Glossary

• Agreed Upon Procedures: the procedures agreed upon between the Applicant Investment Fund, the Auditor and LuxFLAG that are performed to assist LuxFLAG to come to a decision to grant the Applicant Investment Fund with the LuxFLAG ESG Label

• Agreement with an auditor: the agreement entered into between the Applicant Investment Fund and the Auditor with the objective for the Auditor to carry out the Agreed Upon Procedures as attached in Appendix 5.

• Applicant Investment Fund: an investment fund that chooses to apply for the LuxFLAG ESG Label (first time application or application for the renewal of the LuxFLAG ESG Label

• Application form: the form that supports the application by an Applicant Investment Fund for the LuxFLAG ESG Label, as attached in Appendix

• Auditor: the authorised auditor of the applicant investment fund or another authorised auditor

• Detailed questionnaire: a questionnaire as attached in Appendix 4, to be completed by an Applicant Investment Fund designed to provide the information necessary for the Auditor to carry out certain Agreed Upon Procedures

• Eligibility Criteria (of Label): the specific published criteria as defined by LuxFLAG that an Applicant Investment Fund must comply with in order to obtain the LuxFLAG ESG Label as attached in Appendix 1

• ESG: ESG is an abbreviation of "environmental, social and governance" factors. These are the three main areas that make up the integration of extra-financial factors into mainstream analysis of a company.

• Engagement: Engagement, in the context of Responsible Investment, is the act of responsibly using our influence as a shareholder to enter into dialogue with a company. The responsible exercise of shareholder rights can help encourage companies to give due consideration to all of its stakeholders: shareholders, employees, customers and society.

• Environmental criteria: on the environment. Environmental impact is one of the three extra-financial factors that are usually considered when implementing an extra-financial analysis, alongside the company's social and governance performance.
  
  Measures of environmental impact can include a company's tendency to pollute air and water, its energy management policies, the resources it consumes and the direct impact its activities have on the local environment.

• Extra-financial factors: Extra-financial factors are elements of a company's behaviour that may not be immediately apparent solely from an analysis of its financial performance. These factors – environmental, social and governance – may not be quantitatively measured by a company's financial report. An analysis of these factors must take place in addition to, and integrated with, a more traditional financial analysis of the company as part of the Responsible Investment decision-making process

• Social criteria: the direct or indirect impact of an issuer’s business activities on stakeholders with regard to universal values such as human rights, international labour standards, anti-corruption, etc.

• Governance criteria: the processes, regulations, laws and institutions that influence how a company is managed, administered and controlled. They also cover relations with different stakeholders and the objectives that govern company strategy. Main actors include the companies’ shareholders, Board of Directors and management.

• ESG Strategies: Best-in-class / best effort strategies: Approach where leading or best-performing investments within a universe, category, or class are selected or weighted based on ESG criteria.
  
  Multiple exclusion strategies: An approach that excludes specific investments or classes of investment from the investible universe.
  
  Single exclusion: An approach that excludes specific investments or classes of investment from the investible universe such as companies, sectors, or countries.
  
  Engagement & voting strategies: Engagement activities and active ownership through voting of shares and engagement with companies on ESG matters.
  
  ESG strategies recognised for the ESG Label: Best-in-class / best effort strategies, Multiple exclusion strategies.
  
  ESG strategies that are not acceptable by themselves: Single exclusion, Engagement & voting strategies

• Investment Fund: for the purpose of the LuxFLAG Environment Label, investment fund is meant to include traditional undertakings for collective investment, whether corporate or contractual in form, and undertakings or entities that may be structured in a similar manner to undertakings for collective investments, such as entities specialised in risk capital

• Label: The LuxFLAG ESG Label

• Labelled Investment Fund: an investment fund that has been granted the LuxFLAG ESG Label

• LuxFLAG: Created in July 2006, the Luxembourg Finance Labelling Agency (LuxFLAG) is an independent not for profit agency that supports sustainable finance by providing clarity for investors through awarding Labels to applicant investment funds which meet specific published criteria

• LuxFLAG’s Board of Directors: the LuxFLAG body that finally grants the right to use the LuxFLAG ESG Label

• LuxFLAG’s Eligibility Committee: the LuxFLAG body that reviews the application files and that recommends to the LuxFLAG Board of Directors whether the applicant investment fund may be granted the right to use the LuxFLAG ESG Label

• LuxFLAG ESG Label: the Label that LuxFLAG may grant to Applicant Investment Funds that meet all of the ESG Label Eligibility Criteria

• Mainstreaming and integration: Mainstreaming, in the context of Responsible Investment, is the incorporation of extra-financial factors into the core investment decision-making process. This extra-financial analysis therefore becomes fully integrated into the overall analysis of a company's performance potential.
  Mainstreaming and integration are fundamental parts of the Responsible Investment ethos, of ensuring that environmental, social and governance factors are given full consideration – and research support – as an integral part of the investment decision-making process.

• Pre-questionnaire: a questionnaire to be completed by an Applicant Investment Fund that may help the Applicant Investment Fund to assess whether it may be eligible for the LuxFLAG ESG Label as attached in Appendix 2

• Social factors: When a company is analysed through an extra-financial lens, the impact that it and its activities have on society is taken into consideration. Societal impact is one of the three extra-financial factors that are considered, alongside the company's environmental and governance performance.
  Measures of societal impact can include a company's labour management policies and approach towards equal opportunities and human rights, and the direct impact its activities have on the local community

• Socially Responsible Investment (SRI): application of sustainable development principles to investments. This approach involves systematically taking into account ESG criteria in addition to the standard financial criteria when making investment decisions.

• Sustainable development: Sustainable development is development that happens today, but that is not going to prejudice the potential for development tomorrow – development that uses resources today, but that will not deny use of those resources to future generations, or development that meets current needs while keeping in consideration the world's future needs.

• Terms and Conditions: *** as attached in Appendix 6