Sustainable Finance Disclosure Regulation Disclosures
Integration of Sustainability into Investment Process
Because environmental, social, and governance (“ESG”) issues are often important drivers of global economies and markets, Bridgewater has made it a strategic priority to deeply research these issues and to integrate such research into its investment process in a manner that is consistent with its systematic way of managing money.
We also seek to convert the understanding we have built into high-quality solutions for our clients’ most important investment objectives. For portfolios with traditional return and risk objectives, Bridgewater may incorporate ESG considerations that it believes have financial (risk/return) relevance to those portfolios into its broader investment process in an effort to achieve return and risk objectives that are consistent with the investment strategy of the given portfolio. In this context, Bridgewater does not incorporate ESG considerations into its broader investment process in a manner that would reduce the expected risk-adjusted return of a given portfolio.
For portfolios with sustainability goals in addition to traditional return and risk objectives, we not only consider how ESG-related issues might affect return and risk but also how aligned these portfolios are to environmental and social characteristics. We approach the challenge of sustainable investing in liquid markets by applying Bridgewater’s fundamental, systematic, and diversified approach. Using this approach, we have built a systematic assessment process for evaluating whether instruments are aligned with environmental and social goals. This process assesses the alignment of major public market instruments (across asset classes) to the UN Sustainable Development Goals (SDGs). We have selected the alignment to the UN Sustainable Development Goals (SDGs) as the foundational framework for this approach because they are oriented towards positive environmental and social goals, are widely accepted by governments and asset owners, and contain specific and measurable indicators that help investors and researchers to assess whether a given entity is helping to achieve any of the 17 goals.
Remuneration Policy
Bridgewater’s remuneration policies are consistent with its approach to the integration of sustainability risks into the investment decision making process. As sustainability risks can be a type of financial risk, Bridgewater acknowledges that failure to consider such risks could have an adverse impact on the performance of investments. Pursuant to its remuneration practices, Bridgewater typically awards fixed and variable remuneration to staff. Variable remuneration is awarded on a discretionary basis and takes into account the performance of an individual employee and the performance of the strategies managed by Bridgewater. Accordingly, to the extent that sustainability risks have an adverse impact on performance of the strategies that Bridgewater manages, this is likely to be reflected in the overall level of variable remuneration awarded to staff.
Principal Adverse Impact Policy
Bridgewater has implemented a due diligence policy which sets out due diligence measures designed to consider the principal adverse impacts of investment decisions on sustainability factors (the “PAI Policy”). Note that Bridgewater only applies the PAI Policy in connection with products offered by Bridgewater that promote environmental or social characteristics as contemplated by article 8 of SFDR. For such products, Bridgewater currently considers the principal adverse impacts of investment decisions on sustainability factors by investing only in assets that it has assessed to be aligned with the United Nations Sustainable Development Goals, which Bridgewater determines based on a proprietary assessment methodology that utilizes external data sources. For all other products, Bridgewater does not consider the principal adverse impacts of investment decisions on sustainability factors as contemplated by article 4 of SFDR. However, as noted above Bridgewater does incorporate so-called ESG factors that it believes have material financial (risk/return) relevance into its investment process for all products it offers.
Regarding engagement, Bridgewater has implemented a Stewardship and Corporate Engagement Policy which sets out how it integrates shareholder engagement it its investment strategy, which includes engagement with investee companies where ESG risks and/or opportunities for improvement are identified. Bridgewater is a signatory to the UN Principles for Responsible Investment and a supporter of the TCFD. Bridgewater believes that it has aligned its business with the objectives of the Paris Agreement in connection with products offered by Bridgewater that promote environmental or social characteristics as contemplated by article 8 of SFDR.
Sustainability risks and promotion of environmental and/or social characteristics in connection with the All Weather Sustainability strategy
Because environmental, social, and governance ("ESG") issues are often important drivers of global economies and markets, Bridgewater (the “Investment Manager”) has made it a strategic priority to deeply research these issues and to integrate that research into its investment process in a manner that is consistent with its systematic way of managing money. For portfolios with traditional return and risk objectives, the Investment Manager may incorporate ESG considerations that it believes have financial (risk/return) relevance to those portfolios into its broader investment process in an effort to achieve return and risk objectives that are consistent with the relevant investment strategy.
For portfolios with sustainability goals in addition to traditional return and risk objectives, such as the All Weather Sustainability strategy (“All Weather Sustainability”), we not only consider how ESG-related issues might affect return and risk but also how aligned these portfolios are to environmental and social characteristics. We approach the challenge of sustainable investing in liquid markets by applying Bridgewater’s fundamental, systematic, and diversified approach. Using this approach, we have built a systematic assessment process for evaluating whether instruments are aligned with environmental and social goals. This process assesses the alignment of major public market instruments (across asset classes) to the United Nations ("UN") Sustainable Development Goals ("SDGs"). The SDGs are a collection of 17 global goals set by the United Nations General Assembly for the year 2030 that have been ratified by 193 countries. We have selected the alignment to the UN SDGs as the foundational framework for this approach because they are oriented towards positive environmental and social goals, are widely accepted by governments and asset owners, and contain specific and measurable indicators that help investors and researchers to assess whether a given entity is helping to achieve any of the 17 goals.
Through the application of the approach described above, All Weather Sustainability systematically directs capital toward issuers that are aligned to the SDGs and promotes environmental and social characteristics associated with the SDGs. The Investment Manager has developed a proprietary methodology drawing on a range of internal and external data sources in order to determine the extent to which a security is aligned with the SDGs. Within each asset class, the securities that have the highest level of alignment with the SDGs are kept to constitute a universe of sustainable securities. Further information on this process is provided in our Strategic Report which is made available to investors.
Taking account of the Investment Manager's approach to sustainability risks as described above and the Investment Manager's risk management framework, the Investment Manager seeks to ensure that sustainability risks do not have an overall negative impact on the returns of All Weather Sustainability. While the Investment Manager believes that its investment management and risk management practices are sufficiently robust to prevent sustainability risks from being likely to have a materially negative impact on the returns of All Weather Sustainability, there can be no guarantee of this and no guarantee or representation is made that All Weather Sustainability investment strategies will be successful. The potential for All Weather Sustainability to be impacted by certain risks is set out further in the section "Certain Risk Factors" of relevant offering documents.
Note that the above disclosure language is provided in order to provide information on the Investment Manager’s approach to considering ESG issues for the relevant strategy. Such disclosures are not, and should not be construed to be, an offer to sell or the solicitation to buy securities, investment advice, or a suggestion or recommendation to enter into any investment or trading strategy.
SFDR Article 10 Product Level Website Disclosures
The All Weather Sustainability (“AWS”) strategy represents Bridgewater’s optimal approach for incorporating both environmental and social impact objectives and traditional financial risk and return objectives into a scalable strategic asset allocation. The strategy is designed to generate the highest return-to-risk ratio for a beta portfolio using assets that are positively aligned or on a clear and credible path to alignment to the UN Sustainable Development Goals (“SDGs”). AWS promotes environmental and social characteristics by aligning to SDGs representing the environmental and social characteristics the strategy seeks to promote. In addition, good governance is a part of our analysis of the SDG alignment of the investee securities and instruments.
Bridgewater All Weather Sustainability, LP, and Bridgewater All Weather Sustainability 11%, LP, and Bridgewater Active Sustainable Equities, LP are Article 8 funds that promote environmental and social characteristics by selecting securities and instruments that are aligned or are on a clear and credible path to alignment with the UN Sustainable Development Goals (“SDGs”). While most of the securities and instruments that these products invest in contribute to an environmental or social objective, given the legal definition under Article 2(17) of the SFDR, the funds do not commit to a minimum percentage of “sustainable investments” as defined under Article 2(17).
SFDR Article 10 Website Disclosures Bridgewater All Weather Sustainability, LP
SFDR Article 10 Website Disclosures Bridgewater All Weather Sustainability 11%
SFDR Article 10 Website Disclosures Bridgewater Active Sustainable Equities