NOTICE PURSUANT TO ART. 3, 4, 5 of Regulation 2088/19 (SFDR)

Foreword and definitions

As expressly requested by Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 (hereafter “SFDR”) on sustainability?related disclosures in the financial services sector, this notice provides information on:

• policies on the integration of sustainability risks adopted by the Bank in its investment decision-making processes and the provision of consultancy services (art. 3 SFDR);
• where the Bank considers or does not consider the principal adverse impacts of investment decisions on sustainability factors (art. 4 SFDR);
• how the Bank aligns its remuneration policy with the management of sustainability risks (art. 5 SFDR).

To that end, the following definitions apply:

• Sustainability Risk: an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment;
• Sustainable Investment: an investment in an economic activity that contributes to an environmental objective, as measured, for example, by key resource efficiency indicators on the use of energy, renewable energy, raw materials, water and land, on the production of waste, and greenhouse gas emissions, or on its impact on biodiversity and the circular economy, or an investment in an economic activity that contributes to a social objective, in particular an investment that contributes to tackling inequality or that fosters social cohesion, social integration and labour relations, or an investment in human capital or economically or socially disadvantaged communities, provided that such investments do not significantly harm any of those objectives and that the investee companies follow good governance practices, in particular with respect to sound management structures, employee relations, remuneration of staff and tax compliance;
• ESG: abbreviation of Environmental; Social; Governance. These are the so-called environmental, social and good governance factors.

Art. 3 Transparency of sustainability risk policies

For Banca Finnat Euramerica S.p.A. (hereafter “the Bank”) it is fundamentally important to integrate ESG factors into its financial instrument investment decision-making processes based on the portfolio management service and the consultancy service on financial instruments, in the conviction that these elements, in addition to encouraging sustainable economic and social development, also contribute positively towards the financial results of clients' portfolios whilst, at the same time, reducing risks. Sustainability factors are integrated by adopting strategies aimed at excluding from the investable universe issuers/financial instruments with a high sustainability risk.
In particular for its portfolio management service, the Bank follows specific procedures formalised in a special document approved by the Bank's Products Committee setting out the methodology and associated quantitative limits for the above purposes.

To sum up, sustainability risks are mitigated by establishing:

1. exclusion criteria strongly limiting the presence in the managed portfolios of issuers belonging to specific sectors that do not ensure compliance of some ESG criteria;
2. selection (and inclusion) criteria, often accompanied by specific minimum investment limits, based on which the purchase of financial instruments issued by governments/corporations and investment funds particularly virtuous in ESG is preferred;
3. minimum score level (average ESG score) for portfolios that the Bank undertakes to exceed. Scores are measured using data and information made available by primary institutions and/or ESG rating providers.

The application perimeter concerns:

• shares and bonds issued by companies;
• securities issued by government bodies;
• investment funds (OICR).

For its consultancy service the Bank considers ESG criteria in drawing up documents supporting the provision of the service to the client. In particular, model portfolios addressing the provision of consultancy services also identify financial instruments that are sensitive to ESG themes, based on the declarations of the issuers (e.g. KID) or a third-party provider rating.

Art. 5 - Transparency of remuneration policies in relation to the integration of sustainability risks

SFDR provides that the Bank must include in its remuneration and incentive policies information on how coherent they are with the integration of sustainability risks.
In compliance and in conformity with national and/or sector regulations on the integration of ESG criteria in remuneration policies, the Bank implements this guideline into the design of incentive systems linked not only to the achievement of economic results, but also to the achievement of targets related to environmental, social, and governance issues, directly correlated to the ESG drivers identified and deemed fundamental to the company's development strategies.
For further information on the management of ESG risks, see the information on the sustainability risk policy under art. 3 SFDR.

Rome 04 September 2023

Failure to take into account the adverse effects of investment decisions on sustainability factors

(pursuant to art. 4 Transparency of adverse sustainability impacts at entity level)

The Bank, in compliance with art. 4 of Regulation (UE) 2019/2088 (“SFDR”) on sustainability?related disclosures in the financial services sector, has decided to adopt an “explain” approach to the obligation to consider the principal adverse impacts of its investment decisions on ESG sustainability factors.
The Bank communicates that although, as a general rule, it does consider the principal adverse impacts of its investment decisions on sustainability factors (i.e. environmental, social and personnel issues, respect for human rights and issues around the fight against active and passive bribery), it is not currently able to provide the above disclosure. This is due to the fact that, to date, it has not been possible to identify and objectively measure the principal adverse impacts of said investment decisions on sustainability factors, since precise indicators and metrics have not yet been defined through which to verify the degree of likelihood of their occurrence as well as their intensity and possible irremediable nature.
The Bank maintains a proactive approach to defining the indicators and metrics with which the aforementioned adverse impacts are determined, also monitoring changes to the relevant regulatory provisions. The Bank shall provide prompt updates on this aspect.

Failure to take into account the adverse effects of investment and insurance advice on sustainability factors

(pursuant to art. 4 Transparency of adverse sustainability impacts at entity level)

The Bank, in compliance with art. 4 of Regulation (UE) 2019/2088 (“SFDR”) on sustainability?related disclosures in the financial services sector, has decided to adopt an “explain” approach to the obligation to consider the principal adverse impacts of its investment decisions on ESG sustainability factors.
The Bank communicates that although, as a general rule, it does consider the principal adverse impacts of investment and insurance advice of its investment decisions on sustainability factors (i.e. environmental, social and personnel issues, respect for human rights and issues around the fight against active and passive bribery), it is not currently able to provide the above disclosure. This is due to the fact that, to date, it has not been possible to identify and objectively measure the principal adverse impacts of said investment decisions on sustainability factors, since precise indicators and metrics have not yet been defined through which to verify the degree of likelihood of their occurrence as well as their intensity and possible irremediable nature.
The Bank maintains a proactive approach to defining the indicators and metrics with which the aforementioned adverse impacts are determined, also monitoring changes to the relevant regulatory provisions. The Bank shall provide prompt updates on this aspect.

Rome 1 January 2023

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