Muzinich

Muzinich defines ESG factors as “investment factors measured in non-financial terms (and not included on balance sheets) but material to corporate financial performance.” Credit analysts lead ESG integration, evaluating ESG risks and opportunities alongside financial metrics, with oversight from an ESG Eligibility Committee (a 7-member (plus several alternates) committee established to assess breaches of international norms and standards and determine whether norms and behavioral based exclusions should be applied (either Firm-wide or specific to individual portfolios) to the issuer(s) concerned), in assessing high-risk or controversial issuers. A proprietary ESG scoring system, introduced in 2023, uses weighted KPIs across Environmental, Social, and Governance dimensions to assess in relative and absolute terms ESG data is sourced from multiple providers, including Sustainalytics, ISS ESG, Sustainable Fitch, and Ethifinance, with additional insights from brokers, NGOs, and academic research. While we conduct our own research, we use external sources to help us form the basis of our scoring. analyst who selects and weights the KPIs used in the score, and then has the ability to notch the score to a limited extent. Any controversies will then be discussed in the ESG Eligibility committee. ESG integration is nuanced and forward-looking, feeding into investment decisions based on the analysts’ assessment of financial materiality rather than prescriptive rules (outside of other applicable approaches such as ESG exclusions, positive screening, or carbon efficiency targets).