Addition of the PH&N Future Solutions Bond Segregated Fund to the Core investment platform

Plan sponsors may wish to consider whether this investment news has any implications for the investment options available within their plans. Sun Life Assurance Company of Canada purchases units of the fund listed below, which is established as a segregated fund in accordance with the Insurance Companies Act (Canada). 

We’re pleased to announce the addition of the PH&N Future Solutions Bond Segregated Fund (“PH&N Future Solutions Bond Fund”) to the Core investment platform, in the Sustainability Focused fixed income category.  The Fund will be available effective October 1, 2023.

About the PH&N Future Solutions Bond Segregated Fund  

The PH&N Future Solutions Bond Fund seeks to provide long-term capital growth through investment in fixed income securities of companies, government, or quasi-government entities (“issuers”) that aim to make positive changes. The Fund invests in issuers with businesses / activities that fit the following sustainability themes:

• Improve environmental outcomes
  • sustainable management and efficient use of natural resources, 
  • clean energy and energy efficiency, pollution and waste reduction, 
  • sustainable transportation, 
  • climate mitigation and adaptation. 
• Improve quality of life
  • affordable basic infrastructure, 
  • improved digital connectivity, 
  • food security, 
  • socioeconomic advancement and empowerment (including healthcare and education). 
• Build resilient economies
  • investment in economic productivity through diversification, technological upgrades and innovation, responsible production and consumption, and developing reliable and resilient infrastructure.

The PH&N Fixed Income team (“PH&N investment team”) who manages the Fund considers either the bond's use of proceeds or the issuer's business in determining alignment with the themes. The PH&N investment team uses the following exclusion screens based on Sustainalytics’ data: 

• Product involvement – the Fund won’t invest in issuers in the following industries or businesses:
  • Tobacco
  • Extraction or power generation of thermal coal
  • Core weapons system
  • Manufacturing of controversial weapons and their components or services. Controversial weapons generally include, but are not limited to, cluster munitions, land mines, biological and chemical weapons, depleted uranium weapons, blinding laser weapons, incendiary weapons, nondetectable fragments, nuclear weapons, and white phosphorus weapons.
• ESG controversies – the Fund won’t invest in issuers involved in “Category 5-Severe” or “Category 4-High” controversies (in a scale of 1-5). Sustainalytics’ controversies research identifies issuers involved in incidents that may negatively impact stakeholders, the environment or the company’s operations. Examples of incidents are a labor strike at a factory or an accident at a company worksite.
• Country risk rating (for government and quasi government bonds) – the Fund won’t invest in countries with a Sustainalytics Country Risk Rating of D or E (in a scale of A to E). 

The PH&N investment team subsequently assesses the issuers that pass the exclusion screens for alignment with the sustainability themes. In order to qualify, the issuers must meet at least one of three eligibility criteria:

• They generate at least 40% of revenues or allocate 40% of total bond proceeds to products or services providing solutions to current and future challenges that fit in one of the sustainability themes. 
• A portion of their expected future value generation is aligned with at least one theme. These could be companies that are transitioning their business or operations, growing new lines of business, developing products or allocating proceeds that benefit future generations within one of the themes.
• Their operations are notably innovative. They may be eligible for investment if its operational solution addresses a sustainability theme, even when the core business or service does not fit within a theme. 

The Fund may invest ESG-labelled bonds, including green bonds, sustainability bonds, and sustainability-linked bonds, if:

• the issuer of the bonds passes the exclusions screens;
• the bond meets one of the three eligibility criteria;
• the bond meets global standards in environment, social and sustainability-linked bond, such as the International Capital Market Association.

The Fund may hold securities that are not aligned with the sustainability themes to ensure diversification, as long as they pass the exclusion screens. These securities include sovereign bonds, provincial bonds, municipal bonds, mortgage-backed securities and commercial paper.

The Fund’s Statement of Investment Policies and Procedures (SIPP) is available on the plan sponsor website.  

The addition represents Sun Life’s commitment to offer diverse investment options that integrate ESG/sustainability criteria in all aspects of their investment process. 

Do you have to take any action?

You don’t need to take any action. You may consider whether the PH&N Future Solutions Bond Fund would be a suitable addition to your lineup.

About Phillips Hager & North (“PH&N”)

PH&N is the manager of the new Fund. PH&N is a division of RBC Global Asset Management Inc, an indirect, wholly-owned subsidiary of Royal Bank of Canada (RBC). PH&N has managed institutional assets since 1964. As of June 30, 2023, the firm managed C$ 329 billion of assets.

PH&N’s fixed income team is deep and experienced. The team managed C$120.7 billion in assets (as of June 30, 2023).

About Sustainalytics 

Morningstar Sustainalytics provides analytical environmental, social and governance (ESG) research, ratings and data to institutional investors and companies. Sustainalytics was established in 1992 and Morningstar acquired Sustainalytics in 2020. 

As of June 2023, the firm had 16 offices globally and 800 research analysts with research coverage across 172 countries and over 20,000 companies.  

Questions? 

Please contact your Sun Life Group Retirement Services representative.