Responsible Investing report

The CO2 intensity of a company indicates how many tonnes of CO2 that company emits per million USD turnover (tCO2e/$M turnover). The number of tonnes of CO2 emitted by a company is the sum of:

• the direct CO2 emissions resulting from of the company's own activities (Scope 1)
• the indirect CO2 emissions resulting from the generation of purchased electricity (Scope 2)

The indirect CO2 emissions resulting from the activities of suppliers and customers, for example (Scope 3), are not included in the sum.

At fund level, this figure represents the weighted average score of all CO2 intensities of the underlying companies in which the fund invests and for which data is available. The specific ‘target’ objectives for a fund, as well as the benchmark and/or a reference portfolio based on a certain target allocation against which these objectives are compared, can be found at www.kbc.be/investment-legal-documents > Investment policy for Responsible Investing funds.

The CO₂ intensity of a country indicates how many tonnes of CO₂ that country emits per million USD of Gross Domestic Product (tCO₂e/$M GDP).

The number of tonnes of CO₂ emitted by a country is the sum of:

• CO₂ emissions resulting from the domestic production of goods and services for domestic consumption and export
• CO₂ emissions resulting from the import of goods and services, back to the country of origin

At fund level, this figure represents the weighted average of all CO₂ intensities of the underlying countries represented in the fund and for which data is available. 

The data coverage rate reflects the proportion of investment instruments for which relevant data is available, expressed as a percentage. In calculating this, technical elements such as cash or derivatives are not taken into account.

ESG stands for Environment, Social and Governance and refers to the three themes that are central to a sustainability screening.

Bonds to finance green and/or social projects (‘ESG bonds’). We distinguish three types:

1. Green bonds: for financing projects which have a positive impact on the environment.

2. Social bonds: for financing projects which have a positive impact on society.

3. ESG bonds: for funding projects which have a positive impact on both the environment and society.

Both companies and governments are authorised to issue these types of bonds. To qualify as an ESG bond with KBC Asset Management, the bonds must comply with the International Capital Market Association (ICMA) principles for using the proceeds.

The ESG risk score for companies measures the difference between a company's exposure to sector-relevant environmental, social and governance (ESG) risks and the extent to which the company covers these risks. The lower a company's ESG risk score on a scale of 0 to 100, the less its sustainability risk. 

The company ESG risk score is determined from three perspectives:

1. Environment: waste policy, water intensity and greenhouse gas emissions;
2. Social: employment conditions, workforce diversity and union rights;
3. Governance: independence of the board of directors and transparency on pay and taxes.

At fund level, this figure represents the weighted average of all ESG risk scores for the underlying companies in which the fund invests and for which data is available. The specific ‘target’ objectives for a fund, as well as the benchmark and/or a reference portfolio based on a certain target allocation against which these objectives are compared, can be found at www.kbc.be/investment-legal-documents > Investment policy for Responsible Investing funds.

The ESG country score assesses how well the government policies of countries perform in terms of the environment, social issues and corporate governance (ESG). The higher a country’s ESG score on a scale of 0 to 100, the greater the number of countries that are committed to sustainable development.

The score is determined from five perspectives:

1. General economic performance and stability;
2. Socio-economic developments and public health;
3. Equality, freedom and rights of all citizens;
4. Environment;
5. Security, peace and international relations.

At fund level, this figure represents the weighted average of all ESG scores of the underlying countries in the fund for which data is available. The specific ‘target’ objectives for a fund, as well as the benchmark and/or a reference portfolio based on a certain target allocation against which these objectives are compared, can be found at www.kbc.be/investment-legal-documents > Investment policy for responsible investing funds.

This Board is made up of independent members whose sole responsibility is to supervise the approach and activities of the specialist researchers of KBC Asset Management NV.  Any changes KBC Asset Management makes to its responsible investment methodology must pass their test. In this way, KBC Asset Management keeps abreast of social trends.

The United Nations' Global Compact (UNGC) has drawn up 10 sustainability principles in the area of human rights, employment rights, environment and combating corruption, which all businesses have to respect.

For its responsible investing funds, KBC Asset Management excludes all companies that seriously violate these principles,  based on Morningstar Sustainalytics' Global Standard Screening and Controversy Research and MSCI's Controversy Research.

The Sustainable Finance Disclosure Regulation (SFDR) is a European Regulation governing sustainability disclosures in the financial sector. It divides funds into three categories:

• Article 6 funds: funds that neither have sustainable investment as their objective, nor do they promote environmental and/or social characteristics.
• Article 8 funds: funds that promote environmental and/or social characteristics.
• Article 9 funds: funds that have sustainable investment as their objective.

Companies or governments whose activities or the way in which they carry them out run seriously counter to the principles of responsible business are excluded. We distinguish two types of exclusion criteria:

• Exclusion criteria that apply to all KBC funds, such as serious violations of the United Nations Global Compact principles, human rights abuses, controversial regimes, tobacco producers, coal mining, etc.
• Exclusion criteria specific to responsible investment funds, such as companies linked to or active in conventional weapons, fossil fuels, gambling, adult entertainment, fur and speciality leather, irresponsible extraction of palm oil, etc..