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Universal-Investment

Service Providers Framework 2020

You are in Strategy and Governance » Policy on ESG beliefs

Policy on ESG beliefs

SG 01. Responsible investment policy

01.1. Describe how your organisation’s philosophy incorporates environmental, social and governance factors, and the link to your business offerings.

Sustainability is anchored within our vision to become Europe´s leading fund platform that enables and fosters sustainability in investment decisions. We as a platform see ourself in the role as an enabler and we are committed to promote the acceptance and implementation of the UNPRI principles in the investment industry. In order to incorporate sustainability into the corporate structure, ESG topics must align with and be integrated into the business model to be successful. Therefore, we have an ESG governance strucutre in place that is sponsored by our CEO Michael Reinhard who supports the strategic anchoring of ESG themes in the company. Moreover our sustainability officier (Robert Bluhm) together with an interdisciplinary network within UI analyse, develop, integrate and communicate ESG topics.

01.2. Indicate whether you have policies that formalise the incorporation of your ESG beliefs in your business offerings.

01.3. Indicate the components/types of your internal policy and provide the URL and/or an attachment of the document/s if they are publicly available.

Policy components/types

Public availability

          Reporting
        

01.4. Indicate how these are put into practice internally across the organisation.

01.5. Additional information [OPTIONAL]

Currently, remuneration linked to achieving ESG objectives and annual performance incentives in relation to ESG are only applied to our sustainability officer (Head of Securities Product Management). Through different ESG projects that are embedded inside the company different departments are interlinked in the process to internally spread information and put policies into action across the organisation.


SG 02. Norms used to develop policies

02.1. Indicate what frameworks and guidelines you have used to develop your organisation’s policies. Tick all that apply.

          BVI rules of conduct
        

02.2. Additional information. [OPTIONAL]


SG 03. Policy offerings to clients

03.1. Indicate whether you offer standard, off the shelf, policies to clients as part of your product offerings, and/or whether you create tailored versions for individual clients.

Off the shelf
Tailored
Asset class-specific RI guidelines
Sector-specific RI guidelines
Screening/exclusions policy
Engagement policy
(Proxy) voting policy
RI guidelines set out within the Investment Policy Statement (IPS)
RI guidelines set out in a freestanding RI policy
Multi-year RI implementation project plan
Conflict of interest management policy
Stockbroker allocation policy
Securities lending policy
Other, please specify (1)
Other, please specify (2)
Other, please specify (3)
None of the above

03.2. Provide a brief description of the key elements, any variations, or exceptions applying to these policies.

Asset class-specific RI and sector-specific RI guidelines

These client-specific guidelines and investment strategies are incorporated in the funds management (see also the following paragraph)

 

Screening/exclusions policy

We enable our clients to examine potential business relationships on the basis of an internal black list and the Controversial Weapons Monitor: this database of ISS  has currently identified around 400 companies worldwide that are suspected of producing controversial weapons, such as cluster munition. In this way, we exclude cooperation with critical sectors from the very start.

Based on investors’ individual specifications, we offer individual possibilities for funds management:

- The exclusion, from market indexes, of certain sectors, countries or individual equities for example
- Restriction to specific maturities
- The specification of certain ratings, seniorities or issuers
- The use of negative and positive lists

 

Voting policy

Our voting rights guidelines are based on the following principles:

- All decisions are based solely on investor interests and the benefit to the relevant investment fund.
- Decisions regarding the exercise of voting rights are taken independently of third-party interests.
- Market integrity must be preserved in every case.

The "Principles for the Analysis of Shareholders' Meetings (Analyseleitlinien für Hauptversammlungen, "ALHV")", formulated by the Bundesverband Investment und Asset Management e. V. (BVI), form the basis for our voting policies and how we exercise voting rights. This industry standard lays the foundation for a responsible handling of investors' capital and rights. This industry standard is aligned with the interests of investment funds managed by Universal-Investment and is therefore generally applied to all investment funds, unless it is necessary to deviate from these voting rights guidelines for individual investment funds in the interest of investors, market integrity or the benefit to the relevant investment fund.  Voting rights are exercised with respect to foreign assets only if the high cost and/or effort associated with doing so is justified.

 

Conflict of interest policy

The policy defnies potential areas of conflict of interest and provides measures to prevent, manage and monitar these potential conflicts of interest. Apart from the statutory requirements, our company has also accepted and implemented the Code of Conduct issued by the German Investment Funds Association (BVI) as a standard for dealing properly and responsibly with our investors’ capital and rights. Should our company be unable to avoid a conflict of interests, we will inform of the nature of the conflict and its source.

03.3. Additional information. [OPTIONAL]


SG 04. ESG/RI in business offerings

04.1. Briefly describe how you include ESG/RI factors as part of your business offerings.

Business area

Reporting

How you include ESG/RI factors

In 2019 we offered an ESG Reporting and CO₂ Reporting based on MSCI methodology to all interested clients. Furthermore, we are now working on an UI ESG report with variable scopes (S, M, L) depending on the information level required or the target audience (for instance fund initiators need tailored information for retail clients).

Active Ownership Services

How you include ESG/RI factors

The voting obligations arising from being a capital management company we fulfill by using the BVI standard which is considered ESG compliant. Currently, we are working on our own dedicated ESG voting policy standard.

Research and Data Provision

How you include ESG/RI factors

We incorporate ESG data from MSCI in our analysis. We offer an ESG and CO₂ report based on MSCI methodology to all interested clients. Furthermore, we are now working on an UI ESG report with variable scopes (S, M, L) depending on the information level required or the target audience (for instance fund initiators need tailored information for retail clients).

Other, specify (1)

          Administration Services
        

How you include ESG/RI factors

As part of our service offerings we can for instance include ESG factors in an ESG investment impact analysis, construct and manage ESG based passive quantitative portfolios or replicate ESG indices. Generally, services from the other business areas (reporting, AOS or RDP) can be included in administration services offerings.

04.2. Indicate the roles in your organisation, and indicate for each whether they have oversight and/or implementation responsibilities for ESG/RI within the organisation.

Roles present in your organisation
Oversight/accountability for ESG/RI
Implementation of ESG/RI
Board
Directors
Chief Executive Officer (CEO), Chief Financial Officer (CFO)
Chief Operating Officer (COO), Chief Information Officer (CIO)
Other chief-level staff

Please specify

          Area Head Securities, Head of Strategy and Product Governance
        
Other heads of department

Please specify

          Head of  Securities Product Management and Sustainability Officer
        

Please specify

          Head of  Securities Product Management and Sustainability Officer
        
Dedicated ESG/RI staff
Other role, specify (1)

Please specify

          Chief Customer Officer
        

Please specify

          Several departments are involved in the implementation of ESG projects inside UI
        
Other role, specify (2)
Other role, specify (3)
None of the above

04.3. Indicate how you ensure ESG/RI expertise for the roles where there are RI oversight/accountability or implementation responsibilities.

04.4. Indicate whether your organisation has any ESG/RI linked incentives for its employees.

04.6. Describe how you ensure that your employees incorporate ESG/RI into services through other mechanisms than ESG/RI linked incentives.

We strive continuously to raise awareness of our ESG services and products among employees at all levels through our inhouse trainings. This knowledge can than be used to make ESG/RI a subject of discussion in clients meetings.

04.7. Additional information [OPTIONAL]


SG 05. Outsourcing of services (Private)


SG 06. Providing training/education

06.1. Indicate whether you provide training/educational services on ESG/RI. Tick all that apply.

          Inhouse-Training
        

06.2. Describe the main components of your training/educational services on ESG/RI and any variations depending on the group you provide training/education to.

Depending on the participants of the trainings, different topics are tackled:

- general developments of RI/SRI in Germany, Europe and worldwide

- Universal-Investment sustainability strategy and governance structure

- Universal-Investment ESG product and service offerings (current and new one´s)

- knowledge on ESG tools (e.g. MSCI ESG Manager)

06.3. Describe whether these training/educational services include any commercial elements.

          Our training/educational services include some kind of commerical elements in respect to our services (e.g. reporting-services).
        

06.4. Additional information. [OPTIONAL]


SG 07. Applying, advancing and promoting the PRI principles

07.1. Describe how your organisation applies, advances and promotes the PRI Principles.

Due to our position as independent fund service platform we primarily see the PRI principles four to six as decisive for our company. We want to promote cooperation in the area of sustainability, build transparency, establish and promote new standards and actievely shape them. The cooperation with other sustainability inititaves and business partners is of great importance to see emergent developments and take them into account in product development with our clients. Accordingly, Universal Investment is involved in various associaitons and working groups that promote sustainability in the financial sector. We strive for an effective exchange of knowledge and awareness of ESG issues to accelerate their development where we can act as an enabler that connects different parties on our platform.

Moreover, by supporting and accompanying clients on the way to integration of sustainability in their investments we thus also support PRI principles one to three indirectly. In the future we wish to establish a hub with information where clients are able to inform themselves and build a knowledge fundation that enables them to make well-founded decisions for their investment strategies. Through this hub we can create a network that allows to mediate contact to information sources, associations and other service providers.

07.2. Highlight whether there are any ways that your organisation would like to engage further with the PRI. [OPTIONAL]

If the reporting framework for service provider is reviewed and/or adjusted, we would like to join the process. Moreover, if any kind of advisory committee and working group dedicated to service provider is set up, we would be more than glad to join to further interact with other service providers as well as discuss on-going and future ESG developments.


SG 08. Actions taken to promote responsible investment

08.1. Indicate which of the following actions your organisation has taken to promote responsible investments during the reporting year, independently of collaborative initiatives.

          Promotion of ESG transparency/reporting
        

08.2. Additional information. [OPTIONAL]


SG 09. Long term trends

09.1. Indicate which of the following long-term trends are addressed in your product outputs.

09.2. Explain how this long-term trend affects your product outputs.

Universal Investment supports clients (ESG asset managers, fund initiators and institutional clients with proprietary ESG approach) in the implementation of sustainable investing strategies. From themed funds, exclusion lists to filters for positive and negative criteria, we offer a wide range of possibilities to support sustainable investment strategies that take long-term trends like changing demographics, climate change, resource scarcity and technology developments into account. Moreover, we respect these trends in the optimization of portfolios in our role as rule-based, passive manager for institutional clients.

09.2. Explain how this long-term trend affects your product outputs.

See description for "changing demographics".  

09.2. Explain how this long-term trend affects your product outputs.

See description for "changing demographics".  

09.2. Explain how this long-term trend affects your product outputs.

See description for "changing demographics".


SG 10. Interaction with asset owners (Not Applicable)


SG 11. Aligning approach with investor goals

11.1. Describe how you typically align your organisation’s philosophy and approach to ESG/RI with your investor clients’ goals.

11.2. Additional information. [OPTIONAL]


SG 12. ESG recommendations not aligned with investor goals

12.1. Describe what steps you take, if any, when your ESG recommendations are not in line with your investor clients’ goals.

12.2. Additional information. [OPTIONAL]


SG 13. Seeking feedback from clients

13.1. Indicate whether you seek feedback from clients on your RI/ESG services and product offerings

13.2. Describe how you use this feedback in your RI/ESG services and product offerings.

Clients feedback that is adressed to sales or different specialist departments (e.g. product management, portfolio management, reporting) is taken into account when adapting products or services as well as in the process of creating new products and services.


SG 14. Managing conflicts of interest

14.1. Indicate whether your organisation has a policy for managing potential conflicts of interest.

14.2. Describe how you manage potential conflicts of interest.

A.  Potential conflicts of interest

Conflicts of interest can arise between our company, other companies within our group, our management, our employees, external companies and individuals with whom we have contractual arrangements, other third parties, the investment funds and insourcing mandates we manage and our investors or between individual investors and clients or between our investors and the investment funds we manage or between different investment funds we manage. Conflicts of interest could also arise between our company and asset managers mandated by us and other outsourcing companies, investment advisers or custodians.

 

B.   Measures to prevent, manage and monitor these potential conflicts of interest

Universal-Investment-Gesellschaft mbH has organisational and administrative mechanisms in place to identify, prevent, solve, manage and observe/monitor conflicts of interest in order to avoid that conflicts of interest inflict serious damage to investment funds and investors. In particular, we have set up a compliance organisation that monitors said mechanisms independently and regularly trains all our employees on regulatory requirements and on our in-house guidelines. We have set ourselves high ethical standards for dealing with investors, clients and business partners by creating sensitive areas and Chinese walls between individual lines of business, as well as between us and external third parties mandated by us, separating lines of business and responsibilities and implementing organisational guidelines. We expect our business partners to maintain equally high ethical standards. Particular mechanisms are in place to avoid conflicts of interests in our independent risk-monitoring function.

If the organisational arrangements we have put in place to identify, prevent, solve and monitor conflicts of interest in order to avoid the risk of negative implications on investor interests prove insufficient, we will inform investors accordingly in advance and develop countermeasures.

Apart from the statutory requirements, our company has also accepted and implemented the Code of Conduct issued by the German Investment Funds Association (BVI) as a standard for dealing properly and responsibly with our investors’ capital and rights.

 

C.   Disclosure

Should our company be unable to avoid a conflict of interests, we will inform of the nature of the conflict and its source. Unavoidable conflicts of interest may arise due to the fact that our investment funds, for the management of which our firm receives a management fee, may invest in our own products; and we might in some cases additionally receive a distribution fee. Similarly, our investment advisors or asset managers may acquire or recommend the purchase of products for the investment funds that are managed or advised by those same investment advisers or asset managers, who receive a separate management or advisory fee for such products. If such is the case, we seek to prevent damages to investors by ensuring that these products may only be acquired after objective deliberation of whether the purchase is in the best interest of the investors.

In case the portfolio manager intends to contract with affiliated companies (e. g. property managers) in the context of the management of open-ended real estate funds, or companies affiliated with him shall engage in a real estate transaction, or in case the portfolio manager’s property shall be purchased for a fund, we will make reasonable efforts to avoid a resulting material prejudice to the investor’s interests.

Our subsidiary Universal-Investment-Luxembourg S.A. offers securitization services. Products issued based on this service can only be acquired for our investment funds after having been subject to an independent internal check. In the exceptional case of our employees instructing real estate transactions by themselves, we arrange for the avoidance of conflicts of interest which might disadvantage the investors of the relevant real estate investment funds. The responsibilty over the relationship management with every single client of ours has been assumed by one of our managing directors, who are commited to treat all of our clients equally and not to favor or disfavor any client compared to our other clients.

14.3. Describe how you ensure that company employees do not derive any personal gain from the use of information collected during your work process.

Universal-Investment ensures via a guideline that employees do not derive any personal gain from the use of information collected during the work process. The guideline defines the internal rules of the universal investment for personal transactions of its employees.

Content and workflow

"Employee transactions" are the personal and private transactions of employees of Universal Investment with regard to assets, which may also be held in investment funds of Universal-Investment.

With immediate effect, the rules stated below apply when dealing with employee transactions:

Employee transactions which do not comply with the prohibition of insider trading (art. 8. Market Abuse Regulation (EU) No. 596/2014)), or which are associated with the abuse or illegal disclosure of confidential information, or which could conflict with an investment law [1] obligation of Universal Investment may not be carried out. Furthermore, employees of Universal Investment must not advise or induce other persons outside Universal-Investment to carry out a personal transaction that violates with these prohibitions. This also applies to transactions that would misuse information about ongoing transactions.

Compliance Issue and Provision

  • Block on assets of the restricted list
    • Every employee of Universal-Investment is required to compare a planned transaction against the restricted list. Transactions regarding assets on the restricted list must not be carried out to the extent described there.

    • The block on assets of the restricted list does not apply to ongoing savings plans.

    • If an employee of Universal-Investment wishes to engage in a transaction with an asset on the restricted list due to an important reason, he or she must contact a Compliance Officer in advance. The Compliance Officer may approve individual exceptions.

  • Trading of UI funds of and funds administered by UI

    • Before trading UI funds or UI administered funds, the approval of the Compliance Department must be obtained in accordance with the form on the intranet. In case the transaction is approved, trading of respective assets must take place within the next five bank working days. The approval is revoked with immediate effect if the relevant fund is added to the restricted list. This also applies to funds that are administered by Universal Investment due to an insourcing of the fund accounting function. An up-to-date list of UI administered funds can be obtained from the intranet.

    • A four-week minimum holding period applies for funds of Universal-Investement.

  • Transactions subject to reporting requirements
    • a) All transactions must be reported. Exempt are the transaction types listed under b)
      Securities
      Money market instruments
      Derivatives
      Property as well as national and international property equivalent rights
      Real estate entities
      Shares in national and international investments
      Investments in PPP (public-private partnership) project companies
      Unsecuritised loans receivable
      Company shares

  • Non-reportable transactions

    • b) Exceptions apply to:
      Bank deposits
      Precious metals
      Domestic and foreign investment assets (UCITS and AIF)
      Investments in capital formation services
      Statuary Saving plans
      EU or EFTA government bonds
      ETF

  • Completeness clause

    • Every employee is obliged to confirm completeness of the transactions reported to the Compliance Department at least once every calendar year (upon request by the Compliance Department) as well as unsolicited upon resignation or foreseeable longer interruption of his or her work (e.g. due to parental leave). For employees who have not set up a duplicate statement procedure with their custodian bank, a confirmation of completeness is requested quarterly by the Compliance Department. The confirmation of completeness must be submitted via the compliance SharePoint.

  • Participation in compliance trainings

    • Every employee is obliged to attend compliance trainings on a regular basis. The Compliance Department issues invitations or requests for trainings.
      The latest compliance training documents are available in the intranet. The annual confirmation of participation is currently submitted via internal compliance SharePoint.

The employee transactions policy must be adhered to by all employees of Universal Investment and also applies to:
- Interns
- Temps
- Apprentices
- Freelancers

The rules apply to transactions on behalf of and on account of employees as well as persons closely related to (e.g. families) and persons of whom employees have a direct or indirect material interest in the outcome of the business. Therefore, all employees of Universal-Investment are required to disclose no information to third parties with regard to transactions or assets held in UI funds that they have obtained during the course of their professional activities for Universal-Investment.

With the beginning of the employment, an investment account overview (compliant to the intranet form) must be submitted to the Compliance Department, including the own investment account as well as those of third parties via which the employee may trade on the basis of a power of attorney. The Compliance Department must be notified of any changes immediately.

 

[1] This refers to the KAGB as well as Regulation (EU) 231/2013 and further details.

14.4. Additional information. [OPTIONAL]


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