The Fund is designed for investors who want the potential for long term capital growth from a high conviction, values-oriented, concentrated portfolio of typically 15-35 stocks that invests in businesses that in our view, in aggregate, provide a net benefit to Australia’s future economy and society.

The Fund is designed for investors who want the potential for long term capital growth from a high conviction, values-oriented, concentrated portfolio of typically 15-35 stocks. Pendal’s investment process for Australian shares is based on our core investment style and aims to add value through active stock selection and fundamental company analysis. Pendal’s core investment style is to select stocks based on our assessment of their long term worth and ability to outperform the market, without being restricted by a growth or value bias. Our fundamental company analysis focuses on valuation, franchise, management quality and risk factors (both financial and non-financial risk).

Sustainability Objective

The Fund aims to advance the transition to a sustainable future economy by influencing business practices that support the Fund’s vision of this future. The Fund’s vision of a sustainable future economy is an economic system which values environmental and social factors alongside economic factors. This includes, but is not limited to, environmental factors such as Greenhouse Gas Emissions (GHG) reduction and social factors such as social equity (the fair, just, and equitable management of government and corporate institutions).

The Fund aims to achieve this by:

• actively allocating capital to companies that advance the Fund’s vision of a sustainable future economy through their products and service and/or business practices;

• actively engaging with companies to drive systemic change and corporate behaviour to support the Fund’s vision of a sustainable future economy; and

• avoiding exposure to companies with business activities that Pendal considers to negatively impact the transition to a sustainable future economy³.

In managing the Fund, Pendal focuses on sustainable themes (including environmental sustainability, technology for good, health and wellbeing, social inclusion and equality), and draws on internal and external research to assess companies on their sustainability performance. Pendal actively engages with the management of the companies we invest in to manage risk, effect change and realise potential value over the long term. Pendal’s engagement strategy and priorities (including setting engagement goals and monitoring progress) for individual companies is also guided by Pendal’s sustainability assessment framework applied to the Fund.

Sustainability Assessment Framework

Following the application of the exclusionary screens, the Fund applies Pendal’s sustainability assessment framework to the companies in the S&P/ASX 300 Index, which draws on both qualitative and quantitative inputs to determine which companies meet our sustainability criteria.

Pendal’s sustainability assessment framework:

• maps the gross revenue of the companies in the Fund’s investible universe to the Fund’s sustainability themes; and

• compiles data to assess and rank the companies in the Fund’s investible universe on their sustainable business practices; and

• identifies advanced sustainable business practices for thematic engagement with companies.

To be considered as a potential investment of the Fund, companies are assessed and must fall into one of the following three categories:

1. Leaders

This category includes companies that generate at least 50% of its gross revenue¹ from products and services aligned with one or more of the Fund’s sustainable themes (including environmental sustainability, technology for good, health and wellbeing, social inclusion and equality).

1 Where gross revenue is not the most appropriate measure, such as in the case of products generating different margins, Pendal may use another key indicator deemed more appropriate, for example gross profit

Exclusionary Screens

Exclusionary ScreensIn managing the Fund, we will not invest in companies which:

Fossil Fuels

– directly undertake fossil fuel exploration or extraction (specifically, coal, oil and gas); or

– derive more than 10% of their gross revenue from fossil fuel-based power generation, or from fossil fuel refinement or distribution (coal, oil and gas); or

– derive more than 10% of their gross revenue from the provision of supplies or services which relate specifically to the fossil fuel exploration or production industries (coal, oil and gas)

Uranium

– derive 10% or more of their gross revenue from directly mining uranium for the purpose of nuclear power generationLogging

– derive more than 10% of their gross revenue from unsustainable forestry or forest products, including non-Forest Stewardship Council certified forest products or non-Roundtable on Sustainable Palm Oil certified palm oil productionGambling

– directly manufacture, own or operate gambling facilities, gaming services or other forms of wagering; or

– derive more than 10% of their gross revenue from the indirect provision of gambling (for example, through telecommunications platforms)

Pornography

– produce pornography; or

– derive more than 10% of their gross revenue from the distribution or retailing of pornography.

Weapons

– manufacture or distribute controversial weapons (including cluster munitions, landmines, biological or chemical weapons, nuclear weapons, depleted uranium weapons, blinding laser weapons, incendiary weapons, white phosphorous weapons and/or non-detectable fragments); or

– supply of goods or services specifically related to controversial weapons; or

– manufacture of non-controversial weapons or armaments (including civilian firearms or military equipment); or

– derive 10% or more of their gross revenue from the distribution or retailing of non-controversial weapons or armaments (including civilian firearms or military equipment); or

– derive 10% or more of their gross revenue from the supply of goods or services specifically related to non-controversial weapons or armaments.

Alcohol

– produce alcoholic beverages; or

– derive more than 10% of their gross revenue from the distribution or retailing of alcoholic beverages

Tobacco

– produce tobacco (including e-cigarettes and inhalers); or

– derive more than 10% of their gross revenue from the distribution of tobacco (including e-cigarettes and inhalers) or supply of goods or services specifically related to the tobacco industry (for example, packaging or promotion)

Animal Cruelty

– directly undertake animal testing for cosmetic products; or

– directly undertake live animal export Predatory Lending Practices

– directly provide products or services with lending practices that are unfair or deceptive to ordinary borrowers, including small amount short term loans at higher than commercial rates of interest (for example, payday loans, pawn loans or the use of aggressive sales tactics)Breaches/ misconduct.

- we consider to have been found to have significant breaches of social or environmental norms or regulations, or are subject to serious and substantiated allegations of unethical conduct, which we consider have not been remedied or adequately addressed.

Please note, this Fund changed its name from the Pendal Ethical Share Fund to the Pendal Horizon Fund on 15 March 2021.