This means that their assessment of financial materiality – including that of ESG issues – may differ due to factors including investment approach, geographical focus, holding period, portfolio positioning and construction, and risk tolerance.

While this independence of thought is the basis of our approach, there are some overarching views on how ESG issues are integrated where this forms part of the investment process:

• We believe that the integration of material ESG factors into our investment process will enhance returns for clients over the long term
• We assess material risks from both a sector and company-specific perspective
• We use this risk assessment to inform investment decision-making and prioritise engagement with our investee companies

• We use company meetings as an opportunity to discuss the most material risks with companies’ executive board members as well as periodic stand-alone meetings with dedicated sustainability managers and non-executive directors when appropriate

• We document investment analysis and company engagement and share these with the wider Artemis investment teams
• We can explain how factors which can be material such as companies’ environmental performance and governance processes are integrated into our investment decisions

UK equities

Overall investment approach

How we integrate ESG

UK Select

• Artemis Funds (Lux) – UK Select

A ‘best ideas’ strategy, we target long-term capital growth by investing in a focused portfolio of 40 to 60 stocks, without regard for benchmark composition.

Our largest holdings are those in which managers have the highest levels of belief and where there is a strong positive alignment between the stock-specific investment thesis and the manager’s macroeconomic views.

We believe the benefit of ESG integration is to provide additional insight into the balance of risk/reward and hence impact on the share price.

We focus on those factors which do or could have an impact on value. We engage where needed as this is a key component for improving company performance.

US equities

Overall investment approach

How we integrate ESG

US Select and US Smaller Companies

• Artemis Funds (Lux) – US Select
• Artemis Funds (Lux) – US Smaller Companies

US Select is a ‘best ideas’ US equity strategy. The strategy adopts a flexible and pragmatic approach to stock-picking, shifting style to deliver returns through the market cycle. Individual stock ideas undergo a rigorous evaluation process assessing both upside potential and downside risk.

US Smaller Companies is a similar strategy, focusing on stocks with a market cap of under $10 billion.

SFDR Article 8: The Artemis Funds (Lux) sub-fund versions of these strategies have several exclusions in relation to tobacco, weapons, thermal coal and companies determined to be in breach of the United Nations Global Compact (UNGC) principles on human rights, labour rights, the environment and anti-corruption.

The Artemis Investment Funds ICVC sub-funds (UK versions) of these strategies do not have exclusions.

ESG factors are considered as part of our ‘up/down’ investment process. Key to stock selection is that a risk is only worth taking if the potential reward from owning a stock significantly exceeds the potential loss.

The team structure and specialism means that ESG factors are analysed on an industry- and company-specific basis. Inputs include a range of ESG metrics, analysis and assessments from external research providers.

US Extended Alpha

• Artemis Funds (Lux) – US Extended Alpha

The US Extended Alpha Fund is an equity ‘long/short’ fund. The managers use their stock-picking skills in seeking to profit from falling, as well as rising, share prices. The combination of a traditional portfolio of ‘long’ US stocks with a portfolio of ‘short’ positions gives greater scope to generate returns through stock-picking.

SFDR Article 8: The Artemis Funds (Lux) sub-fund version of this strategy has several exclusions in relation to tobacco, weapons, thermal coal and companies determined to be in breach of the United Nations Global Compact (UNGC) principles on human rights, labour rights, the environment and anti-corruption.

The Artemis Investment Funds ICVC sub-funds (UK versions) of this strategy does not have exclusions.

ESG factors are considered as part of our ‘up/down’ investment process. Key to stock selection is that a risk is only worth taking if the potential reward from owning a stock significantly exceeds the potential loss.

The team structure and specialism means that ESG factors are analysed on an industry and company specific basis. Inputs include a range of ESG metrics, analysis and assessments from internal and external research.

Global equities

Overall investment approach

How we integrate ESG

Global Focus

• Artemis Funds (Lux) – Global Focus

This strategy pursues long-term capital growth through investing in a concentrated portfolio of 25 to 35 high-quality stocks.

Companies are selected using an investment process cussed on investing in resilient businesses that are best-placed to benefit from diversified long-term structural growth trends. The managers favour companies with strong market positions, excellent finances and the ability to maintain pricing power over time. In seeking to fully benefit from this, the managers invest for the long run.

SFDR Article 8: This strategy has several exclusions in relation to tobacco, weapons, arctic oil and gas, oil sands, thermal coal and companies determined to be in breach of the United Nations Global Compact (UNGC) principles on human rights, labour rights, the environment and anti-corruption.

ESG factors are viewed as both a potential investment opportunity and risk. Factors are assessed for every stock – both pre investment and on an ongoing basis.

This process involves a range of inputs including ESG metrics, analysis and assessments from external research providers, and our own due diligence, experience and company knowledge.

Leading Consumer Brands

• Artemis Funds (Lux) – Leading Consumer Brands

This strategy aims to grow capital over the long term by tapping into the earnings potential of the emerging middle-class and changing consumer demand through investing in leading consumer brands. The management team looks for underlying brand strength that creates strong barriers to entry, giving the companies that own them pricing power and high profit margins.

SFDR Article 8: This strategy has several exclusions in relation to tobacco, gambling, weapons, coal, oil and gas, and companies determined to be in breach of the UNGC principles on human rights, labour rights, the environment and anti-corruption.

Leading consumer brands are often seeking to create leading sustainability practices – be it through the adoption of innovative materials, engaging in regenerative sourcing and above all, responding to a growing consumer mindset of ‘buy less, buy better’.

The team looks for brands increasingly prioritising value over volume, whose consumption is considered, rather than casual. Brands which prioritise craftsmanship and supply chain transparency typically also have above-normal pricing power – their attention to sustainability being rewarded through margins, and in turn share price performance, that exceeds those of their peers.

ESG metrics and analysis which input into the process therefore include considerations such as supply chain management, employment practices, carbon intensity, carbon transition plans, culture, leadership, remuneration and shareholder rights.

Emerging markets

Overall investment approach

How we integrate ESG

SmartGARP

• Artemis Funds (Lux) – SmartGARP Global Emerging Markets Equity

The Artemis SmartGARP® strategies apply a proprietary systematic, quantitative framework across a specific range of equity funds that aggregates a range of bottom-up and top-down inputs using growth at the right price (GARP), behavioural insights and market signals.

SFDR Article 8: Only the Artemis Funds (Lux) SmartGARP Global Emerging Markets Equity sub-fund has several exclusions in relation to tobacco, weapons, and thermal coal.

ESG is one of eight factors considered by the SmartGARP framework alongside other bottom-up and top-down inputs such as macroeconomic and investor positioning information.

SmartGARP’s ESG factor has two subcomponents, one capturing companies’ carbon footprint and the other focusing more generally on the strength of their ESG newsflow.

Meeting company management does not form part of the SmartGARP process although the strategy does aim to vote all its stock.

Fixed income

Overall investment approach

How we integrate ESG

Global High Yield Bond

• Artemis Funds (Lux) – Global High Yield Bond
• Artemis Funds (Lux) – Short-Dated Global High Yield Bond

For this strategy, the team selects high-yield bonds, those with greater yields than government or investment grade corporate bonds. No one region or currency predominates – we adopt a global approach.

The short-dated strategy restricts itself to bonds that are close to maturity. The fund’s target duration (exposure to interest rate risk) is 0-2 years.

SFDR Article 8: These strategies have several exclusions in relation to tobacco, nuclear power, weapons, thermal coal, oil sands and companies determined to be in breach of the UNGC principles on human rights, labour rights, the environment and anti-corruption.

We consider ESG risks alongside our analysis of other relevant investment factors – financials, covenants, and the pricing of risks.

We do not believe a standardised or fully automated approach to ESG analysis results in effective management of ESG risks within a high-yield portfolio.

This is due to the lack of research coverage of the high-yield market by external ESG ratings services. We utilise the expertise of Artemis’ wider fixed income and equity teams to inform decision making.