Sustainable Disclosures

The Group’s UK regulated entities are subject to the UK Financial Conduct Authority’s (FCA) implementation of the Task Force on Climate-Related Financial Disclosures (TCFD) applicable to asset managers from 1 January 2023. We are developing the Group’s capabilities to address the FCA’s requirements for TCFD recommendations and disclosures applicable to Evelyn Partners from 1 January 2023. This includes forward-looking scenario analysis and metrics on the financed emissions of our clients’ investments, that will enable us to assess the degree of alignment with the objectives of the 2015 Paris Agreement.

This statement will be updated in due course as we implement these requirements and any further FCA Sustainable Disclosure Requirements applicable to the Group.

The Group’s Irish regulated entity Evelyn Partners Investment Management (Europe) Limited (EPE) and our in-house pooled funds managed in the EU are subject to the Sustainable Finance Disclosure Regulation (EU 2019/2088) and related Regulatory Technical Standards (SFDR). The SFDR includes provisions requiring relevant businesses to disclose how sustainability risks are integrated into their investment processes and how due diligence is performed on the Principal Adverse Impacts of their investment decisions and investment advice on sustainability factors.”

The SFDR defines

• Sustainability risk as an Environmental, Social or Governance (ESG) event or condition which, if it occurs, could cause a material negative impact on the value of an investment.
• Sustainability factors are defined as environmental, social and employee matters, respect for human rights, anti-corruption, and anti-bribery matters.
• Principal Adverse Impacts (PAIs) are the most significant negative impacts of investment decisions on sustainability factors.

For the purpose of SFDR Article 7 product level disclosures, EPE provides portfolio management services which are defined as a financial product under the SFDR. For the purposes of reporting PAIs on our EPE portfolios, we assume that the service offered to clients is treated as one product. Accordingly, PAI disclosures for EPE are reported at an entity level.

The Board of Evelyn Partners has delegated authority, via other Committees, to the Investment Process Committee (IPC) to manage and develop the investment process, including investment risk.

The IPC has appointed the Stewardship and Responsible Investment Group (SRIG) to oversee the Group’s approach to responsible investment and overseeing voting and shareholder engagement activities. The IPC reports via other Committees to the Group Executive Committee (GEC).

The Board of EPE, assisted by the EPE Audit and Risk Committee (AROC), is responsible for ensuring the compliance of EPE with the SFDR.

The Institutional Asset Management Committee (IAMC) is responsible for ensuring compliance for in-house pooled funds managed by Evelyn Partners, including both EU and UK based funds.

Our primary source of ESG and PAI data is MSCI. In addition, Evelyn Partners receives data on all securities in the MSCI ACWI and the MSCI UK IMI indices covering 31 risk factors. MSCI also provides an ESG score for all securities that they cover. Our ESG perspective on securities is supplemented by our own fundamental research and analysis, and also from other third-party providers, to arrive at an overall qualitative assessment or recommendation for sustainability risks.

We have the ability to include positive or negative screening using MSCI’s ESG manager tool.

We have built our own proprietary reporting tool to aggregate PAI indicators using MSCI data and we follow their aggregation methodology. We will continue to develop our tool as PAI data becomes more readily available and reliable. We will also add historical comparisons to our internal quarterly PAI reports and public reports (for EPE).

Considering current data shortcomings, we also provide coverage information by asset type alongside the PAI indicators. We expect the availability of ESG data sourced from other fund managers and investee companies, including PAIs, to develop and improve over time. We will continue to work with our third-party data providers to improve the data availability and quality and integrate these considerations into our investment and financial advice processes.

The primary mechanism by which we exercise our duty as responsible investors is to ensure high standards of governance are met, and that social and environmental objectives are given due consideration.

Sector specialists conduct in-depth equity research. They rely on third-party research (including from brokers and MSCI), some primary research, and a large number of company meetings each year.

MSCI’s ESG scores are driven by historical disclosures and a formulaic system is used to derive ratings. This inherently leads to a selective focus based on geography, company size and specific company attributes, as well as providing a backward-looking measure.

When analysing a company, sector specialists must understand the reasons behind the MSCI ESG rating, and the most important ESG factors. Sector specialist typically list the most significant 3 to 5 ESG risk factors for the sector in which the company operates. These must be addressed specifically, with analysts evaluating the short, medium, and long-term impact of these factors on performance. The most important ESG factors for each sector are derived by aggregating the MSCI ESG scores from all companies in the MSCI ACWI and the MSCI UK IMI by sector.

Sector specialists have the autonomy to override the MSCI ESG views with their qualitative assessment where there is a significant divergence between the MSCI ESG score and their own judgement.

This analysis incorporates an assessment of the likely impact of sustainability risks on the returns of these securities. In general, where a sustainability risk exists with an investment, there may be a negative impact on its value. Sustainability risk can either represent a risk on its own, or impact and contribute significantly to other risks, such as market risks, operational risks, liquidity risks or counterparty risks.

Evelyn Partners assesses a wide range of sustainability risks as part of the investment analysis process. Some of these map across to the PAI indicators. However, the two lists are not mutually inclusive. While data for the PAI indicators remains limited, we still use our existing approach to sustainability risks alongside monitoring and assessing PAI indicators (see section 4).

As part of our Due Diligence process, each company will be assessed based on its sector’s material risks and relevant outcomes are recorded in the sector specialist research notes.

The risk factors we consider as part of our sector analysis are as follows:

Evelyn Partners monitors a selection of funds which then can be used to construct and maintain suitable portfolios. The PAI and escalation process for collectives is by and large the same as for direct investments with additional details below:

Due diligence is undertaken on each fund under the following headings:

• Industry bodies: Ideally the investment firm/company should be a signatory to the UN Principles for Responsible Investment (PRI) and/or the UK Stewardship Code, or another equivalent body.
• Investment policy: A fund’s investment policy should incorporate the principles of the UN PRI and/or the UK Stewardship Code in their approach to responsible investment.
• Investment process: The fund manager should be able to describe how ESG is integrated into the investment process.
• ESG resource: Training should be available to all investment professionals. Additional note will be taken where there is dedicated resource and/or external ESG data providers.
• Stewardship: Voting and engagement policies are being developed to also cover ESG issues.
• Principal Adverse Impacts: The investment firm/ company should consider and disclose the PAIs of their investments, as well as provide a European ESG Template (EET) when applicable.

Evelyn Partners uses a third-party platform (Door) to obtain relevant due diligence information on our collectives, in addition to data available through our ESG data provider MSCI.

As part of the due diligence process, sector specialists consider each fund’s approach to sustainability risks and factors, as well as PAIs, although it is not always possible for the group to assess the PAIs of every fund due to data limitations.

Collectives are then assessed for three categories:

• Green Tick funds: can be found in the wider collective list but have stringent enough ESG integration or positive inclusion policies that mean they may be eligible for clients with an ESG mandate.
• Responsible funds: eligible funds have specific responsible strategies/mandates in place. Evelyn Partners can accommodate bespoke negative and positive screening at the request of clients, or a combination of both. As data on collectives becomes more readily available and reliable, we will assess these funds for alignment with the EU taxonomy and the SFDR’s fund classification.
• Other funds: not all funds will have sufficiently stringent ESG integration or positive inclusion processes to earn a Green Tick or be eligible for the Responsible funds. Nevertheless, all collectives are subject to ESG-related due diligence.

Sector specialists regularly meet with fund managers and closely track the performance of funds. This includes an annual review of the fund managers’ responsible investment policies, including their UK Stewardship Code and UN PRI reports where applicable.

As part of this review, sector specialists use MSCI ESG fund ratings as a starting point and include them in their research notes. Sector specialists have the autonomy to override the MSCI ESG views with their qualitative assessment where there is a significant divergence between the MSCI ESG score and their own judgement.

Analysis of collectives incorporates an assessment of the likely impact of sustainability risks on the returns of these funds. In general, where a sustainability risk exists with an investment, there may be a negative impact on its value. Sustainability risk can either represent a risk on its own, or impact and contribute significantly to other risks, such as market risks, operational risks, liquidity risks or counterparty risks.

For collectives, it is more difficult and sometimes not possible to obtain detailed information on their underlying investments and therefore consider PAIs. As ESG data coverage for collectives improves through industry standards such as the EET, we will continue to adapt and refine our approach to considering PAIs for collectives in line with industry best practice and with our third-party data providers.

Evelyn Partners does monitor but does not currently consider the sustainability risks or PAIs of government debt, real estate, corporate debt, derivatives, structured products, private investments, and most alternatives. This will be kept under close review as reliable data on these asset classes becomes more available. However, these other asset classes are not as material as the vast majority of our assets under discretionary management are invested in public equities, directly or indirectly.

As stated above, in addition to the consideration of sustainability risks, we also monitor and evaluate PAI indicators and the adverse impacts of investment decisions on sustainability factors, which include:

* PAIs under development at the time of writing

PAI considerations for the Group

Evelyn Partners assumes that the most important PAI indicators are the most significant ESG risks for each sector (i.e., the top 3-5 risks).

SRIG reviews PAIs on managed assets. We extract the highest contributors per PAI indicator and identify any outliers on a specific PAI or across several PAIs. Further analysis is conducted on any significant outliers and are escalated to the relevant investment groups for direct investments and collectives. These groups then decide on relevant actions to be taken in each case to reduce individual PAIs, including referring to the Stewardship and Responsible Investment team (SRI) for further escalation and engagement with investee companies and fund managers.

PAI data is monitored on a quarterly basis for the Group’s discretionary managed assets for internal purposes only.

The firm will continue to adapt and improve its approach to considering PAIs as circumstances allow, including optional PAIs for material investments.

PAI considerations for EPE

EPE is the Group’s only EU based legal entity directly in scope of the SFDR’s requirement to disclose a principal adverse sustainability impact statement by the 30 June of each year. EPE AROC receives PAI reports on a quarterly basis, and EPE’s annual PAI statement will be published on the Group’s website under Legal and Regulatory disclosures.

Financial advice PAI considerations for EPE

EPE follows the group process for considering PAIs described above for its managed advisory service, where sufficient and reliable data is available.

To support this activity, we collect PAI data for EPE’s managed advisory business on a quarterly basis and report this to AROC for further consideration. This informs decisions on the portfolios or advice given to clients, which they may or may not choose to implement.

We do not rank and select financial products based on the PAI indicators but will review the most significant investments per PAI as part of the quarterly PAI review.

We do not currently define a threshold based on the PAIs to select, or advise on, financial products but will continue to review our methodologies and client documentation to align to the SFDR.

Voting and engagement

As responsible investors, the group practices stewardship and active ownership through regular engagement with companies. This takes the form of informal discussions, as well as more formal voting and collaborative engagement. Through this, the aim is to improve environmental, social and governance performance of companies, along with other stakeholder interests.

Evelyn Partners’ voting policy can be found on the Stewardship section of its external website. This is built from the firm’s experience and engagement with companies, as well as the expertise of sector specialists and investment managers, which allow more nuanced judgements than the rules-based approach provided by proxy voting advisers.

Collaborative engagement

The group is a member of the below collaborative engagement platforms:

• The Investor Forum: is a community interest company set up by institutional investors in UK equities. The forum helps investors to work collectively to escalate material issues with the boards of UK-listed companies.
• Climate Action 100+: is an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
• Find it, fix it, prevent it is an initiative, started by CCLA Investment Management, which aims to bring the investment management industry together to push for meaningful, effective corporate action to end modern slavery.
• Corporate Mental Health Benchmark: we are founding member of the benchmark, which was launched in 2022 by CCLA, targeting FTSE 100 companies on how they manage employee mental health.

Remuneration – Sustainability Disclosure

Evelyn Partners’ remuneration policy takes into account sustainability-related disclosures in the financial services sector. The policy is consistent with Evelyn Partners’ approach to the integration and management of sustainability risks in its investment process. Relevant feedback, including non-financial criteria, is provided to the remuneration committee for consideration in the assessment of variable remuneration. This includes whether the investment process has been followed with regard to matters such as asset allocation, security selection, responsible investment and investment risk management, including sustainability risks.

International standards

Our UN PRI and UK Stewardship Code 2020 obligations frame the Group’s investment process, policies, and procedures.

We have also committed to completing the Carbon Disclosure Project (CDP) disclosures each year from 2022, in addition to TCFD disclosures.

For further information, please see our website for our Corporate Responsibility Report and climate related disclosures.

Industry associations

We are members of several industry associations. They provide a valuable source of additional information in this area. Many have published guidance on best practice and continue to track ongoing developments for responsible investment and sustainability-related finance regulation. Evelyn Partners is an active participant in relevant working groups for sustainability-related initiatives and is a member of the following bodies:

• The Investment Association
• Personal Investment Management & Financial Advice Association (PIMFA)
• The Investing and Saving Alliance (TISA)

Responsible investment is a rapidly evolving area for all investment firms and further changes will take place, especially as Evelyn Partners implements ongoing UK and EU regulatory requirements in its investment process. Training for Investment Managers and Sector Specialists will continue to be provided as these changes are implemented.

Further information on Policies and Stewardship activities

Please refer to our Group website (Responsible investing | Evelyn Partners), our Corporate Responsibility Report, including TCFD climate related disclosures, and Legal and Regulatory disclosures for further information.

Specific detailed policies covering Responsible Investment and Stewardship include:

• Responsible Investment Policy
• Voting Policy
• SRD II Engagement Policy

This statement applies to the following Evelyn Partners legal entities:

Evelyn Partners Asset Management Limited*
Evelyn Partners Discretionary Investment Management Limited*
Tilney Discretionary Portfolio Management Limited*
Evelyn Partners Securities*
Evelyn Partners Investment Management Services Limited*
Evelyn Partners International Limited**
Evelyn Partners Investment Management LLP*
Evelyn Partners Investment Management (Europe) Limited***
Evelyn Partners Investment Services Limited*
Smith & Williamson Investment Management Ireland Limited***
Tilney Asset Management Services Limited*
* Evelyn Partners UK firms authorised and regulated by the Financial Conduct Authority.
** Evelyn Partners International Limited is regulated by the Jersey Financial Services Commission.
*** Evelyn Partners Irish entities regulated by the Central Bank of Ireland