Our approach to sustainable investing (SI) helps you integrate sustainability into your portfolio in a meaningful way at various levels.
At Quoniam, we see it as our responsibility to help shape and develop sustainability in asset management. Our SI approach is of a high standard:
- Since 2012, we have been committed to the Principles for Responsible Investment (PRI) and support various initiatives for sustainable investment.
- In the PRI Transparency Report 2020, we received an A score for all asset classes and the highest grade of A+ in the Strategy & Governance category.
Screening, integration and engagement: these three building blocks enable investors to build a portfolio according to sustainable criteria. We adapt this to your investment guidelines and actively manage it using quantitative methods.
Our investment process is quantitative. It is based on the integration of data that can be processed by our quantitative investment platform – both in the screening and integration building blocks.
Building blocks for sustainable investing
In our investment decisions, we take into account aspects of sustainability in order to generate long-term added value for you. In addition, we are committed to sustainable management and good corporate governance at the companies in which we invest. This way, we contribute to increasing the value of the company in the long term.
Overview of ESG data
Exclusion of controversial business practices
Based on our Responsible Investing Guidelines, Quoniam maintains a negative list of companies and issuers that are excluded from the investment universe.
Where we use screening
- We apply the negative list to all mandates where we have full discretion, including all mutual funds of the Luxembourg-registered Quoniam Funds Selection (QFS) SICAV.
- Discretionary mandates and client-specific funds are excluded from this.
- For special funds, we offer our clients various exclusion criteria to meet their individual needs.
How screening works
- In screening, we take into account the standards of our responsible investment policy, which in turn is based on international guidelines.
- The screening is based on six principles that have to be fulfilled without exception by the companies in the investment universe for Quoniam to invest in their securities.
- We exclude controversial weapons (cluster bombs, weapons of mass destruction, landmines, nuclear weapons and ABC weapons) for all mandates.
- In addition, we apply further exclusion criteria for the mutual funds of the Luxembourg-registered Quoniam Funds Selection (QFS) SICAV (asset manager: Quoniam, management company: Union Investment Luxembourg S.A.).
Exclusion criteria in the mutual funds of the QFS SICAV
- Controversial weapons (complete exclusion)
- Human rights (complete exclusion in case of disregard of human rights)
- Employee rights (complete exclusion in case of violation of employee rights)
- Environment (complete exclusion of certain sectors or exclusion if revenues generated by coal extraction is >5%)
- Governance (exclusion if controversies exist regarding business ethics, bribery, tax evasion, insider trading, etc.)
- Tobacco (exclusion if revenues from tobacco products >5%).
- UN Global Compact (exclusion if the principles of the UNGC have been violated).
Reduction of ESG risks
ESG is an integral part of our investment process. ESG data and factors are incorporated into the specific portfolio construction. For quantitative strategies, this approach is called ‘tilting on ESG factors’. In doing so, we optimise your portfolio in terms of ESG score and carbon footprint to achieve an improved sustainability profile.
As an alternative or supplement to screening, investors can decide to take into account corporate sustainability metrics when selecting stocks. A very broad coverage is offered by an ESG score, which is directly integrated into the portfolio construction and ensures a stronger alignment of the portfolio to one or more metrics.
- This is based on ESG data from MSCI ESG Research, one of the world’s leading providers of environmental, social and governance sustainability analysis and ratings.
- Within this database, the material ESG risks and opportunities of companies as well as sovereign and other issuers are captured, assessed and adjusted according to the industry using thousands of data points in 37 ESG focus areas.
- This evaluation results in ESG scores from 0 to 10 points.
- The analysis incorporates data from governments, international organisations, scientific institutes and non-governmental organisations, as well as corporate data such as the results of annual general meetings and sustainability reports.
One of the most important ecological indicators is the carbon footprint. As part of the Carbon Disclosure Project, many companies now report corresponding data, which is prepared by specialised research companies such as Trucost.
Greenhouse gas emissions stages
The greenhouse gas emissions (equivalent carbon content) of companies can be measured in different stages according to the Greenhouse Gas Protocol:
- Scope 1 includes all direct greenhouse gas emissions produced by companies.
- Scope 2 covers supplies, in particular energy, which are produced outside and are thus responsible for indirect emissions.
- Scope 3 also includes indirect emissions, which are caused, for example, by product use by the end consumer.
As there is only sufficient data quality for greenhouse gas emissions according to Scope 1 and 2, emissions according to Scope 3 have not yet been taken into account by Quoniam.
To calculate the carbon intensity for your investment portfolio, we calculate the carbon emissions in relation to the company’s turnover. We then multiply this quotient by the respective portfolio weight. This method calculates the carbon intensity independent of the absolute value of the portfolio or the value of the invested capital. Quoniam also takes this data into account during portfolio construction and can thus achieve a target carbon footprint for the portfolio. The majority of emissions come from a small number of companies and sectors, such as utilities and commodity producers. However, even companies without Scope 1 emissions, such as those in the service sector, differ in their competitive comparison and in their efforts to reduce their carbon footprint.
UN Sustainable Development Goals (SDGs)
The 17 United Nations Sustainable Development Goals (SDGs) are playing an increasingly important role in asset management. At Quoniam, we can comprehensively integrate SDGs into your investment strategy. In doing so, we create perspective around the SDGs while integrating a variety of other ESG data.
Find out here how you can make an above-average contribution to achieving the SDGs with our transparent SDG investment approach and participate in the global equity markets at the same time.
Direct influence on companies
Engagement refers to the active influence of shareholders or their representatives on companies. The aim is to motivate them to improve their behaviour in terms of sustainability.
The current engagement report for all sub-funds of the Quoniam Fund Selection SICAV can be viewed here.
Where we apply engagement
Within the framework of individual mandates, you can instruct Quoniam to exercise voting rights via the Engagement module. As an active investor, companies are influenced to promote sustainable business and good corporate governance. In this respect, we work together with Union Investment, which implements our guiding principles in contributions and votes at annual general meetings and in direct dialogue with companies.
How engagement works
The engagement approach essentially consists of three phases:
- Pre-engagement identifies the problem areas in companies that can be addressed with engagement activities.
- The two levers in the actual engagement phase are the exercise of voting rights and direct dialogue. The most common topics include corporate governance, controversial shareholdings, carbon emissions, the switch to renewable energies, diversity, environmental issues and social standards.
- In post-commitment, the results of the activities are evaluated at regular intervals. A longer time horizon is assumed here, because sometimes the results of changes only become visible after years.