Responsible Investment and ESG Policy Template

Responsible Investment Policy: [Firm or fund name]

The firm-wide policy for how an asset manager or asset owner takes environmental, social and governance (ESG) factors into account: investment beliefs, governance, the approaches used (integration, exclusions, stewardship, sustainable and impact strategies), sustainability risk assessment, principal adverse impacts, product classification and naming, climate commitments, engagement and voting, data and anti-greenwashing controls, client sustainability preferences, remuneration, monitoring and review. Based on Regulation (EU) 2019/2088 (SFDR) Articles 3 to 9 and Commission Delegated Regulation (EU) 2022/1288, Regulation (EU) 2020/852 (Taxonomy), Directive (EU) 2017/828 (SRD II) Article 3g, the ESMA guidelines on funds' names using ESG or sustainability-related terms, US SEC Rule 206(4)-6 and 29 CFR 2550.404a-1, with the UK Stewardship Code 2026 and the Principles for Responsible Investment cited by name, as in force in October 2026. Replace every [bracketed] value and every row marked Example. This is a document format, not financial, investment, tax, legal or accounting advice. Obtain the standard or law for the normative text.

Document control

Approvals

Revision history

Contents

• 1. Purpose and scope
• 2. Regulatory and framework basis
• 3. Investment beliefs
• 4. Governance and responsibilities
• 5. Responsible investment approaches by product
• 6. ESG integration process
• 7. Exclusions and restrictions
• 8. Sustainability risk assessment
• 9. Principal adverse impacts
• 10. Product classification and naming
• 11. Climate commitments and metrics
• 12. Stewardship: engagement, escalation and voting
• 13. Data, ratings and anti-greenwashing controls
• 14. Client sustainability preferences
• 15. Remuneration
• 16. Monitoring, reporting and review
• 17. Glossary and references
• Standard and licence note

1. Purpose and scope

This policy describes how [Firm name] (the "Firm") identifies, assesses and acts on environmental, social and governance factors in its investment decisions, stewardship and client reporting. It aims to:

1. Improve risk-adjusted returns for clients by treating financially material sustainability factors as part of investment analysis.
2. Meet the sustainability objectives or characteristics that specific products promise, and only those.
3. Satisfy the disclosure and conduct rules that apply to each entity.
4. Give clients, regulators and staff a clear and testable description of what the Firm does and does not do.

Client instructions. Where a client's mandate sets different rules, the mandate governs for that account. For US retirement plans subject to ERISA, the Firm considers ESG factors only where they are relevant to a risk and return analysis, consistent with 29 CFR 2550.404a-1 and any replacement rule (section 2).

2. Regulatory and framework basis

Status as of 2026-10. Check local law and the consolidated texts.

3. Investment beliefs

4. Governance and responsibilities

The RI committee meets [quarterly], is chaired by [the CIO], and includes [the head of RI, two portfolio managers, the CCO and the chief risk officer]. Portfolio managers keep final decision authority over individual positions within this policy and product rules.

5. Responsible investment approaches by product

Sustainable investment test. For products that commit to a share of sustainable investments under SFDR Article 2(17), the Firm documents: (a) the contribution indicators used; (b) how it checks that the investment does no significant harm, using the PAI indicators in section 9; and (c) the good-governance test for investee companies. The methodology is in [Appendix or manual reference] and is approved by the RI committee.

6. ESG integration process

Example (Example): an analyst covering Halvard Tools, a fictional listed toolmaker, identifies product safety and supply-chain labour standards as material. The research note raises the cost of equity by 0.25 percentage points until an audit programme for tier-1 suppliers is in place, and an engagement objective ENG-014 is opened (section 12).

7. Exclusions and restrictions

Implementation. Exclusion lists are refreshed [quarterly] and coded as hard pre-trade blocks in [order management system]. A holding that becomes excluded is sold within [90] days unless the RI committee approves an extension for liquidity reasons, recorded in the exceptions log.

8. Sustainability risk assessment

Climate scenarios. The Firm runs [an orderly transition, a disorderly transition and a hot-house world] scenario for each product at least [annually] using [named scenario set and version], and reports the estimated value change.

9. Principal adverse impacts

Entity position. [Kestrel Bay Capital Europe considers principal adverse impacts of its investment decisions on sustainability factors and publishes its statement by 30 June each year for the previous calendar year.] The statement follows the SFDR Principal Adverse Impacts Statement template (compliance/sfdr-pai-statement).

Indicators. The Delegated Regulation sets 18 mandatory indicators (14 for investee companies, 2 for sovereigns and supranationals, 2 for real estate) plus at least one additional environmental and one additional social indicator chosen by the firm.

10. Product classification and naming

Applying the names test. Classify every term in the fund name before launch and at each name change: environmental, impact and sustainability-related terms (and "ESG", which contains an environmental term) take the Paris-aligned benchmark exclusions in EXC-005; transition, social and governance terms take the Climate Transition Benchmark exclusions in EXC-005b. Test the 80% threshold on the investments used to meet the characteristics or objectives, using the same calculation as the pre-contractual disclosure, and record the calculation, the data date and the reviewer. A temporary fall below the threshold that is not caused by a deliberate choice of the portfolio manager is treated as a passive breach and corrected in the best interests of investors; a deliberate breach is escalated to the RI committee and compliance at once. Keep the ESMA supervisory Q&A on the guidelines under review, because supervisors have used it to narrow how terms are classified.

US funds. For registered funds whose names include ESG terms, the Firm adopts the 80% investment policy required by Rule 35d-1 and defines the term in the prospectus.

SFDR 2.0. If the proposal is adopted, the Firm will map each product to the new categories and update this section. Until then, the current Article 6, 8 and 9 disclosures apply.

11. Climate commitments and metrics

The weighted average carbon intensity (WACI) of a portfolio is:

where $w_i$ is the weight of issuer $i$ in the portfolio (or sleeve), $E_i$ its scope 1 and 2 emissions in tonnes CO2e and $\text{Rev}_i$ its revenue in EUR million.

With a benchmark WACI of 210 t/EUR m, the example sleeve is 8.6% below the benchmark ((210 minus 192) / 210).

Report progress annually with data coverage and quality notes. Where an interim target is missed, the RI committee records the reasons and the corrective plan.

12. Stewardship: engagement, escalation and voting

Engagement. The Firm selects engagement targets by [size of holding, severity of issue, likelihood of success] and sets a specific objective, milestones and a deadline for each.

Escalation ladder.

1. Private meeting with management and investor relations.
2. Letter to the chair or lead independent director.
3. Collaborative engagement with other investors, subject to competition and acting-in-concert rules.
4. Vote against relevant directors or items at the general meeting.
5. Public statement or filing of a shareholder resolution.
6. Reduce or sell the position, or add to the exclusion list, by RI committee decision.

Voting. Voting follows the Proxy Voting Policy (compliance/proxy-voting-policy), which meets Rule 206(4)-6 for the US adviser and SRD II Article 3g for the EU entity. Votes are cast for all holdings where practicable; securities on loan are recalled for votes the Firm considers significant. Annual results, significant votes and engagement outcomes are published in the Stewardship Report (finance/stewardship-report).

Conflicts. Engagement and voting conflicts (for example, an issuer that is also a client) are managed under the Firm's conflicts policy and recorded.

13. Data, ratings and anti-greenwashing controls

Wording rules. Do not use "sustainable", "green", "impact", "net zero" or similar terms for a product, strategy or holding unless the product documents contain the binding commitments that justify the term. Statements about outcomes must be specific, supported by data and dated.

14. Client sustainability preferences

For EU clients receiving investment advice or portfolio management, the Firm collects sustainability preferences as part of the suitability assessment, after the client's knowledge and experience, financial situation and objectives are known. Preferences are recorded as: a minimum share of Taxonomy-aligned investments; a minimum share of sustainable investments; and principal adverse impacts to be considered, with the qualitative or quantitative elements the client chooses.

If no product matches the preferences, the Firm explains this to the client, and the client may adapt the preferences; the explanation and the decision are recorded. The process is documented in the Client Risk Profile (finance/client-risk-profile) and MiFID Suitability Report (compliance/mifid-suitability-report). US clients may give written restrictions or preferences in their investment guidelines.

15. Remuneration

The Firm's remuneration policy is consistent with the integration of sustainability risks: [portfolio manager variable pay is assessed on multi-year risk-adjusted performance, which includes the effect of sustainability risks; a qualitative modifier reflects adherence to this policy and product commitments; breaches of exclusion or product rules can reduce variable pay]. The public summary is published at [URL].

16. Monitoring, reporting and review

Review. This policy is reviewed at least annually, and when law, product range or methodology changes materially. Each review is recorded in the revision history.

How to review this policy. Start from evidence, not from the text. Sample investment decisions from each strategy and check that the ESG view in the research record actually changed a valuation, rating, position size or engagement plan; take every product with binding elements and test the year-end portfolio against them; and compare the public policy, the product documents, the website and recent marketing for the same claim. Ask the RI committee to approve the findings and the changes in one paper, so that the public version, the internal manual and the product documents move together.

Common errors. The errors supervisors most often find are: an exclusion threshold stated in the policy but coded differently in the order management system; an Article 8 product whose binding elements are so loose that the benchmark already meets them; PAI indicators "considered" with no action ever taken on them; climate targets reported without data coverage, so a rise in coverage looks like progress; engagement counted by meetings rather than by objectives achieved; and fund names changed in marketing before the legal documents. Each control in section 13 exists to catch one of these, so a failed control test should lead to a correction of the process as well as the record.

17. Glossary and references

17.1 Glossary

17.2 References

Standard and licence note

Based on public law and regulatory guidance: Regulation (EU) 2019/2088, Commission Delegated Regulations (EU) 2022/1288 and 2020/1818, Regulation (EU) 2020/852 and Directive (EU) 2017/828 (EUR-Lex, reuse with acknowledgement); the ESMA guidelines on fund names and on MiFID II suitability (reuse with acknowledgement; ESMA does not endorse this template); and US federal rules 17 CFR 275.206(4)-6, 29 CFR 2550.404a-1 and Rule 35d-1 (public domain). Article and rule numbers are cited and obligations are summarised in original wording. The UK Stewardship Code 2026, the FCA sustainability rules and the Principles for Responsible Investment are cited by name only, and this template is not affiliated with or endorsed by the Financial Reporting Council, the FCA or PRI. The structure and text are original. Check the current official versions, the consolidated texts and the status of SFDR 2.0 and the US Department of Labor rulemaking before use. This is a document format, not financial, investment, tax, legal or accounting advice. Template licence: MIT.