Janus Henderson EUR Short Duration Income Active Core UCITS ETF
SFDR classification: Article 8
A. Summary
| No sustainable investment objective | This financial product is categorised as meeting the provisions set out in Article 8 of SFDR. It promotes environmental and/or social characteristics and does not have a sustainable investment objective. | |
| Environmental or Social (“E/S”) characteristics of the financial product | The Sub-Fund promotes the following characteristics:
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| Investment strategy | The Sub-Fund aims to provide a steady income stream with capital preservation across various market cycles by investing in an actively managed portfolio of primarily short duration fixed income instruments. The Investment Manager uses exclusionary screens to implement the E/S characteristics. The good governance practices of investee companies are also assessed prior to making an investment and periodically thereafter. | |
| Proportion of investments | Minimum share of investments aligned with E/S characteristics | 70% |
| Minimum share of sustainable investments | 0% | |
| Minimum share of sustainable investments with an environmental objective not aligned with EU Taxonomy | 0% | |
| Minimum share of sustainable investments with an environmental objective aligned with EU Taxonomy | 0% | |
| Minimum share of sustainable investments with a social objective | 0% | |
| Monitoring of E/S characteristics | E/S characteristics are monitored both pre-trade and on an ongoing basis. Exclusionary screens are coded into the Investment Manager’s order management system. | |
| Methodologies | The Sub-Fund uses exclusionary screens to implement the E/S characteristics. | |
| Data sources and processing | The Investment Manager uses ESG data from a variety of third-party sources, including but not limited to MSCI ESG. The Investment Manager receives weekly automated data feeds from external ESG data vendors. Data is subject to quality checks and mapped to the Investment Manager’s internal data structure before it is made available to investment teams. | |
| Limitations to methodologies and data | The Investment Manager acknowledges that there may be limitations to data provided by ESG data providers. Where third-party data is used to apply ESG exclusionary screens, the Investment Manager may only invest in companies that would be excluded by the screens if it believes, based on its own research and as approved by its ESG Oversight Committee, that the third-party data is insufficient or inaccurate. | |
| Due diligence | The Investment Manager completes due diligence processes ahead of making any investment decisions, using internal and external tools and research. In addition, the Investment Manager’s Front Office Controls & Governance, Financial Risk and Investment Compliance teams conduct ongoing review and oversight. | |
| Engagement policies | The Investment Manager applies Janus Henderson’s firmwide Stewardship & Engagement and Proxy Voting policies, as described in section K. | |
| Designated reference benchmark | No index has been designated as a reference benchmark in relation to the Sub-Fund’s attainment of its E/S characteristics. | |
For the purposes of the AMF doctrine, the extra-financial analysis or rating as described above is higher than:
- 90% for equities issued by large capitalisation companies whose registered office is located in "developed" countries, debt securities and money market instruments with an investment grade credit rating, sovereign debt issued by developed countries.
- 75% for equities issued by large capitalisations whose registered office is located in "emerging" countries, equities issued by small and medium capitalisations, debt securities and money market instruments with a high yield credit rating and sovereign debt issued by "emerging" countries.
B. No Sustainable Investment Objective
This financial product promotes environmental or social characteristics but does not have as its objective sustainable investment.
C. Environmental or social (“E/S”) characteristics of the financial product
The Sub-Fund promotes a range of E/S characteristics through (i) binding elements of its stock selection process, including exclusionary screens. The table below details the specific characteristics and how they are implemented within the investment strategy.
| Characteristics | Implementation | |
|---|---|---|
| (i) Supporting the UN Global Compact principles (which cover matters including human rights, labor, corruption, and environmental pollution) | Exclusionary screen:The Sub-Fund does not invest in issuers that are in breach of the UNGC Principles. | |
| (ii) Promoting human health and wellbing Avoiding issuers involved with certain activities with the potential to cause harm to human health and wellbeing | Exclusionary screen: The Sub-Fund excludes issuers involved with certain activities with the potential to cause harm to human health and wellbeing.: | |
| Tobacco | >=10% of revenue | |
| Adult entertainment | >=10% of revenue | |
| Thermal coal extraction | >=10% of revenue | |
| Arctic oil and gas drilling and exploration | >=10% of revenue | |
| Controversial weapons | The Investment Manager’s Firmwide Exclusion Policy currently requires the exclusion of entities involved in the current manufacture of, or minority shareholding of 20% or greater in a manufacturer of controversial weapons, namely:
Classification of issuers is primarily based on activity identification fields supplied by the Investment Manager’s third-party ESG data providers. This classification is subject to an investment research override in cases where sufficient evidence exists that the third-party data field is not accurate or appropriate. In any scenario where a portfolio position is identified as not meeting this exclusion criteria for any reason (legacy holding, transition holding, etc.) the Investment Manager shall be granted 90 days to review or challenge the classification of the issuer if appropriate. After this period, in the event an investment research override is not granted, divestment is required immediately under normal market trading circumstances. |
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| (iii) Promoting climate change mitigation Exclusionary screen: The Sub-Fund excludes issuers involved with certain activities that may be inconsistent with climate change mitigation. Minimising exposure to issuers with high ESG risk ratings | ||
| Other activities listed in the Investment Manager’s Firmwide Exclusion Policy | The Sub-Fund applies the Investment Manager’s Firmwide Exclusions Policy (which currently includes the controversial weapons exclusion described above). This policy applies to all the investment decisions made by the Investment Manager and may be updated from time to time. The policy can be found at here. | |
| Exclusionary screen: The Sub-Fund excludes issuers involved with certain activities that may be inconsistent with climate change mitigation. | ||
The sub-Fund seeks to minimise its exposures to issuers with the worst ESG risk ratings by applying the Investment Manager’s proprietary ESG framework:
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D. Investment Strategy
The Sub-Fund aims to provide a steady income stream with capital preservation across various market cycles by investing in an actively managed portfolio of primarily short duration fixed income instruments.
The Sub-Investment Manager constructs the portfolio by investing primarily in short duration, global investment grade securities seeking to generate income, and by applying secular and opportunistic views across countries, currencies, and sectors to enhance return and mitigate downside risk.
The good governance practices of companies are also assessed, prior to making an investment and periodically thereafter, in accordance with the Investment Manager’s Responsible Investment Policy. This policy sets minimum standards against which investee companies will be assessed and monitored. Such standards may include, but are not limited to, sound management structures, employee relations, remuneration of staff and tax compliance. In addition, the Investment Manager is a signatory to the UN Principles for Responsible Investment (UNPRI). As a signatory, the good governance practices of investee companies are also assessed by having regard to the UNPRI principles prior to making an investment and periodically thereafter.
E. Proportion of investments
A minimum of 70% of the investments of the financial product are used to meet the environmental or social characteristics promoted by the Sub-Fund. The remaining investments, which are not used to meet the environmental or social characteristics, may include cash or cash equivalents, non-agency securitized assets (asset-backed or mortgage-backed securities), derivatives for the purposes of efficient portfolio management, or derivatives for investment purposes other than those used to gain exposure to direct issuers, and Collective Investment Schemes. Derivatives used to gain exposure to direct issuers will be valued based on economic exposure, all other derivatives will be valued based on market value. all other derivatives will be valued based on market value.
| Minimum share of investments aligned with E/S characteristics | 70% |
| Minimum share of sustainable investments | 0% |
| Minimum share of sustainable investments with an environmental objective not aligned with EU Taxonomy | 0% |
| Minimum share of sustainable investments with an environmental objective aligned with EU Taxonomy | 0% |
| Minimum share of sustainable investments with a social objective | 0% |
F. Monitoring of E/S characteristics
The exclusionary screens described in section C are coded into the compliance module of an order management system utilising third-party data provider(s), on an ongoing basis. The exclusionary screens are implemented on both a pre- and post-trade basis enabling any proposed transactions in an excluded security to be blocked and to identify any changes to the status of holdings when third-party data is periodically updated.
The Sub-Fund also considers the following Principal Adverse Impacts on sustainability factors and will publish annual reports disclosing these impacts and its strategies for mitigating them:
- Exposure to companies active in fossil fuels (PAI4): exclusionary screens
- Violations of UN Global Compact principles and Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises (PAI 10): exclusionary screen
- Exposure to controversial weapons (anti-personnel mines, cluster munitions, chemical weapons and biological weapons) (PAI 14): exclusionary screen
Both the annual periodic reports and the disclosures relating to Principal Adverse Impacts will be published at www.janushenderson.com.
G. Methodologies
The Sub-Investment Adviser will:
- Apply screens so that the Fund does not invest in issuers that are in breach of the UNGC Principles (which cover matters including human rights, labour, corruption, and environmental pollution).
- Leverage a proprietary ESG framework, utilising both third party data and proprietary insights, to categorise corporate credit issuers against six ratings from “Category 1” (the highest) to “Category 6” (the lowest). To encourage the adoption of better environmental and/or social practices the Fund will only invest in the top 5 of 6 category ratings, i.e. it will not invest in “Category 6” (the lowest) rated issuers as such issuers have been evaluated as having insufficient management of sustainability risks. The category ratings reflect the Sub-Investment Adviser’s view of the most relevant level of ESG risk for most companies within the sector and can help inform portfolio construction in terms of exposure to a certain sector.
- Leverages a proprietary ESG framework, utilizing both third party data and proprietary insights, that incorporates at least 20 metrics across environmental, social and governance factors to produce countrylevel ESG ratings ranging from AAA to CCC. To encourage the adoption of better environmental and/or social practices the Sub-Fund will only invest in sovereign issuers rated B or higher.
- Leverages a proprietary ESG framework, utilizing both third party data and proprietary insights to categorise issuers of agency mortgage-backed securities against six ratings from “Category 1” (the highest) to “Category 6” (the lowest). To encourage the adoption of better environmental and/or social practices the Sub-Fund will only invest in the top 5 of 6 category ratings, i.e. it will not invest in “Category 6” (the lowest) rated issuers as such issuers have been evaluated as having insufficient management of sustainability risks. The category ratings reflect the Investment Manager’s view of the most relevant level of ESG risk for most issuers within the sector and can help inform portfolio construction in terms of exposure to a certain sector.
- Apply screens to exclude investment in issuers if they derive more than 10% of their revenue from tobacco, adult entertainment.
- Apply screens to exclude investment in issuers if they derive more than 10% of their revenue from thermal coal extraction, oil sands extraction, or arctic oil and gas drilling and exploration.
The Fund also applies the Firmwide Exclusions Policy (the “Firmwide Exclusions Policy”), which includes controversial weapons, as detailed under the Prospectus section entitled “Investment Restrictions” in the Prospectus.
The Sub-Investment Adviser may include positions in the Fund that, based on third-party data or screens, appear to fail the above criteria, where the Sub-Investment Adviser believes that the third-party data is insufficient or inaccurate.
Investors should note that a specific index is not designated as a reference benchmark to determine whether the Fund is aligned with the environmental characteristics promoted.Proprietary ESG Framework
As part of its implementation of the E/S characteristics (see section C), the Investment Manager leverages a proprietary ESG framework, utilizing both third party data and proprietary insights, that incorporates at least 20 metrics across environmental, social and governance factors to produce country-level ESG ratings ranging from AAA to CCC. To encourage the adoption of better environmental and/or social practices the Sub-Fund will only invest in sovereign issuers rated B or higher.
The Investment Manager leverages a proprietary ESG framework, utilizing both third party data and proprietary insights to categorise corporate credit issuers against six ratings from “Category 1” (the highest) to “Category 6” (the lowest). To encourage the adoption of better environmental and/or social practices the Sub-Fund will only invest in the top 5 of 6 category ratings, i.e. it will not invest in “Category 6” (the lowest) rated issuers as such issuers have been evaluated as having insufficient management of sustainability risks. The category ratings reflect the Investment Manager’s view of the most relevant level of ESG risk for most companies within the sector and can help inform portfolio construction in terms of exposure to a certain sector.
The Investment Manager leverages a proprietary ESG framework, utilizing both third party data and proprietary insights to categorise issuers of agency mortgage-backed securities against six ratings from “Category 1” (the highest) to “Category 6” (the lowest). To encourage the adoption of better environmental and/or social practices the Sub-Fund will only invest in the top 5 of 6 category ratings, i.e. it will not invest in “Category 6” (the lowest) rated issuers as such issuers have been evaluated as having insufficient management of sustainability risks. The category ratings reflect the Investment Manager’s view of the most relevant level of ESG risk for most issuers within the sector and can help inform portfolio construction in terms of exposure to a certain sector.
H. Data sources and processing
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 cloud-based 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. JHI is aware of data gaps in ESG Research for non-traditional asset classes compared to mainstream asset classes such as equities and debt instruments.
J. Due diligence
The JHI ESG Investment Policy, which incorporates JHI’s Sustainability Risk Policy, sets out the firmwide 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 8 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
Stewardship and a commitment to good governance is an integral and natural part of Janus Henderson’s long term, active approach to investment management. Strong ownership practices, such as management engagement, can help protect and enhance long-term shareholder value. We support several stewardship codes, such as the UK and Japanese stewardship codes, and broader initiatives around the world including the Principles for Responsible Investment.
The primary route for engagement on stewardship-related issues is the regular meetings analysts and portfolio managers have with the issuers in which they invest. Janus Henderson’s analysts and portfolio managers hold thousands of issuer meetings each year. Meetings incorporate a wide range of topics including strategy, capital allocation, performance, risk, management succession, board composition, corporate governance and environmental and social issues where relevant.
Methods of engagement may vary depending on the level and nature of interaction required. We broadly classify our engagements as: engagements for insight and engagements for action. Engagement for insight involves meetings where ESG issues form a meaningful part of the interaction. The goal is to understand an issuer’s strategy and actions and leverage that insight in our investment research and decision-making. Engagement for action is outcome-oriented, where we encourage issuers to take decisions that we consider to be in the best long-term interests of shareholders and/or bondholders. Results of company engagement are documented and shared via an internal centralised research platform.
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.
L. Designated reference benchmark
No index has been designated as a reference benchmark in relation to the Sub-Fund’s attainment of its E/S characteristics.
Principal adverse impacts (PAI)
The Legal Entity Identifier (LEI) for the product is 6354009TEBIAXGR7FG92
The Sub-Fund considers the following PAIs at the product level1:
| Adverse Sustainability Indicator | Metric | How PAI is considered | |
|---|---|---|---|
| Climate and other environmentrelated indicators | 4. Exposure to companies active in the fossil fuel sector | Share of investments in companies active in the fossil fuel sector | Exclusionary screen |
| Social and employee matters | 10. Violations of UN Global Compact principles and Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises | principles or OECD Guidelines for Multinational Enterprises | Exclusionary screen |
| 14. Exposure to controversial weapons (anti-personnel mines, cluster munitions, chemical weapons and biological weapons) | Share of investments in investee companies involved in the manufacture or selling of controversial weapons | Exclusionary screen | |
'Where the translated version of this disclosure text differs from the English version, the original English version prevails'