Climate Change Data

Environmental Metrics

ESG Focus Areas

• Corporate Governance

Governance Achievements

• Active discount management policy implemented to buy back shares when the discount of the share price against the net asset value per share is greater than 6%.
• Board refreshment with two new directors appointed during the year.

Climate Goals & Targets

Environmental Challenges

• Biotechnology sector experienced a substantial sell-off due to concerns about the sustainability of high drug pricing in the U.S. and potential for new regulation, poor earnings performance by several large-cap firms, and negative pipeline readouts from emerging firms.
• Negative performance due to holdings in Biogen, Esperion Therapeutics, and GW Pharmaceuticals.
• Modest level of gearing (11.1%) had a negative effect on performance.

Mitigation Strategies

• Active discount management and share buybacks to manage share price discount.
• Portfolio Manager's focus remains on selecting stocks with strong prospects for capital enhancement.

Supply Chain Management

Climate-Related Risks & Opportunities

Awards & Recognition

• Money Observer Awards, best large Trust 2014 and 2015
• Investment Week, Investment Company of the year, Specialist Category 2012, 2013 and 2014
• UKtech awards Fund Manager of the year 2013 and 2014 (OrbiMed Capital LLC)
• Investment Trusts Magazine, Best Specialist Trust 2011, 2012 and 2013
• Investment Adviser 100 club, specialist sectors and Assets category 2015

Environmental Metrics

ESG Focus Areas

• Corporate Governance

Governance Achievements

• The Board continued to monitor closely the discount of the Company’s share price to the net asset value per share during the year where it averaged 5.4%.
• The Board’s policy on diversity, including gender, is to take this into consideration during the recruitment and appointment process.
• The Board holds the majority of its regular meetings in the United Kingdom and has a policy that travel, as far as possible, is minimal, thereby minimising the Company’s greenhouse gas emissions.

Climate Goals & Targets

Environmental Challenges

• The strong performance reported at the half-year stage did not continue through the second half of the Company’s financial year.
• A number of negative announcements by Celgene, in the autumn of 2017, relating to a clinical trial failure and also lower than expected sales figures, proved to be the catalyst for a souring of investor sentiment regarding large capitalisation biotechnology stocks in particular.
• The portfolio’s overweight position in large capitalisation stocks was a principal contributor to the Company’s underperformance of the benchmark during the six months to March 2018, and therefore the year as a whole.
• Sterling rose by 12.0% over the year, reversing almost completely the previous year’s decline.
• Continued volatility in the sector

Mitigation Strategies

• The Board continued to monitor closely the discount of the Company’s share price to the net asset value per share during the year where it averaged 5.4%.
• Their focus remains on the selection of stocks with strong prospects for capital enhancement.
• The Board manage this risk by: appointing OrbiMed, who operate a team environment such that the loss of any individual should not impact on service levels; receiving reports from OrbiMed at each Board meeting, such reports include any significant changes in the make-up of the team supporting the Company; meeting the wider team, outside the designated lead managers, at OrbiMed’s offices and encouraging the participation of the wider OrbiMed team in investor updates; and delegating to the Management Engagement Committee, responsibility to perform an annual review of the service received from OrbiMed, including, inter alia , the team supporting the lead managers and succession planning.
• The Portfolio Manager has responsibility for selecting investments in accordance with the Company’s investment objective and policy and seeks to ensure that investment in individual stocks falls within acceptable risk levels. Compliance with the limits and guidelines contained in the Company’s investment policy is monitored daily by Frostrow and OrbiMed and reported to the Board monthly.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: AIC Code of Corporate Governance, AIC Corporate Governance Guide for Investment Companies, UK Corporate Governance Code

Certifications: ISO 14001

Third-party Assurance: Ernst & Young LLP

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Climate Goals & Targets

Environmental Challenges

• Lack of availability of accurate, timely and uniform data for ESG evaluation.
• ESG evaluation carries a significant degree of subjectivity.

Mitigation Strategies

• OrbiMed has sole discretion to determine ESG materiality and interpret performance.
• Regular engagement with portfolio companies through meetings, proxy voting, and board representation.
• Quarterly review of financially material ESG factors impacting valuation.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: Sustainability Accounting Standards Board (SASB)

Environmental Metrics

ESG Focus Areas

• Climate Change

Climate Goals & Targets

Environmental Challenges

• Data gaps in emissions data from smaller companies and derivative investments.

Mitigation Strategies

• Uses Morningstar as primary data provider for consistency; Morningstar uses estimation methodologies where data is missing; no internal estimation used if no data from Morningstar.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Physical loss and business disruption (quantified under RCP 2.6 and RCP 8.5 scenarios)

Transition Risks

• Policy and market risks associated with transition to Net Zero economy

Reporting Standards

Frameworks Used: TCFD