Sustainable, Responsible &/or ESG Policy:

The Fund is built upon the foundations of the Janus Henderson Global Technology Leaders Strategy, founded in 1983, one of the largest and longest running technology strategies in Europe. The Global Technology Leaders Team has been investing through a lens of innovation, disruption, navigating the technology hype cycle and integrating ESG factors for more than 20 years. The Sustainable Future Technologies Strategy has been born out of our experience, our research into sustainable technology investing as well as taking inspiration from the Janus Henderson Global Sustainable Equity Strategy, that was founded in 1991. Our focus on technology companies means the strategy naturally avoids the most carbon intensive sectors of the economy and others that have negative externalities, such as environmental pollution, violence and armed conflict, and smoking.

As part of our investment process the Fund employs both positive and negative screening according to a range of themes and sectors. We see significant overlap within our investment themes and the 10 impact investing themes from the UN PRI’s Impact Investing Market Map. We believe that the Fund links directly to 8 of the 10 themes as follows:

• Energy efficiency aligns with our Clean Energy Tech themes
• Green buildings is fully aligned with our Low Carbon Infratructure and Smart Cities themes
• Renewable energy aligns directly to our Clean Energy Technology theme
• Sustainable agriculture aligns to our Resource and Productivity Optimisation theme
• Water aligns to our Resource and Productivity Optimisation
• Education – aligns to our Digital Democratisation theme
• Health – Aligns directly with our Tech Health theme
• Inclusive finance – Aligns directly to our Digital Democratisation theme
• Sustainable forestry – no current direct alignment with our technology themes
• Affordable housing – no current direct alignment with our technology themes

Thematic framework

The positive selection criteria leads the team to invest in businesses that have a positive impact on society and the environment by virtue of the technology products or services they offer, and by the way in which they manage their operations, thereby supporting the UN SDGs.

Positive screening – identifying companies on the right side of environmental and social trends

The sustainable thematic screen guides our idea generation and identification of long term-opportunities created by major sustainable technological shifts. Investments in the portfolio must derive at least 50% of current or future revenues up to a maximum of five years from the investment team’s sustainable technology themes. The revenue mapping is carried out by the investment analysts, utilising their deep tech sector expertise. For thematic integrity, the team’s dedicated sustainability analyst provides support and oversight, assisted by the ESG Corporate Research Team. The strategy’s thematic allocation is dynamic and there is no forced distribution among themes.

Environmental themes

Clean Energy Tech
Innovative technological solutions designed to reimagine the most carbon intensive areas of the economy meeting the challenge of resources constraints, population growth and climate change.
Investment areas include: renewable energy technology, battery technology, smart grids, smart power.

Sustainable transport
Technology to enable the transition to zero emission vehicles, ride hailing, autonomous driving and automated logistics with the goal of climate change adaptation and mitigation.
Investment areas include: electric vehicles, computer vision, sensors, battery management, navigation, platforms.

Low carbon infrastructure
Compute proliferation drives an exponential leap in power consumption, a climate change and resource constraint challenge that requires the transition to low carbon cloud and 5G architecture.
Investment areas include: data centres, Moore’s Law, 5G infrastructure, platforms, software.

Smart cities
Sustainable cities need to be smarter to meet the challenges of a growing and ageing population, resource constraints and climate change necessitating digital transformation and greater connectivity.
Investment areas include: 5G mobility, Internet of Things (IoT), edge compute, smart communications.

Social themes
Resource & productivity optimisation
A growing and ageing population, resource constraints and climate change require technological innovation to boost productivity and to optimise the efficient use of scarce resources.
Investment areas include: digital design, collaboration tools, artificial intelligence, digital productivity, asset tracking.

Digital democratisation
A growing and ageing population beset by rising poverty and inequality requires technological innovation to enable access to quality education and promote financial inclusion.
Investment areas include: AI, data analytics, fintech, edtech, platforms, data access.

Tech health
A growing and ageing population beset by rising poverty and inequality requires technological innovation to enable access to quality healthcare and improved outcomes.
Investment areas include: Medtech, AI, data analytics, platforms.

Data security
A digital and AI world built on big data and analytics in the cloud requires secure and fair data usage to protect our fundamental human right to privacy and our digital identities.
Investment areas include: network security, secure cloud, identity protection, data privacy.

Process:

To deliver our dual mandate, there are six stages to our sustainable investment process incorporating both positive and negative selection criteria, including product and operational impact analysis. Navigating the hype cycle of sustainable future technologies is supported by the five interlinking pillars of our rigorous investment framework integrating sustainability at every level:

1. Positive screening: applied via a positive thematic overlay of eight long term sustainable technology themes with alignment to the UN SDGs
2. Negative screening: strict avoidance criteria are adopted. We will not invest in activities that contribute to environmental and social harm (subject to a de minimis rule). This also helps us avoid investing in industries most likely to be disrupted.
3. Bottom-up fundamental research: incorporating triple-bottom line analysis, integrating ESG and financial analysis and evaluating how companies focus on profits, people and the planet in equal measure.
4. Valuation discipline: seeking underappreciated earnings growth potential and rational growth at a reasonable price and incorporating ESG insights
5. ESG insights and proactive engagement: evaluation of potential ESG issues and development of engagement plans with a focus on continuous, direct, pro-active engagement which is a key aspect of our process.

Thematic framework
The positive selection criteria lead the team to invest in businesses that have a positive impact on society and the environment by virtue of the products or services they sell, and by the way in which they manage their operations, thereby supporting the United Nations Sustainable Development Goals (SDGs) adopted in 2015.

1. Positive screening – identifying companies on the right side of environmental and social trends

The positive impact thematic overlay and positive screening guides our ideas generation and identification of long term-opportunities created by major technological shifts. Investments in the portfolio must derive at least 50% of current or future revenues from these sustainable technology themes. For thematic integrity the independent ESG Investment Team provides portfolio oversight ensuring true alignment with themes.

Environmental themes

Clean Energy Tech
Innovative technological solutions designed to reimagine the most carbon intensive areas of the economy meeting the challenge of resources constraints, population growth and climate change.
Investment areas include: renewable energy technology, battery technology, smart grids, smart power.

Sustainable transport
Technology to enable the transition to zero emission vehicles, ride hailing, autonomous driving and automated logistics with the goal of climate change adaptation and mitigation.
Investment areas include: electric vehicles, computer vision, sensors, battery management, navigation, platforms.

Low carbon infrastructure
Compute proliferation drives an exponential leap in power consumption, a climate change and resource constraint challenge that requires the transition to low carbon cloud and 5G architecture.
Investment areas include: data centres, Moore’s Law, 5G infrastructure, platforms, software.

Smart cities
Sustainable cities need to be smarter to meet the challenges of a growing and ageing population, resource constraints and climate change necessitating digital transformation and greater connectivity.
Investment areas include: 5G mobility, Internet of Things (IoT), edge compute, smart communications.

Social themes

Resource & productivity optimisation
A growing and ageing population, resource constraints and climate change require technological innovation to boost productivity and to optimise the efficient use of scarce resources.
Investment areas include: digital design, collaboration tools, artificial intelligence, digital productivity, asset tracking.

Digital democratisation
A growing and ageing population beset by rising poverty and inequality requires technological innovation to enable access to quality education and promote financial inclusion.
Investment areas include: AI, data analytics, fintech, edtech, platforms, data access.

Tech health
A growing and ageing population beset by rising poverty and inequality requires technological innovation to enable access to quality healthcare and improved outcomes.
Investment areas include: Medtech, AI, data analytics, platforms.

Data security
A digital and AI world built on big data and analytics in the cloud requires secure and fair data usage to protect our fundamental human right to privacy and our digital identities.
Investment areas include: network security, secure cloud, identity protection, data privacy.

2. Negative screening – companies on the wrong side of these trends are subject to disruption

The negative global impact from the cost of economic externalities such as environmental pollution, violence and armed conflict, and smoking is becoming increasingly recognised. We seek to avoid those businesses involved in activities that are harmful to society or the environment via clearly defined standards that govern the companies we exclude from our investment universe. Our exclusions provide ethical, social, environmental, and financial benefits.

UN Global Compact (norms-based screening)
All holdings are compliant with the UN Global Compact, whose 10 principles cover human rights, the International Labour Organisation’s Declaration on workers’ rights, corruption, and environmental pollution. This provides minimum safeguards for the investments in the strategy.

UN Global Compact (norms-based screening)
All holdings are compliant with the UN Global Compact, whose 10 principles cover human rights, the International Labour Organisation’s Declaration on workers’ rights, corruption, and environmental pollution. This provides minimum safeguards for the investments in the strategy.

Exclusion criteria
At a corporate level, we utilise a third-party vendor to compare all companies, including their beneficial owners, and as appropriate, directors, against sanctions lists maintained by the Office of Foreign Assets Control (OFAC, US), the European Union, the United Nations and multiple countries including Canada, Australia, Switzerland, and the UK.

The strategy naturally and explicitly excludes investment in multiple sectors which have many negative externalities, such as environmental pollution, violence and armed conflict, and smoking, and have a detrimental effect on the global economy subject to a de minimis rule (for further details on this, please refer to our Investment Principles document).

3. Bottom-up fundamental research – triple bottom-line approach

We assess the positive impact, organic growth potential, the size of the addressable opportunity, barriers to entry, ESG operational risks and management quality. The nature of the competitive advantage of the moat and whether that is increasing or decreasing has implications for margins. We look for companies where we believe the management quality, growth rate or the sustainability of that growth rate is underappreciated. Via bottom-up fundamental research and proprietary forecasting we seek to identify unexpected earnings or cashflow growth as a core tenet of every investment case. Positive impact and ESG leadership are integrated into a proprietary sustainability rating and into our valuation framework.

The team is ultimately analysing every company on the basis of the ‘3 Ps’ of their triple bottom line: how they generate profits, how they impact people; and how they impact the planet. Gaining a deep understanding of all of these elements of a company’s fundamentals is a critical aspect of the ‘five stages’ of the team’s investment process, and each company is assessed on this basis.

4. Valuation discipline – a belief in valuation discipline as a guide to unappreciated earnings growth

Valuation discipline is a key defining part of our bottom-up research. The focus is on rational growth at a reasonable price (GARP). We do not believe that pure ‘value’ investing is appropriate in a dynamic sector like technology and seek to avoid companies that are in secular decline. We are disciplined in our approach utilising a variety of valuation approaches used by sector specialists, which are all focused on future earnings and cashflow. We also integrate sustainability and ESG criteria into our valuation assessment to help assess the appropriate premium/discount to the market. Our proprietary master valuation spreadsheet monitors all our target prices, earnings momentum and share price performance, while our ESG process monitor control allows us to identify ESG indicators relevant to the valuation framework.

5. ESG insights and pro-active engagement

We believe that financial indicators have strong non-financial roots. As active managers with superb access to senior management, we take a pro-active approach to communicating views to companies and seeking improvements in performance and standards of corporate responsibility and core principles such as disclosure, transparency, and consistency. Each company held in the portfolio is reviewed in relation to its environmental social and governance risks as outlined in the following engagement framework.

The strategy has a dual mandate with a sustainable objective and promotes environmental and social characteristics via its portfolio commitments, for example on decarbonisation and board gender diversity.

We consider our approach to voting and engagement as ‘evidence-based’, systematic and pragmatic. These are reviewed using a variety of information and data taken either directly from the security issuer or from third parties (research providers, index providers, consultants). The following ESG data providers are used to inform our ESG analysis. We use a variety of information sources including security issuers and third-party research providers and consultants to rank and assess our investee companies. The sources include, for example:

• MSCI, main firmwide strategic provider
• Sustainalytics
• Bloomberg
• Vigeo EIRIS
• Institutional Shareholder Services (ISS)
• RepRisk

We monitor each company’s performance and ESG disclosure against key metrics. Using our proprietary ranking screen, we rank our investment universe of over 700 companies on a broad range of internal and external ESG data points and principles to identify leaders, those which are transitioning and companies who are lagging, which feeds into both our valuation framework and our engagement. Materiality is assessed based on SASB Standards, Global Reporting Initiative (GRI), EU Principal Adverse Impacts (PAI), Task Force on Climate-Related Financial Disclosures (TCFD), Taxonomy, our dedicated sustainability analyst and teams understanding of ESG and technology. The process control monitor is a dashboard of key ESG indicators and our revenue mapping. Using these tools and through our engagement we implement the do no significant harm criteria and minimum social safeguards (for example via UNGC and OECD MNE Principles), while promoting environmental and social characteristics. Our dedicated sustainability analyst ensures implementation of ESG principles.

We recognise that such information or data may be incomplete, inaccurate, or inconsistent given the limitations of static scoring of complex issues with imperfect data. In such situations, the investment team’s extensive experience, deep sector expertise, industry contacts and support from the ESG Corporate Research Team may prove beneficial.

We engage directly with companies via formal and informal meetings, calls and in writing, providing thought leadership in engagement on complex social and environmental issues.

We actively manage our positions for controversies and risk incidents, which also shapes our engagements. Engagement work can be company specific or thematic-led and represents a mixture of proactive and reactive engagement.

Engagement topics include for example: performance and policy standards on deforestation, biodiversity, diversity, equity and inclusion (DE&I), education, research and development (R&D), renumeration, data privacy and security, and tax. As technology specialists we believe we are well positioned to understand the disruptive aspects of technology and potential future ESG issues that may arise. In the past this has been reflected in our engagement on topics ranging from mental health impacts of social media, taxation policy of mega-cap companies, whistle-blower policy standards, the balance of data security and privacy and the effects and controls on casual gaming.

We are action-orientated and address areas for improvement through formalised action plans with clear objectives and timeframes. A lack of progress or negative ESG momentum may prompt a revisit of the investment case and lead to an exit from the stock.

The strategy avoids ESG laggards, companies with high controversies, and negative ESG momentum as defined by third party data, our ESG principles, proprietary ESG ranking screen and process control monitor, as well as our action plans and engagement. We will use engagement to promote best-in-class practices, for example on decarbonisation targets and data privacy & security. We may hold companies that score poorly due to a lack of disclosure, notably smaller companies, or due to minor ESG issues if we have a positive outlook on near-term improvements via engagement, which may be formalised within an action plan including clear objectives and timelines. In addition to the investment team’s focus, which includes input from our dedicated sustainability analyst, the Governance & Stewardship Team also identifies further issues and facilitates collaboration with other investors to enhance engagement influence.

The SFT strategy adopts a low-carbon approach, based on exclusionary criteria, ESG commitments and engagement.

Stock selection

Our universe is shaped by our negative screening exclusion criteria and by our positive screening and thematic requirements.

Any investee company must derive at least 50% of their future expected revenues from the sustainable technology themes the investment manager has identified, thereby having a clear positive environmental or social impact. As well as the products and services generating revenues, the operations of the business will also be assessed for alignment with the UN’s sustainable development goals as indicated by the UNPRI guidelines.

The team operates as sub-sector analysts to foster deep understanding and expertise of industry verticals, management teams and competitive dynamics. This depth of knowledge and focus facilitates a more holistic view of how product and services fit within the sustainable technology themes outlined above, of management quality as well as their earnings trajectory relative to consensus estimates. This is overlaid with a rigorous valuation discipline that defines the investment process and is tailored to specific sub-sectors rather than using a one size fits all approach. Based on this stock selection process, the team assigns a stock rating from one (highest upside/highest conviction) to five (low/no conviction upside).

The investment team has a long track record of technology investing, ESG factor assessment, and pro-active engagement focused on sustainable growth. This experience is supplemented by a dedicated team sustainability analyst who in conjunction with the fundamental research analyst, provides a systematic assessment of the positive impact of our holdings (social and environmental) as well as assessing several key indicators of a company’s evolution with regards to its disclosure, management, governance, progress, and risk. Factors for monitoring and analysis are aligned with the UN Global Compact Principles as well as the required technical standards of global sustainable finance regulation. The team have developed a process control monitor (PCM) and proprietary ESG ranking screen to reflect these considerations, which are then reflected in the stock rating.
This combination of qualitative and quantitative review results in a sustainability rating for each holding with one (highest alignment in revenues and operations) to three (more limited disclosure, engagement required). Negative screening criteria ensure no stocks rated four or five would be held in the portfolio.

The combination of analyst rating and sustainability rating are key inputs in portfolio construction.

Resources, Affiliations & Corporate Strategies:

The strategy is managed with a team approach, comprising co-managers Alison Porter, Graeme Clark, and Richard Clode, CFA. Each portfolio manager is a sector specialist responsible for bottom-up stock picking in their sector, as well as contributing to the positive impact thematic overlay of the portfolio. Investment ideas, themes, and portfolio construction are discussed in a collegiate manner with decision making driven by the three co-managers who are supported by a technology analyst as well as a dedicated sustainability analyst.

The experience of the investment team.

• Alison Porter, Portfolio Manager with 29 years of experience and 10 years with the firm.
• Graeme Clark, Portfolio Manager with 30 years of experience and 11 years with the firm.
• Richard Clode, CFA, Portfolio Manager with 21 years of experience and 10 years with the firm.
• Gordon Mackay, Research Analyst with 28 years of experience and 7 years with the firm.
• Kimberley Pavier, Sustainability Manager with 2 years of experience and 5 years with the firm.

The team have a close working relationship with the firm’s Responsibility Team, specifically in relation to the analysis of financially material environmental, social, and governance (ESG) issues and company engagement. The Responsibility Team comprises 26 members across responsible investment and governance, ESG strategy and operations, and client ESG solutions.

The Responsibility Team manage, implement, and integrate responsible investment policies and processes across the Janus Henderson product range. They work in close collaboration with portfolio managers and the independent Investment Risk Team on identifying companies with high levels of ESG risk as rated by external research providers, as well as other stakeholders within the business.

Please refer to the following link for a complete list of the Firm’s affiliations: ESG Affiliations at Janus Henderson - Janus Henderson Investors

Governance

ESG issues, including climate are of increasing importance both to Janus Henderson as a corporate entity and in our investment processes. Our Investment Teams are at the core of our governance process and bear the primary responsibility for identifying, analysing, and integrating financially material ESG and climate considerations. In addition, we have established oversight mechanisms and we are continually enhancing the governance and oversight of these considerations. Recent enhancements to the governance and oversight process include:

• To reflect our commitment to corporate responsibility and responsible investing, we appointed a Chief Responsibility Officer to oversee all elements of our responsible investment strategy. To emphasise the importance of our responsibility efforts and ensure they are embedded across our entire firm, the Chief Responsibility Officer will report directly to the CEO and be a member of the Strategic Leadership Team. Michelle Dunstan, an experienced leader in ESG strategy and investing, assumed this position in January 2023 and will guide and shape our ESG efforts and governance structure in 2023 and beyond.
• In 2023, the Parent Company Board of Directors will take oversight over both Corporate Responsibility and Responsible Investing under their remit.
• In 2023, the risk management framework is being enhanced to capture ESG risks and the potential impacts they can represent to the business and our assets under management. ESG-related scenarios are being developed to identify appropriate risks to the business.
• An ESG Oversight Committee was established in 2022 to provide oversight over a range of issues at a portfolio and security level.

On a day-to-day basis, the Front Office Governance and Risk Committee (FOGRC) is ultimately responsible for front office policies and procedures, including those pertaining to the integration of sustainability risks into investment decision making. A sub-committee, ESG Oversight Committee (ESGOC) provides oversight of ESG investment matters. This subcommittee, chaired by Michelle Dunstan, our Chief Responsibility Officer, is responsible for ensuring that the Investments framework for managing ESG-related risks is adequate and effective, and reports into the Front Office Governance & Risk Committee

Dialshifter

This fund is helping to ‘shift the dial from brown to green’ by…

SFT was born from a desire to create a “tech for good” portfolio, aligned with the team's core belief that technology is the science of solving problems and key to addressing global challenges, catalysing positive environmental and social change. This is embodied through our eight sustainable technology themes, aligned to the UN Sustainable Development Goals. We firmly believe businesses and investors have the ability – and the responsibility – to help steer our world onto a more sustainable path.

Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by…

We have embedded climate change, including many aspects of the NZAMI framework, within our investment processes including the following:

• Maintaining Janus Henderson Carbon Neutral Status since 2007
• Founding signatory of the UN Principles for Responsible Investment in 2006.
• Signatory to the Paris Pledge for Action, announced prior to COP21
• Member of the Global Impact Investing Network, and the US, UK and European Sustainable Investment Forums
• Active engagement with portfolio companies on climate issues, including as a participant in Climate Action 100+, a five-year collaborative initiative led by investors to engage with the world’s largest corporate greenhouse gas emitters.

SDR Labelling: Sustainability Focus label

• Consumer Facing Disclosure