Miralta Asset Management

The funds (Miralta Sequoia FI and Miralta Narval FI) promote environmental or social characteristics in accordance with Article 8 of Regulation (EU) 2019/2088, but they do not have sustainable investment as their objective.

These funds are not intended to make sustainable investments, although they incorporate extra-financial criteria to ensure that their investments have a positive impact on several of the underlying targets of the Sustainable Development Goals (SDGs) set out in the 2030 Agenda, adopted in 2015 by the United Nations General Assembly. The analysis also considers whether any of their investments may individually harm any of the SDGs, taking into account the Principal Adverse Impacts (PAIs) associated with issuers held or considered for inclusion in the portfolio, as well as specific exclusion policies and evaluative criteria designed to ensure that most investments are aligned with the fund’s sustainable philosophy.
From an ESG standpoint, the investment strategy therefore consists of investing in assets that contribute to achieving this ESG philosophy.

Miraltabank applies its own proprietary ESG assessment methodology, which, in combination with external data providers, provides a comprehensive view of the risks and opportunities to which potential investments are exposed. This helps identify assets that are best positioned to meet the challenges of achieving the SDGs — those with optimal policies and systems to generate a positive impact on both society and the environment, while anticipating associated risks.

To determine eligible investments, the sustainability principles are applied based on the following criteria, used throughout the investment decision-making process:

1. Exclusion Criteria (applied to at least 70% of the portfolio positions):

As an initial basic exclusion filter, countries (and companies based in those countries) subject to sanctions for breaching international regulations (EU Sanctions or the United Nations Security Council Consolidated List), or classified as high-risk jurisdictions by the Financial Action Task Force (FATF), will be excluded from the investment universe.

Additionally, based on the nature of business activities or the identification of additional risks, certain corporations are excluded. In general, issuers whose primary source of revenue exceeds the following thresholds will be excluded:

• Armaments sector (involving the manufacture or sale of controversial weapons): more than 5% of revenue.

• Tobacco companies: more than 20% of revenue.

• Adult gaming or gambling companies: more than 5% or 20% of revenue respectively.

2. Evaluative Criteria (applied to at least 51% of the portfolio positions):

As part of the evaluation methodology, information is gathered from publicly available sources — including specialised organisations, UN-affiliated bodies, company disclosures, and third-party data providers such as Clarity or Bloomberg — to assess how each company performs against certain Sustainable Development Goals (SDGs). This evaluation measures whether companies actively contribute to achieving the SDGs, and to what extent.

Several underlying targets (“sub-goals”) of the SDGs are taken into account. Based on data from third-party providers used for calculating Principal Adverse Impacts, the fund evaluates each potential investment’s performance across various relevant dimensions. This assessment determines whether an investment may significantly harm any sustainability objectives, and, if so, whether to redirect capital toward assets aligned with sustainability principles.

In this way, the adverse impacts of investment decisions on sustainability factors are considered to avoid material harm to any of the SDGs.

In summary, the funds aim to maintain at least 70% of investments aligned with exclusion criteria and 51% aligned with evaluative criteria.

Control mechanisms are internal and based on monitoring the investment universe to keep the majority of the portfolio within established limits. At least quarterly, a report is prepared and reviewed by the Investment Committee to verify portfolio alignment with the defined criteria. This review helps identify strengths and weaknesses across positions and guides potential adjustments or exclusions where limits are exceeded.

Data sources used to achieve the environmental or social characteristics promoted by the financial product may include:

• The FATF high-risk jurisdictions list.

• Information from UN-affiliated organisations such as the UN Global Compact.

• Country-level SDG performance statistics (e.g., University of Cambridge).

• Third-party data providers such as Clarity and Bloomberg.

• Publicly available information from issuers (e.g., annual reports or sustainability reports).

The main limitation of this methodology lies in the availability and frequency of extra-financial data from the above sources, as some companies do not publish relevant sustainability information, or do so with limited updates.

In assessing underlying assets, the entity considers sustainability risks and opportunities alongside other financial variables. This is managed through the described methodology, involving multiple levels of governance, particularly senior decision-making bodies, to ensure proper due diligence and integration into the group’s overall strategy.

Where possible, and depending on asset type and ownership percentage, the entity exercises voting rights at shareholder meetings or engages in collaborative engagement activities consistent with the sustainable characteristics of its funds.
While action may be taken at lower ownership levels, a minimum 1% shareholding generally triggers default engagement activity.

No reference benchmark has been designated for the attainment of the environmental or social characteristics promoted by this financial product.

Our funds promote environmental or social characteristics, but they do not have sustainable investment as their objective. Likewise, they do not establish a minimum percentage of investments to be allocated to sustainable investments, nor do they measure their share, although they may regularly maintain a portion of their portfolio in investments considered sustainable.

Regardless of this, every effort will be made to ensure that investments aligned with environmental or social characteristics do not cause significant harm to any of the Sustainable Development Goals (SDGs) that form part of the fund’s sustainable philosophy. To this end, both their contribution to the relevant SDGs and selected principal adverse impacts (PAIs) in relation to those objectives will be taken into account.

Information regarding the principal adverse impacts on sustainability factors, even if not subject to mandatory disclosure, will be included in the periodic sustainability reporting.

In the same manner, the compliance of issuers with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights will be analysed, including the principles and rights established in the eight fundamental conventions referenced in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, as well as the International Bill of Human Rights. Any controversies identified in this regard for positions held in the portfolio will be reported to the management bodies for appropriate action.

The funds will primarily invest in companies that demonstrate sound management practices in relation to sustainability, taking into account their performance relative to peers in environmental, social, and governance (ESG) matters. These companies, in addition to meeting exclusion criteria based on factors such as country of origin and the nature of their business, must also achieve a score higher than 70 out of 100 in the Clarity AI sustainability data platform, in at least two out of ten selected targets. These targets are drawn from seven of the United Nations Sustainable Development Goals (SDGs) — selected from among the 17 SDGs — as representative of the environmental and social characteristics the funds aim to promote. The analysis also considers potential negative impacts on any of the other SDGs assessed, based on the measurement of principal adverse impacts (PAIs).

Among the environmental and social characteristics promoted by these funds are:

• Ensuring full participation of women and equal opportunities;

• Improving production efficiency and promoting responsible consumption;

• Fostering the modernisation of infrastructure and the adoption of clean technologies;

• Reducing income inequality by encouraging growth in lower wages;

• Mitigating environmental impact in urban areas;

• Achieving the efficient use of natural resources;

• Reducing food waste and promoting recycling and reuse of materials;

• Encouraging the elimination of corruption and bribery.

The funds follow both financial and extra-financial criteria in line with their sustainability philosophy. Investments must primarily comply with the fund’s sustainability framework. From an ESG perspective, the following criteria are applied prior to making any investment decisions:

1. Exclusion criteria (applied to at least 70% of the portfolio positions, whenever data are available):

As a first and basic exclusion criterion, the investment universe will exclude any countries (and companies domiciled therein) sanctioned for breaches of international regulations (such as EU Sanctions or the United Nations Security Council Consolidated List), or those included by the Financial Action Task Force (FATF) on its list of high-risk jurisdictions — territories with serious deficiencies in preventing money laundering or terrorist financing.

As a second level of exclusion, primarily applied to corporate issuers, companies will be excluded based on the percentage of revenues derived from certain activities, taking into account the nature of their business. In general, issuers whose main source of income exceeds the following thresholds will be excluded:

• Armaments sector (manufacture or sale of controversial weapons), whenever more than 5% of company revenues come from any of the following areas:

  • Manufacture or supply of cluster bombs

  • Manufacture or supply of anti-personnel mines

  • Manufacture or supply of incendiary weapons (e.g., white phosphorus)

  • Manufacture of riot-control weapons (e.g., pepper spray)

  • Manufacture of small arms

  • Manufacture or supply of chemical or biological weapons

• Tobacco companies (manufacturing, cultivation, or distribution) deriving more than 20% of their revenues from related activities. This higher threshold is intended to exclude companies primarily engaged in tobacco-related activities, while avoiding excessive restrictions on sectors indirectly linked to tobacco (e.g., hospitality or vending operations). Over time, this threshold will be progressively reduced, in line with tightening regulations and the declining societal consumption of tobacco.

• Companies operating in adult entertainment or gambling, where adult content activities (manufacture or distribution of erotic or pornographic products) exceed 5% of revenues, and gambling or betting exceeds 20%. Similar to tobacco-related industries, these limits seek to restrict exposure to controversial sectors without excessively narrowing diversification or investment opportunities.

2. Evaluative Criteria (applied to at least 51% of the portfolio positions, whenever data are available):

As part of the evaluation methodology, information is gathered from public sources, UN-affiliated organisations, company and regulatory disclosures, and, most importantly, through specialised sustainability data providers (mainly Clarity AI and Bloomberg).

The analysis assesses each investment’s contribution to several Sustainable Development Goals (SDGs) and their related targets or sub-targets, as adopted by the United Nations General Assembly in 2015, to determine whether companies actively contribute to these goals — and to what extent. This evaluation is performed at the issuer level.

Investments are considered to promote environmental or social characteristics when the issuer scores above 70 out of 100 in the Clarity AI “UN SDGs” assessment for at least two of the following targets or sub-goals:

• 5.5 Ensure women’s full participation in leadership and decision-making.

• 8.4 Improve resource efficiency in production and consumption.

• 9.4 Enhance the sustainability of infrastructure and industry.

• 10.1 Reduce income inequality.

• 10.3 Ensure equal opportunities and end discrimination.

• 11.6 Reduce environmental impact in cities.

• 12.2 Promote sustainable management and use of natural resources.

• 12.3 Halve global food waste.

• 12.5 Substantially reduce waste generation.

• 16.5 Contribute to reducing corruption and bribery.

If an issuer’s overall UN SDG score is below 25 points, its individual scores for these areas will be reviewed, and the matter will be escalated to the investment decision-making bodies for consideration (e.g., inclusion, rejection, or divestment if already held).

The issuer’s country of domicile will also be considered, given regulatory and sustainability differences across jurisdictions. Reference will be made to the University of Cambridge’s “Sustainable Development Report” country ranking (https://dashboards.sdgindex.org/rankings), promoting investments in companies based in countries scoring above 65 out of 100, and avoiding others unless specifically justified by the investment committee.

For public debt issuers, the same approach applies: if data from sustainability providers are unavailable (e.g., for municipal or regional governments), they will be assimilated to the national sovereign rating of the corresponding country. For supranational issuers, which may not be directly assessed, the Luxembourg rating will be used by default, as it is the reference jurisdiction for most supranational bond issues in the portfolio.

To complete the analysis, data from sustainability providers are used to measure Principal Adverse Impacts (PAIs) and assess each issuer’s individual impact across relevant areas. The objective is to determine whether an issuer causes significant harm to any selected goals and to redirect investment towards assets that avoid unsustainable practices.

The main PAIs considered include, for corporate issuers:

• Carbon footprint

• GHG intensity

• UNGC violations

• Gender pay gap

• Board gender diversity

• Exposure to controversial weapons

For sovereign issuers:

• Country GHG intensity

• Country sustainability score

Given that the issuer’s country of origin is already a primary control factor, sovereign issuers will be considered compliant even if certain sustainability data are unavailable.

This methodology applies equally to both fixed income and equity funds, and in a similar way to investments in other funds or ETFs. Through look-through analyses conducted by external data providers, the same approach is applied to evaluate their alignment with SDGs, country of origin, and principal adverse impacts.
Funds classified as Article 9 under the SFDR are automatically considered aligned with the sustainability philosophy and are included within the minimum 51% threshold of investments promoting environmental or social characteristics.

The aforementioned procedures will generally apply to all positions within the fund, provided that relevant data are available. However, in many cases such data may not be available, as is often the case for derivative instruments (mainly used for hedging purposes), cash positions, or short-term corporate financing instruments such as commercial paper. These instruments — typically due to their size or nature — do not allow for a reliable assessment using this methodology, as they lack the same level of data depth available for larger or listed companies.

In any case, at least 70% of the Fund’s assets must be invested in assets that comply with the exclusion criteria, and 51% must comply with the evaluative criteria. In other words, in a global analysis of the portfolio, at least 51% of the assets must meet the requirement that a minimum of two out of the ten assessed targets achieve a score higher than 70 out of 100 according to the Clarity AI application.

The remaining 49% of the Fund’s assets will include investments not aligned with environmental, social, or sustainable characteristics, of which no more than 30% may fall outside the exclusion criteria. These will mainly consist of derivative instruments used for hedging or performance optimisation purposes, as well as the Fund’s cash holdings.

Regarding liquidity, in the absence of sufficient data to assess its alignment with the targeted characteristics, it will be considered neutral for the purpose of calculating the above percentages. This will not apply to derivative positions or other investments for which no sustainability contribution can be identified, which will therefore be included within the 49% not aligned with environmental or social characteristics.

The minimum percentage of the Fund’s investments in transitional and enabling activities is not determined, and is therefore 0%.

The minimum proportion of sustainable investments with an environmental objective not aligned with the EU Taxonomy is also 0% of the Fund’s assets, as no specific allocation has been established.

Similarly, the minimum proportion of socially sustainable investments will be 0% of the Fund’s assets.

The financial product does not set a target for investment in activities related to fossil gas or nuclear energy that comply with the EU Taxonomy.

The environmental and social characteristics of the funds are integrated into the investment process itself—initially through exclusion criteria, and subsequently through issuer-level analysis of the targeted Sustainable Development Goals (SDGs). Once a company is deemed eligible for investment and the acquisition is completed, its aggregate portfolio performance is monitored, and periodically—at least on a quarterly basis—the fund’s sustainability performance is reviewed by the Investment Committee.

To monitor the evolution of the investments in terms of sustainability, the aggregate portfolio performance will be periodically assessed in relation to the SDGs. The aim is to ensure that its overall score across the 17 SDGs does not fall below 40 out of 100 in the Clarity platform, and that for at least two of the ten selected targets, a score of 70 out of 100 is achieved in the “UN SDGs” section, according to the provider’s proprietary methodology.

Regarding Principal Adverse Impacts (PAIs), an individual comparison will be conducted for all issuers (including look-through holdings) against their peers. The Investment Committee will be duly informed of any issuers whose scores fall below the 25th percentile in any of the evaluated categories—based on analysis provided by Clarity AI—so that appropriate decisions can be made accordingly.

To assess compliance with the environmental or social characteristics, once the initial exclusion criteria have been applied, a preliminary evaluative analysis is carried out. This is followed by ongoing monitoring of the evolution of the Principal Adverse Impacts (PAIs) and the aggregate progress towards the targeted Sustainable Development Goals (SDGs), allowing for the continuous tracking of the degree to which the promoted sustainable characteristics are being achieved.

This strategy is implemented continuously throughout the investment process of the manager’s sustainable vehicles. Any existing controversies are analysed in order to determine whether to maintain or divest positions when a company is considered no longer aligned with the fund’s sustainability philosophy, as well as to decide on any other appropriate actions (for example, in response to corporate events).

The Investment Committee, in its periodic reviews, is responsible for ensuring that the fund’s investments remain predominantly aligned with its sustainability philosophy.

The data sources used to achieve the promoted environmental and social characteristics are primarily the following:

• United Nations Security Council Consolidated List
  (https://www.un.org/securitycouncil/content/un-sc-consolidated-list)

• FATF List
  (https://www.tesoro.es/sites/default/files/publicaciones/lista_gafi_jurisdicciones_de_riesgo_y_monitoreadas._octubre2022.pdf)

• EU Sanctions List
  (https://data.europa.eu/data/datasets/consolidated-list-of-persons-groups-and-entities-subject-to-eu-financial-sanctions?locale=en)

• Bloomberg – Principal Adverse Impacts (PAIs)

• Morningstar – Sustainable Development Goals (SDGs) / PAIs

• Clarity AI – Sustainable Development Goals (SDGs) / PAIs

• UN Global Compact
  (https://www.unglobalcompact.org/what-is-gc/participants) – SDGs

• University of Cambridge
  (https://dashboards.sdgindex.org/rankings) – Country-level SDGs

• Sustainability reports and annual reports from the various issuers.

All sources used have been duly reviewed and validated, and are considered globally recognised, maintaining an appropriate level of quality for this purpose.

The main limitation identified, both in the methods and in the data sources, lies in the lack of completeness and frequency of updates for certain data, as well as inconsistencies among different providers.
For example, regarding Principal Adverse Impacts (PAIs) — primarily sourced from Bloomberg and Clarity AI — a significant proportion of the analysed holdings lack full coverage of adverse impact indicators. This requires temporarily excluding certain PAIs from the analysis, as their limited data availability renders them statistically unrepresentative, thereby partially constraining the methodology.

However, it is expected that as sustainable finance regulations continue to expand and deepen their application at the corporate level, the volume and quality of available data will improve, enabling broader and more accurate analysis.

Another limitation concerns certain financial instruments (such as derivatives, structured products, and cash positions), where data availability is even more limited, and in some cases, no data can be obtained at all.

An additional limitation arises from the frequency of data updates, which are typically annual. This restricts the ability to react to short-term changes. Nevertheless, by integrating multiple data sources and using a range of indicators with differing update cycles, these limitations can be partially mitigated, reducing their overall impact on the analysis.

Our methodology is subject to continuous review, with the aim of adapting as effectively as possible to current regulations, optimising the use and integration of data sources, and continuously identifying and assessing alternative sources to enhance the quality and scope of available information.

Regular due diligence reviews are conducted to evaluate the accuracy and consistency of data obtained from third-party tools, and to compare this information with other providers in order to detect and report inconsistencies or identify potential discrepancies in our analysis.

The established sustainability criteria are periodically reviewed to ensure that, while promoting compliance, they remain aligned with the broader objectives of stakeholders, such as return and risk considerations. The Investment Committee also carries out periodic reviews to ensure that the funds’ sustainability philosophy is being upheld, and that all extra-financial information is properly integrated into the investment decision-making process for vehicles with sustainable characteristics.

Furthermore, the portfolio holdings are regularly monitored to confirm that they comply with the defined requirements.

Engagement will be pursued either through the exercise of voting rights at general shareholders’ meetings or through collaborative engagement initiatives, whenever permitted by the type of assets and the level of ownership.
A minimum holding of more than 1% of a company’s share capital is set as the threshold from which active engagement becomes mandatory. The objective is to take appropriate actions consistent with the sustainable characteristics of the funds, including during potential corporate events or litigation related to sustainability issues involving investee companies, while always maintaining alignment with the objective of maximising returns for the clients involved.

Where possible, and in line with the firm’s capacity for influence, the goal is to maintain an active ownership approach that promotes, through dialogue with corporate issuers or other channels of participation, the alignment of the investee companies’ corporate policies with the sustainability preferences defined in the fund’s sustainability philosophy.

Accordingly, when assessing actions to be taken, consideration will be given not only to the potential financial impact, risk implications, and suitability of the proposed initiative, but also to the associated sustainability risks and opportunities.

No reference benchmark has been designated to measure the alignment of the portfolio with the sustainable characteristics it promotes.