Responsible Investing Policy

ESG integration applies to all managed assets within PWM (funds, Pictet Equity Certificates, Discretionary Portfolio Management mandates) and to investment advice where relevant. It excludes client-initiated transactions under reverse solicitation and execution only services.

We define ESG integration as the use of relevant ESG data to evaluate sustainability risks as part of the investment or advisory process.

Our investments take into account sustainability risks by integrating in the investment process environmental, social and governance factors, based on proprietary and third-party research, to evaluate both investment risks and opportunities. The integration of sustainability risk analysis should mitigate the impact of such risks on the value of the investments and could help enhance long-term risk-adjusted returns for investors.

Pictet’s exclusions framework constitutes a common minimum standard for investment strategies in scope and covers companies and sovereign /quasi sovereign:

• For companies, exclusions are based on a combination of revenue thresholds derived from controversial activities that are deemed harmful to society and/or the environment. Across all managed assets, we exclude controversial weapons (>0%), thermal coal mining (≥25%) and thermal coal power generation in high-income countries¹ (≥25%).
• For sovereign and quasi-sovereign issuers, exclusions are based on severe breaches of international norms such as state sponsorship of terrorism, threats to international peace, security and stability. Across all managed assets, we exclude countries where they are designated as State Sponsors of Terrorism² or subject to EU financial sanctions targeting central banks and/or state-owned enterprises, while very high- or highrisk countries in the Fragile State Index (FSI) or conflict-affected countries are placed on a watchlist³. Additional exclusions⁴ or restrictions may apply at strategy, product or jurisdiction level. These are specified in the relevant mandate documentation, product information or local policies and should be read in conjunction with this Policy.

We have selected a range of third party specialist providers for ESG data that supports our firm-wide ESG integration and active ownership activities. Data received from external providers complement our internal research and analysis provided by our research, investment and sustainability teams.

ESG data are updated daily in our internal data warehouse and are made available to our research and investments teams through various systems, such as our internal ranking, portfolio management systems.

Key limitations to our methodologies may include a lack of data coverage and/or quality. Our methodologies are informed by reliable sources gathered from diverse reputable third-party research providers that are experts in their areas. In instances where the information from third-party providers is deemed incorrect or incomplete, we retain the right to engage with them or to deviate, on a case-by-case basis.

Service providers are subject to rigorous due diligence supervised by the Pictet Group ESG Data Committee and covering topics such as review of their business model, research process, technical expertise, data coverage, quality assurance mechanisms, and prevention of conflicts of interests. the Pictet Group ESG Data Committee reviews periodically current and potential ESG data providers based on business needs.

Across research and investment activities, we place emphasis on the inclusion of high-quality environmental, social and governance data when evaluating corporate issuers. All investment teams have access to ESG data and are able to demonstrate how sustainability risks are taken into account in their investment or advisory processes.

To this extent we have developed a proprietary Sustainability scoring assessing companies on four criteria: 1) the quality of their governance, 2) their preparedness for climate risks, 3) how their long-term growth potential aligns with major sustainable development trends and 4) their ability to address sector-specific challenges. Based on this assessment, each company is then assigned a sustainability rank ranging from Laggard to Leader.

Similarly, for fund manager selection we systematically address ESG issues with our investment partners and encourage improvements of current practices, if necessary. We have developed a comprehensive ESG questionnaire that includes both firm- and fund-level questions. The completed questionnaires are assessed on four pillars: 1) Management Firm commitment to ESG, 2) Investment Process, 3) Active Ownership, 4) Monitoring and Reporting. Based on this assessment, each fund is then assigned an ESG score ranging from 1 (ESG Laggard) to 5 (ESG Leader).

Subject to applicable local regulations and client contractual documentation, we intend to vote on behalf of eligible Discretionary clients and Advisory clients who have opted into the service, where disclosure of shareholders’ identity is not requested or where such disclosure has been duly authorised by the clients.

It does not include investments through third-party funds, where we expect those managers to exercise their votes according to their own policy and report accordingly.

The overarching purpose of our voting is to protect and promote the rights and long-term interests of our clients as shareholders. We consider it to be our responsibility to support and/or challenge companies’ management to ensure that the issuers that our clients invest in are well-run, adhere to their strategy and deliver shareholder value. We aim to support a strong culture of corporate governance, effective management of environmental and social issues and comprehensive reporting according to credible standards.

Our proxy voting guidelines are based on generally accepted standards in environmental and social matters and corporate governance, including but not limited to board and executive remuneration, risk management and shareholder rights (see Appendix D for more detail). Given that the long-term interests of shareholders are the paramount objective, we do not always support company management and may vote against it. We also reserve the right to deviate from our voting guidelines to consider company-specific circumstances. Such divergences may be initiated by relevant teams within Pictet Wealth Management and must be supported by written rationale. Where consensus cannot be reached, the decision is escalated to the relevant Chief Investment Officer or competent investment committee.

Our proxy voting guidelines are reviewed every year and adapted as appropriate to reflect the specificities of certain regions and/or ownership structures.

The implementation of these principles, including eligible assets, the voting universe and decision-making process are governed by our internal Proxy Voting Procedure.

We seek to engage in priority with corporates where we have expertise and conviction, significant exposure and identified sustainability issues.

The scope for engagement is corporate issuers from the Pictet Wealth Management Investment Universe, actively covered by our analysts, and fulfilling several criteria including potential influence (measured by current holdings), severity of the issue identified, issue linked to priority themes (climate, nature, long-termism), etc.

We consider it our fiduciary duty to engage selected corporate issuers to positively influence a company ESG performance and to protect or enhance the value of our clients’ investments. We press management to adopt appropriate policies, practices, and disclosure in line with established best practices.

Depending on the sustainability issue identified with a given company, we might engage through a combination of targeted in-house-led discussions, and via collaborative institutional investor initiatives.

When we are not satisfied with the outcome of an engagement, we may deploy an escalation strategy that may include voting against management at company meetings. If we are still not satisfied that the management team are acknowledging or addressing our concern(s), we may also consider supporting the submission of shareholder resolutions initiated by third-parties or joining shareholder groups.

Ultimately, if the various escalation channels have been exhausted and we see insufficient progress overtime, we may decide to reduce or sell our holdings.