Regulation & reporting

SFDR disclosures for Article 9

This information relates to Pacific Assets Trust plc (the “Trust”)

What is SFDR?

SFDR stands for the Sustainable Finance Disclosure Regulation. It is a regulation that provides more transparency for investors in relation to sustainability risks. Investment trusts, such as the Trust, need to provide information around sustainability, allowing investors to make more informed decisions.

What is Article 9?

Article 9 funds are those with a clearly defined sustainable investment objective. This means they must make only sustainable investments and explain how these investments are sustainable.

Sustainable investment objective

Companies can contribute in many different ways to a better future for people and planet. The portfolio managers provide descriptions on how they believe each company is contributing towards sustainable development via Portfolio Explorer.

Users can explore the stories of individual companies organised by the diverse contributions they make including towards human development pillars and climate solutions. This information is updated on a quarterly basis.

The Trust only invests in companies that the portfolio managers believe are sustainable, which contribute to a social and/or environmental objective. The contribution of the Trust investments to the social and environmental objectives are assessed by reference to two framework indicators – the portfolio managers’ human development pillars and Project Drawdown climate change solutions.

Stewart Investors considers whether:

• there is either a direct1 or enabling2 link between the activities of the company and the achievement of a positive social or environmental outcome;
• the company can benefit from any contribution to positive social or environmental outcomes through sales or expected growth, or from the company’s strong culture e.g. diversity; and
• the company recognises potential negative outcomes associated with its product or services and works towards minimising them (e.g. a company that sells affordable nutritious food products in plastic packaging, but is investigating alternative packaging).

Positive social outcomes

The Trust will only invest in a company if Stewart Investors believe its activities lead to a positive social outcome.

Stewart Investors commits to investing in companies that it feels contribute to at least one of the following positive social outcomes which Stewart Investors call the human development pillars:

• Health and well-being – access to safe, affordable and nutritious food, medical care, and hygiene products
• Physical infrastructure – access to reliable, affordable and safe energy, housing, water and sanitation
• Economic welfare – access to productive employment, financial services, and material necessities
• Opportunity and empowerment – access to education and training, information and communication technologies, and transport and connectivity

Positive environmental outcomes

Stewart Investors assesses positive environmental outcomes by reference to the climate solutions developed by Project Drawdown³.  Project Drawdown is a non-profit organisation that has mapped, measured and modelled over 90 different climate solutions that it believes will contribute to reaching ‘drawdown’, i.e. the future point in time when levels of greenhouse gases in the atmosphere stop climbing and start to steadily decline.

Below is a list of climate solutions captured in eight broader categories, together with corresponding examples Stewart Investors believes lead to positive environmental outcomes:

• Food system – sustainable farming, food production and distribution of food-related products and services.
• Energy – adoption of renewable energy and other clean energy and related technologies.
• Circular economy and industries – improved efficiency, reduced waste e.g. recycling existing materials.
• Human development – advancement of human rights and education that drive environmental conservation and sustainable use of resources.
• Transport – efficient transport technologies and growth in fossil fuel-free transportation options.
• Buildings – products and services which reduce the environmental footprint of the built environment, including energy efficiency, electrification, improved design, and use of alternative materials.
• Water – less energy-intensive methods for treating, transporting and heating water.
• Conservation and restoration – supporting deforestation-free and environmentally friendly supply chains.