Conscious Alpha Brochure

Conscious Alpha An ESG Investment Solution by Asset Intelligence For the use of professional Financial Advisers only

Conscious Alpha is an exciting new investment proposition from Asset Intelligence which fully integrates environmental, social and governance (ESG) considerations into every aspect of its design.

Conscious Alpha / By Asset Intelligence It delivers a compelling blend of rigorous research, comprehensive consideration of ESG issues and segment-leading in-house sustainability arrangements. Conscious Alpha is: DESIGNED BY POWERED BY DELIVERED FINANCIAL ADVISERS INVESTMENT EXPERTS FOR YOU 3

Conscious Alpha / By Asset Intelligence What will your legacy be? We’d all like to look back on a life well lived; of families supported, friends helped, and communities cared for. But how can you reflect these values in your financial decisions? After all, the big banks haven’t exactly been model corporate citizens in recent years. Thanks to the innovative forward thinking of the award-winning Superbia Group of financial services firms, there’s now a way. It’s simple, compelling and effective. Conscious Alpha. 4

Conscious Alpha / By Asset Intelligence Human actions have a long tail. Deepwater Horizon. Chernobyl. Exxon Valdez. All names from headlines past, yet each continues to affect our environment to this very day. In an interconnected world, the decisions we all make Holding capital is a privilege confers both rights and everyday matter. Which companies and sectors of the responsibilities. And when you place that capital with an economy attract capital – and which don’t – matters. investment firm, they effectively begin acting as stewards Though it might feel like it, it’s not all just numbers and of your assets. lines on a chart. So how, and with whom, you choose to invest your assets Imagine how different things might have been had the really does have an impact on the world around us. projects mentioned above failed to secure funding. 5

Conscious Alpha / By Asset Intelligence Do good. Do well. No need to choose. Historically, the worry has been that incorporating ESG considerations into investment decisions must lower the potential for returns. However, a growing body of academic study suggests that this isn’t the case. In fact, some research now suggests that taking ESG factors into account when making investment decisions is MORE likely to boost returns than to reduce them (although this is not a guarantee). It’s simple when you think about it. Companies which pollute the environment, mistreat their workers or overpay their executives are increasingly likely to find themselves on the wrong side of regulators, lawmakers and public opinion – to the detriment of their share prices. Avoid the worst. Avoid the risk. Win-win. 6

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Conscious Alpha / By Asset Intelligence What is All Conscious Alpha portfolios are mandated to Conscious Alpha? • Maximise total returns over the long-term. It’s a new, discretionary managed • Invest primarily in vehicles which take ESG portfolio proposition which puts ESG risks to capital into account. factors at the heart of the investment process and caters to a wide array of • Operate within a framework which accords risk profiles. with defined risk characteristics. Each portfolio contains holdings in a variety of strategies, sectors and regions, managed by skilled external investment teams and depending on risk profile most will also offer exposure to a blend of different asset classes, such as shares, bonds and cash. 8

Conscious Alpha / By Asset Intelligence The construction of the range has been led by an intensive focus on research: Strategic asset allocation Shorter-term tactical Meanwhile, investment is underpinned by a robust adjustments to the selection is based around model based on well- weightings of particular a high-quality proprietary developed forecasts for investment asset classes, review procedure. Before asset class performance, styles, sectors or regions any given ESG investment is volatility and correlations can also be applied if the approved for inclusion within over the coming decade. Portfolio Manager deems it an Conscious Alpha portfolio, appropriate. These decisions it must undergo Asset This is a forward-looking and will typically be based on Intelligence’s rigorous four- comprehensive approach data and developments stage due diligence process. which considers a deep within the global economy global opportunity set. The or financial markets as Two stages of this process process involves running they emerge. are dedicated to the thousands of simulated vehicle’s ESG credentials scenarios to determine the and the other two to its expected optimal blends. fundamental potential and suitability as an investment. As a further safeguard, each strategy is subject to the well-recognised ‘four-eyes principle’, with at least two Asset Intelligence analysts required to complete the various stages of the process for each ESG fund. 9

Conscious Alpha / By Asset Intelligence Conscious Alpha: Our investment fund selection process. Our proprietary due diligence process for investment selection is comprised of the following four stages: QUANTITATIVE ESG Investment Review and analysis of a thorough set of ESG Review and analysis of a thorough set of fund data metrics, including: data, including: • Comprehensive breakdown outlining where • Cumulative and discrete returns relative to holdings may be involved in contentious peers and market. areas, including animal testing, fur sales, genetically-modified crops and palm oil • Various risk metrics relative to peers, and production. market, including volatility and maximum drawdown. • Estimate of holdings’ exposure to current controversies. • Assessments of manager capability based on track record. • Detailed analysis of carbon emissions calculations and fossil fuel usage and • Degree of deviation from broad stock market. involvement. • Breakdown of current portfolio positioning including ‘style’ analysis and how this has changed over time. • Capital flows into and out of the fund. • Costs, portfolio turnover and yield. 10

Conscious Alpha / By Asset Intelligence QUALITATIVE ESG Investment Holistic and wide-ranging ESG review and Holistic and wide-ranging review and analysis based on fund documentation and analysis based on fund documentation and engagement with the provider, including: engagement with the provider, including: • Overview of the parent group’s history with • Overview, history and ownership structure of ESG investing. parent group, including employee incentives. • Overview of any controversies involving • Fund manager’s history and their current the parent group as well as consideration of access to analyst and technological resource. internal ESG policies. • Investment philosophy. • Analysis of the type of ESG mandate being • Investment ‘universe’ of available assets and pursued. how these are screened. • Consideration of external providers or • Comprehensive review of stock-level consultants providing ESG data . investment process. • Comprehensive review of stock-level ESG • How risk is managed and monitored. analysis process. • How returns to date have been generated. • Relationship between ESG analysis and eventual portfolio construction. • Engagement with companies on ESG. 11

Conscious Alpha / By Asset Intelligence What is ESG? ESG refers to taking environmental, social and governance considerations into account as part of the investment process, rather than purely focusing on financial returns and risk metrics. We use the following definitions as a guide when thinking making our decisions. 12

Conscious Alpha / By Asset Intelligence Environmental Examining how a business behaves with regard to the environment, typically focusing on risks to capital presented by performance in the following areas: Carbon emissions and climate change. Plastic waste. Water and air quality. Resource depletion. Deforestation. 13

Social Looking at how a company treats people, typically focusing on risks to capital presented by performance in the following areas: Labour relations. Employee diversity. Community development. Health and safety for employees and customers. Child labour, modern slavery and operations in conflict zones. Involvement in ‘vice products’ such as gambling, weapon manufacture and tobacco production. 14

Conscious Alpha / By Asset Intelligence Governance Thinking about the ethics of how a corporation manages its internal affairs, typically focusing on risks to capital presented by performance in the following areas: Tax strategy. Executive remuneration. Management oversight and decision-making procedures. Donations and political lobbying. Corruption and bribery. Board diversity and structure. 15

Conscious Alpha / By Asset Intelligence Aligned to a globally recognised ESG standard. Many of the investment funds held within Conscious Alpha align their investment policies and desired ESG outcomes with the UN Sustainable Development Goals (SDGs). The SDGs were formally adopted by the General Assembly of the UN in September 2015. They comprise a detailed set of individual targets which aim to improve the lives of millions of people worldwide by the year 2030. 16

Conscious Alpha / By Asset Intelligence These targets are grouped into 17 overarching themes, as depicted below: UN Sustainable Development Goals (SDGs) 1 2 3 4 5 6 7 8 9 NO ZERO GOOD HEALTH QUALITY GENDER CLEAR WATER AND AFFORDABLE AND DECENT WORK INDUSTRY, POVERTY HUNGER AND WELL-BEING EDUCATION EQUALITY SANITATION CLEAN ENERGY AND ECONOMIC INNOVATION AND INFRASTRUCTURE GROWTH 10 11 12 13 14 15 16 17 LIFE LIFE REDUCED SUSTAINABLE RESPONSIBLE CLIMATE BELOW WATER ON LAND PEACE, JUSTICE PARTNERSHIPS INEQUALITIES CITIES AND CONSUMPTION ACTION AND STRONG FOR THE GOALS COMMUNITIES AND PRODUCTION INSTITUTIONS We believe the SDGs provide a useful framework of consideration for both fund managers and investors thinking about how their capital allocation decisions are – or are not – contributing to positive global change. 17

Conscious Alpha / By Asset Intelligence ESG A nuclear investment reaction. values in action. When a devastating earthquake and tsunami hit the Fukushima Daiichi Nuclear Power Plant in Japan in 2011, So how might these fund manager Yu Shimizu immediately travelled to the concepts and processes region to move his parents out of the danger zone. around ESG translate into your portfolio? Here are The incident had a profound effect on him and led to his some genuine examples decision to found the SPARX Japan Equity Sustainable from the investment All Cap Strategy, an ESG-mandated version of the firm’s funds held at launch. successful investment offerings. The fund’s mandate precludes it from investing in any company which derives 18 more than 10% of its revenue from nuclear power.

Conscious Alpha / By Asset Intelligence A bond as good as its word. The Rathbone Ethical Bond fund currently holds a bond issued by Burnham and Weston. This energy firm owns Wick Farm, one of the largest community solar farms in the UK, where 36,000 solar panels generate an annual electricity output equivalent to the consumption of around 2,000 homes! Any surplus income generated by the Wick Farm venture is used to provide grants to a range of local community organisations and projects. It’s estimated that this funding will reach a total of £3 million over the 23-year life of the programme and the bond offers its investors a coupon of 5% per annum. 19

Conscious Alpha / By Asset Intelligence Infection rejection. Nanosonics is an Australian healthcare company currently held within the Janus Henderson Global Sustainable Equity fund. The firm’s range of products help to prevent the cross-contamination of clinical equipment, significantly improving patient safety during hospital stays. What’s more, the products offered by Nanosonics lessen the environmental impact of keeping hospitals clean, reducing the number of disposable gowns used during cleaning, and keeping usage of chemical by-products low in comparison to a key competitor. 70% of annual sales are made from recurring business with firm has recording gross profit margins of over 90%. 20

Conscious Alpha / By Asset Intelligence Sink carbon. The Allianz Green Bond fund invests in fixed income securities specifically designed to support environmentally friendly projects. The fund holds bonds issued by organisations involved in an assortment of fields, including renewable energy; biodiversity and conservation, climate change adaptation and green buildings. It is estimated that by investing in the Allianz vehicle as opposed to a conventional bond fund, the total amount of capital currently held at the time of writing is preventing around 600,000 tonnes of carbon emissions every year. That’s the same amount of carbon that would be emitted by charging your smartphone around 77.4 billion times. That’s way more than even the most social media-obsessed teenager could manage in a year! Note: funds held within the portfolio may be removed at any time as deemed appropriate by the investment managers. As such, the examples above may not feature within the portfolios on a permanent basis but are correct at the time of writing. 21

Conscious Alpha / By Asset Intelligence Conscious Alpha An ESG Investment Solution Investment for the planet. For the future. For the next generation. 22

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Get in Touch Our contact details are: 340 Melton Road Leicester LE4 7SL 0208 144 8370 [email protected] asset-intelligence.com Log into our Adviser Resource Centre to find out more: www.asset-intelligence.com/adviser-resource-centre-login/ assetintell Asset Intelligence Registered address: Asset Intelligence Portfolio Management Ltd (Registered in Granville Hall England & Wales 11955590) is authorised and regulated by Granville Road the Financial Conduct Authority (Reference number 842662). Leicester Asset Intelligence Portfolio Management Ltd’s Registered Office LE1 7RU is: Granville Hall, Granville Road, Leicester, LE1 7RU. 0208 144 8370 [email protected] 1016/10.2021 asset-intelligence.com