Mandatum AM Fixed Income Portfolio

Introduction

Mandatum AM Fixed Income Portfolio integrates environmental, social, and governance (ESG) factors into its fundamental investment approach. This document provides transparency on the portfolio's environmental and social characteristics, our methodology, and the outcomes of our sustainable investing approach.

As asset managers responsible for over 15 billion in fixed income assets, we recognize our role in directing capital toward sustainable solutions while mitigating potential ESG-related risks in traditional investments.

Environmental Characteristics

Our fixed income portfolio incorporates several environmental characteristics that align with global initiatives such as the Paris Agreement and EU Sustainable Finance Disclosure Regulation (SFDR).

Climate Transition Allocations

34.2% of our portfolio is invested in instruments that support the transition to a climate-neutral economy, including:

• Green bonds financing renewable energy projects (12.8% of portfolio)
• Corporate bonds from companies with Science Based Targets initiative (SBTi) alignment (15.4% of portfolio)
• Sovereign bonds from countries with substantial climate policies (6.0% of portfolio)

Carbon Footprint Reduction

The portfolio maintains a carbon intensity 25% lower than the Bloomberg Barclays Global Aggregate Index, achieved through:

• Sector allocation optimization, minimizing exposure to high-carbon industries
• Preference for issuers with verified GHG emission reduction targets
• Active engagement with companies regarding their transition strategies

Biodiversity and Natural Capital

8.7% of our holdings are in bonds that explicitly contribute to biodiversity protection, water resource management, and circular economy principles. This includes:

• Municipal bonds funding sustainable water management infrastructure
• Corporate bonds from companies implementing nature-positive business practices
• Supranational bonds dedicated to environmental conservation projects

Social Characteristics

The portfolio's social characteristics reflect our commitment to positive social outcomes alongside financial returns, grounded in the recognition that social factors are material to long-term creditworthiness.

Labor and Human Rights Standards

We prioritize issuers that demonstrate strong labor practices and respect for human rights:

• 87.3% of corporate holdings are from companies adhering to UN Global Compact principles
• 92.1% of holdings maintain policies aligned with International Labour Organization standards
• All corporate bond issuers are screened against international conventions on forced labor and child labor

Community Impact Investments

12.4% of the portfolio is directed toward investments with demonstrable community benefits:

• Education infrastructure bonds supporting access to quality learning facilities
• Healthcare financing for underserved communities
• Affordable housing investments in high-need regions
• SME financing initiatives promoting economic inclusion

Product Responsibility and Consumer Protection

67.8% of our corporate holdings are from manufacturers and service providers with:

• Rigorous product safety protocols
• Responsible marketing practices
• Data privacy policies meeting or exceeding regulatory requirements
• Supply chain oversight ensuring ethical sourcing

Investment Methodology

Our integrated ESG approach combines proprietary research with recognized frameworks to evaluate environmental and social characteristics of potential and existing investments.

Our Multi-Factor Screening Process

• Initial negative screening excluding issuers involved in controversial weapons, tobacco, and thermal coal
• Positive ESG assessment using internally developed scoring methodology
• Engagement with issuers to improve ESG practices and disclosure
• Monitoring of ESG performance indicators throughout investment lifecycle

Research Framework Integration

Our credit analysts incorporate ESG considerations into traditional financial analysis using materiality matrices informed by SASB standards and EU Taxonomy criteria, ensuring that ESG factors are systematically considered in investment decisions and valuation methodologies.

Proxy Voting and Stewardship

We actively exercise voting rights on proxy ballots related to environmental and social issues when available. For holdings without voting rights, we engage with management teams to progress ESG practices aligned with investor expectations and regulatory requirements.

Portfolio Metrics

Reporting and Transparency

We provide quarterly reporting on environmental and social metrics to investors, aligned with European ESG Template (EET) standards where applicable. Our annual sustainability report contains comprehensive analysis of portfolio performance against ESG objectives and details of engagement activities.

Third-party verification through GRESB and CDP assessments ensures our approach meets international best practices and maintains investor confidence in our ESG integration methodology.