The Fund aims to outperform the MSCI All Country World Index (with net dividends reinvested) in Australian dollars over the long term. MSCI Inc. (MSCI) is the provider of the MSCI All Country World Index. The Fund also aims to invest primarily in the equities of companies whose products and/or services make a positive social or environmental impact, which is determined by the investment manager's assessment of whether the company addresses the social or environmental impact themes below. The Fund may also invest in other transferable securities, money market instruments, cash and cash equivalents (Other Investments). All equity securities included in the investment portfolio are assessed by the investment manager against the investment criteria and process set out below and are therefore considered investments which make a ‘positive impact’.
The Fund invests across four ‘positive impact themes’, which are described below.

Four Positive impact themes

Social impact themes

1. Social Inclusion and Education: Companies that are contributing to a more inclusive society or are improving the quality or accessibility of education. This may include companies which provide education and connection services to improve how people and groups participate in society.

2. Healthcare and Quality of Life: Companies that are actively improving the quality of life in developed and developing countries. This may include companies which focus on understanding of diseases, diagnostics, treatment, prevention, and efficiency.

3. Base of the Pyramid: Companies that are addressing the basic and aspirational needs of the world’s poorest populations. This may include companies that provide financial and or telecommunication services to low-income individuals, primarily in developing areas of the globe.

Environmental Impact Theme

4. Environment and Resource Needs: Companies committed to improving resource efficiency or reducing the environmental impact of society’s economic activities. This may include companies involved in the energy transition, water management or recycling activities.

How we assess companies against the positive impact themes

The investment manager actively manages the Fund’s portfolio of typically 25 to 50 global companies, generating ideas from a diverse range of sources. Investments are selected using a ‘bottom up’ approach based on fundamental in-house research using a consistent framework consisting of two stages: fundamental company research and impact analysis. The investment managers fundamental company research involves eight questions relating to the quality of the business, its growth prospects, the change the company is expected to deliver and valuation. This includes consideration to the company’s broad opportunity set, the strength and durability of the competitive advantage, the financial characteristics and management attitudes when assessing the growth potential and quality of the business. Valuation analysis focuses on whether the investment manager believes the long-term growth prospects of a company are underappreciated. The impact analysis is carried out independently of the investment case using a rigorous, qualitative framework that is based upon assessing three factors about each company: (i) intent towards delivering a positive impact – e.g. considering a company’s mission and how it is implemented and their influence in the wider industry. (ii) impact of products and/or services – e.g. the relationship between the product and the problem and the breadth and depth of the impact. (iii) business practices – e.g, understanding a company’s business practices to determine whether it can achieve sustainable growth. A result of the impact analysis includes the development of a ‘positive change hypothesis’ for each company, which outlines how the investment managers expects companies’ products and services to deliver positive change. This includes identifying bespoke metrics and/or milestones for each company, which come from different sources, and using these to assess progress in respect of the contribution of the company’s products and services. All portfolio companies with be classified in one of the four Positive impact themes with the investment manager linking the contribution to the United Nations Sustainable Development Goals (SDGs).
To monitor how a company may move towards its positive change hypothesis, the investment manager applies their 'Positive Chains' framework which shows how each company is delivering change through its product and services.

Positive Chains have five components: 1. inputs (the resources used by the company, eg financial capital, human capital); 2. activities (the use of inputs or other actions to produce outputs); 3. outputs (the production or delivery of products or services to beneficiaries); 4. outcomes (short-term changes as a result of those activities and outputs); and 5. impacts (system-level changes expected to happen owing to the company’s activities and outputs, linked to the SDGs).
The investment manager also applies investment restrictions seeking to exclude investments on various norms and revenue-based indicators. This includes restrictions which seek to prevent investment in companies that are identified through screening undertaken by MSCI as being involved in: (i) the production of tobacco or manufacture of nicotine alternatives and tobacco-based products; (ii) the production of controversial weapons (which includes cluster munitions, landmines, depleted uranium weapons, biological/chemical weapons, blinding lasers, non-detectable fragments and incendiary weapons); or (iii) the development, production or maintenance of nuclear weapons.

As well as to these screens, the investment manager will undertake additional due diligence to confirm that a company is an eligible investment in some cases. For example, if a company derives more than 5% of its revenue (the type of revenue used for the purpose of these thresholds is determined by the investment manager and may include reasonable estimates or forecasts from different sources) from alcohol, adult entertainment, gambling or lending practices which the investment manager considers predatory, an investment is not permitted until additional due diligence is completed to ensure that the company is suitable for the Fund. These considerations are not strict exclusionary criteria and may change from time to time but may form part of the investment manager’s overall consideration of a company’s positive impact. The Fund aims to hold securities for long periods (typically at least 5 years), which generally results in relatively low portfolio turnover and is in line with the Fund’s long-term investment outlook. Currency considerations are part of the overall, fundamental bottom-up research process.

Vanguard Active Positive Impact Fund managed by Baillie Gifford, aims to outperform the benchmark over the long term. The Fund also aims to contribute towards a more sustainable and inclusive world by investing primarily in the equities of companies whose products and/or services make a positive social or environmental impact.

The Fund is an actively managed portfolio of typically 25 – 50 global companies seeking long term outperformance and positive impact in areas including but not limited to: Social Inclusion and Education, Healthcare and Quality of Life, Environment and Resource Needs and Base of Pyramid (addressing needs of the world’s poorest populations).

Investment ideas are generated from a diverse range of sources, selected using a ‘bottom up’ approach based on fundamental in-house research employing a consistent framework. The impact analysis is carried out independently of the investment case using a rigorous, qualitative framework that is based upon assessing predetermined factors. The investment manager also applies investment restrictions seeking to exclude investments on various norms and revenue-based indicators.

The Fund aims to hold securities for long periods (typically at least 5 years), which generally results in relatively low portfolio turnover and is in line with the Fund’s long-term investment outlook