Companies are excluded from the Fund in accordance with the following Responsible Exclusions criteria

• Companies that derive 50% or more of their revenues (as a % of their balance sheet) from coal mining or extraction are excluded from the Fund.
• Companies that are in breach of at least one of the United Nation Global Compact principles for a continuous period of three years (36 months) or more are considered persistent violators and are excluded.
• Companies involved in controversial weapons are also excluded. These exclusions, however, did not form the rationale for the article 8 categorisation.

The Responsible Exclusions list is monitored on an on-going basis and updated on an annual basis. In order to determine the list of companies included on the Responsible Exclusion List, we use data from a number of external ESG data providers.

Our ESG integration encompasses both top-down and bottom-up approaches to identify and assess ESG factors in the research analysis process. The top-down research analysis identifies long-term, thematic shifts and structural changes which help determine the resiliency of sectors and the companies within them. The bottom-up analysis uses a proprietary, company analysis tool called Active ESG View which provides information on the ESG credentials of companies.

• Our Active ESG View tool forms an essential component of this overall active research process. The tool brings together granular quantitative and qualitative inputs in order to reflect a full picture of the ESG risks and opportunities embedded within each company.
• Active ESG View combines ESG raw data with qualitative assessment capturing ESG insights from our company analysis and engagements.
• The ESG analysis starts with third-party data from multiple different vendors which includes hundreds of ESG metrics (including data on carbon emissions, water and waste, environmental policies and controls, labour, health and safety, bribery and corruption) spanning 64 specific sectors and/or sub-sectors from a number of ESG data providers.
• Our Global Research and Engagement Groups (GREG), which is made up of Investment Stewardship and investment teams, have established a proprietary materiality matrix using such data which seeks to identify financially material topics for a given industry. The materiality matrix brings structure to our research and a framework to help systematically define and prioritise our engagement activity across the firm.
• The GREGs review the ESG data within the Active ESG View tool for each sector in order to increase or decrease weightings for each environmental, social and/or governance factor within the tool with the aim to create an overall assessment.

Active ESG View is an integral feature of this fund and the outputs of Active ESG View must be taken into account for all investment decisions.

Active engagement is a vital pillar within our approach to ESG integration. In practice, the data alone may not tell the full story, which is why we believe that incorporating a qualitative element is essential in order to fully capture the ESG risks embedded within each company. Our qualitative inputs capture ESG insights leveraging on the extensive knowledge of our various research.

A number of policies and processes guide the engagement activities, set out the approach to investment stewardship, and outline the expectations of investee issuers. The Global Corporate Governance and Responsible Investment Principles set out the approach and expectations with respect to key topics that are essential for an efficient governance framework, and for building a sustainable business model. We expect all issuers on a global scale to closely align with our principles which set out the fundamentals of corporate governance. We also take into account market specificities and take a tailored approach to voting on some topics in various markets. Further related policies can be found on the Investment Stewardship section of the LGIM website.

Active engagement with the issuers is used as a tool to drive progress and influence positive change and is conducted independently and in collaboration with industry peers and broader stakeholders. Engagement activities normally focus on specific material ESG issues and involve formulating an engagement strategy with regard to such issues with the aim to track and review the progress of the issuers during this process.

LGIM's Investment Stewardship team actively engages with policy makers and legislators to ensure there is strong regulation and standards in regards to governance practices.