Socially Responsible Investor Policy

April 2021 INTRODUCTION

LYXOR is a group of asset management companies with expertise in all investment forms, active, passive and alternative. LYXOR creates innovative investment solutions to meet the long-term challenges of savings management. Thanks to its experts and its engineering and research tradition, LYXOR combines performance and risk management.

LYXOR puts Socially Responsible Investment at the heart of its investment strategy by creating concrete solutions that take into account environmental, social and governance factors, in order to address the challenges of the future.

Through this report, LYXOR presents how socially responsible investment is implemented on a daily basis.

CONTENTS

LYXOR, a responsible investor 3

LYXOR commitments and partnerships 4

An ecosystem to support SRI deployment at LYXOR 7

Design innovative solutions incorporating ESG criteria 11

Act as a committed and responsible shareholder 22

Integrate ESG into the core of our model 26

Publications related to LYXOR SRI activities 29

2 LYXOR, A RESPONSIBLE INVESTOR

Convinced of the environmental, social and governance challenges facing civil society, LYXOR has defined – in line with its long-standing commitment to the Principles for Responsible Investment (PRI) of the United Nations, a responsible investor policy.

This policy outlines the values and practices established by our organization to integrate ESG issues into its various investment solutions. Its main objectives are: • Taking into account the sustainability risks and opportunities resulting from the non-financial analysis of companies, • Investing to have a positive impact on social, environmental and corporate governance integration, • Influence companies to adopt more sustainable practices.

As part of its responsible investor policy, LYXOR focuses its commitments on three pillars:

Design innovative solutions incorporating ESG criteria

Act as a committed and responsible shareholder

Integrate ESG into the core of its model

In conjunction with the integration of ESG criteria into its investment strategy and its shareholder engagement policy, LYXOR takes climate issues into account as an integral part of its responsible investment policy and presents them in its Climate Policy available HERE.

3 INTEGRATION OF SUSTAINABILITY RISKS

Integration of sustainability risks by the Management Company in its investment decision‐making processes relies namely on practices described in this policy.

"Sustainability Risk" means an environmental, social or governance (ESG) event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investments made by the relevant fund. Sustainability Risks can either represent a risk on their own or have an impact on other risks and may contribute significantly to such risks, such as (but not limited to) market risks, operational risks, liquidity risks or counterparty risks. Assessment of sustainability risks is complex and may be based on ESG data which is difficult to obtain, incomplete, estimated, out of date and/or otherwise materially inaccurate. Even when identified, there can be no guarantee that these data will be correctly assessed.

Sustainability risk is linked but not limited to climate-related events resulting from climate change (a.k.a Physical Risks) or to the society’s response to climate change (a.k.a Transition Risks), which may result in unanticipated losses that could affect the relevant [Sub-Fund]’s investments and financial condition. Social events (e.g. inequality, inclusiveness, labour relations, investment in human capital, accident prevention, changing customer behaviour, etc.) or governance shortcomings (e.g. recurrent significant breach of international agreements, bribery issues, products quality and safety, selling practices, etc.) may also translate into Sustainability Risks.

By implementing exclusion policies in relation to issuers whose environmental and/or social and/or governance practices are controversial on certain strategies, the Management Company aims to mitigate Sustainability Risks. In addition, when a Fund follows an extra-financial approach, through the implementation of the ESG investment process (including but not limited to selection, thematic or impact), Sustainability Risk intend to be further significantly reduced or mitigated. In both cases, please note that no insurance can be given that Sustainability Risks will be totally removed.

4 LYXOR COMMITMENTS AND PARTNERSHIPS

LYXOR is a signatory to the Principles for Responsible Investment supported by the United Nations (www.unpri.org), and thus undertakes to respect the following 6 principles:

The 6 commitments of LYXOR as a signatory of the PRI 1 2 3 4 5 6 We will integrate We will be active We will seek We will promote We will work We will each ESG issues into shareholders and appropriate acceptance and together to report on our our decision- will integrate ESG disclosure on ESG implementation enhance our activities and making and issues into our issues by the of the Principles effectiveness in progress towards investment ownership entities in which within the implementing the implementing the analysis policies and we invest. investment Principles. Principles. processes. procedures. industry.

2019 LYXOR Rating

5 A+ Since 2017, LYXOR has obtained the rating of A+ in the Strategy and Governance category of the UNPRI

Climate commitments

LYXOR joined the Climate Bond Initiative partnership program to demonstrate its commitment to contributing to low-carbon investments. With this in mind, LYXOR and CBI have unveiled a detailed report on the French green bond market.

As an investor in the green bond market, LYXOR adheres to the Green Bond Principles, which determine the terms of issuance of green bonds contributing to the integrity of the market. GBPs provide advice to issuers on the key elements involved in launching a credible green bond; assist investors by ensuring the availability of information necessary to assess the environmental impact of their investments in green bonds; and they help underwriters by moving the market to standard disclosures that will facilitate transactions.

In 2018, LYXOR joined the Climate Action 100+, an international initiative that mobilize and engage greenhouse gas emitters to drive the energy transition and thus contribute to the achievement of the Paris Agreement objectives. Through Climate Action 100+, LYXOR is seeking the commitment of companies, specifically from boards of directors and management, to provide more complete information in accordance with the final recommendations of the Task-force on Climate-related Financial Disclosures (TCFD).

In 2020, LYXOR has joined the CDP. The CDP investor initiatives (Former Carbon Disclosure Project) is a non-profit organization of British origin, launched in 2000, its goal is to engage with businesses to inspire them to disclose and manage climate change issues, in order to create a sustainable investment for their shareholders. The CDP aims to promote the efforts made to reduce the carbon impact. The CDP wants to encourage investors, companies and cities to "do what is necessary quickly to build a truly sustainable economy" by measuring and understanding their environmental impact.

6 In 2020, LYXOR publicly supports the TCFD. Initiated in 2017, it encourages organizations to communicate on the way in which they manage climate-related risks according to 4 pillars: governance, strategy, risk management and metrics & targets. This pledge fits into the continuity of commitments that LYXOR is taking to participate in the fight against climate change.

Commitments within professional associations

LYXOR is a member of professional associations (AFG, EFAMA) in order to participate in discussions at national and European level, via dedicated working groups on responsible investment.

LYXOR also participates in the following technical committees and working groups of the Association Française de Gestion d'actifs (AFG): • Responsible Investment Committee • Corporate Governance Committee

Academic Research Partnerships

LYXOR has joined several academic chairs whose objective is to promote high quality academic research on portfolio management and construction. The idea is to connect universities with the asset management industry.

LYXOR is a member of the Sustainable Finance and Responsible Investment Chair whose work has contributed to the emergence of new valuation models that take into account the environmental and social consequences of companies’ actions in the long term. It is co- directed by Sébastien Pouget (Université Toulouse 1 Capitole, IDEI-TSE and IAE) and Patricia Crifo (Department of Economics of the Ecole Polytechnique), and builds on the skills of teams of highly qualified and internationally recognized researchers.

In 2015, LYXOR launched in partnership with the House of Finance of the University Paris- Dauphine, an innovative research initiative: the ‘Research Academy’.

7 AN ECOSYSTEM TO SUPPORT SRI DEPLOYMENT AT LYXOR

A dedicated SRI team created in 2015

LYXOR has a dedicated SRI team, which determines the Responsible Investment Policy and its implementation. The team centralizes all ESG/SRI-related matters and represents LYXOR in the due diligence process in support of the Risk, Management, Sales, Marketing and Customer Relations teams.

The SRI team has six members (responsible investment’ professionals) including four SRI analysts and one intern. The SRI team is under the responsibility of Florent DEIXONNE and integrated into the General Secretariat division.

Florent Deixonne Sandra Martin Mouad Haddioui Head of Socially SRI analyst, in charge SRI analyst, in charge of Responsible of the ESG and the ESG integration in Investment Climate risks investment processes assessment

Paul Marouzé Déborah Slama Yomtob SRI analyst, in charge SRI analyst, in charge of voting and of voting and engagement activities engagement activities

Tuyen Doan Intern Climate Analyst

8 Governance

The Head of the LYXOR SRI Team reports directly: • Every week to the LYXOR General Secretary which is a member of the LYXOR executive committee, • Biannually, to the executive committee of LYXOR, including the Chief Executive Officer of LYXOR, on its activities and the implementation of the responsible investment strategy.

The Head of the LYXOR SRI Team is also member of : • The Responsible Committee (CORESP) of the Société Générale Group, • The Responsible Committee (CORESP) of the Business Unit, • The CSR Management Committee of Société Générale Group.

The SRI team also has internal relays, particularly in the Management, Sales, Marketing, Multi Management Analysts, Research and Risk teams.

In addition, a bi-annual governance committee oversees and validates the implementation of the voting and engagement policy. This committee is composed of the following members: Chief Investment Officers (CIO), General Secretary, Head of Private Wealth Investments, Head of Legal Affairs, Chief Compliance Officer (RCCI), Head of Socially Responsible Investment, SRI Analyst.

The Committee’s role includes decisions on the following: • Evolution of the voting policy, • Evolution of the scope of the voting policy, • Evolution of the engagement policy, • Potential conflict of interest.

Finally, a Climate Strategy Committee oversees and validates the LYXOR’s Climate strategy. This committee, chaired by the President of LYXOR, is composed of the following members: General Secretary, Head of ETF and Index Management, Director of SG29, Chief Investment Officers, Head of Private Wealth Investments, Head of Sales and Customer Relationship, Head of Socially Responsible Investment, Head of Risk Management, Chief Compliance Officer, Head of Communication.

The Climate Strategy Committee (i) Analyzes the correct implementation of past commitments related to climate issues, (ii) Discusses and validates future climate orientations.

The figure below presents the general governance of LYXOR related to Socially Responsible Investment and Climate.

9 Supervisory Board Approves the Company's CSR policy guidelines

Management Body (1) Validates and supervises LYXOR’s SRI and Climate strategy

Executive Committee Committee in charge of the Business Unit (CORESP)(2)

Drives SRI and Climate strategic Oversees SRI and Climate topics decisions

Committees Climate Committee Governance Committee

Supervises and validates the Oversees and validates voting and implementation of the Climate engagement policy strategy

ESG & Climate Risk Evaluation

ESG & Climate assessment Sector policies and implementation

ESG & Climate Issues Assessment Framework for managing Framework controversies and material issues

Business Lines The SRI and Climate strategy is set out in each business’ lines

Socially Responsible Strategic Marketing, Fund Risk and Compliance Other Business Lines Investment Team (SRI) Management, Structuring (1)(2)(3) Proposes and deploys the Develops an offer of Controls the correct Sales, Legal, Marketing etc. SRI and Climate strategy sustainable investment implementation of SRI and solutions Climate processes

(1) LYXOR’s General Management and the Head of SRI participate to the Responsible Committee (CORESP) of the Société Générale Group. (2) LYXOR’s General Management and the Head of SRI participate to the Responsible Committee (CORESP) of the Business Unit. Within the Société Générale Group, the Business Unit gathers Asset Management and Private Banking activities. (3) The Head of SRI is a member of the Société Générale Group's CSR Steering Committee.

10 Missions The missions covered by the LYXOR SRI team include among others:

• The determination and the deployment of the SRI strategy of the LYXOR Group,

• A shareholder engagement activity that results in an engagement policy and a voting rights policy,

• The integration of ESG issues into investment solutions. LYXOR’s SRI team works in collaboration with management and structuring teams when defining new products and restructuring,

• The ESG and Climate risk assessment at portfolio level and its availability to clients. In addition, the SRI team carries out complementary ESG analyses, either through an expertise on ESG integration applied to non- listed companies (SME/ETI type) as well as through an expertise related to Green Bonds,

• The support of clients in the ESG and Climate integration within their investments,

• The support of sales forces towards LYXOR clients,

• The regulatory adequacy.

11 Finally, LYXOR has established a number of partnerships. Each partnership was established following rigorous selection and due diligence procedures.

LYXOR uses the services of a proxy voting advisor (ISS) for corporate governance research (as part of LYXOR's voting policy).

LYXOR uses the services of Sustainalytics to support LYXOR in its thematic engagement campaigns

LYXOR uses ESG research from MSCI as an ESG database in order to integrate these stakes and to assess its funds.

LYXOR uses ESG research from Trucost as an Environmental & Climate database in order to integrate these stakes and to assess its funds.

LYXOR uses the Vigeo Eiris services as part of LYXOR’s ESG evaluation applied to unlisted assets (SME/ETI).

CBI, Equileap, Solactive, MSCI, RobecoSAM, etc as index providers or advisors.

Moreover, in the global context of the Société Générale Group Environmental and Social Policies, LYXOR used the Global Compact List produced by the Group, based on:

• ISS-Ethix data to identify companies considered in violation of its Defense policy,

• Sustainalytics data to identify companies that are associated with serious and repeated breaches of criteria, standards and/or mandatory requirements relating to controversial sectors and products.

12 DESIGNING INNOVATIVE SOLUTIONS INCORPORATING ESG CRITERIA

With a culture of innovation and the ability to design liquid and transparent investment vehicles, LYXOR is well positioned to help its clients meet the challenge of sustainable investment.

Indeed, LYXOR puts SRI at the heart of its investment strategy by creating concrete solutions that take into account environmental, social and governance factors. This consideration is based on the belief that non-financial analysis contributes to value creation, expands the selection process and contributes to the robustness of the management process.

Our active and passive management solutions, as well as our expertise in fund selection, enable us to meet the growing demand for socially responsible investments and the challenges of climate change.

Exclusion strategies

❑ Defense exclusion

Since 2007, LYXOR has implemented an exclusion list based on the Defense Sector Policy, applied systematically to the assets of its ETF portfolios whose replication mode is indirect, as well as in its Absolute Return funds, Risk Based & Solutions and on certain funds of the managed account platform, to the extent that this is legally possible and at its sole discretion.

The Exclusion List aggregates the firms that are to be excluded in application of the Defense E&S Sector Policy, due to their involvement in activities linked to prohibited or controversial weapons (anti-personnel mines, cluster bombs, chemical and biological weapons, nuclear weapons - outside NPT- and depleted uranium ammunitions).

❑ Thermal Coal exclusion

LYXOR has taken the commitment1 to divest its CIUs of thermal coal while strengthening its dialogue with the companies concerned in order to encourage them to be more transparent and to take into account the risks and opportunities associated with the change climate. LYXOR has thus decided to divest from the most exposed players by excluding companies whose turnover from activities related to the extraction of thermal coal is greater than 10% and companies that belong to the energy sector, of which more than 30% of electricity generation (energy mix) comes from thermal coal.

1 As of July 2019, https://www.lyxor.com/en/lyxor-climate-policy-2020-en 13 ❑ Tobacco As part of its responsible investor strategy, LYXOR has pledged to exit the tobacco sector gradually1 . LYXOR has decided to exit from companies that are most exposed, i.e.: • Tobacco producers • Tobacco suppliers that derive more than 50% of their revenues from tobacco These criteria are applied by LYXOR to all products, subject to legal and commercial constraints.

❑ Norm-based exclusion

LYXOR is able to provide its clients with a “norm-based exclusion” list, used in some of its sustainable investment solutions, excluding companies associated with serious and repeated breaches of the principles of the United Nations Global Compact. These ten principles of the Global Compact are derived from international standards and guide corporate behavior in the areas of Human Rights, Labor, Environment and Corruption.

❑ Tailor-made multicriteria exclusion

LYXOR offers the possibility to implement tailor-made multicriteria exclusions, in line with our clients' SRI concerns, such as the exclusion of companies associated with major ESG controversies or involved in particular activities or sectors.

In some funds, LYXOR excludes companies involved in activities or sectors deemed controversial (Gambling, Tobacco, Human Cloning...) or having the majority of their income from sectors with major sustainability risks (Coal, etc.).

❑ Investment based on agriculture

For agriculture-based investment funds and products: • LYXOR refrains from creating funds likely to contribute to agricultural commodity price inflation, • LYXOR does not proactively market products that focus primarily on agricultural commodities.

For each new product likely to have exposure to agricultural raw materials, LYXOR carries out a specific analysis to ensure that these new funds or investment products comply with the criteria of the Société Générale Group’s Agriculture, Fisheries and Agri-Food Sector Policy.

1 This commitment will be phased in beginning the second quarter 2021. 14 Thematic investments

This strategy is based on financing sustainable projects or companies. Thematic investment encompasses a variety of themes, allowing investors to choose specific investment fields. This strategy requires the development of dedicated and tailor-made thematic impact solutions to generate social and environmental added value. Because they provide concrete solutions to sustainable development, these activities should benefit from attractive growth opportunities.

LYXOR has thus developed several dedicated thematic funds aiming to finance some of the United Nations Sustainable Development Goals (SDGs), namely gender equality (SDG 5) with the LYXOR ETF Gender Equality fund, clean water and sanitation (SDG 6) with the LYXOR ETF World Water fund, clean and affordable energy (SDG 7) with the LYXOR New Energy fund, sustainable cities and communities (SDG 11) with the LYXOR ETF Smart Cities and LYXOR ETF Future Mobility funds, and the fight against climate change (SDG 13) with the LYXOR ETF Green Bond, LYXOR ETF Paris-Aligned Climate and LYXOR ETF Climate Change funds.

A few examples of these funds are presented below.

LYXOR Gender Equality

LYXOR launched in 2017 the Global Gender Equality fund, which is the first ETF to invest in the 150 companies who achieved the highest gender equality scores.

By launching this ETF, LYXOR hopes to have a positive impact and accelerate progress towards gender equality. Indeed, women’s low wages and lower labor force participation have a profound impact on the global economy as a whole. Recent figures estimate the cost to the global economy at $9 trillion a year.

The ESG issues identified at the company level and thus allowing LYXOR to choose its investment universe are grouped into 4 categories listed below: • Gender balance in leadership and workforce • Equal pay and work/life balance • Policies to promote gender equality • Commitment to transparency and accountability

15 LYXOR New Energy

In 2007, LYXOR has launched the New Energy fund which reflects the 40 largest stocks involved in renewable energy, energy efficiency, and decentralized energy supply.

This ETF is channeling capital towards companies that are deriving at least 50% of their own turnover in either of: • Renewable Energy (SunPower, wind power, biomass). • Energy efficiency (better use of energy sources, via in particular investment in smart meters, superconductors and smart grids applications) • Decentralization of energy supply (generation of electricity close to the consumer, particularly via micro-turbines and fuel cells).

LYXOR World Water

In 2007, LYXOR has launched the World Water fund, which has become one of the Europe’s largest one, and invests in the 30 largest companies in the water supply, infrastructure and water treatment sectors.

This ETF is channeling capital towards companies that are deriving at least 50% of their own turnover in either of: • Water utilities: supply, waste water treatment, operation of facilities, that help sanitation, conveyance and safeguarding of water, • Water infrastructure suppliers (pipes, valves, pumps, meters and consulting), that help managing water resources more efficiently, • Water treatment equipment (technology for filtration, disinfection, desalinization), that help expanding the availability of drinkable water resources.

LYXOR Paris-Aligned Climate

In 2020, LYXOR launched a range of ETFs for investors seeking to align with climate-related carbon reduction targets. These Paris-Aligned Climate (PAB) ETFs are designed to provide exposure to equity investments with a significant reduction in carbon footprint in line with the Paris Agreement to limit global warming to less than 2°C.

The range consists of four funds that focus on large and mid-cap stocks in developed global, US, European and Eurozone equity markets.

They are directly linked to the "EU Paris-Aligned Benchmarks" which aim to reallocate capital towards a low-carbon and climate resilient economy.

16 LYXOR Green Bond

In 2017, LYXOR launched the Green Bond fund, the world’s first Green Bond ETF 1. The Green Bond ETF replicates the Solactive Green Bond, which is representative of the performance of green bonds issued by investment grade entities.

LYXOR has partnered with CBI, one of the major actors in this green bond market, to benefit from its knowledge and robust asset selection process.

The criteria of the index developed in partnership with LYXOR are rigorous: the universe of eligible bonds is limited to labelled green bonds selected by the Climate Bonds Initiative. This investor-oriented, not-for-profit organization promotes large-scale green investments to develop a low-carbon, climate-resilient economy.

Thus, the Climate Bonds Initiative has developed and adopted a clear set of criteria to define eligible green bonds for inclusion in the Index. To be able to integrate the Index, green bonds must follow a strict process.

At the beginning of 2019, LYXOR obtained the GREENFIN label (formerly TEEC label) for the LYXOR Green Bond ETF, which is the first ETF to obtain this label. This label allows LYXOR to improve the transparency and monitoring of funded green bonds, in order to avoid financing in controversial or non “truly sustainable” projects, and in order to calculate the impact of these loans, in the interest of better information for our clients.

In order to comply with the requirements of the Energy and Ecological Transition label for the climate (GREENFIN label, ex-TEEC), LYXOR has added specific requirements: • Minimum of 75% of green bonds validated by the TEEC label in the portfolio, • Analysis and exclusion of Green Bond financing activities excluded by the Label, • Application of ESG monitoring / exclusion on highly controversial bond financing projects, • Application of an exclusion on the LYXOR Defense list (companies active in the controversial weapons field).

1st Certified ETF Green Bond in the world

1 Launched as of 20/02/2017 17 LYXOR Climate Change

In 2020, LYXOR launched an ETF ecosystem designed to fight climate change in order to offer to investors ETFs that take into account the carbon emission reduction targets of the 2015 Paris Agreement. These unique ETFs aim to replicate the MSCI Climate Change indices, which take into consideration the main objectives of the new European Union regulation on benchmark investment indices, as part of its 2018 "Action Plan on Financing Sustainable Growth". To create these new indices, European experts (Technical Expert Group) have recommended the use of the most ambitious scenario of the IPCC (Intergovernmental Panel on Climate Change), i.e. the 1.5°C warming scenario ("no or limited exceedance"). To this end, the MSCI Climate Change Indices are designed to meet the main objectives of the new European regulation on indices encouraging the transition to a low-carbon economy, including an immediate 30% reduction in carbon intensity and an annual emissions reduction trajectory of 7%, while reallocating capital to those sectors and companies that more effectively reduce their greenhouse gas emissions to achieve net carbon neutrality by 2050.

For each of these thematic ETFs, LYXOR has decided to associate itself with the best partner on the subject. LYXOR has therefore joined forces with Equileap, a Dutch NGO that wants to accelerate gender equality in companies, for the ETF Global Gender Equality, with Robeco- Sam, a recognized specialist in the sustainable investment sector, for the ETF Word Water and the ETF New Energy, with Trucost S&P for the ETF Paris-Aligned Climate, with Solactive for the ETF Green Bond and finally with MSCI for the ETF Climate Change.

18 ESG Selection

This strategy involves the selection or overweight of the best performing companies identified by the ESG analysis, in a defined investment universe. This approach, applied in active as well as passive management solutions avoids the sustainability risks that could compromise the company’s long-term financial performance.

LYXOR ESG Trend Leaders

LYXOR has launched a new ETF range which combines the ESG selection with the ESG Momentum's innovative score that measures trends in the ESG score of companies. These LYXOR ESG Trend Leaders funds, launched in 2018, aim to create a positive selection by rewarding companies seeking to improve their non-financial ratings. Four market exposures are offered to investors (European, US, global and emerging), offering an alternative to standard portfolio allocations, with better ESG ratings.

For this new range, LYXOR chose index designed by MSCI, which is recognized for its ESG expertise.

These funds take into account the following ESG criteria: • Exclusions of companies active in sensitive sectors: alcohol, gambling, tobacco, civilian firearms, nuclear energy, conventional and controversial weapons • Exclusion of companies involved in a major ESG controversy (based on the MSCI ESG Controversy score) • Companies are ranked according to their ESG ratings and ESG trends (annual improvement or deterioration of ESG ratings) • The Index is constructed using a "Best in Class" strategy: the top ranked companies in each sector (in accordance with the Global Industry Classification) are selected to build the Index.

In 2019, the Lyxor MSCI EMU ESG Trend Leaders Fund was awarded the SRI Label. Created by the French Ministry of Finance, the "SRI Label" is a guarantee for European investors of the quality and robustness of the ESG investment process, transparency and reporting.

19 LYXOR ESG Leaders

LYXOR launched in 2019, the LYXOR MSCI Europe ESG Leaders, which reproduces the MSCI Europe ESG Leaders Net Total Return Index, which offers exposure to the performance of European large and mid-cap equities, issued by companies with environmental ratings, social and governance (ESG) issues in their respective sectors.

The index is calculated and published by the international index provider MSCI, which has the following characteristics: • Exclusion of companies active in so-called sensitive sectors: alcohol, gambling, tobacco, civilian firearms, nuclear energy, nuclear weapons and controversial. • Exclusion of companies involved in a major ESG issue controversy (based on the MSCI ESG Controversy score); • The index is built according to a "Best in Class" strategy: the top ranked companies in each sector (according to the World Industry Classification) are selected to form the index.

In 2019, the fund obtained the SRI Label. Created by the French Ministry of Finance, the "SRI Label" is a guarantee for European investors of the quality and robustness of the ESG investment process, transparency and reporting.

GARI Strategy The GARI stock selection developed by LYXOR is a rating model that is characterized by sustained earnings while taking into account significant sustainability risks.

The model chooses its investment universe by initially removing the 20% of companies with the worst governance score. Indeed, LYXOR considers that good governance and effective management practices are important factors in identifying well-managed companies that will experience sustained growth. LYXOR has decided to develop GARI indices to combine the GARI equity model with enhanced ESG inclusion, also integrating the ESG score of companies in the selection of the investment universe (removing 30% of the companies with the lowest ESG score). This methodology will allow LYXOR to select the best performing companies, both in terms of governance and ESG management, thus allowing for a better integration of ESG risks and performance over the long term compared to the previous model.

20 FRR mandate: SME/ETI financing

LYXOR has developed for a French institutional, a dedicated mandate to finance French SMEs and intermediate-sized companies that incorporate an ESG focus. This SMEs mandate, includes before each investment decision, an ESG Pre-Check that aim to evaluate an ESG risk score (ex: presence of CSR information in the SMEs’ website, SMEs’ sector, GP’s evaluation, private info that conclude the existence of CSR practices, evaluation of CSR practices compare to best practices, etc.). It enables LYXOR to carry out an initial ESG risk analysis to assess that the companies it might invest in have integrated these issues.

Moreover, after the initial investment LYXOR will carry out every year an ESG due diligences on these companies, to analyze their strengths and weaknesses and to encourage them to improve their ESG integration. This extra-financial evaluation activity gives rise to an individual report on each of the SME/ETI as well as to the overall mandate.

This dialogue activity is an important part of the SRI strategy as it allows asset managers to engage with, influence and try to encourage companies to adopt best practices. Indeed, SME/ETI can really benefit from better ESG integration in their management, as this allows them to significantly reduce their costs, develop their position and improve the overall management of the company.

21 ESG Integration

ESG integration involves taking into account in traditional management (also called mainstream) some environmental, social or governance criteria (ESG) to make them available to all management teams in order to promote the consideration of ESG directly at the heart of the financial analysis parameters and in the construction of portfolios.

HQLA ESG

LYXOR Asset Management has announced in 2019 the integration of ESG filters into its sovereign bond management business. This HQLA (High Quality Liquidity Assets) strategy, which enables LYXOR to manage the regulatory liquidity buffers of more than 20 banks, is accessible via dedicated mandates or funds and invested on investment grade sovereign bonds. Based on MSCI ESG data, LYXOR now integrates a country's overall ESG score to assess its long-term economic sustainability in view of its exposure to environmental, social and governance risks.

The management preference is to overweight sovereign bonds with a good ESG score and under-weighting others without excluding them, given the limited universe for sovereign bond management linked to banks' regulatory obligations in terms of liquidity.

22 Impact Investing

Impact investing aims to combine financial returns with a positive and measurable environmental and social outcome. The aggregation of those two objectives provides investors with concrete solutions to meet the Sustainable Development Goals.

LYXOR SEB Impact Investing

In 2019, LYXOR collaborated with SEB (Swedish investor) on a Multi-manager strategy to provide an innovative ESG selection in order to create investment universes with a positive and measurable economic and/or environmental impact (otherwise referred to as “Impact Investing”).

This strategy covers a wide range of investments covering areas such as clean energy, water, agriculture, rational use of resources and improvement of society, which are directly aligned with the United Nations Sustainable Development Goals.

€16 As of December 31st 2020, €16 billion ESG assets* billion

€67 As of December 31st 2020, €67 billion of assets covered billion by an exclusion strategy

(*) These AUM include LYXOR investment vehicles that implement the following ESG approaches: ESG Integration, ESG Selection, ESG Thematic and Impact, i.e. €16 billion. As of 31/03/2021, €8 billion of these assets under management are aligned with Articles 8 or 9 of the SFDR regulation.

23 ACT AS A COMMITTED AND RESPONSIBLE SHAREHOLDER

In order to promote best environmental, social and governance practices, LYXOR has defined a shareholder engagement policy that is based on two complementary areas (voting and engagement).

By exercising its voting rights, LYXOR can contribute to improving the economic and financial performance of the companies in which it invests on behalf of its clients, to encourage the adoption of best practices and to mitigate the risk of business failure.

Engagement Policy

Convinced that a company’s performance is not based solely on its financial performance, LYXOR now expects companies in which it invests to consider, and be transparent, on the extra-financial issues they face. The consideration of these environmental, social, societal and governance issues is beneficial to the long-term performance of companies and therefore in the long-term interest of investors.

In order to promote best practices in this area, LYXOR has thus defined an engagement policy that is structured around three axes:

❑ An engagement related to general meetings

As a representative of the CIS that it manages, LYXOR undertakes to exercise the voting rights attached to the shares held by these CIS in order to promote best corporate governance practices. In order to do this, LYXOR will use its influence before general meetings to initiate a constructive dialogue with the companies and enrich the analytical work done internally by LYXOR.

❑ An engagement related to environmental, social and/or governance issues

The consideration of environmental, social and/or governance issues is at the heart of LYXOR’s responsible investor strategy. Discussing with companies to understand how they are managing sustainability risks and how they are taking advantage of related opportunities is critical. The objective of LYXOR on this type of engagement is to work with companies to encourage them to improve their Corporate Social Responsibility practices.

❑ An engagement related to climate

International politics really took hold of the subject at COP 21 by adopting the Paris Agreement (2015), which made it possible to frame the climate change ambitions at the international level: to maintain the increase in global temperature well below 2°C, and further efforts to limit this increase to 1.5°C. Once the framework is defined, it is necessary that each one at his level seizes the subject and makes the practices evolve.

24 Thereby, LYXOR joined the Climate Action 100+, an international initiative led by investors to engage systemically with important greenhouse gas emitters and other companies across the global economy that have significant opportunities to drive the clean energy transition and help achieve the goals of the Paris Agreement.

The choice of the climate change issue as the first thematic engagement is part of a continuity of LYXOR’s policy for Socially Responsible Investments. In 2020, LYXOR strengthened its engagement in the Climate Action 100+ initiative by increasing by more than 40% the number of companies covered.

In 2020, LYXOR has planned to launch three new engagement campaigns with the following themes: - Localized Water Management - Plastics and the Circular Economy - Responsible Cleantech

To carry out its engagement campaigns, LYXOR can:

✓ Organize one-on-one meetings with management, board members, investor relations, sustainable development teams or any person within the company who can provide answers to the issue; ✓ Partner with other management companies to gain greater leverage with targeted companies; ✓ Join working groups or initiatives specializing in certain areas.

In 2020, the Sustainable and Responsible Investments team of LYXOR had the opportunity to carry out 118 engagement campaigns among 78 international companies. These campaigns could specifically concern the issuer’s general meeting or being broader and address environmental, social or governance issues.

Thereby, 45% of the engagement campaigns were directly linked to topics addressed during general meetings, 41% concerned ESG issues specific to each company and finally almost 14% of engagement campaigns were dedicated to climate.

25 Voting Rights Policy

Convinced of the environmental, social and governance challenges, LYXOR has defined a voting policy attached to the securities held by the CISs (AIFs and UCITS) which it manages.

We believe that good corporate governance means:

❑ The protection of the long-term interests and ❑ The balance of the financial structure of the rights of shareholders, supporting the “one company allowing it both to have the essential share, one vote” principle, where shareholders conditions to deploy its strategy while preserving have voting rights in direct proportion to their the position of the shareholder economic interest in a company ❑ The fair and transparent executives’ ❑ The independence and diversity of boards of remuneration policy in line with the performance directors to avoid conflicts of interests and to of the company foster optimal effectiveness and efficiency ❑ The Integration of corporate environmental and ❑ The quality and integrity of financial information social responsibility in the company’s operations and related communication to shareholders for the benefit of the company, its shareholders and other stakeholders

Internally, the coordination of votes (analysis and decision) is ensured by the SRI team. The development of voting decisions takes into account the international corporate governance standards as well as the regulations and corporate governance codes in force in the various countries.

The LYXOR SRI team thus carries out a detailed analysis of the corporate governance of the companies for which it will exercise its right to vote: the composition of the Board of Directors, the separation of the functions of Chairman and Chief Executive Officer, the diversity policy, the remuneration policy, the respect of the rights of the shareholders are among other topics analyzed by the team and discussed at engagement meetings.

As far as compensation issues are concerned, LYXOR has developed a rating grid on the remuneration policies put in place by issuers.

LYXOR also uses the services of ISS (Institutional Shareholder Services) as « proxy advisor » to prepare analyses and make voting recommendations regarding resolutions. LYXOR uses these recommendations but decides on the basis of its own voting policy and retains the final decision.

26 Voting Scope

In 2020, the voting scope is the following: • French, Luxembourgish and German mutual funds (Fonds Communs de Placement – FCP) and SICAV*; • Securities of issuers domiciled in Europe: in order to prevent excessive costs inherent in the voting process, LYXOR participates in general meetings when the consolidated holding represents more than 0.10% of the company’s capital; • Securities of issuers domiciled in the United States: LYXOR will exercise its right to vote on its largest consolidated holdings; • Equity securities of issuers domiciled in Japan: LYXOR will exercise its right to vote on its largest consolidated holdings; The following are the key cases which are excluded from LYXOR’s voting process: • Voting at general meetings that require blocking share • Voting at general meetings of companies whose shares are listed on markets involving excessive formalities or administrative costs • Voting on loyalty shares • Voting in countries for which custodians used by LYXOR do not offer proxy voting services Key figures 2020

€ 14.7 54% 447 bn

Voted assets Share of voted Voted General assets ** Meetings 5,562 19% 59%

Analysed Average opposition Share of GM with resolutions rate in GM a negative vote

*Except the vehicles using a method of synthetic replication which are designed to track a financial exposure through a performance swap. Therefore, the returns of the vehicles do not depend on the return on the shares held by these funds. All dividends and profits are swapped with a market counterparty. ** Based on equity-type underlying assets in investment vehicles in direct replication. The funds where the exercise of the voting rights are delegated to an external manager are not taken into account..

27 INTEGRATING ESG AT THE HEART OF OUR MODEL

In addition to taking into account non-financial criteria that play a key role in the development of our activities, LYXOR has implemented a proprietary methodology to achieve an ESG & Climate rating (including carbon footprint) of its investment vehicles.

This ESG & Climate assessment makes it possible to identify the risks and opportunities of the various issuers (companies and governments) in the portfolio. All asset classes (stocks and bonds, including companies, countries, government organizations) are covered. The investor can thus analyse his exposure to these sustainability risks and benefit from an ESG and Climate assessment of his investment vehicles.

ESG indicators

The ESG rating calculated at the portfolio level Number of funds measures the capacity of the underlying issuers to assessed by the manage key risks and opportunities related to 325 environmental, social and governance factors. The ESG & Climate Risk rating scale is between 0 (high risk) and 10 (low risk). Assessment tool

For governments, exposure to measures and For companies, exposure to measures and management of ESG issues cover the following management of ESG issues cover the following themes: themes:

Environment  Environmental externalities, natural Environment  pollution, waste management, resources sustainable use of resources, climate change

Social  Human Capital, Economic Environment Social  employment, social relations, health and safety, training, compliance with ILO conventions Governance  Financial Governance and Political Governance Governance  Board of directors or supervisory board, audit and internal control, executive compensation

28 Exposure to controversies

The ESG & Climate rating tool also makes it possible to measure the portfolio’s exposure to companies subject to controversies related to compliance with international standards according to their degree of severity as well as to companies subject to controversies relating to the 10 principles of the United Nations Global Compact.

Climate indicators

LYXOR believes that it is essential to assess the climate risks of all its funds under management, beyond the sustainability risks. Indeed, any portfolio carries a climate risk, and its contribution to the energy and ecological transition as well as its alignment with the international objective of limiting global warming to 2 degrees by 2100, can be measured.

29 Climate indicators reported by LYXOR

Portfolio carbon footprint: Measuring the greenhouse gas (GHG) emissions of its investments gives investors an indication of their funded emissions.

With regard to transition risks, and more particularly to stranded assets, it was decided to present: • The share of fossil reserves (thermal coal, gas, oil) held in a portfolio for which an investor would be responsible (per $M invested), • Potential emissions of these known fuel reserves (expressed in tCO2e per $M invested). • A focus is presented on potential emissions from high-impact fossil fuel reserves (thermal coal, oil sands, oil and shale gas) In terms of carbon risk management, a portfolio-level classification of issuers is presented based on their efforts in terms of energy initiatives (use of cleaner energy sources, energy consumption management and operational efficiency, carbon reduction targets).

LYXOR presents the energy mix of power companies in portfolio. The company’s fuel mix is estimated by taking the ratio of power-generation volume by fuel type (reported or estimated) and the total power-generation volume.

With regard to physical risks and biodiversity, LYXOR has chosen to present the portfolio's exposure to issuers with operations located in geographical areas sensitive to physical risks as well as to issuers in sectors/ businesses sensitive to physical risks.

LYXOR assesses the climate change related risks of its portfolios and their alignment with the climate objectives of the Paris Agreement. To measure a fund temperature, LYXOR’s approach integrates forward-looking data in order to capture all the efforts that an issuer has made and will make to reduce its carbon emissions.

The portfolio’s exposure to issuer revenues devoted to environmental solutions contributing to the Sustainable Development Goals (SDGs) is also presented.

30 LYXOR ISR ACTIVITY PUBLICATIONS

Climate Policy

Climate Report (TCFD compliant and Article 173 of the French law on the energy transition for green growth)

LYXOR report on the transparency of its PRI activities

Voting and Engagement Policy

Lyxor Asset Management

Lyxor International Asset Management

Report on Voting Rights and Engagement Activities (2020)

Lyxor Asset Management

Lyxor International Asset Management

Details of the General Assemblies voted (2020)

Lyxor Asset Management

Lyxor International Asset Management

Lyxor Funds Solutions

In addition, LYXOR publishes the ESG & Climate factsheet (including the carbon footprint of the portfolio and its temperature) of its funds on its websites: https://www.lyxoretf.fr/ and https://www.lyxorfunds.com/. In 2020, LYXOR launched a dedicated website to expose the temperature of more than 100 of its ETFs : https://esginvesting.lyxoretf.com/gbr/en/instit/co-tool/cotool

31 NOTICE

This document is for informational purposes only and does not constitute, on the portfolio management company, an offer to buy or sell or a solicitation or investment advice, and must not be used as a basis or be taken in account for any contract or commitment. The information contained in this document is established on extra financial data basis available from various reputable sources. However, validity, accuracy, exhaustiveness and relevance of this information are not guaranteed by LYXOR. In addition, this information is subject to change without any prior notice and LYXOR shall not be obligated to update or revise the document. The information was issued at a given time, and is therefore likely to vary at any time. The portfolio management company disclaims any and all liability relating to information contained in this document and to a decision based or on reliance on this document. Persons receiving this document undertake to use the information contained therein in the limit of the sole assessment of their own interest.

Any partial or total reproduction of the information or the document is subject to the prior express authorization of the portfolio management company.

LYXOR Asset Management (LAM) is a portfolio management company regulated by the Autorité des marchés financiers to conduct investment business in compliance with provisions of the UCITS (2009/65/CE) and AIFM (2011/61/EU) Directives.

LYXOR International Asset Management (LIAM) is a portfolio management company regulated by the Autorité des marchés financiers to conduct investment business in compliance with provisions of the UCITS (2009/65/CE) and AIFM (2011/61/EU) Directives.

Société Générale is a French credit institution approved by the Autorité de contrôle prudentiel et de résolution.

32 Lyxor Asset Management – Tours Société Générale 17 Cours Valmy – 92987 La Défense Cedex – France www.lyxor.com - [email protected]