ESG & Stewardship Policy

1. An ESG Risk Management Framework based on SASB Guidelines

AR’s ESG framework is part of its risk management process. This framework is based on fundamental research using the SASB materiality matrix, to identify potential red flags. Red flags can be identified for companies operating within certain sectors and subsectors, by incorporating and effectively managing ESG principles and material factors for the companies in a specific sector and industry. AR’s framework is based on fundamental analysis of material factors of the SASB materiality matrix. Link to the materiality map: https://materiality.sasb.org/. Committees including AR Investment Team members, portfolio managers and the CEO, are accountable for executing AR’s ESG framework.

2. AR’s Screening Process

Exclude deep cyclicals. As a result of AR’s continued aversion to investing in deep-cyclical and commodity-based sectors (which is a core tenet of its investment approach), AR’s strategies aim to inherently carry relatively minimal exposure to companies involved with fossil fuels, carbon emissions, and greenhouse gases.

3. Management

In addition, Criteria 3 of the investment process (Management’s Operational Track Record), aims to address Governance factors included in SASB materiality map for a specific company in an industry.

4. Ethical filter

Applied Research offers two ESG-based strategies with an additional ethical filter superimposed on the two strategies presented (ARI Global and ARI Global Opportunities). On top of the regular ESG research framework based on the SASB materiality matrix, both strategies incorporate a specialized ESG product filter that prohibits investments in companies that operate within (and obtain a significant percentage of sales from a handful of pre-defined ethically “unattractive” industry sub-groups such as: adult entertainment, gambling, tobacco, alcohol, and firearms.

5. Engagement

ARI aims to engage with various stakeholders on ESG related matter, fiduciary and stewardship matters as well has have a direct impact over the long run on client portfolios and communities.

Investee Engagement

AR prioritizes engaging with companies for which our analysis suggests that ESG or other factors are potentially material to an investment’s risk/reward profile.

5.1 Proxy Voting Engagement

When shareholder proposals on the proxy include ESG, AR’s policy is to vote in favor of ESG proposals. AR’s belief is that these ESG factors may affect investment performance over the long run and require appropriate consideration to protect the client’s investment. AR is of the view that behaving in a socially responsible manner should reduce potential liability and therefore be an additional factor that guides AR’s risk management and proxy voting standards. AR aims to align its voting practices in reference to the U.N Sustainable Development Goals to guide our socially responsible voting practices. AR’s focus is to enhance transparency and disclosure.

• Engagement efforts are recorded and tracked in a centralized internal database to manage engagement objectives. This process is monitored regularly though a committee.
• AR also aims to communicate and engage with investees in our proxy voting process, and not to use voting as a punitive measure when engagement targets aren’t met.
• Disclosure of voting intentions are in compliance with our fiduciary duty to our clients. 

5.2 Broader Investment Community and Company Engagement

Key holdings with ESG material factor risks across portfolios are monitored for potential engagement opportunities where AR considers they can be impactful. If the results of stakeholders and AR do not align with AR’s intended approach and create a material risk, AR looks to divest or manage portfolio security weights Investment Teams’ discretion. Engagement efforts are monitored to guide and monitor AR engagement objectives.

5.3 Stakeholder and Community Engagement

Engagement practices- Education and Communication 

• Education and communication- AR regularly monitors companies on ESG SASB factors, which are material for growing capital, and managing risk of the ecosystem over the long run. It also shares finding and communicates with various stakeholders.
• Strategies also consider an understanding of the governance, corporate culture and the company’s performance and strategy through our research processes.
• AR aims to build deep relationships with companies to obtain and understand any public information about the companies’ financial information and any information relevant to the ESG practices. This is done through regular meetings between the analyst team and the company’s representatives and management, as well as through proxy voting engagements.
• AR aims to engage in its community on material factors for assets managers according to SASB. The firm actively engages in industry events and organizations membership that align with that goal.
• Relation to investment decisions with training program 

ARI aims to link its active ownership to investment decisions making. To be able to achieve this goal, ESG research is conducted by analysts and portfolio managers. AR always involves portfolio managers and analysts in risk committees when defining an engagement program and developing voting decisions. ESG investment teams are encouraged to join engagement meetings and roadshows and pass on that knowledge to the next generation.

Community Engagement

AR aims to engage in its community on material factors for asset managers according to SASB, engaging with groups like vendors and regulators to advocate ESG or regulatory positions. This includes vendor diversity such as Minority Brokers for example and various organizations that promote diversity in the investment management industry. AR also publicly discloses relationships and support for trade associations and other bodies that conduct advocacy on behalf of their members. AR’s Investment committee and Compliance committee review potential or ongoing communications with policy makers and other engagements, to make sure our engagements are in line with our organizational priorities.

Service providers assessment and engagement:

• AR proceeds to a regular review of its services providers. This includes a review of every policy applicable on the service provider side.
• AR is a signatory of the UN Principles for Responsible Investment (PRI), which allows AR to publicly demonstrate its commitment to including environmental, social and governance (ESG) factors in investment decision making and ownership. AR dedicates to facilitate collaboration to help investors align their responsible investment practices with the broader sustainable objectives of society.

Direct Impact, driven by Direct Action:

• Fueled by the mission of doing the right thing, AR’s global Impact goals have been 2 folds to date. 
• Locally: Incubating, training, growing uncovered diverse talent accessing/ the investment management industry. 
• Opportunistically, Globally, Direct Impact Action- Through small baby step action, AR aims to provide Access to basic needs for underserved communities around the globe. When AR became profitable, through access to a direct diverse network, small action initiative towards giving back to underserved communities around the globe through AR’s global diverse network. An example of direct action- Local Water drilling for a village in Guinea Conakry where families used to walk 1 mile to access water for basic needs. 

5.4 Political Engagement Policy

AR’s policy of not making political statements or engaging in political activities is driven by various factors, including fiduciary duty, a desire to remain neutral, avoid potential conflicts, and focus on its core business objectives. This approach is often justified the fiduciary duty that the AR owes to its stakeholders. By abstaining from political engagement, AR aims to avoid potential controversies, polarization, and risks that could negatively impact shareholder value and Governance. AR acknowledges that companies may still indirectly engage in political activities through their lobbying efforts, support of industry associations, or involvement in public policy debates. These actions may be driven by specific business interests, such as advocating for favorable regulations or protecting their market position and therefore may influence fiduciary duty. While refraining from making explicit political statements it is essential AR considers the ESG broader impact.

AR political engagement policy is aligned with its values, corporate culture, and long-term fiduciary duty.