Our approach to Environmental Social and Governance (ESG)
Ardea’s primary purpose is to achieve the best risk adjusted returns for our clients. We believe that incorporating ESG considerations within our investment process helps us to achieve this. We assess the materiality of ESG issues for investment decisions and then determine what impact this will make to the portfolio.
Ardea believes that ESG megatrends can affect important drivers in the economy which in turn, can have a material impact on bond market returns in the longer term. We therefore incorporate ESG considerations into our macro portfolio positioning.
Understanding ESG issues has always been an implicit part of Ardea’s qualitative fundamental risk assessment for credit investing. Indeed, we believe that incorporating ESG into our investment process is our fiduciary responsibility.
For more information on our ESG philosophy and process please refer to our ESG Policy.
Click here to view our most recent PRI Transparency Report.
The Fund does not promote environmental or social characteristics in a way that meets the specific criteria contained in Article 8 of SFDR or have sustainable investment as its objective in a way that meets the specific criteria contained in Article 9 of SFDR.
Notwithstanding this, the ICAV still considers that the Fund is managed responsibly. The Investment Manager evaluates and integrates Sustainability Risks and other relevant ESG factors at multiple stages throughout the investment process. This is considered an important element in contributing towards long-term investment returns and an effective risk-mitigation technique. The Investment Manager has carried out an assessment of the likely impacts of Sustainability Risks on the returns of the Fund and does not expect that it will materially impact the expected risk or return characteristics of the Fund currently. The Investment Manager believes its ESG-related research capabilities enables the identification of ESG risks and opportunities of most relevance to the strategy. Specifically, the Fund generates returns via the implementation of a relative value strategy which isolates mispricing between securities and mitigates exposure to market risks (including ESG risk factors). Further, the Investment Manager’s investment universe is confined to high grade liquid sovereign bond markets and their associated derivatives. The Investment Manager’s research has identified that, as at the date of this Supplement, developing markets are materially more exposed to ESG risks than developed markets. For more details on how ESG factors are integrated into the investment process please refer to the Investment Manager’s ESG policy at https://www.ardea.com.au/wp-content/uploads/Ardea-ESG-Policy_FINAL.pdf. The Investment Manager will continue to undertake research on evolving Sustainability Risks and opportunities as the Investment Manager believes Sustainability Risks may become more material risks for developed markets over time. This will necessitate an evolving ESG integration policy also.
Notwithstanding that the Investment Manager integrates the consideration of Sustainability Risks into the investment decision-making process, the Investment Manager does not currently consider the principal adverse impacts of its investment decisions on Sustainability Factors. The Investment Manager has opted against doing so, primarily as the regulatory technical standards supplementing SFDR which will set out the content, methodology and information required in the principal adverse sustainability impact (“PASI“) statement remain in draft form and have been delayed.
Performance of staff on sustainability matters is evaluated through a KPI Framework in the Ardea staff Performance Plan. Staff are scored on People and Culture KPI’s and Individual ESG and sustainability KPI’s. This is applicable for most employees, including asset managers, C-suite level staff, fund/portfolio managers, investment analysts, investment committee members and investor relations.”