01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.1 Evolving our strategic approach Principles 1 4 9 The year 2021 saw significant evolution of our Risk and exclusion flags: greater clarity These enhancements also help to identify Our focus for 2022 included: approach to sustainable investing, setting the to improve understanding of the reasons what types of investors can hold specific scene for 2022. The year’s geopolitical events for exclusions. assets, which is important for technical • Addressing the close interconnectivity and regulatory environment, however, considerations and positioning. All of between the climate crisis and created unexpectedly testing market Clearer guidance: a new framework this informs how we can engage and biodiversity. We see these as key themes dynamics for sustainable investors. Our focus on regulatory measures (sustainable target stewardship outcomes for investee to be tackled in collaboration with remained a commitment to developing investment share, “Do No Significant holdings, which can add important other stakeholders. The need to tackle scalable solutions to support the transition Harm” principles, EU taxonomy shares) perspectives on how to interpret existing risks and opportunities associated with from ESG to sustainability to impact. which combines a quantitative approach data sets at a time when data continues biodiversity loss has been emphasised with qualitative research. to evolve. by food supply shortages because of The implementation of this strategy in 2022 the war in Ukraine and droughts around included a number of key developments Evolving climate data capture: data Looking ahead to 2023, having developed the world in 2022. which underpin our vision for credible monitoring to support decarbonisation a robust architecture for the “inputs” • The future of energy accelerated as sustainable investing and meaningful impact. pathways and net zero alignment. into investment decisions, we will turn a theme following the outbreak of war our attention to the best way to approach in Ukraine in February 2022. Energy is Sector research: enhanced sustainability Performance transparency: expanding the outcome or “impact” of those central to our themes of climate change sector frameworks, showing how an key performance indicators (KPIs) for investment decisions and the extent to and inclusive capitalism. industry sector screens on multiple planetary boundaries and inclusive which capital has achieved non-financial • Inclusive capitalism has come to the fore factors, and our proprietary Sustainability capitalism topics in line with work done goals alongside financial returns. as investors look to increasingly embed Materiality Matrix identifies the most on climate change KPIs. We expect to see accelerating progress social factors into decision making. material E, S and G sub-factors for in the coming year. This touches upon social inclusion, but is 24 broad sector classifications. We believe enhanced research and our new highly interconnected with climate proprietary Sustainability Insights Engine 01.1.2 Focusing on the material change, biodiversity loss and welfare Company research: we developed separate (SusIE) will enable colleagues across the sustainability themes of today security deriving from food, water and absolute company ESG scores to provide investment platform to help investors and tomorrow and energy. additional perspectives for investment understand the scope of non-financial Our approach is guided by the material See section 02.2.1 for insights decision-making. We supplemented these considerations of investee companies, sustainability themes of today and those from our research across themes with detailed company analysis commentary and the potential for this to influence of tomorrow, which requires a constant including sustainable food systems, which now includes human rights – a key financial returns. focus on the shifting global context. healthcare and energy security. topic within our inclusive capitalism theme. 16