an overview of EU regulation.

EU regulation on sustainable investments aims to reorient capital flows towards sustainable investment, foster greater transparency and long-termism in financial and economic activities, and manage risks arising from climate change.

This regulatory backdrop guides how we design our products as well as the criteria we use in our investment framework. Since regulation is a powerful force propelling the transition, we aim to fully align our strategies and process with how regulators approach sustainable investments.

Comprised of three branches, EU regulation impacts us at a product and firm-wide level. The three branches and their key aims are:

The EU Taxonomy: Do companies in the portfolio contribute to a sustainable objective through their activities?
SFDR (Sustainable Finance Disclosure Regulation): How are sustainable factors and objectives taken into account and met?
MIFID II: If the investor is interested in sustainable investment products, how to assess the sustainability preferences?

The table below provides a brief introduction to each area.

Regulation	Objective	Regulation in one sentence	Timeline	Interaction between regulations
EU Taxonomy	A framework for “sustainable” economic activities in the EU	The EU Taxonomy defines sustainable economic activities classified by six environmental objectives. The list of eligible activities needs to fulfil strict technical screening criteria to be considered aligned activities	Yet to be finalised. 1st January 2024 for corporate reporting	Taxonomy alignment is one of the parameters to be reported under the SFDR if the fund commits to make sustainable investments of EU Taxonomy alignment is one of the sustainable preferences under MIFID II
SFDR	Transparency and comparability on sustainability reporting obligations towards end-investors	Three main changes are introduced: Classification of funds as Article 6/8/9; Definition of sustainable investment; Sustainable indicators to monitor sustainability risk and performance of funds	1st January 2023 for SFDR level 2; SFDR level 1 came into force on 10th March 2021	Pre-contractual (prospectus) and periodic disclosures will include, among other information: of sustainable investments, of EU taxonomy aligned indicators, including principal adverse impact indicators considered by the fund
MIFID II	Introduction of sustainability preferences for end-investors	End-investors as part of the suitability assessment will need to declare if they have a preference for sustainable investments based on the three sustainability preferences proposed by the regulator	1st August 2022	The 3 sustainable preferences are: Minimum % of sustainable investment under the SFDR Minimum % of EU Taxonomy aligned investment Consideration of principal adverse impact indicators proposed by the SFDR

Regulation

Objective

Regulation in one sentence

Timeline

Interaction between regulations

EU Taxonomy

A framework for “sustainable” economic activities in the EU

The EU Taxonomy defines sustainable economic activities classified by six environmental objectives.

The list of eligible activities needs to fulfil strict technical screening criteria to be considered aligned activities

Yet to be finalised.

1st January 2024 for corporate reporting

Taxonomy alignment is one of the parameters to be reported under the SFDR if the fund commits to make sustainable investments of EU Taxonomy alignment is one of the sustainable preferences under MIFID II

SFDR

Transparency and comparability on sustainability reporting obligations towards end-investors

Three main changes are introduced:

Classification of funds as Article 6/8/9;

Definition of sustainable investment;

Sustainable indicators to monitor sustainability risk and performance of funds

1st January 2023 for SFDR level 2; SFDR level 1 came into force on 10th March 2021

Pre-contractual (prospectus) and periodic disclosures will include, among other information:

of sustainable investments,
of EU taxonomy aligned
indicators, including principal adverse impact indicators considered by the fund

MIFID II

Introduction of sustainability preferences for end-investors

End-investors as part of the suitability assessment will need to declare if they have a preference for sustainable investments based on the three sustainability preferences proposed by the regulator

1st August 2022

The 3 sustainable preferences are: