Greater transparency with our sustainability reporting

More and more investors believe that an investment portfolio should no longer deliver just a good risk-adjusted return, but should also, for example, leave as small a CO2 footprint as possible and should contribute to achieving the United Nations’ Sustainable Development Goals. Newly developed comprehensive sustainability reporting enables interested clients of Kaiser Partner Privatbank to track the status and progress of their portfolios in detail with regard to their impact on fostering sustainable environmental and societal development.

 

We provide a permanent overview

Sustainability investing is enjoying growing popularity and booming demand worldwide. More and more investors want their investment portfolios to deliver good risk-adjusted returns while taking environmental, social and corporate governance (ESG) aspects into account. There is a wide array of sustainability objectives that can be pursued through the investment of capital. The spectrum ranges from adherence to international norms and compliance with a two-degree global warming scenario to keeping CO2 footprints as small as possible and supporting the UN Sustainable Development Goals, or even achieving a measurable impact. To meet such demanding aspirations, it is necessary to regularly conduct an in-depth portfolio analysis based on specific sustainability criteria. The quantity and quality of sustainability data reported by corporations have increased and improved in recent years and look set to continue doing so in the future, not least due to political pressure. At the same time, the number of data providers that collect and prepare ESG information in different forms and according to different criteria has also increased and has given rise to a veritable data jungle in the meantime. Our newly developed comprehensive sustainability reporting thus creates transparency on two counts: we bring order to the jumble of “green” data and give interested clients a tool they can use to track the status and progress of their portfolios in detail with regard to their impact on fostering sustainable environmental and societal development. Below we describe the most important elements of our sustainability reporting.

 

Impact measurements:

The 17 Sustainable Development Goals (SDGs) initiated by the United Nations in 2015 have quickly evolved into a global standard and a guidepost for a growing number of sustainability strategies. The SDGs, which encompass issues including food security and nutrition, therapies for diseases, and (sustainable) water resource management, can also be used to measure the impact that portfolio investments have on the real world. In this sense, our sustainability reporting makes it possible to evaluate an investment portfolio’s contribution to a “more sustainable” society. To facilitate the evaluation, the report aggregates the revenues generated by portfolio companies in business areas promoting sustainability (such as alternative energy, energy efficiency, pollution prevention, education, or hygiene, for example). This ultimately enables concrete assertions to be made about how much SDG-target-oriented real economic activity is connected with a certain portfolio size (CHF 1 million, for example). The report also provides a qualitative assessment of the extent to which companies in a portfolio contribute to the SDGs at the operational and product level and appraises how well an overall investment portfolio aligns with each of the 17 UN Sustainable Development Goals. This, too, enables comparisons with respective corresponding benchmarks.

 

What is my contribution to achieving UN Sustainable Development Goals?

Sustainability themes at a glance

Impact measurement

Source: Kaiser Partner Privatbank

 

ESG rating distribution and ESG scores:

Sustainability ratings reflect the risks and opportunities that arise for companies out of ESG factors and how they deal with them. Our sustainability reporting provides a detailed breakdown of the ESG rating distribution and ESG scores of the companies held in an investment portfolio either in the form of shares or bonds or indirectly via equity or fixed-income funds and ETFs. The ESG rating distribution is broken down across a rating spectrum from AAA (very good) to CCC (very bad). The aggregated ESG scores, in turn, are depicted in relation to the three aspects environment (E), social (S) and corporate governance (G) and are additionally broken down into several subcategories. The subcategories under “environment”, for example, are climate change, use of natural resources, waste management and environmental opportunities. The sustainability report always sets the ESG rating distribution and ESG scores for a client portfolio against comparable figures for a corresponding benchmark (usually an equity or bond index) and points out positive and negative deviations. Moreover, the reporting enables the ESG ratings and scores to be broken down to the sector level and let’s you see which portfolio companies are the best and worst performers in terms of their ESG scores.

 

How sustainable is my portfolio?

ESG ratings at a glance

ESG rating distribution and ESG scores (portfolio vs. benchmark)

 

Source: Kaiser Partner Privatbank

 

Ecological footprint:

Global warming and its consequences are arguably the most relevant ESG risk for the Earth’s population as well as for companies, and indirectly thus also for investors in the end. The ecological footprint of an investment portfolio (and the ambition to progressively shrink its size) therefore has elevated importance. Our sustainability report discloses the amount of CO2 emissions associated with the stocks held in an investment portfolio. The overall level of CO2 emissions includes direct emissions (scope 1), indirect emissions from energy supplied by third parties (scope 2) and other indirect emissions (scope 3) that occur before the start of or after the end of a company’s product or service cycle. The report additionally calculates the portfolio’s relative CO2 footprint (how many tons of CO2 per CHF 1 million of invested assets are emitted?) and emissions intensity (how many tons of CO2 per CHF 1 million of revenue are emitted by the companies held in the portfolio?). Just like for ESG ratings and scores, the reporting also makes it possible to compare a portfolio’s ecological footprint data against comparable figures for a corresponding benchmark. In addition, the sustainability report shows which individual positions and sectors in the portfolio have the biggest ecological footprint and sheds light on what percentage of the portfolio is invested in companies that generate revenue with fossil fuels (coal, oil, natural gas) and are only marginally improving their ecological footprint.

 

How big is my ecological footprint?

Emissions at a glance

CO2 report

Source: Kaiser Partner Privatbank

 

Controversial business areas:

Alcohol and tobacco, gambling, genetic engineering, atomic energy and arms manufacturing are all considered controversial business areas and need to be critically questioned, particularly in the context of environmental and social aspects. Exposure to these questionable business areas poses a potential source of risk in an investment portfolio and therefore must be explicitly monitored. Our sustainability report points out what percentage of a portfolio’s market value exhibits exposure to companies operating in controversial business areas as well as exposure to controversies in connection with violations of global standards and norms.

 

Your contribution to a more sustainable society

Our sustainability reporting can be drawn up and delivered to interested clients at any time on request and/or can be attached as a supplement to the periodical portfolio report. It provides not just a comprehensive overview of the current state of ESG risks and opportunities in an investment portfolio, but also enables you to further refine the portfolio sustainably. We will be happy to assist you in adding personal touches to your portfolio and putting your investment assets to work to contribute to a more sustainable society.

 

Would you like to learn more about our sustainability reporting? We look forward to hearing from you.

 

Oliver Hackel, CFA Senior Investment Strategist

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