This article outlines the requirements for investment directions that consider sustainability risk when making investment decisions and transparently describe the potential negative impact on sustainability. However, they do not directly promote environmentally or socially sustainable activities and do not have sustainable investment objectives.

This article outlines the requirements for investment directions that directly promote environmentally or socially sustainable activities, or a combination of such activities, and ensure that the companies in which they invest adhere to principles of good governance.

This section outlines the requirements for investment directions that consider sustainable investments as their primary objective. These funds are exclusively focused on sustainable investments.

Sustainability risk refers to events or conditions related to environmental protection, social responsibility, or corporate governance (ESG) that could have a significant or potentially negative impact on the value of investments. 

Safety and sustainability are key aspects of capital investment management at Compensa Life. As a part of the international insurance group Vienna Insurance Group (VIG), Compensa Life adheres to the sustainability strategy principles set by the group. Among the main principles outlined in the strategy is the evaluation of social and environmental factors in investment processes.

Sustainability risk is integrated into the investment decision-making process through the application of investment exclusion criteria and is managed by implementing risk mitigation principles. Compensa Life applies the investment exclusion and restriction criteria set out in VIG’s ESG Strategy. More detailed information can be found below under "Excluded High-Risk Investments."

The risk management process and nature of risks at Compensa Life are disclosed in the annual Statement of Solvency and Financial Position Report, which also includes an assessment of sustainability risks.

The company regularly reviews the list of risks to ensure it is relevant and comprehensive, incorporating new risks as necessary according to the standard risk management process of the Vienna Insurance Group (VIG). The annual risk inventory process quantitatively and qualitatively identifies all types of risks within the company, including those in the ESG (Environmental, Social, and Governance) areas.

Sustainability risks at Compensa Life refer to potential impacts in the ESG areas that could negatively affect the overall performance of Compensa Life (external risk) or arise from Compensa Life activities and could have a negative impact on the environment and/or society (internal risks affecting the external environment). These different types of risks form the basis for how they are assessed and managed according to the Company's risk management system:

a) Internal-to-external risks are assessed during regular risk management processes. To this end, ESG risks are identified during the annual risk inventory process and then incorporated into further risk management processes and the ORSA (Own Risk and Solvency Assessment) process, depending on the significance of the risk.

b) Internal-to-external risks may also be identified during the risk inventory process or in any other risk management processes and/or areas. The assessment of these risks can be part of the ORSA process.

In summary, the analysis showed that sustainability risks at Compensa Life are currently primarily at low and medium levels. However, it is expected that their significance will increase in the future, partly due to the growing importance of this topic.

Considering the risk mitigation rules, the significance of risks is assessed based on the applicable standard Solvency capital requirement. A safe solvency level is set within the range of 150%-200%, as it is essential for the business's sustainability.

A risk is considered significant if the anticipated impact exceeds 2.5% of the Company's own funds.

For more information on the integration of sustainability risks, please refer to the Compensa Life ESG Strategy.

When selecting investment directions, Compensa Life prioritizes sustainability and aims to offer clients investment directions that meet at least the sustainability level corresponding to Article 8 of the SFDR. In selecting investment directions, we also consider:

• the total profitability over the last three years, the yield compared to similar investment directions offered by other fund managers, and the deviation from the benchmark index;
• the costs incurred by the client.

All of this data is compared using the Lipper Leader Rating fund comparison platform.

As outlined in the Vienna Insurance Group ESG (Environmental, Social, and Corporate Governance) strategy and the investment and risk management strategy of Compensa Life, when making investment decisions, Compensa Life does not invest in the following areas:

• Prohibited weapons: the sale of such weapons, collaboration with companies related to prohibited weapons, as well as cooperation with brokers, agents, and other individuals involved in the trade of prohibited weapons.
• Thermal coal: existing investments will be reduced by more than 50% by the end of 2025 compared to 2019. Existing investments will be fully divested by 2035 at the latest.
• Fossil oil and gas sand products.
• Companies significantly violating human rights or the principles of the United Nations Global Compact.

Current positions in the aforementioned areas are continuously monitored, and investments that do not meet the requirements set out in the strategy are removed from the investment portfolio. Compensa Life aims to eliminate all unsuitable investments from its portfolio by 2035.