);
• the guiding principles of the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles of 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.

Due diligence
Prior to investment, during the due diligence phase, the main impacts on environmental and social objectives are analysed to ensure the absence of negative impacts, in accordance with the do no significant harm principle (DNSH), and compliance with minimum safeguard principles.

Engagement
During the holding period Ambienta will continue monitoring negative impacts through a combination of data collection and internal analysis. Findings deriving from the monitoring activities are integrated into our engagement and active ownership practices to ensure the mitigation of any risks of negative impacts (i.e. on DNSH principles) that may have arisen post-investment and minimum safeguards continued compliance.

An escalation process has also been put in place, based on findings from the aforementioned phases, consisting of additional company engagement activities and progress analysis in respect of mitigation of negative impacts. The escalation process may ultimately result, based on severity of the negative impacts by an investee company, in disinvestment from the company.

Attainment of the sustainable investment objective

No specific index is designated as a reference benchmark to meet the sustainable investment objective.