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 7 March 2024, Simplicity was advised by Bloomberg that as a result of a discrepancy between the Index methodology and their index screening data model, they had failed to exclude two companies from the Index between 28 April 2023 and 12 March 2024. The companies in question were Norfolk Southern Corporation and CX Corporation, both US-based entities that generate 5% or more of their revenue from providing supporting products or services for thermal coal extraction.

Impact

Both the Hedged Global Share Fund and Unhedged Global Share Fund held small investments in shares of Norfolk Southern Corporation and CX Corporation for just under 11 months between 28 April 2023 and 12 March 2024, 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 processes for checking their index screening data model against the published index methodologies, 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.