Sustainable investing, also known as socially responsible investing, is the process of incorporating environmental, social and governance (ESG) factors into investment decisions.
Through sustainable investing, individuals are able to choose investments based on values and personal priorities that consider factors such as:
• Environmental Factors which measure the impact on the environment such as climate change, carbon emissions, pollution and deforestation.
• Social Factors which measure the impact on society like employee working conditions and inclusion and hiring programmes, racial diversity, equality.
• Governance Factors which consider issues such as how much top management earn compared to other workers, ethics (such as whether a company is involved in bribery or corruption), tax transparency and board management.
Regulatory Background
Regulators in the European Union have created policies aimed at establishing sustainability risk assessment at the heart of firms’ investment decisions, governance, and risk management processes. Sustainability risk is defined as “an environmental, social, or governance event that if occurs, could cause an actual or potential negative impact on the value of the investment due to its harmful sustainability impact”.
European Union regulators have introduced a number of regulations which aim to address combatting climate change and reducing carbon intensive activities from an investment perspective.
These regulations include:
• EU Taxonomy
• Sustainable Financial Disclosure Regulation (SFDR)
• Insurance Distribution Directive (IDD)
Fact Find
During the financial advice process, we will carry out a Fact Find which requires you to answer questions about your financial circumstances, personal circumstances, and objectives in order for us to give you appropriate advice. We are now also required to ask questions about sustainability preferences when we advise you on insurance-based investment products (‘IBIPs’).
It is important to note that your sustainability preferences alone will not dictate product choice. When we assess the market for a suitable product for you, your risk profile, investment objectives and capacity for bearing loss will outweigh your sustainability preferences.
Sustainability Preferences
Sustainability preferences can be defined as whether you want consideration to be given to the possible negative impact that your investment may have on people, the environment or society.
When providing advice to you, we will ask you about your sustainability preferences to ascertain whether you would like ESG factors to be considered when we are assessing the market for products for you.
We will establish your sustainability preferences by seeking your preferences in the following areas, and you may specify a minimum part of your portfolio (10; 20; 30% etc.) that will be invested with these objectives:
| Sustainability Investment Options in relation to the IDD | Definitions |
|---|---|
| Principal Adverse Impacts |
Investments which consider Principal Adverse Impacts (PAIs) on sustainability factors: • The investment considers negative, material, or likely to be material effects on sustainability factors. • Sustainability factors include environmental, social and employee matters, respect for human rights, anti-corruption, and anti-bribery matters. |
| Sustainable Investments (SFDR-Aligned) |
Sustainable Investments as defined by the SFDR: • The SFDR was introduced to improve transparency in the market for sustainable investment products by making the sustainability profile of products more comparable and better understood by end-investors. • Sustainable investments as defined in the SFDR are investments in an economic activity that contributes to an environmental or social objective. • This is provided that the investment does not significantly harm any environmental or social objective and that the investee companies follow good governance practices |
| Environmentally Sustainable Investment (Taxonomy-Aligned) |
EU Taxonomy-Aligned investments: • The EU Taxonomy is a green classification system that translates the EU’s climate and environmental objectives into criteria for specific economic activities for investment purposes. • An EU Taxonomy-Aligned investment contributes substantially to one or more environmental objectives and does no significant harm to any of the remaining environmental objectives. • The investment is carried out in compliance with minimum social safeguards and complies with technical screening criteria established in the Climate Delegated Act. |
Important Information
• We will provide you with financial planning and product recommendations based on all the information gathered in respect of financial circumstances, attitude to risk and sustainability preferences.
• Where you do not answer the question whether you have sustainability preferences or answer “No”, we may consider you as “sustainability neutral” and recommend products both with and without sustainability-related features.
• Given that sustainable investments are relatively new to the market, there may not be products available that suit your ‘sustainability preferences’ which are in line with your personal and financial circumstances. Where this is the case, we will advise you accordingly and you will then be given the option to amend your ‘sustainability preferences’.
• Products that have some sustainability features but are not matching your specific sustainability preferences, cannot be recommended to you unless you adapt your preferences.
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