Sustainability-related information on the portfolio management service

1. Summary

Open Bank, S.A. (hereinafter, “Openbank” or the “Bank”), for the purpose of managing the investment strategy of the “We Invest for You” portfolio management service, which is composed of investment funds (hereinafter, the “Strategy”); applies traditional financial criteria, as well as socially responsible investment criteria (environmental, social and governance or “ESG” criteria) to promote environmental or social characteristics through the investment funds in which it invests.

Although the Strategy has no sustainable investment goal, the environmental or social characteristics it promotes include the following.
 

• Environmental protection.

• Social criteria.

• Good governance and business ethics: corporate governance and behaviour.
 

The Strategy invests through investment funds that focus on environmental criteria (such as climate change prevention, natural resource depletion, or loss of biodiversity) and social and governance criteria. Accordingly, 50% of the Strategy will be exposed to investment funds that promote sustainability-related investment criteria.
 

Openbank uses a methodology based on the analysis of ESG indicators at Investment Fund level to monitor the Strategy’s environmental or social characteristics. Our analysis covers aspects including the following Sustainable and Responsible Investment (SRI) strategies of the underlying assets:
 

• Exclusion criteria.

• Dispute analysis.

• Best-in-class strategy.

• Engagement activities.

Openbank adopts an ESG analysis methodology, which includes its own governance indicators, and focuses mainly on aspects of corporate governance and business ethics at fund level.
 

It also uses information - such as data, tools and analytics provided by various third parties and financial and ESG databases - to integrate ESG information into our investment process in order to meet established criteria.
 

In the case of this Strategy, we apply due diligence policies, using both the policies established at Santander Group level and Openbank’s own policies and procedures.
 

It is currently not possible to carry out engagement activities in Listed Companies because Openbank invests exclusively in third-party investment funds, and the managed portfolios never include direct investments in these companies.

No specific benchmark index has been established to measure the alignment of the Strategy with the environmental or social characteristics it promotes as part of the management of this service.


2. No sustainable investment objective
 

This financial product promotes environmental and/or social characteristics, but has no sustainable investment goal1.

 

3. Environmental or social characteristics of the financial product
 

The Bank, through its decision-making and control mechanisms, ensures that the assets in which the Strategy invests comply with and promote the following characteristics (within its scope):
 

• Environmental protection: climate change (promotion and/or development of renewable energy, reduction of CO2 emissions and greenhouse gases, etc.); natural resources (forest, water, wood and water treatment policies, etc.); pollution and waste and environmental opportunity management.
 

• Social criteria: fostering respect for human rights, decent work, internal professional or personal development (gender equality, training, health and safety, professional development, etc.); and/or company product monitoring to ensure they do not cause physical or moral damage to consumers, among others. Literacy, employment, education, social quality (life expectancy) policies. Initiatives to drive the development of more deprived regions will be given favourable consideration.
 

• Good governance and business ethics: corporate governance and behaviour: the quality of the management team is thoroughly analysed in order to limit negative events and news that may affect short-term share performance: accidents, strikes, corruption and fraud. Within corporate governance, particular attention is paid to board structure, the number of women on the board, salaries, company oversight and ownership, and accounting. The quality of national regulations and laws, corruption control, R&D expenditure, political stability, freedom to establish companies and investments.

 

4. Investment strategy
 

The Strategy invests through investment funds that focus on environmental criteria (such as climate change prevention, natural resource depletion, or loss of biodiversity) and social and governance criteria. Accordingly, 50% of the Strategy’s exposure will be to investment funds that promote sustainability-related investment criteria.
 

For the investment funds in which the Strategy invests in order to achieve each of the environmental or social goals it promotes to be selected, such funds must take sustainability criteria (in accordance with Article 8 and/or 9 of the SFDR Regulation) into account or invest in activities aligned with EU 2020/852 Regulation on the establishment of a framework to facilitate sustainable investment.

Openbank uses a methodology based on the analysis of ESG indicators at Investment Fund level and analyses the following Sustainable and Responsible Investment (SRI) strategies of the underlying assets that make up the Strategy, among others:
 

• Exclusion criteria are analysed if the funds in which the Strategy invests exclude certain activities or controversial sectors (for example, activities related to arms, tobacco, alcohol, etc.). Openbank also conducts an exclusion analysis in line with the General Santander Group Defence Sector Policy (Política General del Sector Defensa del Grupo Santander).

• Dispute analysis that allows improved identification of the fund’s exclusions of companies that violate internationally recognised standards or regulations, such as those issued by the OECD, ILO, UN or UNICEF, and whether critical disputes have been identified.

• Best-in-class strategy that prioritises funds that invest in companies with better ESG ratings (above the sector and region average). The Strategy must also meet a minimum ESG quality rating at portfolio level.

• Analysis of the fund’s engagement activities in line with the Strategy’s social and environmental characteristics and with the Bank’s Engagement Policies.

These elements seek to identify the Investment Funds best prepared to face the challenges of the future that, therefore, have implemented policies and management systems with the greatest potential for having a positive impact on society and the environment.

 

5. Proportion of investments

At least 50% of the total investments will meet the Strategy’s environmental or social characteristics. All of these will fall within Category #1A Other environmental or social characteristics, given that the Strategy will not make sustainable investments.
 

These percentages may vary during Strategy management, so long as the investments made in line with environmental and social characteristics represent the majority. The actual percentage will be reported in the periodic information document applicable to each reference period. This product has no minimum commitment to sustainable investment and the percentages represented here are merely indicative.

 

6. Monitoring of environmental or social characteristics

In order to track the monitoring of environmental or social characteristics promoted by the Strategy, and the sustainability indicators used to measure the effective promotion of each of these environmental or social characteristics, Openbank uses an ESG methodology based on the analysis of quantitative and qualitative indicators, and analyses the Sustainable and Responsible Investment (SRI) strategies applied by the funds in the Strategy (exclusion criteria, international standards monitoring, best-in-class strategies, etc.), in order to manage risks and mitigate potential adverse incidents that may affect the Strategy’s profitability.

Additionally, the Investment Committee monitors and reports the behaviour of funds that promote ESG characteristics and ensures they effectively comply with the commitments established by Openbank.



7. Methodologies

Openbank uses an ESG methodology based on the analysis of quantitative and qualitative indicators obtained from different data providers, that allow it to assess how this Strategy promotes the environmental and/or social characteristics identified above.


Specifically, this Strategy invests in funds that promote ESG criteria by monitoring that the Strategy’s normal exposure to these products is greater than 50%. To identify which funds take ESG criteria into account, Openbank’s Investment Committee will consider the Article 8 or 9 classification set out in the SFDR Regulation and EU 2020/852 regulation on the establishment of a framework to facilitate sustainable investment.


8. Data sources and processing

Openbank uses sustainability indicators that it obtains from different third-party providers and financial and ESG databases to assess ESG analysis and measure compliance with the environmental or social characteristics that this Strategy promotes. Such third-party information is based on information published by companies (general reports, sustainability reports, annual reports), access to specialist databases (government, NGOs, specialist models) and in the media (both global and local).
 

This assessment system allows Openbank to identify the best-performing funds based on ESG criteria and the active management of environmental, social and governance risks.
 

The Bank works with an advisor who specialises in processing and performing their own calculations based on the indicators obtained from third-party providers. Openbank uses this information to analyse the funds’ sustainability and investment strategy risks.
 

Openbank also implements procedures to determine the quality of ESG information providers and the continuity of the service provided.
 

9. Limitations to methodologies and data
 

Openbank has access to information such as data, tools and analytics through different thirdparty providers and financial and ESG databases, allowing it to integrate ESG information into its investment process in order to meet established criteria.
 

In addition to having access to these third-party providers and financial and ESG databases, Openbank may also supplement these sources, as applicable, with analyses conducted by its internal departments, as well as information and data published by the issuers in which it invests.
 

The reader of the sustainability-related information for this Strategy assumes all risk arising from any use they may make or allow to be made of such information. The Bank makes no express or implied representations or warranties and assumes no liability for any errors or omissions contained in this information, or in connection with any related damages. All of the foregoing does not exclude or limit any liability that cannot be excluded or limited under applicable law.
 


10. Due Diligence

We apply due diligence policies using both the policies established at Santander Group level (for example, the policies on defence and sustainability) as well as Openbank’s own policies and procedures, for this Strategy.


11. Engagement policies

The investment strategies of the portfolio management service Openbank offers its customers are, currently, composed exclusively of third-party investment funds. The managed portfolios do not incorporate direct investments in listed companies in any circumstances.

Therefore, it is not currently possible to carry out engagement activities at the aforementioned listed companies. However, Openbank deems that the funds in which it invests carry out engagement activities, i.e., active dialogue and collaboration between the shareholders and their companies in order to improve their strategy and ESG results. It also determines whether the shareholders of the companies in which the fund invests have the right to vote on ESG strategies at general meetings.
 

If Openbank includes any direct investment in listed companies into its customer portfolios in future, it will encourage long-term engagement activities.

 

12. Designated reference benchmark
 

No specific reference benchmark has been designated to measure Strategy alignment with the environmental or social characteristics it promotes for the management of this Strategy.

 

 

1 “Sustainable investments” are understood to mean any investment in an economic activity that contributes to an environmental objective, measured, for example, through key resource efficiency indicators regarding: use of energy and renewable energy; commodity, water and soil consumption; waste generation and greenhouse gas emissions and their impact on biodiversity; and the circular economy or investments in an economic activity that contribute to a social objective; in particular, any investment that contributes to fighting inequality. They also include any investment that strengthens social cohesion, social integration and employment relations; or any investment in human capital or in economically or socially underprivileged communities, provided the investments are not significantly detrimental to any of those objectives and the beneficiary companies follow good governance practices, particularly in terms of their management structures, employee relationships and relevant personnel remuneration being decent and compliant with tax obligations.