1. => screening alone: For all actively managed listed equities (in funds & mandates) we systematicly exclude controversial weapons
2. => screening alone & integration strategy: For all actively managed equity funds we systematicly exclude controversial weapons and integrate ESG-Data (such as general ESG-Scores, Carbon Footprint, Reputational Risks or Governence Issues and so on)
3. => All three strategies combined: For all sustainable products: In order to define the range of sustainable products, the analysts apply a selection of very stringent exclusion criteria. The application of the exclusion criteria is followed by a sector analysis: The aim is to extract those companies in their respective industries and regions that set an example by excelling at taking responsible actions in terms of environmental protection, social and governance issues. The sector analysis is followed by a fundamental stock analysis with a strong focus on companies with a high sustainability impact.
Details combination of ESG incorporation strategies:
2. For all actively managed equity products
First goal: We want to avoid investing in companies which have an unfavourable risk-return-profile, due to material ESG risks not yet (well) reflected in the valuation. We strive to identify potential risks to shareholders which could disrupt the share price.
How? The in-house ESG research team provides a database and a template which allows PM/Analysts to calculate the ESG indicator (ESG-I) for each company of the MSCI AC World Index and displays it graphically. The ESG indicator and its sub-scores in the environmental, social and governance field are ranked on a scale from one to ten and illustrated by colours from green (i.e. good) to red (i.e. bad). The scores rank a company within its global peer group industry (GICS level 3). When addressing the ESG issues, PM/Analysts are required to discuss the potential impact on valuation with the different ESG analysts to better understand whether the ESG issues are sufficiently reflected in the share price. These ESG issues are mostly sector relevant and should be addressed during an interaction with company and/or broker/analyst.
Second goal: We want to improve our understanding of the key economic drivers of each industry by addressing the key ESG challenges per industry.
How? Every analyst/PM gets an input based on industry specific ESG criteria in order to be able to define the relevant and material industry drivers. For successful investing it is imperative to understand the key economic drivers of each industry. In order to understand them, it is crucial to know if an industry is faced with severe ESG challenges (risk view). Within the quality assessment of the companies IAEN will provide for every industry the most material ESG criteria (so-called ESG KPI’s). The KPI’s are highlighted on the ESG template along with the connected material ESG questions which should be used when engaging with companies. The ESG KPI’s are presented and updated (if necessary) to the analysts/PM’s within the framework of the industry review meetings taking place regularly.
Comprehensive Publication of ESG-Integration in listed equities (German): https://www.zkb.ch/media/dok/corporate/nachhaltigkeit/fokus-nachhaltigkeit-2016-07.pdf
3. Details Sustainable products:
Focus on a high "sustainable impact"
In order to define the range of sustainable products, the analysts apply a selection of very stringent exclusion criteria. The ex-ante exclusion criteria make sure that our clients do not invest in companies that contribute to the world’s most serious environmental problems and social risks. Further problem areas such as the compliance ILO principles are reviewed in the analysis and monitored constantly and companies breaching standards are excluded ex-post.
Ex-ante exclusion criteria: => Anthropogenic climate change – Extraction of fossil fuels – Operation of fossil-fuel power stations – Production of cars and aircrafts - Airlines => Endangerment of the Earth's atmosphere – Production of substances that deplete the ozone layer => Loss of biodiversity – not sustainable forestry – not sustainable fishery and fish farming – not sustainable palm-oil plantations – Genetic engineering => Threat to society and health – Nuclear energy – Production of arms and war material – Production of tobacco and smoking – Exploitative child labour.
The application of the exclusion criteria is followed by a sector analysis: The aim is to extract those companies in their respective industries and regions that set an example by excelling at taking responsible actions in terms of environmental protection, social and governance issues. The selection of is based on a multi-step process. The quantitative analysis compares roughly 50 environmental, social and corporate governance indicators. The data is obtained from specialized providers (such as Asset4, Trucost, MSCI ESG Research & Governance Metrics or RepRisk). Then, we carry out a qualitative product and sector analysis, which is mainly built on the know-how, experience and industry-specific knowledge of our analysts.
The sector analysis is followed by a fundamental stock analysis with a strong focus on companies with a high "sustainability impact". The following investment opportunities were defined: Energy: Renewable energy, energy efficiency. Sustainable Mobility: Public transport, Individual transport. Knowledge: Education/Research, Interlinking. Health: Access to basic health supply, Preservation of health. Finance: Access to financial services, Financial infrastructure. Resources: Efficient use of water, resource efficiency.
We offer products on single topics (e.g. water, resource eficency, energy efficency, sustainable mobility, climate change, wind, solar...) as well as a multi thematic funds.