Miralta Asset Management

Miralta SICAV – Sequoia and Miralta Narval FI promote environmental and/or social characteristics in accordance with Article 8 of Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services sector (SFDR). However, they do not have sustainable investment as their objective.

These funds do not intend to make sustainable investments within the meaning of the SFDR. Nevertheless, they incorporate non-financial criteria in order to assess whether the revenue generation of the companies in which they invest is aligned with certain Sustainable Development Goals (SDGs). In addition, specific exclusions will be applied with the aim of ensuring that the investments made by the funds are consistent with their sustainability framework. From an ESG perspective, the investment strategy will therefore focus on investing in assets that support and comply with this ESG framework.

Miraltabank has developed its own proprietary ESG assessment methodology which, in combination with external data providers, enables it to obtain a comprehensive view of the risks and opportunities to which potential investment assets may be exposed. This approach seeks to identify those assets that are considered better prepared to address the challenges associated with pursuing the Sustainable Development Goals, supported by appropriate policies and systems to achieve a positive impact on both society and the environment, while at the same time allowing for the anticipation of associated risks.
In determining the securities eligible for investment, the sustainability framework will be taken into account in accordance with the following criteria, which are applied throughout the investment decision-making process:

1. Exclusion Criteria (applicable to at least 51% of invested positions, excluding cash holdings or assets for which an ESG assessment cannot be obtained, which shall be considered neutral for this purpose):

First, as a basic exclusionary screening criterion, the investment universe shall exclude any countries (as well as companies domiciled in such countries) that are subject to sanctions for breaches of international regulations (including EU Sanctions or the United Nations Security Council Consolidated List), or that are included by the Financial Action Task Force (FATF) on its list of high-risk jurisdictions due to significant deficiencies in the prevention of money laundering or terrorist financing.

Second, in order to complete the exclusion analysis, and as applied to corporate issuers, exclusions will be made based either on the nature of their core business activities or on the identification of additional risks within the assessed processes. Accordingly, and as a general rule, issuers whose main source of revenue derives, beyond the specified thresholds (a maximum of 20% of total revenue for each individual activity), from any of the following activities will be excluded:

• Electricity generation using coal.

• Thermal coal mining

• Exploration or extraction of oil or gas reserves in the Arctic Ocean

• Tobacco production

2. Assesment criteria:

As part of the assessment methodology, and based on publicly available information sourced from specialised organisations, information provided by bodies affiliated with the United Nations, disclosures published on the investee companies’ or regulators’ websites, and, primarily, third-party applications operated by specialised sustainability data providers, the alignment of the portfolios with certain Sustainable Development Goals (SDGs) adopted by the United Nations General Assembly in 2015 will be analysed.This assessment will be carried out using revenue alignment as the primary metric to evaluate whether the investments are actively contributing to the achievement of those objectives.

Given that this methodology is considered sufficiently comprehensive and particularly robust — notably due to its focus on a clearly defined criterion such as the alignment of each company’s revenues with specific Sustainable Development Goals — the fund does not seek to make sustainable investments as defined under Regulation (EU) 2020/852 (the EU Taxonomy Regulation) and, accordingly, does not measure or report taxonomy alignment.Similarly, and in line with the group-level policy, the fund does not take into account Principal Adverse Impacts (PAIs) in investment decision-making, in accordance with Article 4 of the SFDR.

Consistent with the proportion applied to the assessment criteria, the fund aims to achieve a minimum of 51% of investments in assets that meet the assessment criteria, considering cash positions and assets such as derivatives — for which, by their nature, an ESG assessment cannot be obtained — as neutral for this purpose.
Compliance with the assessment criteria will be evaluated at the overall portfolio level, without carrying out a prior ESG assessment for each individual new investment, provided that the basic exclusionary criteria are met. Nevertheless, a comprehensive internal ESG analysis of the portfolio will be conducted at least on a quarterly basis, together with ongoing monitoring of ESG compliance levels. This approach allows for the early identification of deviations and the efficient implementation of corrective measures, ensuring that the alignment percentage does not fall below the minimum threshold of 51%.

Control mechanisms are internal and are based on monitoring the investment universe and ensuring compliance with the established limits. At least on an annual basis, a report will be prepared and reviewed by the Sustainability Committee to assess the evolution of compliance with the sustainability policies. This report will identify the strengths and weaknesses observed across the different portfolio holdings in order to define the appropriate course of action, including, where necessary, the exclusion of assets that do not meet the established criteria.
The minimum 51% threshold will be calculated based on the set of assets for which reliable ESG data is available, excluding assets for which no meaningful data can be obtained, such as derivatives, cash positions or other instruments lacking sufficient ESG coverage.

The data sources used to support each of the environmental or social characteristics promoted by the financial product include the FATF high-risk jurisdictions list, information provided by bodies affiliated with the United Nations — such as the UN Global Compact — as well as country-level statistics on Sustainable Development Goal performance from the Sustainable Development and Data sources also include reports published by the SDG Transformation Center (formerly the SDG Index & Dashboards / Sustainable Development Report published by the University of Cambridge), proprietary third-party data provided by specialised external vendors, as well as publicly available disclosures from issuers, such as information published on companies’ own websites or by regulators, including annual financial statements and sustainability reports.

The main limitation identified in applying the methodology and the ESG policies described across the entire portfolio relates to the limited availability, quality and timeliness of relevant non-financial data for certain companies, as well as for specific asset classes in which the funds invest.

With regard to the due diligence measures applied to the underlying assets of the financial product, the entity takes into account sustainability risks and opportunities alongside other financial risks and variables of the assets. These are managed through the aforementioned methodology and involve a broad range of internal functions, with particular emphasis on the highest-level decision-making bodies, in order to establish, oversee and integrate due diligence processes into the group’s overall strategy.

As part of the engagement policy, and where the nature of the assets and the level of ownership (a minimum shareholding of 1%) allow, the entity will seek to take appropriate actions aligned with the environmental and/or social characteristics of the investment vehicles. Such actions may include the exercise of voting rights at general shareholders’ meetings or corporate events, as well as collaborative engagement initiatives.

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

The aforementioned financial products promote environmental and/or social characteristics; however, they do not have sustainable investment as their objective. Likewise, they do not establish a minimum proportion of their investments to be allocated to sustainable investments, nor do they assess the weight of such investments, without prejudice to the fact that they may on a recurring basis hold a portion of their portfolio in investments that could be classified as sustainable (which may occur in practice, but without being formally defined or quantified).

In line with the group-level policy, the investment vehicles do not take into account Principal Adverse Impacts (PAIs) in investment decision-making, in accordance with Article 4 of the SFDR.

In addition, as part of the investment selection process, compliance by investee companies with the OECD Guidelines for Multinational Enterprises and the United Nations Guiding Principles on Business and Human Rights will be assessed, including the principles and rights set out in the eight fundamental conventions referred to in the International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work, as well as the International Bill of Human Rights.

Los fondos invertirán mayoritariamente en compañías que muestren una gestión sensata en relación a la sostenibilidad, teniendo para ello en cuenta su desempeño ESG mediante el análisis de varios indicadores. Dichas empresas, además de superar unas exclusiones en base a su procedencia o a la naturaleza de su negocio, deberán observar mayoritariamente una mínima alineación con algunos de los Objetivos de Desarrollo Sostenible (ODS) establecidos en 2015 por la Asamblea General de la ONU, analizándose su implicación a nivel agregado principalmente a través del criterio de Revenue Alignment o mediante alguno asimilable que permita realizar un análisis pormenorizado tanto para las diferentes compañías como para el global de la cartera.
Entre las características medioambientales o sociales que promoverán estos productos encontraríamos las de poner fin a la discriminación contra mujeres y niñas, valorar el trabajo no remunerado de los cuidados, o promover la responsabilidad compartida en el hogar, así como garantizar la plena participación de la mujer en el liderazgo y la toma de decisiones, o tratar de ayudar a fortalecer la resiliencia y la capacidad de adaptación ante desastres relacionados con el clima, entre otros.

Among the environmental and/or social characteristics promoted by these products are, inter alia, efforts to eliminate discrimination against women and girls, recognise and value unpaid care and domestic work, promote shared responsibility within households, ensure the full and effective participation of women in leadership and decision-making, and contribute to strengthening resilience and adaptive capacity to climate-related hazards and disasters, among other objectives.

The investment vehicles apply both financial and non-financial criteria in accordance with their sustainability framework. Investments are required, to a predominant extent, to comply with the fund’s sustainability framework, such that at least 51% of the portfolio positions must meet this framework, where reliable data is available. Cash holdings and assets for which no reliable information can be obtained are excluded from this calculation and are considered neutral for these purposes.

In order to assess the assets eligible for investment, the following criteria are applied as part of the investment decision-making process:

1. Exclusion criteria:

First, as a basic exclusionary screening criterion, the investment universe excludes any countries (as well as companies domiciled in such countries) that are subject to sanctions for breaches of international regulations, including EU Sanctions or the United Nations Security Council Consolidated List, or that are identified by the Financial Action Task Force (FATF) as high-risk jurisdictions due to significant deficiencies in the prevention of money laundering or terrorist financing.

Second, in order to complete the exclusion analysis — which applies primarily to corporate issuers — additional exclusions are implemented based on the percentage of revenues derived from certain business activities, taking into account the nature of the underlying operations. Accordingly, and as a general rule, issuers whose main source of revenue derives, beyond a threshold of up to 20% of the company’s total revenues (assessed individually for each activity, and not on an aggregated basis), from any of the following activities are excluded:

• Electricity generation using coal.

• Thermal coal mining.

• Exploration or extraction of oil or gas reserves in the Arctic Ocean.

• Tobacco production

These specific exclusions have been updated following an assessment of their environmental and social impact, as they are considered to generate higher negative externalities in relation to the fund’s sustainability framework. Nevertheless, the established exclusions may be reviewed from time to time in light of developments in the regulatory framework or where deemed necessary following a review by the Sustainability Committee.

2. Assessment criteria

As part of the assessment methodology, and based on publicly available information sourced from specialised organisations, information provided by bodies affiliated with the United Nations, disclosures published on investee companies’ or regulators’ websites, and, primarily, third-party applications operated by specialised sustainability data providers, an analysis will be conducted of how issuers are aligned with certain Sustainable Development Goals (SDGs) adopted by the United Nations General Assembly in 2015.

This assessment will preferably be carried out using revenue alignment as the primary metric to evaluate whether, and to what extent, the companies held in the portfolio actively contribute to the achievement of those objectives, although other comparable metrics may also be used where appropriate in order to reach consistent conclusions.

The assessment of compliance with the sustainability criteria will be performed at the overall portfolio level, without carrying out a prior assessment for each individual new investment, provided that the basic exclusionary criteria are met. Accordingly, the portfolio will be considered to be aligned with the fund’s sustainability framework and therefore to meet the established sustainability criteria where it maintains an overall net positive alignment with at least two Sustainable Development Goals (SDGs).

Priority will be given to SDG 5 (Gender Equality) and SDG 13 (Climate Action), without prejudice to the consideration of other SDGs depending on the composition of the portfolio.

In addition, the country of origin of the issuer will be taken into account as an assessment factor for investments for which no sufficient issuer-specific data can be obtained — a methodology that will be applied by default to sovereign debt — recognising the differences between national regulatory frameworks with respect to sustainability oversight. For this purpose, reference will be made to country-level statistics on compliance with the Sustainable Development Goals (SDGs) as set out in the Sustainable Development Report published by the SDG Transformation Center and issued by Dublin University Press (formerly the SDG Index & Dashboards / Sustainable Development Report published by the University of Cambridge), available at Sustainable Development Report
This source provides complementary information to the official SDG indicators and supports the promotion of investments in jurisdictions achieving a minimum score of 60 out of 100 in overall compliance with the 17 SDGs, while avoiding exposure to jurisdictions below this threshold. Accordingly, investments in official public-sector issuers — including municipal and regional authorities — located in jurisdictions exceeding this threshold will be considered aligned. The same approach will apply to domestic companies for which issuer-level ESG data is not available, noting that such entities remain subject to national regulation. For supranational issuers, which would not generally be assessable under this framework, and where no issuer-specific information can be obtained, the Luxembourg country rating may be used as a proxy, given that Luxembourg is the reference country of issuance for the majority of supranational bonds at a global level. Compliance with the country-level SDG criterion will be reviewed at least annually. Should a jurisdiction fall below the threshold of 60 points out of 100, its continued eligibility will be assessed and appropriate corrective measures will be determined, which may include full divestment.

For the purpose of calculating compliance with the 51% threshold under the assessment criteria at the level of individual positions, a position shall be considered aligned where it meets at least one of the following conditions: it exhibits a net positive alignment with at least two Sustainable Development Goals (SDGs) under the revenue alignment methodology or a comparable approach; or it exhibits a neutral or zero net alignment, provided that it shows no misalignment with any of the SDGs assessed, and is issued in a country with a score above 60 points in the aforementioned SDG Index, in which case the position is deemed to be subject to sufficiently stringent sustainability standards. Accordingly, any position displaying a non-zero misalignment with any of the SDGs analysed shall not be considered aligned.

As part of an update to the policy aimed at integrating and harmonising the sustainability approaches of the various funds in line with the group-level framework, the fund will fully cease to consider Principal Adverse Impacts (PAIs) in investment decision-making, in accordance with Article 4 of the SFDR, as its sustainability methodology is based on the application of specific exclusionary and assessment criteria designed to ensure ESG alignment at the portfolio level.
Likewise, the fund will maintain its decision not to pursue investments aligned with the EU Taxonomy, as its ESG approach is grounded in the integration of ESG factors into investment selection and portfolio management, rather than in assessing substantial contribution to environmental objectives as defined under Regulation (EU) 2020/852.

This methodology shall be applied in a consistent manner across both fixed income and equity funds, and similarly to investments in collective investment schemes. In the case of fund investments, look-through analyses will be performed using external data providers in order to assess alignment with the aforementioned SDGs. However, funds classified as Article 8 or Article 9 under the SFDR shall be deemed aligned by default with the sustainability framework, without requiring additional assessment, and shall therefore be included within the minimum 51% threshold of investments promoting environmental and/or social characteristics, given that such funds have already been assessed in accordance with the applicable SFDR regulatory requirements. For private equity, direct lending or similar funds where publicly available information cannot be used or where data cannot be obtained through external providers, specific questionnaires may be implemented to assess whether the underlying companies comply with the sustainability framework, for the purpose of evaluating ESG alignment and the associated risks. For assets for which no ESG data is available, alternative criteria may be applied, such as peer comparison assessments or alignment by reference to the issuer’s country of origin, on the basis that the issuer is subject to the relevant national sustainability regulations.

While at least 51% of the fund’s investments are required to promote environmental and/or social characteristics, in practice this percentage is expected to be significantly higher, as the majority of the assets held in the portfolio already comply with high ESG standards established by their countries of issuance, and the fund typically invests in large-capitalisation, well-established companies subject to stringent regulatory frameworks and elevated reputational risk considerations.
Should the portfolio at any time approach the 51% ESG alignment threshold, the necessary adjustments would be proposed in order to remain in compliance with the established sustainability criteria.

While the remaining 49% of the portfolio is not required to comply with these criteria, the overall composition of the portfolio will be subject to continuous review, enabling the identification of potential exposures to highly controversial sectors or issuers, which would be reported to the Sustainability Committee. The fund will likewise periodically monitor the ESG risks of the portfolio, with the aim of avoiding significant exposures to sectors or activities that could pose a material sustainability risk to the portfolio.

The procedures described above shall generally apply to all portfolio positions, provided that sufficient data is available. However, such data may not be available in many cases, as is typically the case for derivative instruments (primarily used for hedging purposes), cash positions, or short-term instruments such as corporate commercial paper, for which an adequate assessment under this methodology is not feasible due to the lack of the same depth and quality of data available for listed companies or larger issuers. As many of these instruments are not assessable from an ESG perspective, they shall be excluded from the calculation of the minimum 51% threshold, which shall apply solely to assets for which relevant ESG data is available.

In any event, at least 51% of the assets of the funds must be invested in assets that comply with the aforementioned exclusionary and assessment criteria. No predetermined proportion is established for individual Sustainable Development Goals (SDGs) analysed under the assessment criteria. The respective percentages of compliance with the exclusionary criteria and the assessment criteria may therefore differ. The remaining 49% of the assets of the funds shall consist of investments that do not promote environmental or social characteristics and are not classified as sustainable, and shall mainly include derivative instruments used for risk hedging or for the optimisation of financial performance, as well as the fund’s liquidity.

With respect to the minimum proportion of the funds’ investments in transition and enabling activities, no such proportion has been defined and is therefore set at 0%. Similarly, the minimum proportion of environmentally sustainable investments not aligned with the EU Taxonomy has not been established and is therefore also 0% of the funds’ assets. The minimum proportion of socially sustainable investments is likewise set at 0%.

The environmental and social characteristics of the funds are integrated into the investment process, initially through the application of basic exclusionary criteria, and subsequently through an aggregate-level assessment of alignment with the Sustainable Development Goals (SDGs). Once a company is deemed eligible for investment and an investment is executed, the portfolio’s aggregate performance is monitored, and, on a periodic basis — at least annually — the evolution of the fund’s sustainability profile is reviewed by the Sustainability Committee.

In order to monitor the sustainability performance of the investments, a continuous analysis of portfolio-level alignment with the relevant SDGs is maintained, primarily through revenue alignment (or a comparable metric), with the objective of ensuring that the portfolios remain aligned with these objectives over time. Should the aggregate alignment of the portfolios approach levels that could result in non-compliance with the sustainability framework promoted, or with the thresholds applicable to the exclusionary or assessment criteria, such situations will be reported to the relevant decision-making bodies, which will take the appropriate actions to ensure continued compliance with the sustainable standards promoted by the funds. Periodic alignment checks will be carried out as deemed necessary in order to promptly identify and address any potential risk of misalignment.

In order to assess compliance with the environmental and/or social characteristics, exclusionary criteria will be applied as an initial screening step. Thereafter, on a periodic basis, an analysis will be carried out of the evolution of the portfolios’ aggregate alignment with the targeted Sustainable Development Goals (SDGs), thereby monitoring the overall level of compliance with the environmental and/or social characteristics promoted. This strategy will be implemented on an ongoing basis within the investment process of the vehicles promoting environmental and/or social characteristics. At least annually, potential changes in the country-level assessment of portfolio holdings will also be reviewed, with a view to maintaining investments or proposing divestments where a jurisdiction is deemed no longer to be aligned with the funds’ sustainability framework. The continued holding or divestment of positions will likewise be assessed where it is considered that material changes may have occurred, or may occur, in this respect, including as a result of extraordinary events (for example, certain corporate actions).

The Sustainability Committee is responsible for ensuring that the assets in which the funds invest predominantly comply with the sustainability framework.

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 with respect to both the methodologies applied and the data sources used relates to the lack of timely updates or the incomplete coverage of certain data points, as well as to inconsistencies across different data providers. For example, instances have been identified where globally recognised companies are reported by some data providers as being in breach of the principles of the UN Global Compact or the OECD Guidelines for Multinational Enterprises, while other providers do not identify such breaches. In such cases, a detailed, case-by-case analysis will be conducted in order to clarify the situation. Another limitation arises in relation to certain financial instruments such as derivatives, structured products and cash positions for which even less ESG-related data is available than for other asset classes, and for which, in some cases, no relevant information can be obtained at all. These instruments will not be considered aligned with environmental or social characteristics; however, they will not be included in the calculation of the minimum 51% ESG-aligned threshold, and will therefore be treated as neutral for these purposes.

An additional limitation concerns the frequency of data updates, which is generally established on an annual basis and restricts the ability to respond to short-term changes. This has also led to the adoption of an annual review cycle, aligned with the data update frequency applied by the majority of ESG data providers.

This methodology is subject to continuous review, with the aim of ensuring the highest possible level of alignment with the applicable regulatory framework, optimising the use and effectiveness of available data sources, and continuously identifying and assessing alternative sources in order to enhance the reliability of the analyses conducted in this area. In parallel, periodic due diligence reviews are carried out to assess the accuracy of the data obtained through third-party tools, as well as through comparison with other data providers, with a view to identifying and reporting any inconsistencies or discrepancies in the analysis.

The established sustainability criteria are reviewed on a regular basis to ensure that, while their application is promoted, they remain aligned with the broader objectives of stakeholders, such as return and risk considerations. In addition, the Sustainability Committee periodically reviews compliance with the sustainability framework, ensuring that all relevant non-financial information is integrated into the investment decision-making process for the managed vehicles that promote environmental and/or social characteristics, and that the various portfolios comply, at an aggregate level, with the established requirements.

Where the nature of the assets and the level of ownership allow objectively defined as a holding exceeding 1% of the share capital of any company — the entity will seek to take appropriate actions aligned with the environmental and/or social characteristics of the investment vehicles, either through the exercise of voting rights at general shareholders’ meetings or through collaborative engagement initiatives. This approach may also extend to relevant corporate events or litigation related to sustainability matters affecting investee companies, while at all times remaining consistent with the objective of maximising returns for clients. Accordingly, to the extent possible and in line with the entity’s capacity to exert influence, an active ownership approach will be pursued, promoting — through dialogue with corporate issuers or through other mechanisms that allow for engagement or participation in decision-making the alignment of the underlying companies’ corporate policies with the sustainability preferences set out in the sustainability framework. For assets where the level of ownership does not reach the established threshold, and where the entity’s influence is therefore deemed insufficient to meaningfully affect decision-making, voting decisions will, by default, be delegated to the shareholders’ meeting of the relevant company. This shall be without prejudice to the possibility of adopting a specific course of action in certain exceptional circumstances, where such action is considered appropriate and remains aligned with the environmental and/or social characteristics promoted.

In this context, when assessing the decisions to be taken, consideration will be given to the potential impact of the proposed course of action from a financial, risk and suitability perspective, as well as to the associated sustainability-related risks and opportunities.

No benchmark index has been designated to measure the alignment of the portfolios with the environmental and/or social characteristics they promote.