In order to comply with legislation and to provide information to investors so that informed investment decisions can be made, Value Square NV, as portfolio manager of Value Square Fund, is obliged to disclose information on how it deals with sustainability.
A sustainable investment is defined as an investment in an economic activity that contributes to the achievement of an environmental or social objective, as measured by indicators listed in EU legislation.
Value Square NV does not promote Value Square Fund as an investment product with environmental or social characteristics. It is important to note that Value Square Fund does not take into account the EU criteria for environmentally sustainable economic activities. The reason for this is that Value Square NV cannot meet the EU standard that allows one to speak of sustainable investment.
It is also important to note that Value Square NV does not consider principal adverse impacts of investment decisions on sustainability factors at the current moment. Sustainability factors are environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters.
The reason for this is that no final regulatory technical standards (RTS) have been published by the European legislator. As a result, there is a lack of clarity about the correct method to consider principal adverse impacts of investment decisions on sustainability factors. Value Square NV intends (best-effort commitment) to consider principal adverse impacts of investment decisions on sustainability factors within 2 years from the publication of the final RTS and to publish a due diligence policy in this regard.
Fundamental ecological and social safeguard
Value Square NV does apply a fundamental environmental and social safeguard for all Value Square Fund's commercialized sub-funds in the form of three basic strategies that consider ESG (Environmental, Social and Governance) criteria:
1. Negative exclusion
2. ESG integration
3. Active shareholding (engagement).
These three basic strategies involve Value Square Fund excluding certain securities based on legislation, product category, market participation and on behavior. Three specific examples of exclusion are:
(i) companies prohibited under the law of June 8, 2006, called the Law on Arms, as amended by the law of July 16, 2009 (companies whose activities consist of the manufacture, use, repair, sale, distribution, import or export, storage or transport of anti-personnel mines, sub-munitions and/or inert ammunition and armor containing depleted uranium or any other industrial uranium within the meaning of the law and with a view to its proliferation);
ii) companies that violate the principles of the United Nations Global Compact (human rights, labor conditions, environment, anti-corruption);
(iii) manufacturers and wholesale distributors of tobacco products.
In addition, non-excluded securities are analyzed based on 60 ESG parameters.
Engagement includes voting and asking questions at General Meetings of Shareholders, involvement through phone calls, email, letters, etc.
More information on this environmental and social protection threshold can be found in Value Square NV's ESG-policy: Read our ESG-policy applicable to all subfunds of Value Square Fund, the specific ESG-policy of Value Square Fund Equity World and the ESG Committee policy.
Sustainability risks in investment advice and asset management
Value Square NV integrates sustainability risk into its investment advice and investment decisions because it applies negative exclusion in the selection of financial instruments as described above. As a result, the remaining sustainability risk for each sub-fund of the sicav is no longer assessed as high but as medium-high. Sustainability risk is an environmental, social or governance event or circumstance that, if it occurred, could cause an actual or potential material adverse effect on the value of the investment.
Some examples of sustainability risks that may occur in all sub-funds are (non-exhaustive list):
- Risk of a negative impact on human rights (oil production - land use conflict, resettlement)
- Risk of environmental pollution (oil transportation - oil spill in the ocean)
- Risk of a negative impact on labor relations
- Risk of exposure to biological agents and hazardous substances when recycling raw materials
If a sustainability risk manifests itself, the 'divest or engage' principle applies. Value Square NV will analyse the manifestation of the sustainability risk and engage with the company in question. If engagement does not lead to improvements, Value Square will divest.
Value Square NV does not integrate sustainability risks in her remuneration policy.
In-house funds based on the principles of Value Investing