Swisscanto Invest is building on its role as a pioneer in the field of sustainability. Zürcher Kantonalbank's asset management division is the first fund provider to implement the Paris climate goal in its active product portfolio. Its contribution to limiting the rise in global average tempera-tures to below two degrees Celsius is shown transparently and measurably.
Swisscanto Invest is the first fund provider to implement an annual CO2 reduction target of four percent when making investment decisions in active funds. This means it is adhering to the reduction target set by the Paris Climate Agreement, which aims to limit the global average temperature rise to below two degrees Celsius and which was ratified by Switzerland in 2017. As a new standard, the Responsible approach includes complying with the CO2 reduction target of four percent and systematically integrating ESG criteria in all active investment decisions. The engagement strategy, sustainability report-ing and the blacklist are also being expanded.
CO2 reduction target and integrating the ESG
The CO2 reduction target of four percent per year is implemented for each active fund through engage-ment efforts and capital allocation. As part of its engagement and as a shareholder and lender, Swisscan-to Invest is engaged in active dialogue to ensure that the companies formulate ambitious CO2 reduction targets of at least four percent per year and implement them consistently. With the help of capital alloca-tion, CO2-intensive companies or countries that do not themselves pursue CO2 reduction targets will grad-ually become underweighted in the funds over time. These two measures will ensure that the four per-cent CO2 reduction pathway is adhered to in all active funds.
The systematic consideration of environmental, social and governance criteria (ESG criteria) in all active investment processes is being developed further. An in-depth analysis of the individual ESG dimension pro-vides portfolio managers with extra information and allows them to make better investment decisions. Companies and countries with the highest ESG risks require separate justification and documentation if the portfolio manager wishes to keep them in the fund. Consequently, companies that generate more than ten percent of their turnover from coal production are not included. This reduces the investment risks in the portfolios.
A broader engagement
The engagement efforts are also being extended to international securities. The engagement approach includes maintaining an active dialogue with management or the Board of Directors, actively exercising voting rights, and getting proposals included on the agenda of Annual General Meetings. In addition to making an effort to improve corporate governance, Swisscanto Invest requires companies to reduce their CO2 emissions by four percent per year. The exercising of voting rights is reported transparently on the homepage.
Detailed sustainability reporting
Swisscanto Invest prepares a detailed sustainability report for each investment product. This means clients can transparently see how the market and investment products are actually developing with regard to the CO2 reduction target. They also receive information on other sustainability indicators. The carbon footprint per sector and per asset class is shown in particular, and is compared with the corresponding benchmark. Since 2011, the Zürcher Kantonalbank has used a traffic light system, which indicates the sustainability of each investment product for all clients simply and transparently in one single size variable.
Blacklist also applies to passive funds
Swisscanto Invest has applied the blacklist to the entire range of funds since the beginning of 2020. This makes it the first fund provider to integrate sustainability criteria into passive products as well. The black-list excludes arms manufacturers that produce weapons which are prohibited under international treaties or that breach Swiss sanctions.
Broad-based sustainability
Sustainability is one of the three pillars of the service mandate, and is embedded in the requirements of the Zürcher Kantonalbank as an integrated business principle.
Iwan Deplazes, Head Asset Management Swisscanto Invest, commented: "Switzerland has ratified the Paris Climate Agreement, and so committed itself to, among other things, orienting its capital flows in a way which is climate-friendly. As a pioneer in the Swiss financial sector, Swisscanto Invest is now making its contribution towards measurable and verifiable climate protection."
Dr. René Nicolodi, Head Themes and Equities, Swisscanto Invest, added: "Having an active influence on ESG issues and climate protection is our fiduciary and social responsibility. Ultimately, including these di-mensions promotes performance in wealth management in the long term."