Responsible Investment Policy

1) KAsset and Responsible Investment

KAsset, as the leading domestic asset manager, our investment approach is to invest in companies which generate both financial and sustainable economic value for investors. We strive to integrate Environmental, Social and Governance (“ESG") issues as well as ethical issues into our investment analysis, decision-making process and portfolio construction across all asset classes.

In addition, as being a wholly owned subsidiary of Kasikornbank Plc. (“KBank") which is one of Thailand's largest commercial banks, our investment practice is aligned with our Group's policy which conducts business with adherence to the sustainable development philosophy in all business decision-making.

Being engaged in an asset management industry, KAsset duly recognizes the public's trust and faith in the Company as keys to success for our business. We truly believe that good corporate governance will help sustain and enhance the Company's operations, which are means to achieve our ultimate goal to maximize our customers' satisfaction. With our top priority is given to investors' benefits, we also seek to ensure effective measures to prevent conflict of interest and assure transparency.

2) Oversight

The Sustainable Development Committee (“SDC”)​ is delegated by the Board of Directors to be responsible for oversight of KAsset's ESG and Climate Change activities and practices as follows:

• Review KAsset Responsible Investment Policy
• Review ESG and Climate change approaches
• Monitor and enhance ESG integrations into investment process for all asset classes
• Review and approve securities that to be put on watch list or excluded from KAsset investment universe due to ESG-related issues
• Approve and review ESG/SRI-labelled products
• Review ESG engagement and stewardship activities of investment professionals
• Review and approve reports on ESG and Climate related activities to public and external parties such as UN-Supported Principles for Responsible Investment (UNPRI), Task Force on Climate-Related Financial Disclosures (TCFD), Investment Governance Report (I Code) etc.
• Promote and ensure effective ESG practices across functions within KAsset
• Report and update ESG activities, progress and outcome to the Board of Directors

3) Scope of ESG Considerations and Priorities​

​​Environmental:KAsset aims to support a sustainable and low carbon economy transition. We measure and assess our investee companies on their ability to control direct and indirect environmental impact as well as seek new opportunities that may arise. Our main area of focus are such as:-

• Greenhouse gas emissions
• Pollution
• Waste management
• Energy efficiency
• Climate risk
• Biodiversity

Social: We focus on how companies managing their human capital, establish their social goals and measuring social impact, considerations area are such as:-

• Child Labor
• Discrimination in respect of employment and occupation
• Diversity, equity and inclusion
• Human rights
• Employee health and safety
• Product quality and safely

​Governance: Our approach to corporate governance and proxy voting are based on corporate governance principles listed below:-

• Integrity
• Transparency
• Independence
• Responsibility
• Accountability
  
• Fairness

We have established an internal proxy voting policy as a guidance to our exercise of voting rights and appropriate actions to be taken, if necessary, as well as to support and encourage sound corporate governance practice.

Corporate governance issues are systematically integrated through proxy voting and engagement process through active communication with the investee companies. For example, for any shareholder meeting which “against" vote is potentially casted, KAsset will make best effort to contact companies before exercising votes to discuss on the matter and explain the reasons for vote cast in opposition to management's recommendations. This provides us opportunities to communicate and raise our concerns to the Companies. Post-shareholding meetings, the follow-up process will be carried out to ensure our investment decision/appropriate action towards the companies, if necessary. We also focus on issues such as conflict of interest, anti-bribery and anti-corruption.

4) A Summary of KAsset Firm-Wide ESG Implementation by Asset Class and Product Segment

ESG Integration Process
KAsset incorporates ESG into our investment process from securities selection to portfolio construction. Our ESG data are conducted through various sources such as management discussions, questionnaires, company visits, site (factory) visits, company's relevant report filings e.g. one report, 56-1, sustainability report, annual and interim financial reports, shareholders' meetings agendas, database/research provided by third party service providers such as Refinitiv, Bloomberg, Institutional Shareholder Services (ISS) and other available public information.

Currently, we evaluate ESG through our internal checklist template and scoring methodology which could differ among asset classes according to their suitability. Both direct and indirect ESG impacts are incorporated into investment evaluation according to their materiality. We also incorporate ESG external ratings from the reliable service providers. The evaluation topics cover all ESG areas e.g. climate change, carbon emission, human right, socio-impact, governance etc. To reflect the materiality of ESG factors, we assign weighting of each factor varying by industry that individual company is in. The derived ESG scores and ratings will then be integrated into our investment process. Fund managers/analysts will reflect ESG data into their respective financial forecasts, company valuations and portfolio construction. In case there is an ESGissue that has an impact onthe company's operations or value,we will engage with the investee company to obtain additional information in order to assess the potential impact and formulate the investment decision making.

KAsset shall analyze and evaluate quality of ESG of the investee companies at least once a year and review upon any significant changes or material events.

A.Active Equity Strategy

ESG is assessed at issuer level across active equity strategies through our internal evaluation template which also incorporates third party service provider ratings where applicable. ESG consideration is part of both stock selection and portfolio construction process. The evaluating factors depend on the nature of an individual company and its respective industry that could have a reputational, regulatory and/or financially impact on a company which potentially deteriorate shareholder's value. We believe that the analysis of ESG risks and opportunities together with our ongoing active ownership activities can help us achieving sustainable and superior risk-adjusted return over the long ​​term.

We do not apply exclusionary policy for our passive equity strategy as the strategy is to minimize tracking error to their respective benchmarks. However, in case there is material ESG event, we will bring it up to discuss in the SDC and act on a case by case basis. We also apply active ownership principle to our passive funds through proxy votings and corporate engagements. Our policy is to vote in every shareholder meeting of all companies invested by our passive funds although some companies are not in our active investment universe.

C.Passive Equity Investment (Indirect Investment through ETFs)

For ESG evaluation for our investment in ETFs, we evaluate at asset manager level at least on an annual basis. We also evaluate total ESG score development for each ETF as well as sub score in E, S and G, which provided by external ESG rating agency, at least on annual basis

D.Domestic Fixed Income

ESG is considered as an integral part of our investment process and portfolio construction both qualitative and quantitative analysis.

Governmental securities/instruments: ESG is evaluated at sovereign level. For investment in Thai domicile fund, ESG score of Thailand is not applicable for any investment limit.

Deposit, corporate debentures and non-governmental fixed income related instruments: ESG is pre-evaluated at issuer level through data sources from external services provider. Internal evaluation template may be applied if necessary in case that external data is inconsistent with our preliminary review or external data sources are not available.

A matrix of ESG and company fundamental score is integrated to specify tenor and investment amount limit for each issuer.

E.Foreign Fixed Income
Foreign fixed income securities/bank deposits:
We integrate the ESG assessment into our qualitative and quantitative analysis of each issuer (foreign bank deposits and foreign bonds). For qualitative assessment, our analysts will gather relevant information to identify key risk factors which might impact companies' sustainability, then mapping their probabilities and potential severities for the company. Taking into consideration with the quantitative ESG score from reliable ESG data provider, we therefore study the companies' ESG performance compared to their relevant peers as well as their own historical trend. Subsequently we utilize this ESG assessment as a part of internal credit rating model. The final credit score will be used to determine the exposure limit into our investment consideration within the given constraints.
Sovereign debt:
ESG factors are assessed as sovereign level. Key considerations are such as but not limited to institutional strength, political stability, government and regulatory effectiveness, corruption, social cohesion, living standards and income inequality, risks associated with natural resources and energy transition. Those factors are mostly rated by trusted international organization such as World Bank, United Nation and OECD, and are publicly accessible. We utilize those data for our internal assessment by combining those data into an index score and then compare sovereign ESG risk. In comparison, we may segregate between countries within developed markets and emerging markets to better reflect peer risks. The final ESG score will be one of the factors that we allocate investment limit and specify tenor for fixed income investment.

F. Feeder Funds

ESG is evaluated at asset manager level when selecting third-party asset managers. The Sustainable Investment (“SI") review process is conducted annually by the Product Strategy team using a questionnaire to gather all the necessary information from third-party asset managers. The questionnaire covers a wide range of information, from company specific data, which helps us cover the firm's initial due diligence, to their product strategies, which deep dives into ESG related information of a specific strategy. This data helps us to evaluate whether the strategy has a suitable SI processes in place and how these processes change over time.

G. Property/Infrastructure Funds which KAsset has either Fund Manager Role or Trustee Role

ESG integration is included from selection and due diligence process prior to the appointment of fund managers and trustees, whereby ESG is a part of overall assessment such as an examination of environmental, and property and infrastructure-related laws and regulations.

ESG approach is varied based on characteristics/ type of which matter i.e. major renovation, construction, selection of property managers and lessees, with considerations of ESG factors such as the maintenance of the building to be in good condition, waste water management, waste management, relationship and development within community, employee handling procedure, and acquiring licenses as laws and regulations required. In doing so, fund managers and trustees shall support property managers and REIT managers analyzing ESG throughout the management period of such property funds and REITs.

The property managers of property funds and REITs will be selected by considering the ESG policy of such company including energy saving campaign, waste water management, activities with building users, track records, and also procurement policy. Furthermore, property managers and REIT managers are encouraged and supported by fund managers and trustees to disclose information regarding ESG-related matters.

5) Climate Change Approach

KAsset fully recognizes the impact of climate change and the urgent need to accelerate the sustainable transition towards global net-zero emissions as environmental impact could have adverse impact on investment performance. We strive to evaluate climate risks and opportunities and try to manage risks that consider material to our investments and business. Climate change is one of our engagement priority topics with investee companies.

Since we deem transparency and disclosure on climate related risk is important in order for quantify the potential impact of climate change to financial performance of companies. KAsset has signed up as official supporter of Task Force on Climate-related Financial Disclosures (TCFD) and will try to align our practices in accordance with the guidelines.

SDC is responsible for monitoring and ensuring the collaboration with portfolios managers to integrate potential impact of climate change into security analysis and portfolio construction which is part of ESG. SDC is responsible for report and update the impact and outcome to the Board.

6) Exclusionary Guideline (For Direct Investment only)

A: Companies that have controversial behavior according to international standards on responsible conduct and the management does not react to address the issues proactively or implement necessary reforms, will be placed on watched list and may be excluded from KAsset investment universe.

B. Companies that involve/manufacture/distribute or sell products in the following product categories will be excluded from our investment universe:-

• Controversial weapons such as chemical, biological, nuclear weapons
• Anti-personnel landmines
• Cluster bombs or munitions
• Firearms
• Military contracting
• Adult Entertainment

C.Companies that involves in businesses that consider high carbon emission such as coal mining, coal-based electricity, fossil fuel will be closely monitored the development of the company' strategies to achieve a transition toward a low or net-zero carbon emission target.

7) Active Ownership Activities

A. Engagement Approaches
We believe engagement with investee companies is an important part for fundamental approach investors as ongoing active dialogues with the investee companies could gain more understanding on their business strategy and direction as well as creating constructive feedbacks. This could help improving companies' performance and reducing potential risks and uncertainties.
In case the concerned issue is considered serious and might incur negative consequences, we might escalate the issue to the Board level of the investee companies.
Although in general and most cases of our approach, we prefer to communicate with investee companies privately on our stewardship activities since we believe in positive relation and trust and also avoid public misleading that could cause an unintended outcome. To conduct any action towards an investee company that is involved with KAsset's concerns and is unable to solve the problem even after the degree of monitoring has been raised, KAsset may collaborate with other investors (both domestic and foreign investors) or other stakeholders in a collective engagement as deemed necessary to bring about an improved situation.
KAsset also acts collectively with other domestic institutional investors through industry organization such as Association of investment Management Companies (“AIMC"), Thai Listed Companies Association (“TLCA"), Thai Institute of Directors (“IOD") and regulators such as the Stock Exchange of Thailand (“SET"), the Securities and Exchange Commission (“SEC") the and Bank of Thailand (BoT). We actively participate in public hearings, focused groups and give feedbacks for any new or reviews of the existing regulations or notifications by related regulators. We are also a member in ESG Collective Action Committee arranged by the AIMC and signed the guidance to apply negative list with investee companies together with other institutional investors on behalf of the AIMC.

Escalation:

After the considerable effort of engagement is done and the concerned topics have not been satisfactory resolved, we may escalate in the following order:-
- Sending letters to the board of directors
- Collective engagement with other investors
- Withholding support from directors
- Opposing a management proposal
- Supporting a shareholder proposal at annual meetings
- Making our concerns public
- Nominating new directors to the board
- Choosing to not or no longer invest in the company.

Prioritization of engagement topics

Engagement topics may vary upon circumstances/incidents and materiality of business that each company operates in. However, we have identified priority on ESG engagement topics that considered as common and have high impact on most of investee companies' performance:-

1. Climate Change and natural sustainability
   
2. Human capital
3. Company strategy, purpose and resilience
4. Board quality
   

Overall political engagement of investee companies

We support political engagement of our investee companies that are conducted in line with business principles that ensure integrity and sustainability goals. The activities should lead to effective public policy decisions that contribute to a stable economic system and promote positive real-world sustainability outcomes.

B. Proxy Voting
We believe that proxy voting is an integral aspect of investment management. KAsset has established internal proxy voting policy. Our criteria are focused on potential impact on a company from environmental, social and corporate governance issues. The proxy voting policy is reviewed at least on an annual basis to ensure that KAsset votes proxies prudently and in the best interest of its clients.

We have also subscribed third party proxy research service provider for comparison and reference of global practice. However, we retain full discretion when determining how to vote on behalf of our clients.

C. Securities Lending Program
Certain funds of KAsset may participate in a securities lending program.

• KAsset maintains the list of securities restricted from lending and the lis​t is being monitored on a daily updates for upcoming proxy events.

Where a security on loan is subject to a proxy event, it is our policy to instruct the lending agent to recall the security so that we may vote such shares. However, this will be done on a best effort basis considering the circumstance.​