Foord International Fund

(a)     Summary

The fund promotes environmental and social characteristics but does not make sustainable investments. The fund does not use a reference benchmark for the purpose of attaining the environmental characteristics.

Foord promotes environmental safeguards for the fund by applying exclusion criteria to issuers that do not meet qualifying environmental, social and governance (ESG) peer-group scores. The fund excludes the lowest scoring 25% of issuers within the peer group.  In addition, the fund also applies exclusion against international norms violation such as the UN Global Compact, among other criteria.

Foord considers all mandatory Principal Adverse Impacts (PAI) indicators within the investment process as applied to the fund, where practical.

The fund invests in global equities, warrants, exchange traded funds, UCITS and other UCIs, interest-bearing securities, commodity-backed or commodity-linked securities, structured products and cash instruments, reflecting the fund managers’ prevailing best investment view. The portfolio also includes investments in China A-Shares through the Shanghai Hong Kong Stock Connect, term deposits and money market funds.

Foord will align the fund’s equity and credit holdings with environmental and social characteristics. Foord excludes other asset classes from this practice because ESG considerations are either not relevant or to do so is not feasible.

Where data is limited, incomplete or inaccurate, Foord will use its judgment and qualitative knowledge of the issuer and sector to estimate material ESG impacts on the business. The proportion of estimated data will also vary depending on the market and over time, based on the holdings of the fund.

Foord assesses the good governance practices of investee companies using bottom-up analysis. The assessment will consider sound management structures, employee relations, remuneration of staff and tax compliance.

(b)    No sustainable investment objective

This financial product promotes environmental characteristics but does not have as its objective sustainable investment.

(c)     Environmental or social characteristics of the financial product

The Fund promotes environmental characteristics by applying exclusion criteria to issuers that score in the bottom 25% within a peer group based on the methodology provided by Bloomberg ESG Score. 

Foord uses a bottom-up ESG scoring framework to rank the universe of available investments for the fund by environmental, social and governance factors. The ESG scoring framework is based primarly on the Bloomberg ESG score method, but supplemented by internal scoring where required.  

The Fund also applies screening and exclusion against international norms violation. This includes the UN Global Compact, among other criteria, outlined herein:

•              Human Rights Violations
•              Environmental Harm
•              Corruption and Unethical Practices
•              Violation of Labour Standards
•              Involvement in Controversial Weapons
•              Non-compliance with International Sanctions.

The fund operates without a reference benchmark. This approach allows the investment managers to focus on individual investment merits, rather than conforming to a predefined benchmark regarding the promotion of environmental and social characteristics.

(d)    Investment strategy

The fund employs a forward-looking investment approach in pursuit of its twin objectives of preserving investor capital and safely compounding long-term, inflation-beating US dollar returns. The strategy involves dynamic asset allocation, geographic and factor diversification and has a value bias in selecting securities after robust fundamental assessment. 

Foord conducts rigorous bottom-up, fundamental research into companies that exhibit attractive and persistent returns on equity and stewardship excellence. The Fund excludes the lowest 25% of the issuers within a peer group being evaluated for inclusion into the Fund based on the Bloomberg ESG scoring framework. Bloomberg’s ESG scores measure a company’s management of financially material, industry-specific environmental and social issues and opportunities, as well as governance policies and practices, with adjustments for country-specific rules and regulations. The scores measure best-in-class performance within peer groups.  The Sub-Fund will screen out the bottom-performing companies within each peer group at the pre-investment level. If the bottom performing companies are found in the already existing portfolio, the Sub-Fund manager will evaluate the ESG performace of such issuer individually and assess whether engagement or divestment should be the next step.

Assessment of good governance practices

Foord will assess good governance of all portfolio companies as part of its bottom-up, fundamental analysis. The assessment will consider sound management structures, employee relations, remuneration practices and tax compliance.

(e)     Proportion of investments

The fund comprises a conservatively managed portfolio of global equities, warrants, exchange traded funds, UCITS and other UCIs, interest-bearing securities, commodity-backed or commodity-linked securities, structured products and cash instruments reflecting Foord’s prevailing best investment view. The portfolio also includes investments in China A-Shares through the Shanghai Hong Kong Stock Connect, term deposits and money market funds.

The Fund will fund’s equity and credit holdings with environmental and social characteristics. Given that the share of equity and credit holdings can vary significantly in the portfolio, the number indicated under #1 Aligned with E/S characteristics is calculated as a target average of the share of equity and credit in the portfolio compared to other assets. The share of assets indicated under #2 Other includes the remaining asset classes such as warrants, exchange traded funds, UCITS and other UCIs, commodity-backed or commodity-linked securities, structured products and cash instruments, for which ESG considerations are either not relevant or it is not feasible to evaluate for the ESG considerations.

(f)      Monitoring of environmental or social characteristics

Consistent with the investment approach, Foord monitors financially material environmental and social factors as part of the research, portfolio construction and ongoing portfolio risk review. Foord uses desktop tools, combining a range of ESG data sources to monitor changes that may impact the portfolio and applies judgement in assessing the portfolio. Where applicable, Foord engages company management to monitor progress and to promote sustainable business practices.

(g)     Methodologies

Foord mainly uses Bloomberg’s ESG datasets to achieve the fund's binding elements for the promotion of environmental characteristics. Bloomberg’s ESG scores measure a company’s management of financially material, industry-specific environmental and social issues and opportunities, as well as governance policies and practices, with adjustments for country-specific rules and regulations. The scores measure best-in-class performance within peer groups.

Foord may also use tools and methodologies that combine a range of other ESG data sources to identify environmental and social characteristics of investee companies and to integrate this information into the investment decision-making process and ongoing monitoring of the fund’s portfolio.

(h)     Data sources and processing 

Foord’s bottom-up research process includes the assessment of ESG factors. The investment team incorporates ESG considerations into its fundamental analysis and decision-making process when it believes they could materially impair a company's valuation or financial performance. This is supported by third-party data and analysis, principally from Bloomberg. Bloomberg’s ESG scores measure a company’s management of financially material ESG issues. Financially material issues are those issues that can have a negative or positive impact on a company’s financial performance, including on its revenue streams, operating costs, cost of capital, asset value and liabilities. Bloomberg identifies financially material ESG issues based on proprietary research, which is shared transparently and based on an assessment of probability, magnitude and timing of impact.

The use of Bloomberg data allows for efficient identification of ESG issues across multiple sectors in the portfolio and allows the investment team to concentrate on deeper analysis of those issues that are most material.

(i)       Limitations to methodologies and data

The availability and accuracy of published data on environmental and social criteria may be more limited in some markets. Where data is limited, incomplete or deemed inaccurate, Foord may use other data sources or rely on its own judgment and qualitative knowledge of the company and sector to estimate material ESG impacts on the business.

(j)       Due diligence

Foord’s due diligence on underlying assets is carried out by reference to ESG ratings which incorporate analysis of the environmental, social and governance characteristics of an issuer. Foord may conduct additional due diligence using a variety of internal research and external data (including public disclosures and news reports) to scrutinise the data quality.

(k)     Engagement policies

Foord commits to influencing investee companies through company engagement and shareholder votes to support appropriate and suitable ESG initiatives to shape positive ESG outcomes.

Refer to Stewardship and voting policy and Engagement Policy on Foord’s website.

(l)       Designated reference benchmark

The fund does not make use of a reference benchmark.