With a diversified strategy of investments in different asset classes, the Asset Manager identifies the major global issues (themes) related to the protection and promotion of human dignity for impact investing and aligns them with the corresponding SDGs.

To select investments, the Asset Manager considers a number of sustainability criteria, which are both value-based (an investment is positively evaluated if its ESG characteristics stand out) and exclusionary (an investment is excluded from the investment universe if its ESG characteristics are incompatible with the sustainable objective of each product):

Investment in issuers whose activities do not comply with the list of activities prohibited by the International Finance Corporation (IFC) of the World Bank are excluded: (i) construction of dams with high adverse effects on ecosystems and people, (ii) production or trade of any product or activity considered illegal under the laws or regulations of the host country or the international conventions and agreements, or subject to international prohibitions, (iii) projects involving the displacement of more than 5000 people, (iv) investments impacting natural areas declared World Heritage Sites or national parks or protected by the UN, (v) extraction or infrastructure impacting other protected or natural areas, (vi) production or trade of radioactive materials, except for the purchase of medical or quality control equipment or asbestos fibres (vii) fishing practices that harm protected species or biodiversity, (viii) production or activities involving harmful or exploitative forms of forced labour/child labour, (ix) projects in companies that violate local legislation on certain matters (x) production or trade of weapons and ammunition, certain alcoholic beverages, tobacco, gambling, or casinos, (xi) projects or companies majority-owned or controlled by the government of the country unless it is in the process of privatisation (xii) illegal monopolistic practices (xiii) projects or companies that support governments that infringe human rights (xiv) projects or companies that engage in certain non-voluntary family planning practices (xv) production, trade, storage, or transportation of significant volumes of hazardous chemicals, or commercial-scale use of hazardous chemicals, (xvi) production or activities affecting lands belonging to indigenous peoples, or claimed under an adjudication, without the full documented consent of such peoples.

In addition, if a potential investment scores less than 60% on the internal IBIST® measurement tool (whose operation is further developed later in this policy), it is deemed not to meet the minimum impact requirements for each fund and would be excluded from the investment universe.

Impact investments are made when they contribute positively to at least one of the impact objectives defined for each product. These investments must be shown to be acceptable in three different dimensions:

To assess the impact of investments, the Asset Manager has developed an impact measurement system, the IBIST® tool, which allows each investment to be analysed from a social and environmental impact point of view, from the pre-investment stage and continues while the investment remains in the portfolio, and to identify how this impact can be improved over time.

The IBIST® tool is based on 67 objective and subjective indicators and calculates a score from 0% to 100% for each investment (direct and indirect). The better the IBIST® score, the better the investment is considered from an impact standpoint.

With the dual objective of measuring and incorporating sustainability risks, and managing the Principal Adverse Impacts (PAIs) throughout the investment decision-making process, in addition to the IBIST®, the Asset Manager also has an internally developed ESG tool. This tool, which uses proprietary and third-party data, analyses the materiality (relevance) and ESG risk for each investment in relation to 32 ESG factors. The results of this tool enable the Asset Manager to identify the main negative impacts of each investment, real or potential, and to take measures to stop, prevent or mitigate them, thus ensuring that it does not, in any case, significantly harm any sustainable objective. Such measures may include taking partial or total divestment decisions.

In addition, as part of the due diligence process, the Asset Manager thoroughly analyses all governance practices of the underlying investments. Governance is closely related to the concept of intentionality, which the Asset Manager analyses and scores with its IBIST® tool. Some of the variables studied by the Asset Manager include compensation policies, employee relationships, diversity and equality policies, and the decision-making structure within the company.

Before executing each investment, the Asset Manager conducts a study of the expected impact of the investment, analysing in detail the activities to be financed and their effects on the communities, and including an explanation of how the investment is expected to contribute to the sustainable investment objective and how it will not significantly harm any other sustainable objective. If this analysis identifies that the investment would significantly harm any sustainable objective, the investment would not be undertaken. In addition, in some of the Asset Manager's investment vehicles there are contractual impact objectives or Impact Covenants, which are determined in this screening process.

For investments made, the Asset Manager provides financial support, as well as advice on how to measure and improve the impact of these investments. When analysing this impact, the Asset Manager shares the conclusions of this analysis with the issuers in which it invests (directly or indirectly), giving them tools to improve their impact and reporting.

An open dialogue takes place with all the mutual funds and issuers in which the Asset Manager invests in relation to their respective ESG factors, with the aim of improving these factors. This dialogue is continuous and includes sending annual letters in which the Asset Manager offers specific recommendations for improvement in sustainability factors that the Asset Manager identifies from the results obtained with its IBIST® tool.  

In addition, when investing through mutual funds with a corporate form, the Asset Manager participates in the corporate governance decisions of these mutual funds through proxy voting, taking into account the PAIs and other ESG issues in such voting decisions.

Principal Adverse Impacts are understood as those impacts of investmentdecisions that may have negative effects on sustainability factors.

Impact Bridge Asset Management SGIIC, S.A. ("Impact Bridge") manages thePrincipal Adverse Impacts on its funds, including in its investment process aseries of measures that are based on three important pillars:

The first measure to reduce PAIs is the monitoring of the International FinanceCorporation (IFC) exclusion list 1 . In other words, Impact Bridge does not financeprojects with the following characteristics:

In addition to the IFC´s list of exclusions, we apply the following exclusions:

In 2020, Impact Bridge adhered to the Principles for Responsible Investment(PRI) 2 , an initiative of the investment community promoted by the UnitedNations whose ultimate objective is to contribute to the development of a morestable and sustainable financial system, thanks to the implementation of the sixprinciples defined:

These principles are an important part of our investment model.

Through its vehicles, Impact Bridge undertakes to carry out its activity in strictcompliance with applicable regulations and in accordance with the highestethical standards and professional conduct, including:

Finally, Impact Bridge is a signatory to the Operating Principles for ImpactManagement (OPIM):

Impact Bridge is committed to transparency and the transmission of informationon the procedures, results and plans relating to the due diligence proceduresimplemented for the development of its asset management activity. Article 4 ofthe Regulation (2019/2088 on sustainability-related disclosures in the financialservices sector (hereinafter, the "Sustainable Finance Disclosure Regulation")establishes the obligation to report on due diligence policies in relation to suchadverse events, which is complied through this Statement.

The OECD Due Diligence Guidance for Responsible Business Conductrecommends that companies conduct risk-based due diligence to avoid andaddress these negative impacts associated with investment decision-making inasset management.

Impact Bridge has risk-based due diligence processes in place to identify,prevent, mitigate, and explain how these negative impacts are addressed. In the area of asset management, Impact Bridge has the opportunity not only to avoidadverse events but also to facilitate change through its dialogue and activevoting policies, where applicable. Therefore, the existing due diligence in theirbusiness conduct is also strengthened in the area of investment decisionsthrough specific due diligence measures.

Due diligence helps to anticipate, prevent or mitigate adverse events. In somecases, due diligence can help decide whether or not to continue activities orinvestments as a last resort, either because the risk of a negative impact is toohigh, or because mitigation efforts have not been successful.

Considering that due diligence must be proportionate to the risk and appropriateto the circumstances and context of a particular company, the followingprinciples are followed in Impact Bridge's investment decision-making process:

In this regard, the Management Company has implemented a specificprocedure in order to adequately monitor compliance with these principles on arecurring basis. In practice, the due diligence process is continuous, iterative,and not necessarily sequential, as several stages can be developedsimultaneously with results that feedback into each other.