DISCLAIMER: This document has been provided for informational purposes only. The contents and application of this document shall at all times remain within the sole discretion of Purpose Investments Inc. (the “Manager”). This procedure is non-binding, is subject to change without notice, and does not commit the Manager to its contents in any way.

October 2021

Introduction

Purpose is an investment company that builds products around its core beliefs, whether they relate to investment principles such as market efficiency, fundamental value and diversification, investor utility, or societal impact.

We fundamentally believe that incorporating environmental, social, and governance factors into our investment processes is supportive of superior long-term performance while also generating a positive benefit broadly on society. More information makes for more robust processes, better security selection and superior risk management, while responsible stewardship of capital rewards corporate ESG leaders while pressuring laggards to adopt better sustainability practices.

Purpose Investments seeks to integrate ESG wherever possible across its fund lineup. In practice, this means we aim to incorporate an ESG framework into any fund where the investment strategy applies active security selection. We do so across asset classes and whether the strategy be driven by a discretionary or quantitative approach.

The specific approach to ESG integration utilized by our Portfolio Managers should depend on a variety of factors including the fund’s objectives, the asset class, time horizon, as well as the unique research and portfolio construction methodologies, philosophies and processes used by each of our Portfolio Managers.

Key ESG Factors

At Purpose, we apply ESG as a three-pillared investment paradigm based on the notion that companies that better manage their impact on society will be more successful over the long term, which improves investment returns.

Key ESG factors across these three pillars are enumerated below:

By incorporating ESG factors into our decision-making processes, we seek to generate insights that are not properly captured by traditional financial modeling and engender a more effective investment process, better security selection decisions, and ultimately higher quality returns. The research that we have done into ESG integration supports our conclusion that ESG is not an altruistic performance compromise but an invaluable positive screening tool and risk management discipline.

Scope

Purpose’s ESG policy applies to capabilities across our firm and is intended to provide a broad understanding of our approach to ESG integration. The specific approach to ESG integration utilized by our Portfolio Managers depends on a variety of factors including the fund’s objectives, the asset class, time horizon, as well as the unique research and portfolio construction methodologies, philosophies and processes used by each of our Portfolio Managers.

Integration

At a base level, we believe in using an integration approach rather than an exclusionary one. Integration involves combining traditional fundamental analysis with ESG factors to tilt portfolio exposures rather than shrinking the investable universe by wholly eliminating certain industries or companies.

There is no one-size-fits-all approach to integration. Regardless of strategy, ESG implementation requires a nuanced approach that reflects the efficacy of the multitude of ESG issues across different sectors and business activities. For example, environmental factors are likely to matter much more in resource sectors than communication services, product safety is critical in consumer discretionary, and corporate governance matters everywhere.

Stewardship

We believe that engaging with issuers is an essential part of being a long-term active owner and that engaging with them on ESG topics can improve corporate performance and reduce risk. Purpose has partnered with Glass Lewis, a proxy advisory services company that provides governance services to support engagement among investors through its research, proxy vote management, and technology platforms.

When voting proxies, we apply a custom blend of Glass Lewis’ ESG Policy and Climate Policy to inform our votes and ensure that the companies we invest in are effectively overseeing and managing ESG risk. Our policy incorporates the notion of materiality to apply the highest standard of ESG scrutiny to any relevant issue in determining how we will vote.

Communicating About ESG

We provide each of our funds (where possible) with an ESG risk rating shown on our website, powered by Sustainalytics, which evaluates a fund’s aggregated exposure to environmental, social, and governance risk factors as well as management efforts to mitigate underlying risks. In our outward messaging regarding ESG integration, we are vigilant to ensure we do not overstate the role of ESG in our investment processes. Our primary motivation for adopting ESG is the driving belief that doing so will result in stronger risk-adjusted performance for our clients.