Sustainable investments

Exclusion policy

The Fund Manager is a major investor in numerous industries and companies and, therefore, has a major responsibility as a capital investor. The Fund Manager is committed to investing prudently and responsibly for the benefit of its clients, while identifying and managing risks appropriately.

As an owner and acting as a shareholder, the Fund Manager seeks to contribute to prosperity and sustainable development for the benefit of the investment funds and portfolios it manages. It believes that integrating environmental, social and governance (ESG) criteria into ownership and investment decision-making has a positive impact on long-term returns. It expects all its employees, especially those involved in investment activities, to support this approach.

In its responsible investment practice, the Fund Manager applies the following strategies, taking into account the specificities of the various portfolios:

• Exclusion criteria – The Fund Manager refrains from investing in companies whose activities are considered harmful according to international standards (e.g.: non-compliance with the principles of the UN Global Compact, involvement in controversial weapons manufacturing, companies with exposure to thermal coal, and companies involved in the tobacco industry). We define our exclusion lists along the lines of the exclusion principles, which may vary across funds with different sustainability objectives.
• Integrating ESG considerations – The Fund Manager takes environmental, social and governance factors into account in its investment decisions. In assessing sustainability risks, it relies on data provided by third party ESG data providers, which may also use internal analyses to process such data.
• Active ownership – engagement and voting – The Fund Manager typically engages in dialogue with the companies in which it invests. It obtains information about the companies it wants to invest in through conference calls and, on occasion, company visits. In addition, it participates in the annual general meetings, where it exercises its voting rights as set out in its Engagement Policy. In doing so, it collects information on the sustainability commitment of the companies concerned and, where justified, it enforces this sustainability commitment in votes. The Fund Manager operates and develops investment decision-making processes that aim to integrate sustainability risks alongside other relevant investment risks. The specific manner in which sustainability risks are taken into account depends on the nature of the given portfolio. Where the portfolio's investment policy explicitly includes objectives to promote environmental or social characteristics or a combination thereof, or where the investment policy seeks to implement a sustainable investment, the Fund Manager's asset management practice, to a varying extent, but explicitly favours instruments where exposure to sustainability risks is typically lower. In its investment decisions, the Fund Manager takes into account the principal adverse impacts on sustainability factors – as defined by Regulation (EU) 2019/2088 of the European Parliament and of the Council on sustainability‐related disclosures in the financial services sector – at the organisational level. The Fund Manager assesses and measures sustainability risks through these principal adverse impacts on the issuers of investment instruments.
• Declaration on the principal adverse impacts of investment advice on sustainability factors – The Fund Manager declares that it measures the principal adverse impacts on sustainability factors (PAI indicators) for funds and, for funds with sustainability objectives, it also assesses these and informs its clients of the results in the annual report.

ESG Guide

The acronym stands for environmental, social and corporate governance responsibility, i.e. a set of standards for corporate behaviour that socially conscious investors use to screen and assess potential investments.

E is for environment: the examination of the positive and negative environmental impact of a business.

The question "How seriously is environmental responsibility taken?" can be answered by looking in particular at the following aspects: gas emissions (carbon dioxide and other greenhouse gases), biodiversity conservation, air, water and soil pollution, forest, land, waste and water management, resource use, energy saving and emission reduction efforts.

Most people – wrongly – identify the whole approach with this area, as it is the best known and indeed the most emphatic.

S is for social: addressing social issues outside and inside the organisation.

In relation to the question "How are stakeholders (employees, suppliers, customers) treated?", the most important aspects are human rights management, labour code compliance, gender equality, employee health, development and safety, local community satisfaction, data security, product safety and quality, supplier issues.

G is for governance: the set of decision-making mechanisms and senior management activities.

Factors that provide the answer to the question "How are the rights of small investors and other stakeholders ensured in corporate governance?": board independence and diversity, executive compensation, anti-corruption policy, fair practices, transparent taxation, shareholder rights, remuneration policy. The leadership approach has a strong impact on the other two categories, as it can determine long-term success.

Behind the three letters is a holistic approach to examining all segments of companies, thus it is not enough to use only green technologies or to engage in directly non-polluting activities (e.g. financial companies), as these are only one aspect of the matter.

Companies with these considerations in mind can attract more cheap capital from investors, tend to prioritise ethical considerations, perform better in the stock market, have a more predictable risk profile, and can gain an advantage in the labour market and reduce their operating costs. At the same time, developing credible company-specific methodologies (not only in communication), integrating these into everyday life, and producing detailed performance reports can be challenging.

Why is ESG important for the client?

The client’s decision is increasingly impacted by whether or not they can ascertain beforehand that the company or the processes used to produce the product meet society's safety and physiological needs.

Why is ESG important for the employee?

Employee satisfaction keeps employees with the company and attracts new staff. It is increasingly important for employees that companies make strategic decisions based on ESG considerations. Current or future employees also want to know how the company looks after staff – whether it is involved in helping disadvantaged people; whether it is involved in mitigating environmental damage; whether it looks after employees through various screening programmes.

Why is ESG important for the owner?

Companies are increasingly expected to operate not only on the basis of profitability and financial returns, but also on the basis of sustainability, social and environmental benefits. In the case of listed companies, even the price of the company's shares can be affected by the application and appropriate communication of its ESG approach.

Why is ESG important for the investor?

More and more investors are taking ESG into account in their investment decisions, and several analyst firms are producing ESG assessments of listed companies, which are increasingly being used by professionals facing investment decisions. Today, one third of all investments take ESG aspects into account, meaning that companies that underperform in these aspects may face less investor interest in the future.

ESG funds