Sustainable Finance Disclosure Regulation, Article 6 disclosure

As part of the EU’s Sustainable Finance Disclosure Regulation (2019/2088) (“SFDR”), we are required to integrate sustainability risks into our discretionary investment decision-making process.  “Sustainability risk” is defined in the SFDR as an environmental, social or governance event or condition which, if it occurs, could cause an actual or potential material negative impact on the value of an investment.

The Wahed S&P 500 Shariah UCITS ETF (USD) and Wahed Dow Jones Islamic World UCITS ETF (USD) have been classified under Article 6 of the Sustainable Finance Disclosure Regulation (Regulation EU/2019/2088) as amended ("SFDR"). Wahed Invest Ltd (“Wahed”) does not integrate a consideration of environmentally sustainable economic activities into the investment process for the funds. Therefore, for the purpose of the Taxonomy Regulation, it should be noted that the investments underlying the Fund do not take into account the EU criteria for environmentally sustainable economic activities.

The Funds do not promote environmental or social characteristics in a way that meets the specific criteria contained in Article 8 of SFDR or have sustainable investment as their objective as per the requirements of Article 9 of SFDR. Accordingly, and for reasons further explained in the following paragraph, principal adverse impacts ("PAI") of investment decisions are not typically considered by Wahed as part of the investment decision-making process in respect of the Funds. However, Wahed may consider PAI in the ongoing management of the Funds via its stewardship, corporate engagement and voting practices with relevant companies held within the Funds aimed at reducing adverse impacts and seeking to influence more sustainable business models over the long-term.

Notwithstanding the Article 6 classification, consistent with the requirements applicable to it under the UCITS Regulations, Wahed is required to take Sustainability Risks into account in the process of selection and ongoing monitoring of investments and Wahed will evaluate and integrate Sustainability Risks where relevant throughout the investment process. By implementing its Shariah governance review process. Wahed considers social and governance-related Sustainability Risks when deciding to exclude or adjust the timing or weighting of investments in contrast to the Index. However, due to the fact that the Funds are actively managed in reference to the Index, Sustainability Risk considerations may not be a primary consideration for an investment decision and Wahed does not expect that the assessment of likely impacts of Sustainability Risks will materially impact the expected risk or return characteristics of the Funds.