The Index is comprised of bio-technology companies that are actively engaged in the research, development and/or manufacturing of orphan drugs that treat rare diseases.

Companies eligible for inclusion in the Index universe shall be determined based on industry classification data provided by an independent third-party provider of consensus forecasts of leading industry analysts and analysis of the pharmaceutical and biotechnology healthcare sectors. In order to be eligible for inclusion in the Index a company must have a minimum of two marketed orphan drugs and must derive a proportion of revenue from orphan drugs which is within the top two quartiles of relevant orphan drugs companies, as determined by an independent third-party provider.

Having assessed the existing constituents of the Index, we have concluded that such investments do not significantly harm any environmental and social objectives. We have implemented processes and checks, using both environmental and social indicators, to verify on a bi-annual basis that the Fund’s investments do not cause any significant harm to any such objectives.

The Index excludes companies which

• are non-compliant with the UN Global Compact,
• are associated with a controversy (i.e. companies that have been involved in events that have a severe impact on the environment and society, posing serious business risks to the company),
• are involved in the production or retail of tobacco, or are a related product/service,
• are involved in military contracting weapons or related products,
• are directly involved or indirectly involved through corporate ownership, in controversial weapons,
• are involved in the retail or distribution of small arms to civilians (assault and non-assault weapons) and military/law enforcement customers, as well as key components of small arms,
• are involved in thermal coal extraction, power generation or increase the power generation capacity of coal
• are involved in the generation, production or increase the capacity of conventional oil and gas, or supporting products/services,
• are involved in oil sands extraction, arctic oil & gas exploration/extraction, shale energy extraction or increase the capacity of unconventional oil & gas,
• are involved in the production, distribution, supporting products or capacity increase of nuclear power,
• are involved in the production, retail or related services/products of alcohol,
• are involved in the operations, specialized equipment or supporting products/services of gambling, and
• are involved in the production or distribution of adult entertainment.

The ESG Exclusions Enhanced Index is monitored on an on-going basis and updated regularly by the index provider. Such exclusions and the definition of “involvement” are determined by the Index provider by reference to the “ESG Exclusions Enhanced Index" which is found at: https://solactive.com/downloads/Guideline-Solactive-ESG-Exclusions-Enhanced-Index.pdf

The Fund does not invest a minimum amount in economic activities that qualify as environmentally sustainable under the Taxonomy Regulation.

The Fund will invest at least 90% of its portfolio in investments that qualify as sustainable, all of which provide direct exposure to investee companies. The Fund will invest at least 0% of its portfolio in environmentally sustainable investments and at least 90% of its portfolio in socially sustainable investments. The actual level of environmentally and socially sustainable investments held by the Fund will always equate to at least the minimum proportion of sustainable investments of the portfolio outlined above. Some of the sustainable investments may be considered to contribute to both environmental and social objectives. The remaining portion of investments are not used to meet the sustainable investment objective.

Further information on LGIM's Sustainable Investment Methodology can be found here.

The Fund considers principal adverse impacts on sustainability factors and LGIM has identified a subset of the adverse sustainability indicators that are relevant to the Fund’s investments. The Fund considers principal adverse impacts, identified using the below listed sustainability indicators, through the implementation of the Fund’s ESG investment strategy.

• PAI 10: Companies violating UNGC/OECD