Sustainability methodology

Demographic change and economic growth produce pressure on ecosystems, the environment and society. Climate changes and shortage of natural resources hold regionally different opportunities and risks for national economies. The social, ecological and governance criteria defined by Swisscanto identify companies and countries adjusting successfully to new realities and making an active contribution to sustainable growth.

Sustainability analysis of companies

In principle, in a first step, all companies, whose activities are problematic from an ecological and social point of view, are excluded from the sustainability analysis in accordance with clearly defined criteria.

Swisscanto invests on principle only in companies which are not active in the following sectors:

• Acceleration of climate change (among other things extraction of fossil energy sources, car manufacturers and airlines)
• Reduction of the ozone layer
• Decline in the variety of species of plants and animals (among other things non-sustainable forestry)
• Nuclear energy
• Genetic engineering
• Manufacture of weapons of all kinds
• Production of tobacco and smokers’ requisites
• Manufacture of PVC and vinyl chloride
   

Only then does the sustainability analysis take place. Strict social, ecological and governance criteria have been stipulated in this connection. They are translated into action by the specialists from Inrate, our partner in sustainability research. Companies meeting the selection hurdles in the comparison of branches stipulated by Swisscanto can be included in the investment funds. The same approach applies for corporate bonds.

The test criteria are divided into five fields. Here below are some examples for the over 100 criteria from the five topic fields:

• Environment
  In the environment field, for example, the structure of the environmental management system and the development of energy consumption, emissions and the quantity of waste are assessed.
   
• Society
  These include activities or services by the company which have a positive effect on the public at large. Examples of this are respecting human rights in everyday business life or donations by companies for the benefit of charitable organisations.
   
• Employees
  At the centre of attention are, among other things, the shaping of working conditions, the promotion of equality of opportunity between women and men, as well as structures to suit the needs of families.
   
• Governance
  A responsible company management of integrity as well as excellent internal control systems are a central topic. So it is important that board members should not only have sufficient specialist knowledge, but also the necessary independence towards the top management.
   
• Product analysis
  In the environment field, for example, a life cycle analysis specifically for the branch is conducted. With this approach, all the environmental pollution is recorded and evaluated which can accumulate in the extraction of raw materials, from production to marketing.
   
• Offences
  Critical incidents can occur in companies or countries at any time. Therefore companies and countries are constantly probed by Inrate in response to accusations with regard to infringements of social conventions, environmental law guidelines as well as white-collar crime. Actual offences, poor crisis management on the part of companies and governments have a negative effect on the final result.
   
• Sustainability analysis countries
  The test procedure is adapted to the respective borrower category. As already mentioned, corporate bonds are analysed in the same way as quoted companies. For the selection of the best countries, quantitative environmental and social indicators for the choice are analysed in the case of countries and constituent states.
   
• Selection of securities
  The sustainable investment universe includes companies which profit most from the trends identified. In a next step, it is endeavoured to select the securities showing the best yield/risk profile from a combination of quantitative models and financial analyses.