Investment Screening and Exclusion Policy

Ethical Capital LLC

1. Policy Framework and Governance

1.1 Fiduciary Foundation

Our ultimate purpose is to serve our clients’ best interests.

To durably accomplish this, we must rigorously align with their values, willingness, and ability to bear risk.

clearly communicate the framework we’ll use to make decisions on their behalf, and

1.2 Core Philosophy

We seek to align with goodness and avoid preventable harm to living things.

This is fundamentally reliant on our judgment, which is inherently flawed. To mitigate this, we judge the success or failure of our screening process (and all of our investment activities) on the degree to which they build cumulative knowledge.

This process is rigorous, and will eliminate a significant number of securities from consideration. We will inhabit (rather than resist) the distinctive opportunity set that results, and seek

1.3 Governance Structure

• Decision Authority: The Chief Investment Officer has final authority over all exclusion and inclusion decisions. In specific situations where a holding violates an exclusion criterion but the CIO believes that security is appropriate, the CIO retains sole discretion to suspend that criterion for that security only. This does not modify the criterion itself — it remains in effect for all other securities.
• Discretionary Management: As a discretionary investment manager, professional judgment is exercised on a case-by-case basis within the framework of preventing harm.
• Client Input: While clients cannot weaken firm-wide exclusions, they may adopt stricter parameters for their individual portfolios.
• Documentation Standards: Exclusion decisions are tracked through portfolio management systems and reviewed as part of our holistic process.

1.4 Formal Commitments

Ethical Capital maintains the following institutional commitments:

• Apartheid-Free Pledge: Formal commitment to exclude companies complicit in systematic oppression.
• PetChem Investor Declaration: Commitment to address petrochemical risks and plastic pollution.
• Plant-Based Treaty: Commitment to support a transition towards a plant-based society.
• Additional commitments may be adopted as they align with our core mission.

2. Criteria for Product-Based Exclusion of Companies

Assets entrusted to our firm shall not be invested in companies which engage in any of the below activities directly or through entities they control:

2.1 Harm to Living Beings

Manufacturing, distributing, or profiting from products and services that cause direct harm to animals:

• Manufacturing meat, dairy, eggs, honey, butter, silk, cheese
• Contributing to demand for leathers, hides, furs, and exotic skins
• Production of equipment that directly harms animals
• Animal testing and research for commercial products
• Industrial-scale confined animal feeding operations
• Animal entertainment (racing, captive display, performance)

2.2 Weapons and Military Systems

• Sale of weapons, military materiel, or consulting services that support military operations
• Manufacturing or distribution of defense equipment and technologies
• Nuclear weapons production
• Retail promotion and sale of firearms and weapons to civilians

2.3 Addictive and Harmful Products

Products designed to exploit addictions, dependencies, or vulnerable populations:

• Tobacco and nicotine products
• Gambling operations and platforms
• Alcohol production and distribution
• Opioid manufacturing and distribution
• Pesticide and toxic chemical manufacturing
• Entertainment business models that exploit participants or audiences

2.4 Fossil Fuels and Extractive Industries

• Upstream operations: exploration and production of oil, gas, and coal
• Midstream operations: pipelines, storage terminals, LNG facilities (existing pipelines are evaluated case-by-case and are not automatically excluded)
• Downstream operations: refining, processing, and retail
• Oilfield services and equipment
• Mining, expropriation of public assets, or activities generating significant externalized costs

2.5 Surveillance Technology

• Manufacturing or selling surveillance hardware (cameras, sensors, screening systems)
• Intelligence and forensic software (mobile extraction, facial recognition, predictive analytics)
• Surveillance infrastructure built for deployment by governments or corporations
• Distinct from behavioral surveillance deployed against a company’s own users, which is addressed under conduct-based exclusions (3.8)

3. Criteria for Conduct-Based Exclusion of Companies

Companies may be excluded or placed under observation if there is unacceptable risk that the company contributes to or is responsible for:

3.1 Forced Labor, Child Labor, and Trafficking

Coerced labor, exploitation of children, and modern slavery — whether in direct operations or supply chains.

3.2 Worker Rights and Workplace Safety

Violations of labor rights, workplace safety standards, and employment law in the company’s own operations:

• Anti-union activity and suppression of collective bargaining
• Workplace discrimination (age, race, gender, disability)
• Unsafe working conditions and preventable workplace injuries
• Wage theft, gig worker exploitation, and contractor misclassification
• Deaths attributable to corporate negligence

3.3 Conflict, Occupation, and Indigenous Rights

• Complicity in armed conflict or military occupation
• Operations in or support of occupied territories
• Violations of indigenous community rights and sovereignty

3.4 Environmental and Climate Misconduct

Environmental damage, climate failures, and ecological harm caused by company operations (distinct from companies whose core business is fossil fuels, which are in 2.4):

• Pollution, contamination, and ecological destruction
• Unacceptable greenhouse gas emissions and air quality violations
• Failure to develop credible climate transition plans
• Waste management failures and plastic pollution
• Water contamination and excessive water extraction

3.5 Financial Crime and Market Abuse

• Securities fraud, accounting fraud, and market manipulation
• Bribery, FCPA violations, and gross corruption
• Aggressive tax avoidance schemes significantly departing from industry norms
• Antitrust violations, monopolistic behavior, and price fixing

3.6 Consumer and Community Harm

• Predatory lending and extractive financial products
• Consumer protection failures and deceptive practices
• Externalized costs to communities (housing exploitation, infrastructure burden, PFAS contamination)
• Abuse of legal systems (patent trolling, litigation as business model)

3.7 Political Influence and Democratic Integrity

• Systemic use of corporate resources to influence political outcomes
• Dark money contributions and undisclosed political spending
• Financial support for politicians or parties enacting restrictions on essential services

3.8 Information Integrity and Platform Accountability

• Disinformation operations, greenwashing, and systematic consumer deception
• Operating, financing, or materially supporting for-profit incarceration
• Surveillance capitalism: deploying behavioral surveillance against a company’s own users for commercial gain without meaningful consent (ad-tech behavioral profiling, data brokers packaging consumer profiles)

3.9 Regulatory and Governance Failures

• Systemic compliance failures and patterns of regulatory violations
• Failure to provide appropriate oversight (including safe working conditions and consumer protection)

4. Implementation and Discretion

4.1 Exclusion Framework

• Binary Decisions: Exclusions are binary determinations applied to the universe of securities. The Chief Investment Officer may suspend any criterion for a specific security while the criterion remains in effect for all others.
• Industry Context: Companies presenting outstanding opportunities on all criteria except a narrow issue consistent with industry practices may warrant security-specific exceptions.
• Holistic Assessment: All securities evaluated based on products and conduct.
• Professional Judgment: All decisions involve professional discretion within the framework of preventing harm.
• Information Basis: We make the best decisions we can with the information we have.

4.2 No Exceptions or Appeals

• No formal appeals process exists, as companies are not notified of their exclusion status.
• Clients are encouraged to request a rationale for any exclusion decision.
• The Chief Investment Officer may suspend an exclusion criterion for a specific security at any time, at their sole discretion, without modifying the criterion itself.

4.3 Engagement with Companies

Upon discovery of a prohibited practice at a current holding, the Chief Investment Officer may choose to engage with companies instead of immediately disposing of the position.

4.4 Materiality and Scope

Revenue materiality. A company is excluded when the excluded activity constitutes approximately 15–20% or more of revenue. A gas station landlord whose tenants sell fossil fuels qualifies. A diversified conglomerate with a small energy consulting unit does not. Where revenue attribution is ambiguous, the CIO applies judgment.

Binary product exclusions. For categories where the harm is inherent in the product — animal-derived materials, weapons, tobacco, gambling — the test is binary: the company either produces or sells the product, or it does not. A shoe retailer that sells leather qualifies. A secondhand marketplace that resells leather goods qualifies on the same basis.

Equipment and dual-use technology. If equipment is purpose-built for the excluded activity (gestation crates, weapons components), the manufacturer is excluded. If the equipment is general-purpose across many applications (chromatography instruments, genomic sequencing platforms), the manufacturer is not excluded unless the excluded end-use constitutes the substantial majority of its business. This determination is made case-by-case by the CIO.

Surveillance capitalism. Digital advertising infrastructure — behavioral profiling, programmatic ad exchanges, data brokerage, and ad-tech platforms — is classified as surveillance technology. The commercial extraction of behavioral data for advertising purposes meets our exclusion threshold regardless of how the company self-describes.

Financial intermediaries. Banks and insurers are excluded for material facilitation of excluded activities. For fossil fuel financing, we rely on the Banking on Climate Chaos annual report to identify major financiers. For other categories, the same revenue materiality threshold applies.

Royalty and streaming companies. Financial royalty holders are excluded for the conduct of the underlying operations from which they derive revenue. A royalty company that collects payments from a mine with documented environmental violations is excluded on the same basis as the mine operator.

4.5 Corporate Attribution

Direct benefit. Parent-subsidiary attribution requires that the company directly benefits from the excluded activity. A bottler is not excluded for practices at a brand owned by its parent company. A subsidiary that operates the excluded business directly is excluded.

Employee misconduct. A company is not excluded for crimes committed by individual employees acting outside the scope of their duties, particularly where the company is the victim. Violations of the Foreign Corrupt Practices Act, Anti-Kickback Statute, or similar laws — where the company benefits from the corrupt act — are grounds for exclusion regardless of whether the company claims the conduct was unauthorized.

Retail resale. Companies that resell excluded products (e.g., convenience stores selling tobacco) are not excluded unless the excluded product is a material revenue driver.

4.6 Temporal and Evidentiary Standards

Five-year recency. A single enforcement action more than five years old, with no subsequent pattern, is insufficient grounds for continued exclusion. Ongoing patterns of violation remain grounds for exclusion regardless of when the pattern began.

Pattern over incident. Our exclusion framework identifies companies that lack effective internal controls. Enforcement actions represent only a fraction of actual violations — a single documented incident often indicates broader systemic risk. The pattern matters more than any individual incident.

Statutory context. Fine amounts are interpreted in the context of statutory maximums. Regulatory agencies often operate under penalty caps that limit fine amounts regardless of the severity of the violation.

4.7 Geopolitical Exclusions

Occupied territories. Companies are excluded for specific, documented involvement in activities related to military occupation — not for their country of incorporation. Specific activities that trigger exclusion: providing goods or services to settlements, operating in settlement industrial zones, supplying military or surveillance equipment used in occupation, and financing settlement infrastructure.

Sanctioned entities. Companies subject to Western sanctions regimes are noted as uninvestable. The exclusion is retained for completeness.

5. Strategy-Specific Implementation

5.1 Growth Strategy — Full Implementation

• Target: Full policy alignment.
• Positive Impact Requirement: Companies must generate positive outcomes through their primary business lines (i.e., the same way they generate revenue, not through unrelated programs).

5.2 Income Strategy — Flexible Implementation

• Target: As close to 100% policy alignment as possible while fulfilling strategy objectives.
• Implementation Limitations: This strategy may hold as much as 100% direct securities or 100% funds.
• Direct Holdings: Individual securities will always be selected with full exclusion criteria.
• Fund Component: Managers that align with our mission will be selected.

5.3 Diversification Strategy — Aligned Implementation

• Target: As close to 100% policy alignment as possible while fulfilling strategy objectives.
• Implementation Limitations: This strategy is invested through external managers, 100% funds through selection of aligned managers and vehicles.
• Fund Selection: Mission-aligned funds preferred; broad market funds accepted where necessary.
• Structural Limitations: Acknowledges constraints inherent in external fund management.

5.4 Portfolio Management

• Review Frequency: All holdings rebalanced on the last trading day before or first trading day after the new moon. In any cycle where the CIO determines that no material drift exists between target and current weightings, or where market conditions warrant deferral, rebalancing may be postponed to the following cycle.
• Composition Changes: All strategies evolve to align with opportunities — clients should expect this.
• Client Communication: Chief Investment Officer retains discretion regarding issue notification.

6. Research and Monitoring Framework

6.1 Data Sources

Primary Sources:

• Company disclosures and direct communications
• Proprietary research

Secondary Sources:

• Activist reports and NGO investigations
• Credible media reporting
• AI-assisted analysis: Large language models review company filings, disclosures, and news sources to identify potential exclusion triggers and compile preliminary research inputs. All AI-generated analysis is reviewed and verified by the CIO before any investment decisions are made.

Note: We do not rely on third-party ethical ratings services, conducting all screening through internal analysis.

6.2 Process

• Preemptive Screening: Exclusions occur before purchase consideration.
• Continuous Monitoring: Living framework refined through ongoing research.
• Corporate Actions: Evaluated the same way as any other investment decision.
• Documentation: Portfolio management spreadsheet tracks exclusion decisions and rationale.

7. Client Relations & Communications

7.1 Customization Parameters

• Clients may adopt stricter exclusion parameters than firm policy.
• Clients cannot weaken or reverse firm-wide exclusions, but are encouraged to engage in dialogue about them.
• Individual position exclusions permitted at client request.

7.2 Transparency

• Clients are asked not to share details on our engagements with companies to maximize the likelihood of positive outcomes.
• Full explanation of exclusion rationale available to clients upon request.
• Clients are encouraged to review our public exclusions database and submit feedback or observations.
• This policy and our exclusion data are published on our website as our primary open-source repository.

8. Key Performance Indicator

Primary Metric: Do portfolio companies align with goodness and avoid preventable harm to living things?

This singular focus reflects our conviction that long-term value creation requires integration between business operations and societal wellbeing.

9. Revision History

10. Licensing

This policy is licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0). Organizations may adapt this framework with appropriate attribution to Ethical Capital LLC.

Appendix A: Implications of Our Public Pledges

As signatories to the Apartheid-Free Pledge, we commit to:

• Exclude companies complicit in systematic oppression
• Divest from entities operating in occupied territories in ways that entrench oppression
• Support economic pressure for justice and human rights
• Regular review of operations in contested regions

Companies are assessed against apartheid criteria including:

• Operating in occupied territories
• Providing services/infrastructure that entrench occupation
• Supplying military/security equipment used in oppression
• Benefiting from systematic discrimination

As signatories to the petchem investor statement, we formalize the expectation that companies:

• Transparently disclose, define strategies and set clear targets to transition to production of safe, environmentally sound and sustainable plastic
• Address polymers and chemicals of concern in their products
• Build suitable infrastructure for production of sustainable materials
• Establish dedicated governance
• Publicly support an ambitious international legally binding instrument for ending plastic pollution

Appendix B: Core Harm Assessment Questions

When evaluating a company, we ask:

1. Does this company’s existence cause net harm to living beings?
2. Is the harm preventable through different business practices?
3. Is the company taking meaningful action to eliminate harm?
4. Would excluding this company reduce harm in the world?
5. Are there alternatives that achieve similar ends without harm?