SUSTAINABILITY POLICY

Policy on the Integration of Sustainability Risks and Their Impact on Investment Decision-Making and Investment Advisory Services in accordance with Articles 3, 4, 5 and 6 of Regulation (EU) 2019/2088 of the European Parliament and of the Council.

TABLE OF CONTENTS

1. PURPOSE AND STRUCTURE

2. DIFINITIONS

3. PRINCIPLES FOR THE INTEGRATION OF SUSTAINABILITY RISKS INTO DECISION-MAKING PROCESSES, INVESTMENT SERVICES AND INSURANCE ADVISORY SERVICES

4. PRINCIPLES FOR ASSESSING PRINCIPAL ADVERSE SUSTAINABILITY IMPACTS IN DECISION-MAKING PROCESSES, INVESTMENT SERVICES AND INSURANCE ADVISORY SERVICES

5. REMUNERATION POLICY IN RELATION TO THE INTEGRATION OF SUSTAINABILITY RISKS

1. PURPOSE AND STRUCTURE

The purpose of this Policy is to describe the general principles under which SIA Colemont FKB Latvia (hereinafter – FKB) assesses sustainability risks and principal adverse sustainability impacts when providing insurance distribution services in relation to insurers' products in the fields of life insurance, savings, and investments, as well as insurance advisory services.

2. DEFINITIONS

Sustainability factor:

A sustainability factor is defined as a change (whether immediate or long-term) in environmental, social, or governance conditions that has an economic impact on the value of a financial asset. Examples of sustainability factors include drought, floods, biodiversity loss, unhealthy lifestyles, poor nutrition, and an uncompetitive workforce.

Principal adverse sustainability impact:

A principal adverse sustainability impact arises where the issuer of a financial asset has a negative impact on sustainability factors.

Sustainability risk:

A sustainability risk is the risk of any adverse financial impact on the value of a financial asset. Such adverse impact may result from the issuer's principal adverse sustainability impacts or from other sustainability factors (for example, drought, floods, biodiversity loss, unhealthy nutrition, or an uncompetitive workforce).

Transmission channels:

A sequence of interconnected events – economic activities or other actions – through which sustainability risks (including shocks) may materialise. Such events may have an adverse impact on the value of a financial asset.

Investment decision-making:

Portfolio management in relation to individually managed investment portfolios and the management of investment funds.

ESG (Environmental, Social and Governance) factors:

ESG refers to all environmental, social, and corporate governance factors.

3. PRINCIPLES FOR THE INTEGRATION OF SUSTAINABILITY RISKS INTO DECISION-MAKING PROCESSES, INVESTMENT SERVICES AND INSURANCE ADVISORY SERVICES

3.1 In the investment decision-making process, FKB offers a highly conservative investment strategy. Clients are offered individually managed investment portfolios developed by insurers represented in Latvia. In assessing sustainability risks within the investment decision-making process for individually managed investment portfolios, FKB takes into account the type of assets or funds included in the portfolio:

3.1.1 Direct investment assets included in the portfolios of local insurers are analysed by assessing their sustainability risks and the transmission channels that could lead to the materialisation of such risks. The assessment includes an analysis of the material factors relating to the industry in which the issuer of the financial instrument operates in order to determine the significance of its impact on sustainability factors. The integration of sustainability risks includes, but is not limited to, the application of exclusion criteria, risk limitation measures, and corporate engagement. The analysis is based on both the Company's internal capabilities and external data and research providers.

3.1.2 The impact of sustainability risks on funds managed by foreign asset managers and the transmission channels that may give rise to such risks are analysed and managed using a strategy that incorporates integration, engagement, and exclusion.

3.1.3 All managers of the funds offered have become signatories to the United Nations Principles for Responsible Investment (UN PRI). This means that the fund management companies have committed themselves to complying with the six Principles for Responsible Investment. Among other things, these principles require fund management companies to integrate environmental, social, and corporate governance (ESG) factors into their investment processes and decision-making. The available funds are assessed and selected based on the sustainability assessments provided by the insurers. The scope of the analysis for each fund is determined using a risk-based approach, taking into account the significance of the strategy, the size of the fund, the portfolio composition, and the level of risk. The qualitative assessment of funds and the high-level analysis of environmental, social, and governance factors take into account the integration of sustainability risks within each third-party managed investment fund using a methodology that includes the following assessment criteria:

• Organisation and resources – the sustainability strategy of the management company;

• Integration of environmental, social and governance factors – the complexity of the integration processes;

• Ownership stewardship – voting and engagement.

3.2 FKB provides investment, savings, and insurance advisory services by taking sustainability risks into account in the same manner as in the investment decision-making process. FKB also offers products in respect of which it does not provide recommendations or advice and informs clients that clients are responsible for the underlying assets of such products.

4. PRINCIPLES FOR ASSESSING PRINCIPAL ADVERSE SUSTAINABILITY IMPACTS IN DECISION-MAKING PROCESSES, INVESTMENT AND INSURANCE ADVISORY SERVICES

4.1 Direct investment assets and funds in investment decision-making.

4.1.1 FKB has established a sustainability policy framework for identifying principal adverse sustainability impacts with the aim of determining, prior to the conclusion of each contract, the insurance and investment decision-making procedures applied by insurance undertakings. The thematic policies support the identification of principal adverse sustainability impacts:

1. Business sustainability policy. This policy establishes the overall sustainability framework and general approach of the insurance undertaking. It also defines how sustainability-related decisions are implemented in the day-to-day responsibilities of employees and management.

2. Thematic policies. These policies define the approach to specific sustainability topics, as well as the principles for identifying thematic principal adverse sustainability impacts and establishing restrictions relating to specific corporate conduct. FKB reviews the following thematic policies:

· Environmental policy

· Human rights policy

4.1.2 FKB pays particular attention to sustainability-related risk restrictions by establishing procedures that define how the Company should act in the event of a potential principal adverse sustainability impact.

Restrictions are specified in the following areas:

4.1.2.1 Controversial weapons – FKB does not recommend financing or investing in companies that manufacture, develop, or trade in controversial weapons.

4.1.2.2 Fossil fuels – FKB does not recommend financing or investing in companies engaged in the extraction, processing, or energy production of the following fossil fuels:

· Thermal coal;

· Coal and gas (conventional, unconventional, and operations in environmentally sensitive areas);

· Fuel peat.

4.1.2.3 Gambling – FKB does not recommend financing or investing in companies whose principal source of revenue is gambling products and services.

4.1.2.4 Tobacco manufacturing – FKB does not recommend financing or investing in companies engaged in the manufacture and distribution of cigarettes and electronic cigarettes.

4.1.3 Engagement policies

FKB has no affiliation with banks, investment firms, or investment brokers; therefore, FKB has not adopted engagement policies.

4.1.4 FKB recognises the importance of complying with and supporting internationally recognised standards that enable companies to operate more responsibly. FKB's Business Sustainability Policy is based on the principles established in international agreements and internationally recognised standards, which FKB observes.

4.2 Funds managed by all market participants.

4.2.1 Description of the measures for preventing principal adverse sustainability impacts.

Third-party funds offered by insurers within portfolio solutions are subject to the following set of sustainability requirements related to their integration for the prevention of principal adverse sustainability impacts:

· The fund management company has signed the United Nations Principles for Responsible Investment (UN Principles for Responsible Investment – UN PRI). This means that the fund management company has committed itself to complying with the six Principles for Responsible Investment. Among other things, these principles require fund management companies to integrate environmental, social and corporate governance (ESG) factors into their investment processes and decision-making.

· Exclusion of controversial weapons, as provided for under recognised international conventions.

With regard to third-party index funds offered by insurers, the fund management company is required to comply only with the first criterion (the United Nations Principles for Responsible Investment).

4.2.2 Engagement policies

Where there is an interest in third-party funds offered by insurers, FKB requests the insurer to provide additional information regarding the assessed management companies that are subject to qualitative analysis, including their engagement policies and practices in relation to the areas listed below. The scope of the analysis for each fund is determined using a risk-based approach, meaning that the significance of the strategy is assessed taking into account the size, portfolio composition, and level of risk.

· Engagement policy and activities;

· Voting structure and policy;

· Reporting.

4.2.3 Compliance with responsible business codes and internationally recognised standards in relation to due diligence and reporting. As a minimum requirement, third-party funds must comply with the United Nations Principles for Responsible Investment.

4.3 FKB provides investment advisory services and insurance advisory services regarding funds managed by insurers or third-party fund managers, taking into account principal adverse sustainability impacts in the same manner as in the investment decision-making process.

5. REMUNERATION POLICY IN RELATION TO THE INTEGRATION OF SUSTAINABILITY RISKS

Sustainability risks are not incorporated into the remuneration principles of FKB's Remuneration Policy, as this is governed by Section 33, Paragraph Four of the Insurance and Reinsurance Distribution Law, which prohibits remuneration systems from being linked to sales targets or other factors that could encourage the Broker's employees to recommend a particular insurance product to a client where the Broker is able to offer a different insurance product that better meets the client's interests.