Date: 27 October 2023
This disclosure is made by Brandes Investment Partners (Europe) Limited (the “Manager”) in respect of Brandes European Value Fund (the “Sub-Fund”), a sub-fund of Brandes Investment Funds plc (the “Company”) pursuant to Article 10 of the Sustainable Finance Disclosure Regulation (EU) 2019/2088 (“SFDR”).
A translated summary section is available at the following link.
The Sub-Fund’s supplement is available on the Manager’s website along with a copy of the most recent annual reports of the Company.
Summary
In this section, we provide a summary of the information which is provided in more detail below. Please refer to each of the relevant sections below for further information.
As outlined in the Sub-Fund’s supplement, the Sub-Fund promotes environmental and social characteristics but does not have as its objective sustainable investment, meaning that the Sub-Fund is classified as an Article 8 fund under the SFDR. Such characteristics include carbon intensity and greenhouse gas (“GHG”) emissions, energy efficiency and intensity, biodiversity, water, gender equality, health, employee welfare, anti-corruption, bribery, controversial weaponry, and good governance qualities. The Sub-Fund promotes such environmental and social characteristics through its exclusions policy, consideration of principal adverse impacts through a materiality framework, good governance assessment of investee companies, and monitoring of the Sub-Fund’s Weighted Average Carbon Intensity (“WACI”) relative to the MSCI World Index (the “Index”). It has not designated a reference benchmark for the purpose of meeting the environmental and social characteristics.
Data required for the binding criteria of the Sub-Fund’s investment strategy is typically sourced by the Manager in various ways, including from a third-party data vendor (ISS) and/or generating such data through proprietary analysis carried out by the Manager and/or obtaining such data directly from the underlying issuer. As appropriate, due diligence will be carried out on such data sources used by the Manager. The data provided by the third-party vendor is generally integrated directly into the Manager’s internal systems. The Sub-Fund may need to use proxies or estimates from time to time as a result of data challenges (data availability and reliability). For example, the availability of sustainability-related data can in certain circumstances be limited due to a lack of corporate disclosure being made by issuers, or in circumstances where such data may not be standardized or verified when provided by an issuer. Such data challenges may result in difficulty in reporting sufficiently accurate numbers or affect the proportion of estimated or approximated data used by the Manager.
No Sustainable Investment Objective
This Sub-Fund promotes environmental and social characteristics but does not have as its objective sustainable investment
Environmental or Social Characteristics of the Financial Product
As outlined in the Sub-Fund supplement, the Sub-Fund will promote environmental and social characteristics. Such characteristics include carbon intensity and GHG emissions, energy efficiency and intensity, biodiversity, water, gender equality, health, employee welfare, anti-corruption, bribery, controversial weaponry, and good governance qualities. The Sub-Fund promotes such environmental and social characteristics through its exclusions policy, consideration of principal adverse impacts through a materiality framework, good governance assessment of investee companies, and monitoring of the Sub-Fund’s WACI relative to its Index.
Investment Strategy
In promoting environmental and social characteristics, the Manager identifies material sustainability indicators for its investments using a materiality framework that measures against set metrics. As part of this, the Manager will consider relevant metrics, including the principal adverse indicators and other metrics where appropriate, based on its materiality framework.
As further outlined in the Sub-Fund’s supplement, the Sub-Fund also promotes environmental and social characteristics through an exclusions policy. For example, the Manager will not invest in the securities of any company that it deems to be engaged principally in the manufacture of controversial weapons as defined by the UN Global Compact, including Depleted Uranium and White Phosphorous, or in the securities of any company deriving more than 5% of revenues from the manufacture of nuclear weapons. Concurrently, the Sub-Fund uses an exclusion list based on the list of prohibited munitions (i.e. cluster munitions, explosive bomblets or anti-personnel mines) maintained pursuant to the Cluster Munitions and Anti-Personnel Mines Act 2008. Furthermore, the Manager will not invest in the securities of any company which it deems to be engaged principally in the production of tobacco products or in the securities of any company deriving more than 10% of its revenue from the distribution of tobacco products. The Manager will also not invest in the securities of any company that is involved in thermal coal mining development, in the securities of any company that derives more than 10% of its revenue from the mining of thermal coal, or in the securities of any company that derives more than 10% of its revenue from operations in oil sands. Lastly, the Manager will not invest in the securities of any company that has been found to have committed a severe and verified violation of certain principles of the United Nations Global Compact. The Sub-Fund’s exclusions policy is monitored by the Manager on a pre-trade basis and on an ongoing basis thereafter.
In addition, the Sub-Fund monitors the WACI at the portfolio level relative to its Index. The Sub-Fund aims to maintain a WACI that is lower than the WACI of the Index on an annual basis.
The Manager aims to ensure that investee companies operate in compliance with good governance practices, with particular reference to sound management structures, relations with employees, staff remuneration and compliance with tax obligations. The Manager ensures that investee companies have good governance practices through analysis conducted on the relevant company by the Manager’s investment management team supplemented by a review of governance ratings provided by third-party data providers, and through engagement with the management of the company.
Proportion of Investments
The Sub-Fund invests at least 90% of its portfolio in investments to meet the environmental and social characteristics it promotes. Up to 10% of the Sub-Fund’s holdings may be held in cash and cash equivalents and are therefore not used to attain the environmental and social characteristics promoted by the Sub-Fund. The Sub-Fund does not commit to making any sustainable investments.
Monitoring of Environmental or Social Characteristics
The Manager monitors the Sub-Fund’s binding criteria at the time of trade and on an ongoing basis by way of its internal compliance system, which has been codified with the applicable exclusions policy, and considers the principal adverse impacts and good governance of companies the Sub-Fund invests in. The Manager will monitor the WACI at the portfolio level, relative to its Index and aim to maintain a WACI that is lower than the WACI of the Index on an annual basis.
Methodologies for Environmental or Social Characteristics
The attainment of the environmental and social characteristics promoted by the Sub-Fund and described above is measured through analysis of relevant ESG metrics, based on consideration of principal adverse impacts through materiality mapping of constituent securities, seeking to maintain a WACI that is lower than that of the Index on an annual basis and through implementation of the Sub-Fund’s exclusion strategy.
These criteria are periodically reviewed and updated by the Manager’s investment management team who meet regularly to ensure that the Sub-Fund’s guidelines are being applied in an appropriate manner and in line with the Manager’s evolving views on sustainability.
Data Sources and Processing
Data required for the binding criteria of the Sub-Fund’s investment strategy is typically sourced by the Manager in various ways, including from a third-party data vendor (ISS,) and/or generating such data through proprietary analysis carried out by the Manager and/or obtaining such data directly from the underlying issuer. As appropriate, due diligence will be carried out on such data sources used by the Manager. The data provided by the third-party vendor is generally integrated directly into the Manager’s internal systems. The Sub-Fund may need to use proxies or estimates from time to time as a result of data challenges (data availability and reliability). For example, the availability of sustainability-related data can in certain circumstances be limited due to a lack of corporate disclosure being made by issuers, or in circumstances where such data may not be standardized or verified when provided by an issuer. Such data challenges may result in difficulty in reporting sufficiently accurate numbers or affect the proportion of estimated or approximated data used by the Manager.
Limitations to Methodologies and Data
As noted above, the availability of sustainability-related data can in certain circumstances be limited and data quality can be a challenge due to a lack of corporate disclosure, the nature of the disclosures being made by issuers or the data supplied by third party vendors. In seeking to ensure that the promotion of environmental or social characteristics is not impacted by these data limitations, the Manager may need to use proxies or estimates from time to time.
Due Diligence
As outlined above, the Manager has identified the specific environmental and social characteristics promoted by the Sub-Fund and the sustainability indicators to assess, measure and monitor such characteristics.
In acquiring any new investment on behalf of the Sub-Fund, the Manager shall assess the relevant investment against each identified environmental and social characteristic. The portfolio of assets held by the Sub-Fund is managed by the Manager in accordance with relevant minimum commitments to investment in assets promoting environmental and/or social characteristics. The Manager maintains documented due diligence in respect of each investment categorised as promoting an environmental or social characteristic.
Further information on the due diligence carried out by the Manager is detailed above under “Investment Strategy” and “Methodologies for Environmental or Social Characteristics”.
Engagement Policies
Although not a binding element of the investment strategy, the Manager may engage with the management of investee companies to ensure that investee companies operate in compliance with good governance practices, with particular reference to sound management structures, relations with employees, staff remuneration and compliance with tax obligations.
Designated reference benchmark
As detailed in the Sub-Fund supplement, the Sub-Fund has not designated a reference benchmark for the purpose of meeting the environmental or social characteristics promoted by it.