ESG criteria in asset management

Along with our direct impacts on the environment and society, we are able to make a positive contribution to sustainable development through our investing activities by avoiding socially harmful investments. Sustainability in asset management is therefore a major concern for our company.

Investors, analysts and clients are increasingly taking an interest in how we incorporate social and environmental aspects into the management of our investments. In general terms, when it comes to the management of our asset portfolio we aim to generate a stable and commensurate market return in the interests of our clients and shareholders. We also take into account environmental, social and governance (ESG) criteria. Our sustainability approach on the investment side is defined in writing in our “Responsible Investment Policy”, which we developed in 2011 and have subsequently already updated on two occasions. Specifically, we are guided here by, inter alia, the ten principles of the United Nations Global Compact, i. e. we also take into account considerations relating to human rights, working conditions, the environment and anti-corruption. Instruments issued by companies that fail to respect human rights or are complicit in human rights abuses are excluded from our investment universe, as are issuers that disregard basic labour standards and environmental protection considerations. Similarly, exposures to companies that have been noted for their use of compulsory / child labour or their involvement in discrimination or corruption are also avoided. In our review of government issuers the focus is on whether they are currently subject to sanctions and, if so, what these sanctions are. Furthermore, we avoid exposures to issuers who are involved in the development and proliferation of controversial weapons. With regard to the fossil fuels sector, from 2018 onwards we are no longer purchasing securities of issuers who generate 25% or more of their turnover from coal mining and coal-based energy generation.

Our investments are subject to negative screening every six months by an external service provider to verify compliance with these ESG criteria. Securities of issuers defined as “non-adequate” are actively reduced while minimising the market impact. In addition, potential new investments are checked in advance to see whether the issuers violate the defined ESG criteria. Such exposure is avoided if this is found to be the case. The portfolio subjected to this screening encompasses major asset classes such as fixed-income securities (government debt securities and debt securities issued by semi-governmental entities, corporate bonds and covered bonds) and listed equities. Altogether, depending on strategically motivated allocation changes, virtually 90% of our investments under own management (EUR 42,197.3 million) are therefore screened according to ESG criteria.

In the year under review we also implemented a “best-in-class” investment approach as an additional tool within our responsible investment policy. An ESG officer on the investment team assures the development and application of our sustainable investment guideline. In addition, major investment decisions are discussed and approved by the Investment Committee, two of whose members belong to the Executive Board.

Given that the proportion of listed equities in our asset portfolio accounts for less than 1% of our investments under own management, we have not adopted any voting guidelines to date on environmental and social issues in connection with the sustainable orientation of our investments, nor have we defined any corresponding processes or measures. Should the proportion of listed equities in our portfolio increase significantly, we shall revisit the topic of active ownership.