Sustainability-related Disclosures

a) Summary

SFDR classification*: Article 8, the fund promotes environmental and social characteristics.

The fund promotes environmental and social characteristics as part of its investment activities by integrating information on sustainability factors into the investment analysis, by engagement and stewardship activities, and by the use of exclusion lists and criteria.

Based on the information integrated in the investment analysis, the fund exercises positive selection in an effort to promote environmental and social characteristics. The fund seeks to promote the UN Sustainable Development Goal 8: Decent Work and Economic Growth by financing small and medium sized enterprises and so promoting employment in the SME sector. Reporting of the fund includes information on the promotion of these sustainability factors. The fund also requires adherence to good governance practices (the UN Global Compact).

The analysis is carried out by the portfolio managers of the fund with support of the UB ESG team. The fund complies with the United Bankers Principles of Responsible Investment, including UB’s general exclusion principles. In case the analysis reveals substantial unresolved sustainability risks, the investment will not be made.

The fund’s reporting includes information on responsible investment, sustainability factors and sustainability risks on fund-specific reports. The fund has no designated reference benchmark index.

 

*Pursuant to EU’s Sustainable Finance Disclosure Regulation 2019/2088 (SFDR), United Bankers’ funds have been classified into three categories in terms of sustainability factors: mainstream Article 6 funds consider sustainability risks in their activities, Article 8 funds promote environmental and social characteristics alongside other characteristics. Furthermore, some of these funds are committed to having a portion of their investments in sustainable investments. The investment objective of Article 9 funds is sustainable investments.

b) No sustainable investment objective

This product promotes environmental and social characteristics, but it has no sustainable investment objective.

 

c) Environmental or social characteristics of the financial product

 

The fund promotes environmental and social characteristics, especially social goals. The fund grants customized financing to Finnish companies in the SME sector. With this activity, the fund promotes in particular the UN's Sustainable Development Goal 8: Decent work and economic growth, by financing companies in the SME sector and thus promoting the growth of companies and employment in the SME sector.

 

Companies in the SME sector produce more than half of the value add produced by companies in the Finnish national economy. About 60% of the total workforce works in the SME sector (calculated in man-years). In companies in the SME sector, the growth in value add is also typically higher in proportion than in larger companies. This has been reflected in the fact that the labor force growth calculated in person-years of work in the SME sector is typically greater than in larger companies. Employment in the SME sector is also more often focused on the home country, as the investments of larger companies are focused relatively more outside the country's borders. In the 2010s, the productivity growth of independent SMEs has been slightly higher than that of larger companies. According to studies, flexible financing solutions that suit companies' needs are key to the development of companies in the SME sector and the growth of employment in the sector. (TEM, 2020: The role of companies of different sizes in the economy and in achieving growth. Publications of the Ministry of Labor and the Economy 7/2020. Available at: https://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/162079/TEM_2020_7.pdf

 

d) Investment strategy

 

UB Corporate lending fund I provides secured debt capital loans to domestic companies in the SME sector. A significant part of the loans granted by the fund is aimed at financing investments made by companies, through this the fund is also able to support positive employment development in the target companies. The fund's investment strategy is to finance Finnish companies or SMEs operating in Finland. The loans granted by the fund are aimed at increasing business operations, supporting working capital that grows as a result of business acquisitions, fixed asset investments or business volume growth. More information about the investment strategy: UB Corporate Lending Fund I

 

The fund promotes environmental and social characteristics as part of its investment activities by integrating information on sustainability factors into the investment analysis, by engagement and stewardship activities, and by the use of exclusion lists and criteria. The fund strives to select investees where environmental and social performance is at a good level and/or where there is a potential to promote environmental and social characteristics during the investment.

 

The fund doesn’t invest in companies that are on the United Bankers’ exclusion list. Exclusion list available on the page Responsible investing.

Good governance practices are assessed in line with United Bankers’ principles for responsible investment. Alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, as well as their underlying conventions and declarations is analysed as part of due diligence processes prior to making investment decisions, monitored during the investment period, and reported upon in the fund’s periodic reports. The analysis, monitoring and reporting is based on ESG analysis of the investments prior to investment, and data collected form the investees during the investment period.

The fund does not invest in companies that breach the above mentioned norms and conventions. In case norm breach or a high risk of breach occurs during the investment period, the fund seeks to engage with the investee to remedy the situation within a reasonable time frame, or if not possible, exits the investment.

 

e) Proportion of investments

 

This fund promotes environmental and social characteristics. This fund is not committed to making sustainable investments

 

f) Monitoring of environmental or social characteristics

 

Monitoring of the social characteristics promoted by the fund is carried out by monitoring among others the number of employees and changes in the number of employees of the investee companies, the number of financed SME enterprises, and the amount of disbursed financing. United Bankers monitors and reports on the performance of the sustainability indicators regularly.

g) Methodologies

 

The promotion of environmental and social characteristics is measured by monitoring the selected sustainability indicators of the fund. The fund monitors the number of employees and changes in the number of employees of the investee companies, the number of financed SME enterprises, and the amount of disbursed financing. In addition the fund requres that the investees align with good governance practices (UB Global Compact), so the fund monitors also media hits regarding the investees, and possible reputational risks and controversies.

h) Data sources and processing

 

The analysis, monitoring and reporting of environmental and social characteristics and sustainability factors is based primarily on information included in the investee companies official reporting. In addition, ESG databases (Sustainalytics, Morningstar, Bloomberg) and climate target and carbon emissions data disclosed by the Carbon Disclosure Project can be used. In addition, portfolio management may use other sources of information that United Bankers considers of good quality.

 

The data is processed carefully by United Bankers and the relevant ESG service providers. To ensure good data quality, global and reputable ESG databases and analysis methods are used. Some data contained in these databases is based on information reported by the investment objects, and some is based on estimated made by the ESG data providers. The share of data that is based on estimates depends on the ESG database in question.

i) Limitations to methodologies and data

 

It is possible that the ESG databases contain only limited information or no information on some investment objects. In these cases, it is possible to assess and report the sustainability factors based on available information only, in addition to the reporting available directly from the company/companies in question. It is also possible that the information in the ESG databases is updated with months of delay. Both data coverage and data update periodicity can have an impact on the analysis and reporting. In reporting the data coverage and data sources are reported transparently.

j) Due diligence

 

The investment objects of the fund are diligently analyzed prior to investment decision (a due diligence process). In this process the risks and opportunities are analyzed from the sustainability factors and sustainability risks perspective. Regarding sustainability factors the due diligence process typically includes the analysis of how the alignment of the potential investment with the United Bankers Principles of Responsible investment, the investment strategy and goals of the fund, sustainability risks, principal adverse impacts on sustainability factors, climate aspects of the investments, alignment with EU taxonomy, good governance, and international norms. The due diligence process is carried out according to United Bankers due diligence guidelines.

k) Engagement policies

 

The investments of the fund are included in the general stewardship and engagement activities of United Bankers. These include among others the Carbon Disclosure Project -initiative (CDP) that encourages companies to set ambitious science-based climate targets based on the SBTi -framework, and to increase transparency and reporting of their carbon emissions.
Further information on stewardship and engagement activities: Responsible Investing

 

l) Designated reference benchmark

 

This fund has no designated reference benchmark index.