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Socially ResponsibleInvestment Guidelines Carmignac Emergents
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Carmignac’s Overarching Sustainable Framework*
*All the funds and underlying issuers are not concerned by this statement. For more details, please refer to: https://www.carmignac.lu/en_GB/about-us/socially-responsible-investment-sri-3450
**For selected funds.
UNPRI Signatorysince 2012
Investment TeamSRI guidelines
SRI Objectivein prospectus**
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Carmignac Emergents Obtained the French and Belgian sustainability labels
*Label obtained in January 2019. For further information, please visit https://www.lelabelisr.fr/en/**Label obtained in March 2020. For further information, please visit https://www.towardssustainability.be/
**https://www.febelfin.be/fr***Socially Responsible Investment
Labels supported respectively by the French* government and Belgian Financial Sector
Federation Febelfin**
Accredited upon a strict audit run by an independent body
Renders SRI*** products more visible for investors in France and Belgium
and across Europe
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Our Internal ESG Guidelines
* MSCI ESG Ratings is a proprietary methodology from MCSI. To arrive at a final rating (from AAA the best to CCC the worst) the weighted averages of the 37 Key Issue Scores covering 10 different themes (4 for Environment / 4 for Social / 2 for Governance) are aggregated and companies' scores are normalized relatively to their industries. These
assessments of company performance are not absolute but are explicitly intended to be relative to the standards and performance of a company's industry peers.Carmignac is conscious that by monitoring 37 Key Issue Score the methodology cannot followed all the sustainable aspects from the development of companies but Carmignac ensure that it is the most appropriate ones. Moreover, by defining a rating relatively to industry peers, the rating cannot be taken as the objective / inherent assessment of the
Company approach in regards of sustainability.
** The limit defined is rebased in % of the portfolio that has a MSCI ESG rating. For issuers, for which MSCI ESG does not issue any rating, the MSCI ESG Rating from the group the issuer belongs to is used. As of 09/30/2019, 84.9% of the holdings was subject to a rating in the tool MCSI ESG.
*** Guideline starting from 2020. Excluding warrants/ P-Notes and preference sharesSource: Carmignac, 31/03/2020.
Portfolio construction objective
Minimum 30% of the Fund invested in companies rated A* or above by MSCI ESG**
Integration of ESG criteria and engagement with companies
We commit to a strengthened engagement dialogue with companies to improve their approach to ESG issues
Voting Policy engagement
An objective of participation rate of 100% or above***
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Our Approach to Socially Responsible Investment
Source: Carmignac 30/09/2019
EMERGING UNIVERSE
Macro Level
Micro Level
SUSTAINABLE EMERGING UNIVERSE≈ 480 STOCKS
≈ 1 200 stocks
INVESTABLE UNIVERSE ACCORDING TO FINANCIAL CRITERIA≈ 600 stocks
ESG Filter
Country filter Underpenetration
ControversiesExclusions
Sustainable FCF
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Sustainability is at the heart of Carmignac Emergents’ investment process*
*All the funds and underlying issuers are not concerned by this statement. For more details, please refer to: https://www.carmignac.lu/en_GB/about-us/socially-responsible-investment-sri-3450
Generating attractive returns with a low turnover…
By selecting the right
Countries with healthy macro-economic fundamentals and sound balance of payments
Underpenetrated sectors that stand to benefit from long-term growth themes
Capital-light companies offering attractive and sustainable cash generation capable of self-financing their growth
OUR COMMITMENT TO INVESTORS
… while contributing to sustainable development
Systematically taking into account environmental, social and governance criteria (ESG) when analyzing companies and when making our investment decisions
Positively impacting society by Favoring companies that bring solutions to social and environmental challenges
Minimizing the impact on the environment with a portfolio whose carbon footprint is lower than its reference indicator (MSCI EM) and close to the one of the MSCI EM Low Carbon Target index
Identification and exclusion of controversial sectors
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Favoring companies that bring solutions to socialand environmental challenges*
*All the funds and underlying issuers are not concerned by this statement. For more details, please refer to: https://www.carmignac.lu/en_GB/about-us/socially-responsible-investment-sri-3450
FINANCING SUSTAINABLE TECHNOLOGIES
IMPROVINGLIVING STANDARDS
OFFERING INNOVATIVE TECHNOLOGIES
FINANCING THE FUTURE
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ESG criteria are embedded in our decision-making process and our financial analysis*
*All the funds and underlying issuers are not concerned by this statement. For more details, please refer to: https://www.carmignac.lu/en_GB/about-us/socially-responsible-investment-sri-3450
All companies eligible to our investment universe must meet both our country, sector and company criteria as well as our ESG standards guidelines and exclusion policy.
Stock selection is made through a long-term, sustainable approach, which includes consultation of external and independent ESG reports and ratings.Our teams carry out detailed financial and ESG assessments of companiesheld in portfolio.
We complete this analysis by regular on-site visits of production sites andone-to-one meetings with the companies’ management in order to understand their strategy as well as their long-term engagements.
Consideration of ESG issues does not end when the investment decision is made. The Emerging Market (EM) Equity team continuously reviews the investment thesis of companies held in portfolio, including a review of ESG criteria.
Step 1 Setting theinvestment
universe
Step 2 Analysis
Step 3 On-the-ground
visits
Step 4 Monitoring
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The Emerging Market Equity team has extended the exclusion list with its own specific convictions
Exclusion Policy
Exclusion lists are updated on a quarterly basis.
Exclusions across all funds
Additional exclusions for Carmignac Emergents
Detailed ESG analysis and follow-up of companies held in portfolio
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Exclusions Across All Funds
* 1) The Ottawa Treaty (1997), which prohibits the use, stockpiling, production and transfer of anti-personnel mines. 2) The Convention on Cluster Munitions (2008), which prohibits the use, stockpiling, production and transfer of cluster munitions. 3) The Chemical Weapons Convention (1997), which prohibits the use, stockpiling, production and transfer of chemical weapons.
4) The Biological Weapons Convention (1975), which prohibits the use, stockpiling, production and transfer of biological weapons. 5) The Treaty on the Non-Proliferation of Nuclear Weapons (1968), which limits the spread of nuclear weapons to the group of so-called nuclear weapons states
(USA, Russia, UK, France and China). 6) The Belgian Loi Mahoux, which bans uranium weapon investments.
**Tobacco producers and distributors with revenue over 5%***Thermal coal miners with over 10% revenues from extraction with the exception for companies with exit thermal coal plan
****Includes OECD Business Principles and UNGC Principles.Exclusion lists are updated on a quarterly basis
.
Exclusions
Hard restrictions (transactions are prohibited and blocked on trading tools):
- Controversial weapon manufacturers*
- Tobacco producers & wholesale distributors**
- Thermal coal miners***
- International Global Norms violations****
11P R O F E S S I O N A L S O N L Y
Carmignac Emergents Exclusion Policies*
*Our Energy and Ethical policies are aligned with the Quality Standards of the Belgian SRI label (1) Unconventional energy extraction sources: Tar/oil sands, shale oil, shale gas and Arctic drilling.
(2) Conventional energy extraction sources: oil and gas(3) Renewable energy: biofuel, wind, solar, wave, geothermal, hydro, tidal.
(4) Non compliant energy investments (conventional oil, gas and electricity generation) will not exceed maximum of 5% AUMExclusion lists are updated on a quarterly basis
Source : Carmignac, November 2019
• Coal producing companies with more than 5% sales directly derived from coal extraction
• Unconventional energy (1) companies deriving more than 1% of total production from unconventional energy sources
• Conventional energy production (2) companies must have a minimum 40% revenue from Gas and/or Renewable Energy (3)
• Conventional oil energy production companies are limited to 3% of the portfolio(4)
• Power generation companies must not exceed 429 gCO2/kWh carbon intensity or if data is not available cannot exceed:
• Gas- fired – 30% production or revenue• Coal-fired – 10% production or revenue• Nuclear-fired – 30% production or revenue
ENERGY EXCLUSION POLICY ETHICAL EXCLUSION POLICY
All Controversial weapon companies
• Conventional Weapons including components companies (10% revenue hurdles)
• All Tobacco producers
• Norms based exclusion including UN Global Compact violations human rights, labour rights, environment and corruption
• Adult Entertainment companies (2% revenue hurdle)
• Meat-processing companies whose revenues derive partially or completely from the processing of cattle, pork, lamb or poultry
• Companies in the PETA (People for Ethical Treatment of Animals) exclusion list
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A Low Carbon Emission PortfolioCarmignac Emergents Footprint
as of 31/12/2019Investment strategy and transparency
regarding carbon emissions
Our specific carbon risk policy is as follows:
• Minimizing the environmental impact with a portfolio whose carbon footprint is lower than its reference indicator (the MSCI EM index) and close to the one of the MSCI EM Low Carbon Target
• Limiting investments in companies owning fossil fuel reserves
• Selecting companies that follow a more ambitious carbon risk management policy than their industry peers
• Investing in companies that offer clean technology solutions
0
50
100
150
200
250
300
350
Carbon footprint* Weight of companies with fossil fuel reserves (RHS)Carmignac Emergents
MSCI Emerging Markets Index
MSCI EM Low Carbon Target Index
0%
5%
10%
15%
102
298
66
6%
12%
9%
*Tons of CO2 equivalent per million dollars investedMSCI ESG Research has developed a proprietary methodology in order to issue Carbon Portfolio Analytics, which is based on are based on a
variety of aggregation methodologies of the underlying covered holdings from the portfolio in-scope. MSCI ESG Research collects carbon emissions (in other words, greenhouse gas emissions) data for the companies in our coverage universe. Data is collected once per year from
most recent corporate sources, including Annual Reports, Corporate Social Responsibility Reports or websites. In addition, MSCI ESG Research uses the carbon emissions data reported through CDP (formerly the Carbon Disclosure Project) or government databases when reported data
is not available through direct corporate disclosure. When companies do not disclose data, MSCI ESG Research refers proprietary methodologies to estimate Scope 1, Scope 2, Upstream Scope 3, and Downstream Scope 3 carbon emissions. By incorporating estimation in
the methodologies used, Carmignac acknowledges that metrics determined could be assessed as relative rather than objective. Nevertheless, Carmignac confirms that the use of MSCI ESG Research permits to identify and follow the carbon emission of portfolios in comparison to
relevant reference indicator or low carbon benchmark defined.Source: MSCI Carbon Portfolio Analytics, Carmignac, 31/12/2019.
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CARMIGNAC GESTION – 24, place Vendôme - F - 75001 Paris - Tel: (+33) 01 42 86 53 35Public limited company with share capital of €15,000,000 – RCS Paris B 349 501 676
CARMIGNAC GESTION LUXEMBOURG – City Link - 7, rue de la Chapelle - L-1325 Luxembourg - Tel: (+352) 46 70 60 1Subsidiary of Carmignac Gestion. UCITS management company (CSSF authorisation of 10/06/2013). Limited company (SA) with capital of €23,000,000 – Registration no.: RC Luxembourg B67549
DISCLAIMER
This document may not be reproduced, disseminated or communicated, in whole or in part, without prior authorisation from the management company. Theinformation contained in this document may be partial information, and may be modified without prior notice.
Carmignac Emergents (the “Fund”) is a common fund in contractual form (FCP) conforming to the UCITS Directive under French law. Access to the Fund may besubject to restrictions with regard to certain persons or countries. The Fund is not registered in North America, in South America, in Asia nor is it registered inJapan. The Fund is registered in Singapore as restricted foreign scheme (for professional clients only). The Fund has not been registered under the US SecuritiesAct of 1933. The Fund may not be offered or sold, directly or indirectly, for the benefit or on behalf of a "U.S. person", according to the definition of the USRegulation S and/or FATCA. The Fund presents a risk of loss of capital. The risks, fees and ongoing charges are described in the KIID (Key Investor InformationDocument). The Fund's prospectus, KIIDs and annual reports are available at www.carmignac.com, or upon request to the Management Company. The KIIDmust be made available to the subscriber prior to subscription. Past performance is not necessarily indicative of future performance. In the United Kingdom,the Funds' respective prospectuses, KIIDs and annual reports are available at www.carmignac.co.uk, or upon request to the Management Company, or for theFrench Funds, at the offices of the Facilities Agent at BNP PARIBAS SECURITIES SERVICES, operating through its branch in London: 55 Moorgate, London EC2R.This material was prepared by Carmignac Gestion and/or Carmignac Gestion Luxembourg and is being distributed in the UK by Carmignac Gestion LuxembourgUK Branch (Registered in England and Wales with number FC031103, CSSF agreement of 10/06/2013). In Switzerland, the Fund's respective prospectuses,KIIDs and annual reports are available at www.carmignac.ch, or through our representative in Switzerland, CACEIS (Switzerland) SA, Route de Signy 35, CH-1260 Nyon. The paying agent is CACEIS Bank, Paris, succursale de Nyon/Suisse, Route de Signy 35, 1260 Nyon. The KIID must be made available to thesubscriber prior to subscription. Copyright: the information contained herein is proprietary to its content providers as indicated on each page. Non contractualdocument, completion achieved on 30/04/2020.