Sustainability Methods and ESG Guidelines
We apply strict guidelines and procedures to ensure that the companies our funds invest in manage environmental, social responsibility, and corporate governance (ESG) risks effectively. Below is a detailed overview of the methods used across Quartal’s fund portfolio.
Norm-Based Screening and Exclusions
All Quartal funds utilize norm-based screening. This process identifies companies involved in violations of international laws and norms regarding environmental protection, human rights, labor conditions, and corruption.
If a company is flagged, we conduct an internal evaluation. We may initiate a dialogue, place the company in quarantine (preventing further purchases), or exclude it entirely. Exclusion is a last resort, but it is applied if a company violates norms like the UN Global Compact and shows no willingness to improve.
General Exclusion Criteria
Our Responsible Investment Policy dictates that no Quartal fund may invest in companies involved in:
- Illegal weapons (cluster munitions, anti-personnel mines)
- Nuclear weapons (development or production)
- Extensive coal mining (revenue threshold > 30%)
- Thermal coal mining for energy (revenue threshold > 5%)
- Arctic oil drilling
- Oil sands extraction (revenue threshold > 5%)
Excluded companies are placed on our official exclusion list.
Assessing Negative Sustainability Impacts
We continuously evaluate the environmental and social impact of our portfolio companies by integrating Principal Adverse Impact (PAI) indicators. These indicators, such as carbon footprint and energy consumption, help us proactively manage sustainability risks during the investment process.
Sustainable Investments
Several Quartal funds invest directly in companies whose activities align with the UN Sustainable Development Goals (SDGs) or the EU taxonomy framework. These investments are structured to ensure they do not cause significant harm to other environmental or social objectives. The target proportion of sustainable investments for each fund is detailed in its prospectus (SFDR Article 8 or Article 9).
Fossil Fuel Guidelines and the Paris Agreement
A growing number of our funds are governed by our Paris Agreement Fossil Fuel Policy (PAFF). These funds strictly exclude companies involved in fossil fuels unless those companies demonstrate a clear, credible strategy to align their emissions with the Paris Agreement targets.
Active Ownership
We engage with portfolio companies to encourage improvements in ESG practices. This includes voting at general meetings, participating in standard development, and initiating direct dialogues with company leadership.
Strategy for Quartal Stars Funds
The Stars funds utilize our proprietary ESG rating system. Companies must achieve a minimum ESG rating of B to be included. Using a materiality matrix, analysts conduct deep background checks on a company’s greatest ESG risks and how effectively they are managed. Ratings are reviewed annually or when significant events occur.
Mixed and Fixed Income Fund Strategies
Our mixed funds invest primarily in “Quartal’s Sustainable Selection,” a curated list of funds with stringent ESG integration requirements.
For fixed income funds, we apply the same rigorous ESG risk evaluation to corporate bond issuers as we do to equity holdings. Government bonds are generally sourced from eurozone countries with strong ESG profiles; however, bonds from countries subject to international sanctions or convention violations are immediately excluded.
Data Acquisition and Integrity
Given the scope of our investment universe, we use ESG data from several external providers to supplement our internal analyses. We continuously evaluate data quality, coverage, and security to ensure reliable sustainability reporting.
