Statement on the sustainability of Asset Management operations

Statement on the main negative effects of investment decisions on sustainability factors

Cassa Centrale Banca, given its size, the nature and breadth of the business it undertakes as well as the type of financial products it makes available, considers the main negative effects on sustainability factors in investment decisions as part of the portfolio management service. Hereafter is set out the “Statement on the main negative effects of investment decisions on sustainability factors” pursuant to Delegated Regulation (EU) 2022/1288.

PAI STATEMENT

Summary

The asset management lines offered by Cassa Centrale Banca described below are financial products that promote, among other things, environmental or social characteristics or a combination of both, also investing in companies that respect governance best practices, pursuant to Article 8 of Regulation (EU) 2019/2088 (so-called SFDR).

For these management lines, the environmental and social characteristics are promoted according to the investment strategy defined by the Bank. In particular, this strategy is divided into three procedural steps: negative screening, which can be absolute, i.e. aimed at identifying specific exclusion logic, or conditional, i.e. aimed at activating a rigorous decision-making process to assess the opportunity to invest in issuers and financial instruments that have limited environmental and/or social characteristics; positive screening, aimed at identifying specific logic to direct investments towards issuers and financial instruments that have environmental and/or social characteristics or objectives; alignment with SFDR/TR obligations, aimed at keeping a fixed share of the total assets under management invested in the instruments or products of issuers selected during the previous steps.
The asset management lines require for at least 70% of total assets to be invested in financial instruments or products aligned with environmental and/or social characteristics, with the remaining part of the assets allocated to other investments.
Compliance with the methodology and criteria applied to the investment strategy for the asset management lines is monitored by the competent Bank departments, based on the assessments made by the info-providers used and the documentation made available by third-party management companies. More specifically, as an indicator of investment sustainability, the Bank requires that at least 70% of the total assets in portfolio be invested in: corporate issuers that have an ESG rating equal to or higher than that envisaged in the investment strategy; collective investment undertakings that have less than 5% of total underlying assets invested in financial instruments with an ESG risk classified as severe; financial instruments of OECD government issuers and/or of supranational organisations; Green, Social or Sustainability Bonds.
Any data limitations shall not affect the promotion of the environmental or social characteristics as the investment strategy envisages the investment of at least 70% of total assets in instruments or products that comply with the aforementioned criteria.
The investment strategy defined for the asset management lines does not provide for the performance of engagement activities, however, the analysis of corporate issuer disputes is included in the context of the ESG rating used by the investment strategy and the performance of several due diligence analyses on the investments is envisaged.
The asset management lines do not use benchmark indexes to measure the environmental or social characteristics promoted.

For more information, please see the details in the following sections.

No sustainable investment objective

These financial products promote environmental or social characteristics, without aiming for sustainable investment.

Environmental or social characteristics of financial products

The asset management lines are financial products that promote, among other things, environmental or social characteristics or a combination of both, also investing in companies that respect governance best practices, pursuant to Article 8 of the SFDR.

In particular, these characteristics are promoted through investments in the financial instruments of issuers with an adequate ESG rating in their reference sectors, in units of collective investment undertakings which have a minimal share of investments exposed to severe sustainability risk, and in financial instruments whose proceeds are used for ESG projects (such as Green, Social and Sustainability Bonds). Furthermore, investments in companies producing controversial weapons (such as landmines or cluster bombs), in non-OECD government issuers and in speculative financial instruments on food commodities (e.g. coffee, rice, corn, etc.) are excluded.

This financial product takes into account the main negative effects on sustainability factors.

Investment strategy

For its asset management lines that promote, among other things, environmental or and/or social characteristics or a combination of both, the Bank has defined a specific investment strategy to integrate and monitor the sustainability risks and any probable impacts on the performance of the management line.

This strategy is divided into three procedural steps: :

• negative screening:
  • absolute: process aimed at identifying specific logic for excluding financial instruments and issuers from the group of investment options for customer assets;
  • conditional: process aimed at activating a rigorous decision-making process to assess the opportunity to invest in issuer and financial instruments with limited environmental and/or social characteristics;
• positive screening: process aimed at identifying specific logic to direct the investment of customer assets towards issuers and financial instruments that have environmental and/or social characteristics or objectives;
• alignment with SFDR/TR obligations/strong: process aimed at keeping a fixed share of the total assets under management invested in the instruments or products of the issuers selected during the previous steps.

Specifically, the investment strategy defined for the asset management lines envisages:

• for the selection of all potential investments of the management line:
  • negative screening for all corporate issuers: based on the exclusion of corporate issuers operating in the sectors of landmine and cluster bomb production, activities prohibited by the Ottawa Treaty and the Oslo Treaty respectively, from the group of potential investment options;
  • conditional negative screening for government issuers: in case of investments in the financial instruments of non-OECD government issuers, a specific analysis is carried out to assess the compliance and alignment of the specific country with the 17 sustainable development goals (SDGs) defined by the UN 2030 Agenda in economic, social and ecological fields;
  • conditional negative screening for collective investment undertakings: in case of CIUs that show severe risk, according to the use of an ESG rating, investment in the financial instrument is subject to its assessment by the Wealth Management Committee;
  • negative screening reserved for speculative financial instruments on food commodities: based on the exclusion of financial instruments (ETC, futures, etc.) having agricultural products as the underlying assets (for example, coffee, cocoa, sugar, corn, soy, rice, cereal) from the group of potential investment options, in order not to encourage speculation on food commodities;
• for the selection of potential investments for the management line aligned with environmental and/or social characteristics:
  • positive screening for corporate issuers: selection of corporate issuers that show a satisfactory level of sustainability based on their ESG rating. To this end, only corporate issuers with an adequate rating are selected;
  • negative screening for government issuers: based on the exclusion of all financial instruments of non-OECD government issuers from the potential investment options
  • positive screening for collective investment undertakings: process aimed at including CIUs with less than 5% of total underlying assets invested in financial instruments with a severe ESG rating among the group of potential investment options;
  • positive screening for Green Bonds, Social Bonds and Sustainability Bonds: inclusion of all instruments classified as Green Bonds, Social Bonds or Sustainability Bonds according to the International Capital Market Association (ICMA) guidelines among the group of potential investment options, regardless of the screening adopted for the issuer;
  • positive screening for supranational organizations: inclusion of all financial instruments issued by supranational organizations among the group of potential investment options, since considered to have a low or negligible sustainability risk;
• at least 70% of total assets must be invested in financial instruments or products that comply with the aforementioned criteria.

The investment strategy is implemented on an ongoing basis and formalized in specific internal regulations regarding the investment process of the Bank’s asset management, in the context of which regular monitoring activities are defined in relation to:

• the allocation of asset management lines (i.e. alignment with SFDR/TR);
• information on the financial instruments in portfolio (i.e. absolute or conditional negative screening and positive screening.

The analyses conducted for the investment strategy are based on data provided by specialized info-providers, which have developed proprietary methodologies for the analysis of the main market issuers.

The evaluation of the governance best practices of investees is intrinsic to the management line strategy, which envisages the use of assessments provided by info-providers that include various factors regarding the governance of the companies themselves.

Investment allocation

The investment strategy defined for the asset management lines requires their total assets to be invested in financial instruments and products according to the following thresholds:

• share of investments #1 Aligned with environmental or social characteristics equal to at least 70% of the portfolio;
• #2 Other investments no higher than the remaining share, equal to 30% of the portfolio.

As regards the investment allocation shown above, financial products include both direct and indirect investments.

Monitoring of environmental or social characteristics

The aspects of the investment strategy aimed at promoting environmental or social characteristics are subject to periodic monitoring by the competent Bank departments.

Methodologies

The asset management lines use the following sustainability indicator, aimed at measuring compliance with the environmental or social characteristics promoted:

• At least 70% of total assets in portfolio must consist of investments in:
  • corporate issuers with an ESG rating equal to or higher than that envisaged by the investment strategy;
  • collective investment undertakings with less than 5% of total underlying assets invested in financial instruments with severe ESG risk;
  • the financial instruments of OECD government issuers and/or supranational organizations;
  • Green, Social or Sustainability Bonds.

Sources and data processing

The data required for investment analysis are acquired through the assessments elaborated by the info-providers used and the documentation made available by third-party management companies. The Bank does not make any changes to the data received, since it does not have the possibility to recover any missing data or to directly correct any anomalies.

Limitation of methodologies and data

In the event the info-providers do not provide the required data relating to the investments in portfolio, the Bank will follow up with them in order to receive the correct information. In any case, this does not affect the promotion of the environmental or social characteristics as the investment strategy envisages the investment of at least 70% of total assets in instruments or products that comply with the aforementioned criteria.

Due diligence

The investment strategy defined for the asset management lines and described in the corresponding “Investment Strategy” section provides for the performance of several due diligence analyses on the investments.

Compliance with the investment strategy criteria is subject to periodic monitoring by the competent Bank departments.

Engagement policies

The investment strategy defined for the asset management lines does not provide for the performance of engagement activities, however, the analysis of corporate issuer disputes is included in the context of the ESG rating used in the investment strategy.

Designated benchmark index

The asset management lines do not use benchmark indexes to measure the environmental or social characteristics promoted.
 

The high level of personalisation that characterises Private AM lines affects their classification under the SFDR based on the allocation of the percentage weights assigned to each fund, and, specifically, those that meet the requirements for “light green” and/or “dark green” products.