Exclusion policy

Introduction
Gavekal Capital Limited believes that high standards of environmental, social and governance (ESG) considerations lead to smarter and more responsible investing. As such, Gavekal avoids making investments that is deemed harmful to the environment or society. This includes both businessrelated and conduct-based exclusions. This Exclusion Policy sets out the way in which Gavekal Capital Limited applies exclusions in respect of certain investments on the basis of ESG factors.

This Exclusion Policy applies to the management of all products classified as Article 8 or Article 9 under SFDR. The Exclusion Policy does not apply to derivatives unless the derivative is used to gain long exposure to a single issuer. The Exclusion Policy will not be applied to short positions or to positions in index funds or other instruments used to gain exposure to multiple underlying issuers. The Exclusion Policy does not apply to sovereigns, securitized bonds, currencies, cash, cash equivalents and money market funds which are held for cash management/liquidity purposes.

Data Availability
In the application of the exclusion categories mentioned in subsequent segments, Gavekal Capital Limited may be reliant on external data sources alongside Gavekal Capital Limited’s internal research.

Implementation of the Exclusion Policy
Gavekal Capital Limited maintains an exclusion policy as a part of its responsible investing process. Exclusions are applied on a pre-trade basis while post-investment screening and reporting is also performed.

Gavekal Capital Limited has identified certain issuers or groups of issuers that it will exclude or limit in each fund’s portfolio, known as exclusions, to promote the environmental and social characteristics that the relevant fund supports.

Post-investment reporting and monitoring is performed to ensure that each fund’s portfolio is in compliance with the current exclusion list. If a company already in the portfolio is added to the exclusion list, the fund manager will divest the position at an opportune time.

Exclusion Categories
Violation of international norms and standards
Gavekal Capital Limited shall not invest in companies which themselves or through other entities violate the United Nations Global Compact (UNGC) or the OECD Guidelines for Multinational Enterprises.

Controversial Weapons
Companies that produce or sell weapons that in the view of Gavekal Capital Limited violate fundamental humanitarian principles through their normal use will be excluded from Gavekal Capital Limited’s investment universe.

This includes, but is not limited to, anti-personnel mines, cluster munitions, biological weapons, chemical weapons, and nuclear weapons (apart from those whose use is permitted by the Treaty on the Non-Proliferation of Nuclear Weapons).

Tobacco
Gavekal will seek to exclude companies which derive any revenue from the production of tobacco products.

Coal
Gavekal will not invest in companies that derive more than 10% (10 per cent) of their income from the mining of thermal coal or derive more than 10% (10 per cent) or more of their revenue from thermal coal-based power generation.

Gavekal Use of Third Party Data
The Exclusion Policy is a quantitative and data driven approach used globally across all products classified as Article 8 or Article 9 under SFDR. Gavekal places reliance on third party data for this analysis and periodically evaluates the data and service providers through due diligence. For a list of data providers that Gavekal uses to evaluate exclusions, please find more information in the Data Policy Section.