XACT OMXC25 ESG (UCITS ETF)

Summary

No sustainable investment objective

This fund promotes environmental and social characteristics but does not have sustainable investments as its objective. In promoting environmental and social characteristics, the fund takes into account the environment and climate, as well as human rights, employee rights and equal opportunity.

In the promotion of environmental and social characteristics, the fund may also invest in sustainable investments, in accordance with the assessment method applied by the Management Company.

What are the objectives of the sustainable investments that the financial product partially intends to make and how does the sustainable investment contribute to such objectives?

The fund's sustainable investments are made in companies whose economic activities are considered as having a positive impact on the attainment of one or several environmental or social objectives, alternatively, the company is involved in activities aligned with the EU Taxonomy. The environmental and social objectives are defined based on the Sustainable Development Goals in Agenda 2030.

Sustainable investments primarily contribute through investments in companies that support the Sustainable Development Goals or activities aligned to the EU Taxonomy by exceeding a minimum level for a companies' revenue in line with the Sustainable Development Goals, the EU Taxonomy or a combination thereof. In addition to company revenue, the companies' capital expenditures or operational expenditures (CAPEX/OPEX) can be used to assess a company's contributions to the objectives.

For a company to be defined as a sustainable investment, an investment must not only contribute positively to an environmental or social objective, but the investment must also not cause significant harm to any other environmental or social objective in addition to the company following good governance practices. The control to ensure that the company does not cause significant harm to any of the environmental or social objectives is based on two components: taking into account the principal adverse impacts on sustainability factors (PAI, Principal Adverse Impact), as well as ensuring that the company does not significantly obstruct any environmental or social objective through its other products and services. The fund applies the following principles to ensure adherence to the do no significant harm" principle:

1. Exclusion criteria for companies with activities linked to controversial sectors as well as specific PAI indicators (Principal Adverse Impact, see explanation above), such as fossil fuels and controversial weapons. 2. Exclusion criteria for companies with verified violations of international norms and conventions, such as OECD's Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights, the International Labor Organization's (ILO) Declaration on Fundamental Principles and Rights at Work, and in the international regulations for human rights.

3. Assessment that the investments are not considered to result in significant adverse impacts on sustainability factors (PAI). This is conducted through the Management Company's internal PAI tool.

4. Assessment of what products and services in which the company or issuer is otherwise involved in, as well as if these can be considered as significantly obstructing a sustainable development.

In the context of taking into account the PAI indicators, the Management Company conducts engagement work through dialogue and active corporate governance so that the companies manage their sustainability risks and any principal adverse impacts on sustainability factors.

With respect to the Management Company's assessment methodology for sustainable investments, including the assessment of the "do no significant harm" principle, read more in the SFDR - Definitions and description of methodology within sustainability, which is published on our website at www.handelsbankenfonder.se. A description of the Management Company's PAI tool is also available on the website.

Environmental or social characteristics of the financial product

The fund promotes environmental characteristics through:

Investments in companies whose economic activities are considered to be contributing to an environmental objective under the Sustainable Development Goals in Agenda 2030 and/or activities aligned with the EU Taxonomy.
Exclusion criteria for companies with activities linked to fossil fuels and companies with verified violations of international norms and conventions related to environmental issues.
Considering the principal adverse impacts for sustainable development (see explanation above) linked to the environment and climate.

The fund promotes social characteristics through:

Investments in companies whose economic activities are considered to be contributing to a social objective under the Sustainable Development Goals in Agenda 2030.
Exclusion criteria for companies with activities linked to controversial weapons, nuclear weapons, weapons and military equipment, alcohol, tobacco, cannabis, pornography and commercial gambling, as well as by excluding companies with verified violations of international norms and conventions related to human rights, employee rights or anti-corruption and anti-bribery.
Considering the PAI indicators linked to human rights, employee rights or anti-corruption and anti-bribery.

Refer to www.handelsbankenfonder.se as well as the fund's prospectus for more detailed information about the Management Company's strategies regarding exclusion.

Investment strategy

The fund is an exchange-traded index fund that is managed with the purpose of generating returns over time that correspond as closely as possible to the returns of the index. The index tracked by the fund includes sustainability requirements, which means that those companies that do not meet the exclusion criteria of the fund and its index will be excluded from the index. What applies in this regard is indicated below. The sustainability requirements with regard to exclusions as a result of the index are mandatory for the Management Company in the fund's asset management. The fund applies the following investment strategy to attain the environmental and social characteristics promoted by the fund:

Asset Stewardship: Active engagement is an essential strategy to influence companies in a more sustainable direction. The Management Company and the fund manager manage this through company dialogues, voting, nomination committee and work within investor networks. Company dialogues are conducted directly between the fund manager and the company, together with other investors or within the scope of investor networks and other collaborations. The dialogues include a broad spectrum of sustainability issues. The Management Company conducts an active and responsible corporate governance through representation in nomination committees and voting at shareholders' meetings. The starting point for our efforts is based on our Policy for shareholder engagement and responsible investment, as well as our guidelines for nomination committee work.

Exclusion strategy: The fund and its index apply sustainability criteria in the form of an exclusion strategy. The strategy includes companies with production and distribution of controversial weapons, nuclear weapons, weapons and military equipment, alcohol, tobacco, cannabis, pornography, commercial gambling, fossil fuels, as well as companies with verified violations of international norms and conventions related to human rights, the environment, employee rights or anti-corruption and anti-bribery. The limits applied by the Management Company with regard to revenues from production and services are stated in the table for exclusion that is shown in the Appendix for sustainability-related disclosures in the fund's prospectus.

Pursuant to regulations, the fund may only invest in a company that meets good practices for sound corporate governance. The Management Company ensures this through the application of the Exclusion and Inclusion strategies.

By excluding companies with verified violations of international norms and conventions linked to, for example, taxes, workers' rights, as well as anti-corruption and anti-bribery, the Management Company ensures that the fund's investee companies comply with current practices related to good corporate governance. An analysis is conducted for each investment decision in which sustainability dimensions as well as financial dimensions are factored into the decision. This analysis also includes issues related to the company's or issuer's governance, such as relationships with employees, remuneration, management and management structures, as well as compliance with tax regulations. Examples of relevant principles and guidelines include the Global Compact principles 1,3,6 and 10, OECD's Guidelines for Multinational Enterprises as well as conventions such as the UN's Convention against Corruption and ILO's Convention 111, Discrimination in Respect of Employment and Occupation. Read more about the Management Company's definition of principles for good governance in the document, SFDR - Definitions and description of methodology within sustainability, which is available at www.handelsbankenfonder.se.

The fund's commitment to some minimum proportion of sustainable investments and application of an exclusion strategy is mandatory for the Management Company in the fund's asset management.

Proportion of investments

Monitoring of environmental or social characteristics

The Management Company's risk control function monitors the environmental/social characteristics promoted by the fund on a daily basis to ensure compliance. This occurs through the control of the minimum proportion stated in the Appendix for sustainability-related disclosures in the fund's prospectus regarding the share aligned to environmental or social characteristics as well as the minimum proportion of sustainable investments, for example. The Management Company's risk control function also follows up to ensure that the fund abides by its provisions for the exclusion of companies. The control relates to sectors we exclude and those we consider risk counteracting a sustainable development. The Management Company's risk control function also follows up to ensure that the investee companies are not in violation of international norms and conventions. For additional information, refer to the Methodologies" section below.

The following sustainability indicators are used to assess the environmental/social characteristics of the fund:

Sustainable investments: Share of the fund's value that is invested in companies that is considered to be contributing to an environmental or social objective pursuant to the Sustainable Development Goals in Agenda 2030 and/or the EU Taxonomy, at the same time as they do not significantly harm any other environmental or social objective and that the companies follow good governance practices. Follow up is conducted by the Management Company's risk control function.
Carbon footprint: Carbon footprint measured in the investee companies' greenhouse gas emissions Scope 1, 2 and 3 relative to the investee companies' enterprise value including cash (EVIC). Follow up is conducted by the Management Company's risk control function.
Greenhouse gas intensity: The greenhouse gas intensity measured in the investee companies' greenhouse gas emissions Scope 1, 2 and 3 relative to the investee companies' revenue. Follow up is conducted by the Management Company's risk control function.
UN Global Compact (UNGC) principles and Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises: Share of investments in investee companies that have been involved in violations of the UNGC principles or OECD Guidelines for Multinational Enterprises.
Fossil fuels: Share of investments in companies that are active within the fossil fuels sector. Follow up is conducted by the Management Company's risk control function.

The fund is an index fund that is managed with the overall purpose of generating returns over time that correspond as closely as possible to the returns of the index. Given that the companies included in the index are a result of the index methodology and are not the active choice of the fund, the stated minimum proportion of sustainable investments is set at a low level and is subject to ongoing monitoring. The circumstances over which the fund does not have control can result in the need to make adjustments to the minimum proportion of sustainable investments.

Methodologies

Data sources and processing

Information about the companies' exposure to excluded activities and incidents resulting in violations of international norms and conventions is obtained for funds that track sustainability-adapted indexes of index providers from external data providers in accordance with the index methodology for each fund. Corresponding information is also obtained directly from the Management Company. The external data providers gather information about the companies' exposure to excluded activities from public presentations made by the companies and/or through direct contact with the companies. The contributions to the EU Taxonomy are obtained from Sustainalytics and SDG contributions are obtained from ISS ESG. In addition, the Management Company conducts its own analysis with regard to contributions to environmental or social objectives, with the assessment based primarily on data obtained from the companies' annual reports.

Information about violations of international norms and conventions is obtained from ISS ESG. All of the fund's exclusion requirements are built into the fund's index methodology for funds that track a sustainability-oriented index. The Management Company's risk control function monitors these funds on a daily basis to ensure that these funds invest in line with the index.

The sustainability data for various areas can be estimated if this can be carried out in a reliable manner and when reported data is unavailable. In this case, the purpose of the estimation is to give a conservative estimate. Examples of areas that can be estimated are shown below. Where possible, the share of the reported data will also be provided. The share of the estimated data at the fund level is continually changing since estimates are made per investment and the fund’s exposure for each investment changes. Since the fond changed index as of September 1, 2023, we will calculate and provide the data when possible after Q3, 2023.

Greenhouse gas emissions:
Note information given above.
Contributions to the EU Taxonomy:
Note information given above.
Exposure to the fossil fuels sector:
Note information given above.
Company’s sales from products and services considered to be contributing to a social or environmental objective:
Note information given above.

However, no exceptions are made for the index funds that track a sustainability-oriented index with regard to the assessment of the index that is conducted by the service provider. The Management Company analyzes and controls the data to capture any deficiencies and/or inaccurate information. Data received from external sources is used primarily in its raw form since the data is reliable. For example, the management of data conducted for aggregations and transformations, such as the calculation of the carbon footprint based on the separate data points for emissions and company value, respectively.

Limitations to methodologies and data

Information about the companies' exposure to excluded activities is limited to the information made available from companies themselves. Consequently, it is not always possible to ensure the exact exposure to these activities. The limitations are most prominent for companies with a smaller portion of the business involved in the excluded activities, such as a grocery store that also sells alcohol. This is an acceptable limitation since the principal impact of the fund's strategy is attained by the exclusion of companies with significant exposure to the excluded activities.

There are also limitations linked to the use of estimated data to enable the assessment of positive and adverse impacts since an estimate may not necessarily be consistent with reality. The use of estimated data can still be beneficial, provided that it is calculated conservatively and only when it can be conducted reliably. It may then be possible to identify a company with unwanted exposure to fossil fuels, even though the company may not have reported the exposure themselves. There are also limitations due to the fact that a significant amount of data is reported with a lag in the annual reports of companies. This is managed by making use of the most recently available information. Some limitations linked to data accessibility and data quality are inevitable but are reduced where possible through conservative assessment processes and continuous further development to increase coverage and ensure the data quality.

Due diligence

Engagement policies

As a significant investor, the Management Company has a responsibility and an opportunity to engage with companies to act responsibly and conduct their business activities in a sustainable manner, in addition to promoting the development of the sustainability efforts in the asset management industry. The Management Company engages through company dialogues, corporate governance work and investor networks. Our engagement efforts are based on Handelsbanken's core values, our commitments, as well as the international norms and conventions supported by the Management Company. The company dialogues include overall strategic sustainability issues, as well as specific dimensions of a company's risks, opportunities and impact on sustainable development.

Through our corporate governance work, we influence companies by participating in nomination committees and voting at shareholders' meetings. Networks and collaborations with other shareholders and stakeholders contribute to collective learning, development and making an impact in the engagement work. The engagement work is conducted on behalf of the index funds and other passively-managed funds through company dialogues as well as corporate governance work and investor networks. Additional information about the principles and methodologies applied by the Management Company in its engagement work and in its corporate governance, as well as how the work is structured within the Management Company is available in the Management Company's Policy for shareholder engagement and responsible investment at www. handelsbankenfonder.se.