Solactive – German Index Engineering

SOLACTIVE L&G ENHANCED ESG INDEX FAMILY
Investors today are becoming increasingly aware of the impact that strong environmental, social and governance efforts canhave on a company’s sustainability and financial performance. Additionally, investors are looking to achieve not only financial
returns with their investments but also to create a positive impact.
The Solactive L&G Enhanced ESG Index Family was designed to increase exposure to companies that demonstrate goodenvironmental, social, and governance efforts as well as to commit to a fixed carbon emissions reduction trajectory, in order toensure that the portfolio is in line with the climate-neutrality by 2050 objective. The ESG impact is measured by a proprietary
Legal and General ESG scoring system which includes the 34 metrics described on the second page below, while the carbonemissions reduction trajectory is based on the Carbon Intensity Score, primarily composed of company level Carbon Emission
data delivered by ISS ESG.
Index Design
Starting Universe
Solactive GBS Global Markets Large & Mid Cap Index (the “Reference Index”). The Index includes around 3200 securities.
Step 1
Exclude securities based on their involvement in certain controversial activities, including:
Assault weapons, Military Contracting and Tobacco
As well as companies on the L&G Future World Protection List, which includes: (1) companies
involved in the manufacture of controversial weapons (2) persistent violators of the UN Global
Compact and/or (3) pure coal mining companies
Step 2All securities receive an L&G ESG score and their market capitalization is modified such as to tilt it
upwards for those names with the highest L&G ESG score and downwards for the ones with lower scores
Regional sleeves are then created both for the developed markets and emerging markets
segments by grouping the securities based on their country assignment
The regional sleeves are grouped together where applicable to create the two supra-regional
indices: Developed Markets and Emerging Markets. The other regional sleeves form stand alone
indices
Step 3
The weights are then modified to manage concentration limits on securities
The following constraints are applied:
Ensure that the individual weight of any security in the Index does not deviate more than 3%from its weight in the relevant regional or supra-regional sleeve
Ensure that the sum of weights of any sector is not more than 2% greater or 3% less than its
weight in the relevant regional sleeve or supra-regional Index
Subsequently, an optimization is applied to ensure that the Index fulfills the carbon emissions reduction
trajectory as well as certain diversification constraints:
Reduction of the Carbon Intensity of 50%, with an additional 7% year on year trajectory, versus
the relevant regional or supra-regional market capitalization weighted index
Subject to individual security, sector, and regional (where applicable) weight deviation
constraints as well as compliance with the UCITS diversification requirements
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SOLACTIVE L&G Enhanced ESG INDEX Family
ESG factors that comprise the L&G ESG scores

Environmental

SocialGovernanceTransparency

Carbon emissions% of women on theBoard% of company held byconnected shareholder

Adoption of nonfinancial (ESG)
reporting standards

Quality of carbon-based
assets% of women in theworkforce

Shareholders haveequal voting rights
with each other

ESG-related reportingis externally verified

Revenues generated
from “green“ products% of women inmanagement

Separation of Board
Chairman and CEOroles

Company reports
under the Carbon
Disclosure Project

Temperature alignment% of female
executives% of independent
directors on the Board

Disclosure on tax
policies and payments

Carbon reserves

Policy on bribery andcorruption

Average length ofservice of the Board
directors

Disclosure on director
information andbiography

Biodiversity programme

Policy on freedom ofassociation

Payment to external
auditors for non-audit
work versus audit work

Disclosure on
executive pay

Water management
programme

Discrimination
policyFinancial expertise of
the audit committee

Deforestation
programme

Policy on the supply
chain´s socialstandards

Auditor opinion on theaccounts

Employee-related
incidents anddisputes

Lobbying activities(climate lobbying)

Business-related
incidents anddisputes
Supply-chainrelated incidents
and disputes

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REGIONS AND THEIR CONSTRUCTION

United Kingdom
Europe ex UK
Japan

North America

Developed Markets

Emerging Markets

APAC ex JP

Regional IndexRegion

Country

North America

North America

Canada, United States

Europe ex UK

Europe ex UnitedKingdomAustria, Belgium, Switzerland, Germany, Denmark, Spain,Finland, France, Ireland, Italy, Netherlands, Norway, Portugal,Sweden

United Kingdom

United Kingdom

United Kingdom

APAC ex JP

DM APAC ex Japan

Australia, Hong Kong, New Zealand, Singapore

Japan

Japan

Japan

Supra-regional Index

RegionCountry

North America

Canada, United States

Europe ex United
Kingdom

Austria, Belgium, Switzerland, Germany, Denmark, Spain,Finland, France, Ireland, Italy, Netherlands, Norway, Portugal,
SwedenUnited Kingdom

United Kingdom

APAC ex Japan

Australia, Hong Kong, New Zealand, Singapore

JapanJapan

Americas

Argentina, Brazil, Chile, Colombia, Mexico, Peru

EMEA

The United Arab Emirates, Czech Republic, Egypt, Greece,
Hungary, Kuwait, Poland, Qatar, Russia, Saudi Arabia, Turkey,South Africa

EM APAC

China, Indonesia, India, South Korea, Malaysia, Philippines,Pakistan, Thailand, Taiwan

Developed Markets

Emerging Markets
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DISCLAIMER© Solactive AG, 2021. All rights reserved.
”Solactive”, ”Solactive GBS”, ”German Index Engineering” and the logo
are registered trademarks of Solactive AG.
The information contained in this document is impersonal, not tailored to the needs of any person, entity,or group of persons, and is only for additional informational purposes that must be read in conjunction withthe other official Index documents. The information contained herein have been obtained from public
sources believed to be reliable, but no representation or warranty, express or implied, is made that suchinformation is accurate or complete and it should not be relied upon as such.
Solactive AG is not an investment adviser and nothing in this document constitutes a recommendation by
Solactive AG to invest capital in financial instruments or to buy or sell securities. The information in thisdocument does not constitute tax, legal, or investment advice. Solactive AG and all other companies
mentioned in this document are not responsible for the consequences of reliance upon any opinion orstatement contained herein or for any omission.

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