Background

Since they were launched on 28 April 2023, our Hedged Global Share Fund and Unhedged Global Share Fund have used the Bloomberg Developed Markets Ex-New Zealand ESG Screened Index (the Index).Bloomberg uses data sourced from Sustainalytics to exclude companies from the Index in accordance with Simplicity’s Responsible Investment Policy. 

What happened? 

On 8 September 2023, Simplicity was advised by Bloomberg that as a result of an issue obtaining ESG data from
Sustainalytics, they had failed to exclude a company from the Index between 28 April and 14 June 2023. The company in question was Rio Tinto PLC, a UK-based entity that generates 5% or more of its revenue from direct or indirect involvement in the oil and gas industry.

Impact

Both the Hedged Global Share Fund and Unhedged Global Share Fund held small investments in shares of Rio Tinto PLC for just over 5 weeks from 5 May to 13 June 2023, when these shares were sold as part of a regular quarterly index rebalancing process that corrected the error. During that period the shares were held they did not have a material impact on the performance of either fund. 

What has been done to address the issue and prevent a recurrence?

As soon as we became aware of the issue we requested that Bloomberg conduct an investigation into its causes and to provide an assurance that this type of error will not occur again. Bloomberg has conducted a thorough internal investigation which has resulted in a number of changes to their index data management handling process, and we are comfortable that this was an isolated issue and has been properly addressed.     

Summary

We apologise for any concern that this issue may cause our members - rest assured that we take compliance with our Responsible Investment Policy seriously and will continue to monitor our service providers, including Bloomberg, to ensure they remain aligned with this policy.