Status under the EU Sustainable Finance Disclosure Regulation (SFDR)

B. No significant harm to the sustainable investment objective

Within the construction of the reference benchmark, sustainable investments are screened for involvement in activities causing significant harm, including violations of international norms (such as the UN Global Compact), tobacco, fossil fuels, controversial weapons, significant environmental harm, adult entertainment, alcohol, gambling, recreational cannabis, genetic engineering civilian firearms and weapons. The Sub-Fund only invests in bonds of issuers whose bonds are constituents of the reference benchmark, and which therefore comply with these screens.

The table below shows how the Sub-Fund considers Principal Adverse Impacts (PAIs) and aligns with the OECD Guidelines for Multinational Enterprises and UN Guiding Principles on Business and Human Rights. Disclosures pursuant to Article 11(2) of Regulation (EU) 2019/2088 are published at www.janushenderson.com.

Consideration of PAIs

 

C. Sustainable investment objective of the financial product

The sustainable investment objective of the Sub-Fund is to reduce its carbon emissions, thereby aligning investments to the Paris Climate Agreement and assisting the adjustment towards a low carbon economy. The Sub-Fund aims to contribute to the environmental objective of climate mitigation.

The Sub-Fund is actively managed with reference to the Solactive ISS Paris Aligned Select Euro Corporate Bond Index, which meets the criteria for an EU Paris-aligned Benchmark (PAB) described in regulation (EU) 2020/1818. The reference benchmark is designed to have 50% lower greenhouse gas (GHG) emissions than the broad Euro investment grade bond market and a 7% year-on-year reduction in GHG emissions, while also incorporating a range of ESG exclusions. The methodology for the reference benchmark is available at documets.

To achieve its sustainable investment objective, the Sub-Fund will to (a) limit its corporate bond investments to issuers whose bonds are constituents of the reference benchmark and (b) maintain weighted average GHG emissions lower than or equal to the GHG emissions of the reference benchmark. This ensures that the Sub-Fund meets the requirements for PABs in Commission Delegated Regulation (EU) 2020/1818.

D. Investment Strategy

The Sub-Fund invests in an actively managed portfolio comprising primarily Euro investment grade corporate bonds. The Sub-Fund is actively managed with reference to the reference benchmark, targeting an ex-ante annualised tracking error of 0.2% to 1.0% over the long term.

To achieve its sustainable investment objective, the Sub-Fund aims to (a) limit its corporate bond investments to issuers whose bonds are constituents of the reference benchmark and (b) maintain weighted average greenhouse gas (“GHG”) emissions lower than or equal to the GHG emissions of the reference benchmark. This ensures that the Sub-Fund meets the requirements for PABs in Commission Delegated Regulation (EU) 2020/1818.

To further contribute to the objective of climate mitigation, the Sub-Fund invests primarily in bonds of issuers that are committed to the climate transition and also has a minimum allocation to issuers aligned with environmental solutions.

The Investment Manager also makes a direct assessment of the good governance practices of issuers, prior to making an investment and periodically thereafter in accordance with the Investment Manager’s Sustainability Risk Policy (the “Policy”).

The Policy sets minimum standards against which issuers will be assessed and monitored by the Investment Manager prior to making an investment and on an ongoing basis. Such standards may include, but are not limited to: sound management structures, employee relations, remuneration of staff and tax compliance. The Policy can be found at https://www.janushenderson.com/corporate/who-weare/brighter-future-project/responsibility/esg-resources/.

In addition, the Investment Manager is a signatory to the UN-supported Principles for Responsible Investment (PRI). As a signatory, the good governance practices of investee companies are also assessed by having regard to the PRI prior to making an investment and periodically thereafter.

E. Proportion of investments

The Sub-Fund allocates a minimum of 90% of assets to sustainable investments by investing in a portfolio of bonds that meets all the requirements for PABs and by reducing GHG emissions in line with its Parisaligned reference benchmark. Up to 10% of assets may be used for liquidity, hedging purposes or efficient portfolio management, where necessary.

The Sub-Fund will have a minimum of 90% invested in sustainable investments with an environmental objective. Alignment with the EU Taxonomy is not currently in the criteria for PABs and is not incorporated in the reference benchmark methodology. As a result, the Investment Manager does not currently commit to a specific minimum percentage alignment with the EU Taxonomy.

The Sub-Fund does not use derivatives to attain its sustainable investment objective.

F. Monitoring of sustainable investment objective

The sustainability indicators used to measure the attainment of the sustainable investment objective of the Sub-Fund are:

• Weighted average GHG emissions (expected to be lower than or equal to the reference benchmark)
• % of Sub-Fund in bonds of issuers committed to the climate transition (expected to be at least 80%)
• % of Sub-Fund in bonds of issuers with at least 25% of revenue and / or capital expenditures aligned to environmental solutions (expected to be at least 10%)
• % of Sub-Fund complying with ESG exclusions, as described below under “What are the binding elements of the investment strategy used to select the investments to attain the sustainable investment objective?” (expected to be 100% of investments)

G. Methodologies

The Investment Manager will select only bonds of issuers whose bonds are constituents of the reference benchmark. This ensures that selected bonds comply with the following exclusionary screens, built into the reference benchmark methodology. The Investment Manager also conducts independent checks, both pre- and post-trade, using third-party data.

• Violation of social norms: verified failure to respect established norms such as the United Nations Global Compact (UNGC) principles, the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, or UN Guiding Principles for Business and Human Rights
• Significant negative impact on environmental Sustainable Development Goals: (12: Responsible Consumptions and Production, 13: Climate Action, 14: Life Below Water, 15: Life on Land)
• Fossil fuels: >=1% of revenues from coal mining, including thermal and metallurgical coal, and the generation of electric power using coal; >=10% of revenues from fossil fuel extraction or refining; >=50% of revenues by generating electric power by fossil fuel; any tie to thermal coal
• Tobacco cultivation and production
• Controversial weapons: verified or alleged ongoing involvement in banned or controversial weapons, including cluster munitions
• Other harmful activities: adult entertainment, alcohol, gambling, recreational cannabis, genetic engineering, civilian firearms and weapons (subject to the revenue thresholds specified in the reference benchmark methodology)

Additional binding elements of the investment strategy are as follows:

• Weighted average GHG emissions lower than or equal to the reference benchmark: the Investment Manager monitors the weighted average GHG emissions of the Sub-Fund to ensure that they remain at or below the weighted average GHG emissions of the reference benchmark. The reference benchmark’s GHG emissions are published monthly.
• Minimum of 80% of assets invested in hands of issuers committed to the climate transition: The Investment Manager’s Climate Transition Risk Assessment (CTA) is a tool that utilises a proprietary scoring methodology based on key climate transition and decarbonisation factors. The key factors provide an evaluation of each company’s transition-related commitments, actions, governance, and outcomes to reflect a forward-looking assessment of transition alignment. It evaluates its strategies, capabilities and disclosures across four pillars: ambition, action, achievement and accountability. A proprietary scoring methodology leverages over 70 data indicators mapped to these pillars.
• Minimum of 10% of assets invested in bonds of issuers aligned to environmental solutions. the Investment Manager’s leverages its proprietary Environment Solutions Framework to ensure that a minimum of 10% of assets are allocated to issuers deriving more than 25% of revenues or capital expenditure from products and services that directly address environmental challenges. The framework maps a range of environmental themes (including but not limited to clean energy, energy efficiency, sustainable transport and climate infrastructure) to relevant UN SDGs and the EU Taxonomy and uses data from MSCI ESG to assess issuers’ alignment.

H. Data sources and processing

The reference benchmark uses ESG and climate data provided by ISS ESG.

In addition, the Investment Manager uses ESG data from a variety of third-party sources, including but not limited to MSCI ESG. The Investment Manager subscribes to a broad range of external ESG information providers and makes this information available directly to the investment teams. The Investment Manager receives weekly automated data feeds from external ESG Data vendors, which are ingested into a cloudbased data warehouse. Once the data is ingested and Data Quality checks have been performed the raw data is mapped to the Investment Manager’s internal data structure. This ensures that all ESG data from the data warehouse is made available consistently across all downstream applications supporting the different stages in the investment process.

The Investment Manager applies a series of Data Quality rules to ensure the integrity of the data being ingested into the central research alignment solution. Data that is not aligned correctly to the definition as provided by the data vendor is not ingested into the central cloud-based data warehouse and exceptions are raised. These exceptions are monitored and remediated by a central support team. Remediation includes challenging the data provider or internal operations supporting internally managed Systems of Records. Where appropriate the Data Owner responsible and accountable for the data is notified through the internal Data Governance process to resolve outstanding exceptions.

I. Limitations to methodologies and data

Data coverage is directly driven by the coverage of the underlying ESG Data Provider. JHI’s internal data structure provides sufficient flexibility to incorporate proprietary evidence or adapt evaluations to future requirements.

The Sub-Fund is managed with reference to the reference benchmark. As such, it relies on the ESG and climate data provided to the benchmark administrator (Solactive), and the accuracy of the administrator in applying the reference benchmark methodology.

Estimates may be used in the calculation of the reference benchmark. In particular, GHG emissions, where not reported, may be estimated. Further information is available in the reference benchmark methodology, available at documents.

J. Due diligence

The JHI Responsible Investment Policy, which incorporates JHI’s Sustainability Risk Policy, sets out the f irmwide approach to ESG Integration, including JHI's Responsible Investment Principles for long-term investment success, our approaches to Stewardship and Engagement and Baseline Exclusions applied to investee companies. These exclusions are based on classifications provided by third-party data ESG data providers. This classification is subject to an investment research override in cases where sufficient evidence exists that the third-party field is not accurate or appropriate.

Each Investment desk completes their own due diligence processes ahead of making any investment decisions within their Article 9 funds, using internal and external tools and research. The Front Office Controls & Governance team provide ongoing assurance that alignment with documented sustainability commitments where automated controls and/or 3rd party data are not available can be evidenced. Financial Risk review and challenge investment management in light of ESG-related risks, alongside traditional market risk metrics, and embed sustainability risk into the risk profiles. Investment Compliance ensure that ESG-related activities are managed in line with regulatory requirements and expectations and considered within our compliance framework.

K. Engagement Policies

The Investment Manager applies its Responsible Investment Policy which incorporates its policies on Stewardship & Engagement and Proxy Voting. These can be summarised as follows:

Stewardship & Engagement

In addition to the binding elements of the investment strategy described above, stewardship forms an integral and natural part of Janus Henderson’s long-term, active approach to investment management. Details of JHI’s approach to Engagement can be found in the ‘Responsible Investment Policy’ published under the 'ESG Resource Library’ on the Janus Henderson website.

The Firm supports a number of stewardship codes and broader initiatives around the world and is a signatory to the UK Stewardship Code."

Voting

Key voting decisions are made by portfolio managers, with support provided by in-house corporate governance specialists. Janus Henderson has a Proxy Voting Committee, which is responsible for establishing positions on major voting issues and creating guidelines to oversee the voting process. The Committee is comprised of representatives from the Asset Servicing, Compliance, Operational Risk as well as the Responsible Investment and Governance Team and equity portfolio management who provide input on behalf of the investment team. Public links to our voting records are available on company websites in applicable jurisdictions. Janus Henderson’s Proxy Voting Policy is available on our website.

L. Attainment of the sustainable investment objective

The Sub-Fund is actively managed with reference to the Solactive ISS Paris Aligned Select Euro Corporate Bond Index, which meets the criteria for an EU Paris-aligned Benchmark (PAB) described in regulation (EU) 2020/1818. The methodology for the reference benchmark is available at documents.

Principal adverse impacts (PAIs)

Consideration of PAIs