Legg Mason Martin Currie European Absolute Alpha

The environmental and social characteristics of the product include the binding considerations of sustainability risks which may include; supply chain, data protection, pollution/hazardous waste policies, water usage, and climate change policies.

The product is also bound to consider governance characteristics such as: shareholder rights, accounting standards, remuneration, and board structure.

The Fund seeks to achieve its objective through a policy of investing in a long/short portfolio of exposure to companies operating within or servicing the European market. When selecting investments for the strategy the investment manager seeks seeks to identify valuation anomalies and take advantage of them through long or synthetic short positions as appropriate. The investment manager applies its ESG process (as set out in Methodology) to 100% of the portfolio. The Fund will maintain a portfolio ESG rating higher than that of the Fund’s investment universe.

The investment manager uses an established proprietary process to assess ESG factors/characteristics. These factors/characteristics are assessed both quantitatively and qualitatively, through its proprietary ESG rating system and its direct research and engagement process. The manager’s proprietary ESG ratings capture the forward-looking analysis with companies assigned a risk rating on each of Governance and Sustainability from 1 (low risk) to 5 (high risk) following consideration of Environment, Social affairs and Corporate Governance sustainability factors.

On the long side of the portfolio, the Fund will not invest in companies that have a Sustainability Risk rating of 4 or higher. The Fund will not invest in companies which generate more than 5% of revenue from tobacco production or those companies with over 5% of revenue from direct involvement in extraction of fossil fuelsor production of weapons. The Fund will not invest in companies which generate revenue from mining of metals and minerals as defined by GICS sub-industries Diversified Metals and Mining, Copper, Gold and Precious Metals and Minerals. The Fund will not invest in companies generating involved in the production, sale or distribution of dedicated and key components of antipersonnel mines and cluster munitions. The Fund will not invest in companies that are assessed as ‘fail’ under the UN Global Compact. 

Short positions however, may include some or all of the above, as the investment manager believes they will over time reduce in value. 

A combination of internal and external sources is deployed:

• Internal Scoring –Governance Risk rating and Sustainability Risk rating
• Engagement activity and tracking – Environmental, Social or Governance topics and stages of engagement
• External Data Metrics (e.g. MSCI) – Carbon footprint and ESG scoring
• Other measures include carbon Intensity, SDG alignment and Carbon VAR.

No index has been designated as a reference benchmark for sustainability.