Sustainability risks are integrated into the DD Income Fund investment process. The definition of sustainability risk is an environmental, social or governance event or circumstance which, if it occurs, may have an actual or potentially negative material effect on the value of the investment.

As part of the ESG¹ analysis developed by DoubleDividend Management (hereinafter also ‘the Administrator’), research is carried out into the criteria applied by the Administrator in the field of environmental, social and corporate governance aspects.

The ESG analysis of environmental and social aspects is divided into three global challenges that the Administrator believes are the most important to the quality of society.

The analysis assesses whether the companies make a substantial effort with respect to any of the following challenges:

CLIMATE

ECOSYSTEMS

WELL-BEING

The 17 UN Sustainable Development Goals have been ranked under the three identified global challenges, thus integrating the SDGs into the sustainability policy. 

The Administrator applies the following four corporate governance principles in its ESG analysis: fairness, transparency, accountability and responsibility. These four principles are applied to matters including the composition of the board, shareholder rights, the remuneration policy and the provision of information by companies. 

As assessment is performed into whether the issuer of the fixed-income security makes a substantial effort with respect to any of the following challenges:

Based on the ESG analysis DD Income Fund invests in fixed-income securities of companies that respond to opportunities, offer solutions and have a positive impact on any of the aforementioned challenges through their production process, products and/or services.

A distinction is made with respect to fixed-income securities between governments and companies as issuers in terms of exclusions.

With regard to governments, in principle investments are not made in fixed-income securities issued by governments of countries that fall under hybrid and authoritarian regimes on the Economist Democracy Index.

Countries are also rated on corruption, which can lead to a particular country not being included in the universe. For this purpose, the Corruption Perception Index compiled by Transparency International is consulted and a minimum score must be met.

When assessing the environmental policies of countries, the Yale Environmental Performance Index (EPI index), among other things, is considered. The EPI index is compiled annually by Yale University in collaboration with Columbia University. It examines 24 indicators including climate policy, biodiversity and air and water quality. A score is given based on these factors and 180 different countries are ranked.

With regard to companies, investments are not made in fixed-income securities in a number of sectors, nor in companies that issue a fixed-income security that is on the Administrator’s exclusion list. The Administrator has published its view on exclusions as well as the exclusion list on its website (only available in Dutch).

The Administrator is of the opinion that the ESG analysis makes a positive contribution to the risk-return profile of the investment portfolio.

Ecological and/or social aspects 

The Administrator strives to promote certain ecological and/or social aspects.

The ESG analysis includes a large number of indicators that outline the ecological and social characteristics of a company. This can be information about carbon emissions, biodiversity, water use and reuse, waste flows, diversity on the Board, the remuneration policy and shareholder rights. In addition companies may not be in gross violation of the principles of the UN Global Compact, nor be on the Administrator’s exclusion list.

An ESG assessment by DD income fund is performed into whether the issuer of the fixed-income security makes a substantial effort with respect to any of the following challenges .

In companies that respond to opportunities, offer solutions and have a positive impact on any of the aforementioned challenges through their production process, products and/or services.

This ESG analysis (based on the three defined challenges) makes use of sector-specific reports from (societal) organisations, company information on sustainability in annual reports and websites, and Bloomberg. Furthermore the companies are consulted if any further information and/or explanation is desired.

DD Income Fund does not use a financial or reference benchmark  to assess the ecological and/or social aspects of DD Income Fund.

Adverse effects on sustainability factors

The Administrator takes (possible) adverse effects on sustainability factors into account when making investment decisions. The Administrator has included a number of indicators in its ESG analysis that take the sustainability factors into consideration.

In this context ‘sustainability factors’ are defined as environmental, social and employment matters, respect for human rights, and the fight against corruption and bribery.

The indicators applied by the Administrator include at least the indicators stated in Table 1 of the technical standard pertaining to EU Regulation 2019/2088 (SFDR). The possible adverse effects on sustainability factors are assessed for each indicator based on publicly disclosed information. The Administrator notes that it is dependent on the availability of non-financial (sustainability) information from the companies as well as the quality of this data.

As of the 2021 financial year the Administrator includes information about the main adverse effects on sustainability factors in the annual report.

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