For our Sustainable Investing Boutique:
BEST-IN-CLASS: CORPORATE BONDS
The evaluation of the individual company's contribution to reducing environmental and social risks and the exploitation of corresponding opportunities is performed with the help of a matrix of criteria developed in-house which comprises the following three aspects:
Environmental responsibility: the company's measures and initiatives to reduce the environmental impacts in production, the supply chain and product usage. Social responsibility: the company's measures and initiatives to take into consideration the interests of customers, employees, suppliers and society as a whole, for example product safety, occupational health& safety, working conditions at suppliers. Corporate governance: embedding sustainability aspects in the corporate strategy and business model; management systems; corporate governance standards.
The two dimensions for the sustainability rating of government bonds are resource availability and resource productivity.
Resource availability includes the current and future availability of a country's natural resources (primarily the available biocapacity minus the ecological footprint), as well as its social and financial resources.
Resource productivity measures the efficiency with which resources are transformed into material wealth (gross domestic product), the education and health system of a country with respect to resource consumption, as well as the efficiency of a country's economic, political and social processes, and the overall conditions.
PUBLIC FINANCIAL INSTITUTIONS
Public financial institutions are state-supported banks with a set mandate, such as financing export activity or combating poverty.
The contribution made by the mandate assesses to what extent the institution's mandate promotes sustainable development. The contribution made by the implementation establishes how well this mandate is performed within the framework of a company's rating, which is based on the rating criteria for banks.
PUBLIC COVERED BONDS
Covered bonds are eligible for investment if both the issuer and cover pool are sustainable. The issuer rating is determined according to the same methodology as for the corporate rating for that sector, which in most cases are banks (see above, not shown here). The cover pool comprises loans to the public sector as well as government bonds. The sustainability rating of the cover pool thus corresponds to the weighted average rating of the countries financed.