In the Sustainable & Thematic Boutique, consideration of ESG issues is fully integrated into company evaluation. Vontobel's sector specialist analysts are synthesizing their own analysis with inputs from external sustainability specialists and the ESG Investment Committee to form a view on the issues that are most likely to impact the investment case of a company.
Vontobel has switched to this truly integrated approach in 2010 and has further developed the process since.
Furthermore, we have developed a proprietary CO2 Footprinting and assessment tool:
There is broad consensus among politicians, scientists and the business community that global warming needs to be restricted to 2° Celsius. The Paris Agreement, which entered into effect on 4 November 2016, will accelerate the transition to a climate-friendly society. It is therefore necessary for the finance industry to take greater account of the risks of climate change and to report on them transparently. This is why Vontobel works with ISS Ethix Climate Solutions (formerly South Pole Group), a specialist in the measurement of CO2 and environmental factors.
The current carbon footprint of an investment portfolio is measured primarily for risk assessment purposes. This is the most common method used and shows which sectors and companies – in absolute terms – are responsible for the highest emissions in the portfolio. The focus here is primarily on the calculation of the emissions generated as a result of the company’s operations, e.g. when manufacturing goods and products.
With the additional presentation of potential avoided emissions (PAE), we are pursuing a solution-oriented approach: We record the contribution that energy-efficient, climate-friendly products and services are expected to make to the reduction of CO2 emissions in the portfolio. After all, the emissions generated during the phase when a product is in use are often significantly higher than the emissions generated during the production phase. For example, a refrigerator generates substantially more emissions while in use than during production. The energy efficiency of appliances such as these is therefore the decisive factor when determining the amount of avoided CO2 emissions.
This approach is especially pronounced in the Clean Technologies and New Power themes. The funds focus on companies that have a positive effect on the environment with an emphasis on positive climate impacts, which we quantify in collaboration with ISS Ethix Climate Solutions based on PAE. With this methodology, we show the level of emissions that can be avoided at company or portfolio level thanks to energy-efficient products or services.
At the same time, PAE help us to reach investment decisions: To achieve the ambitious targets set out in the Paris Agreement, countries will implement stricter regulatory measures to reduce emissions. This, in turn, will drive a shift in demand towards energy-efficient products. PAE serves as an important indicator in this context in order to identify those companies that stand to benefit most from this change in demand – thus enabling us to allocate capital on a solution- and return-oriented basis.