Responsible Investment Policy

1. Purpose & Interpretation

This policy (the “Policy”) applies to all entities of the Welton Group and seeks to set out Welton’s approach to responsible investing across all of its activities.

2. Welton’s Commitment

2.1. Background

Welton believes that financial markets are a strong component of sustainable development, and that a sustainable and responsible investment policy can deliver long-term value creation for all stakeholders. Accordingly, it is important for investment managers such as Welton to offer responsible investment solutions to their investors.
Welton is therefore striving to develop and offer select products that integrate sustainability factors into the investment process allowing investors to participate in sustainable growth, under the constraint of performance. In pursuing this goal, Welton believes that sustainability risks are present across asset classes and therefore aims to extend responsible investment approaches to all financial instruments traded by the company, when possible, through active research and development if necessary.

3. Codes & Initiatives

3.1. Promotion of Responsible Investment

Welton is a signatory to the United Nations-supported Principles for Responsible Investment (“UN PRI”) and the Standards Board for Alternative Investments (“SBAI”). Both entities are committed to developing robust frameworks for the deployment, implementation and observance of ESG considerations across the industry. It is Welton’s belief that its participation and promotion of the principles and guidelines issued by the UN PRI and SBAI are a demonstration of its commitment to developing a more sustainable global financial system.

3.2. UN Principles for Responsible Investment

Welton became a signatory of the UN PRI in 2020. The UN PRI were issued in 2006 by UNEP Finance Initiative and the UN Global Compact and provide a voluntary framework under which participants can include ESG considerations into their decision-making and ownership practices and better align their investment goals with those of society at large. The six UN PRI are as follows:

    • Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes;
    • Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices;
    • Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest;
    • Principle 4: We will promote acceptance and implementation of the Principles within the investment industry;
    • Principle 5: We will work together to enhance our effectiveness in implementing the Principles; and
    • Principle 6: We will each report on our activities and progress towards implementing the Principles.
3.3. Standard Boards for Alternative Investments

Welton is a signatory of the SBAI which historically held a close alignment with Welton’s core values with key focus areas including:

    • Disclosure;
    • Valuation;
    • Risk management;
    • Fund governance; and
    • Shareholders’ conduct.

Conformity with these standards is achieved on a “comply-or-explain” basis and disclosure statements are required to be made available to all existing and prospective Investors upon request.

4. Scope & Application

Welton recognizes that certain asset classes present a more effective opportunity than others to apply sustainability factors to the investment process. Notwithstanding this, Welton is committed to researching the applicability of sustainability factors across all asset classes traded by the company.

For asset classes where sustainability factors are at an earlier stage of development, Welton has developed its own in-house quantitative methodology for deriving sustainability scores which can be applied to certain products and complements other core design criteria such as trading strategy, portfolio construction, and risk analysis.

As a quantitative investment manager, Welton’s sustainability scores are driven by data. ESG and other sustainability data are dynamically collected and stored from various recognized sources, including third-party data vendors and international organizations. This data may then be used by Welton to design sustainability strategies that can be integrated into specific products.

Welton’s own in-house quantitative methodology for deriving sustainability scores currently covers the following asset classes:

Single Equity Issuers
Sustainability data are obtained through third-party data vendors and used as provided by them.

Financial Derivatives
Sustainability data is derived from a battery of indicators obtained via the World Bank Sovereign ESG data portal. The data is collected and normalized to calculate sovereign sustainability scores applied to Stock Indices, Fixed Income, and Currency derivatives.

Commodity Derivatives
Sustainability scores of commodity derivatives are calculated through the combination of sovereign sustainability scores described above but using a methodology that commodity production is split across multiple sovereign entities. Consequently, the methodology makes use of commodity production data obtained from international institutions to calculate a production-weighted average of sovereign sustainability score for each traded commodity derivative.

For investment products offered by Welton with a specified sustainability mandate, the strategies applied to equities use a combination of screening and dynamic allocation mechanisms, to enforce sustainability within a given product. More specifically, exposure to included instruments is scaled proportionally to their sustainability scores relative to other comparable instruments.

In the case where products with a sustainability mandate use derivative instruments, the use of derivatives is primarily motivated by portfolio construction and hedging considerations. However, Welton is committed to only using derivative instruments for which it can obtain and/or calculate sustainability metrics relevant to the investment product’s sustainability mandate.

5. Investment Process

Within Welton, investment ideas are typically developed by Welton’s research team. When developing an investment idea for a product with a specified sustainability mandate, Welton’s research team must evaluate potential sustainability considerations. Whether or not such considerations will become part of the idea being developed depends on their relevance.

6. Stewardship

Absent any material conflicts of interest, the relevant portfolio manager is responsible for voting proxy ballots pursuant to Welton’s policy to vote proxies in a manner that, in its judgment, is most likely to maximize value on behalf of advisory clients through consideration of all factors that are material to the risk-return analysis, including where appropriate or required climate change and other sustainability factors.

Operationally, Welton has engaged Glass, Lewis & Co. (“GL”), a proxy advisory services company, to assist in voting proxies. GL offers thematic proxy voting policies that can be selected for reference in voting proxies. The thematic policies offered include a Climate Policy, ESG Policy and Catholic Policy, among others. For each investment product with a specified sustainability mandate, the thematic proxy voting policy or combination of policies is selected to meet the sustainability goals of the investment product.

At the firm-level, Welton seeks opportunities to collaborate with other leading financial institutions to demand greater transparency from issuers on matters of importance in developing a more sustainable global financial system.

7. Governance

Welton’s Investment Committee reviews all components of the systematic investment strategies. These also include the sustainability considerations Welton’s research team evaluated when developing an investment idea. Further, given that Welton’s management has sustainable development at heart and tracks progress towards specified goals, these are also considered by Welton’s Sustainability Committee.

Furthermore, departments other than the research team are responsible for ensuring this Policy is correctly implemented and observed. These include Welton’s compliance team and risk team.

8. Policy Review

The Policy will be considered for review at least annually and/or when any material changes or update is deemed required.

Welton Investment Partners