Sustainable, Responsible &/or ESG Policy:
The investment theme defines our long-term strategic orientation and sustainability objectives.
Investment themes are identified based on our megatrend framework.
The strategy aims to capture investment opportunities across all areas of the global industry, whilst making a positive contribution towards a more sustainable world. The strategy focuses on the following areas:
- Energy efficiency
- Pollution control
- Water supply & technology
- Waste management & recycling
- Sustainable agriculture & forestry
- Dematerialized economy
The companies’ business models must have a low environmental impact, as well as driving & benefitting from development of environmental solutions. We only select companies that make a substantial ‘active’ contribution to solving environmental challenges. This is measured by the strategic importance of environmentally related products and services within the company and by the quality and amount of R&D spent in the environmental domain.
In order to be eligible in the portfolio, at least 20% of the activities of the firm must be related to products and services actively solving environmental challenges.
A dedicated Advisory Board helps the investment managers to track the evolution of the theme and to identify future trends in technology, public policy, and consumption patterns. The Board also helps defining new theme segments.
Board members are recognized experts in their respective domain; they often come from academia, NGOs or the private sector.
Sustainable, Responsible &/or ESG Process:
Our investment approach uses a unique scientific framework for the purpose of universe construction. The framework – Planetary Boundaries – was first published in Nature magazine in 2009 (by Johan Rockström (Stockholm Resilience Centre)). It represents the state of the art in terms of the current scientific consensus regarding which environmental challenges matter most. The planetary boundaries framework identifies nine key environmental dimensions (water, climate change, biodiversity, landuse, nitrogen & phosphorous cycle, ocean acidification, ozone depletion, aerosol loading and chemical pollution) and specifies the respective thresholds that humanity shall not cross, lest it is to cause irreversible environmental damage with potentially catastrophic consequences. The area within the boundaries, where human activities can take place safely is called the ‘safe operating space’. We relate planetary boundaries and safe operating space to subindustries and to individual companies.
This allows us to understand how a company’s products and services, taken over their entire life cycle, impact on the nine key environmental dimensions. We can thus see whether a company’s activities lie within the safe operating space, and whether its business model is rather forfeited or favoured by stricter environmental constraints in the future. We only invest in companies within the safe operating space that provide at the same time make an ‘active’ contribution to solving environmental challenges.
We identify an initial universe of listed companies active in the environmental value chain. Out of 40’000 global companies, approx. 3’500 operate within the safe operating space as defined by the Planetary Boundaries framework.
Only companies with sufficient exposure to environmental solutions are eligible for investment. This includes areas such as energy efficiency, pollution control, water supply & technology, waste management & recycling, sustainable agriculture & forestry and the dematerialized economy. 400 of the firms operating within the safe operating space also make an active contribution to solving environmental challenges. These 400 companies are our investable universe.
We include companies in the investable universe only if at least 20% of the enterprise value (or sales, EBIT, EBITDA, or similar measures) is derived from theme-related activities (“purity” to the theme).
When defining the investment universe of Thematic strategies, we systematically exclude stocks that have negative impacts on the environment or society. If a company’s revenues generated by such activities are above the threshold, the company is excluded from the universe.
We also exclude companies in severe material breach of UN Global Compact Principles on human rights, labour standards, environmental protection and anti-bribery/corruption.
Exclusions are based on reliable sources gathered from reputable third-party research providers. Pictet AM retains full discretion over exclusions and always reserves the right to deviate from third party information on a case by case basis.
We monitor the exposure to all activities that might be perceived as controversial by some investors. We use Sustainalytics as our external data provider and enhance it with company disclosures and our own research.
Resources, Affiliations & Corporate Strategies
Pictet Asset Management has a dedicated ESG Team which leads and co-ordinates implementation of our responsible investment policy, including ESG integration in investment processes, ownership practices, risk management and reporting tools. The ESG Team reports directly to Sébastien Eisinger, Managing Partner Pictet Group, Co-CEO Pictet Asset Management and Head of Investments.
Key responsibilities include:
Investments
- Selection and due-diligence of external data providers in collaboration with investment teams and other B/Ls
- Development of proprietary assessment methodologies (eg sector-specific “E&S Deep Dives”, sovereign issuers)
- Integration of relevant ESG datasets in IT systems and definition of quality checks
- Training and awareness raising of investment teams
Active Ownership
- Definition of engagement strategy and proxy voting policy
- Co-ordinate targeted engagements and participation in collaborative initiatives
- Consensus building between investment teams on specific resolutions
Pictet Asset Management has been a signatory of the UNPRI since 2007. In addition, Pictet Asset Management actively participates in several investor initiatives aimed at sharing best practices between asset managers and owners and encouraging corporate disclosure on ESG issues. We are notably involved in the IIGCC (Institutional Investors Group on Climate Change), SSF (Swiss Sustainable Finance) and similar organisation in the UK, Germany and Spain.
Pictet Group and / or Pictet Asset Management supports and actively participates in international and national initiatives, organisations and partnerships including the below (which indicates Pictet’s involvement, year joined and key areas of focus) :
- FNG, SpainSIF: Member (2006) - Transparency on ESG
- UNPRI: Signatory (2007) - Transparency on ESG
- Copenhagen Institute for Futures Studies (CIFS): Member, Research Partnership: Megatrends Research (2007) - Interdisciplinary academic disciplines
- CDP: Member (2007) - Carbon
- Swiss Climate Foundation: Corporate sponsor (2008) - Climate
- Sustainable Finance Geneva (SFG): Institutional Partner (Pictet Group), President Strategy and Surveillance Committee (2008) - Promotion of sustainable finance
- EFAMA (European Fund and Asset Management Association): Member of the Stewardship Market Integrity & ESG Investment Standing Committee (2010) - Fund and Asset Management
- Climate Bond Initiative: Member of the Standards Board (2013) - Climate
- IIGCC (Institutional Investors Group on Climate Change): Member of the Adaptation & Resilience Working Group (2013) - Climate
- FTSE Environmental Markets: Member of the Advisory Committee (2013) - Environment
- Swiss Sustainable Finance (SSF): Founding member (2014) - Promotion of the integration of sustainability in the financial industry
- JP Stewardship Code: Signatory (2014) - Stewardship standards
- Stockholm Resilience Centre (SRC): Research Partnership: Planetary Boundaries Framework (from 2014-ongoing), Mistra Biodiversity Finance programme (from 2022) (2014) - Core focus is to advance research in the frontier of biosphere-based sustainability science, applying a social ecological approach and resilience thinking
- Investment Association: Member of the Sustainability and Responsible Investment Committee (2018) - Stewardship and Corporate governance
- Climate Action 100+: Collaborative Engagement (2018) - Climate
- Access to Nutrition Initiative (ATNI): Signatory (Pictet Group) (2018) - Delivery of nutritious, affordable foods.
- Empower: Partnership (2019) - Youth at Risk
- UNEP Finance Initiative: Signatory (Pictet Group) (2019) - Environment
- Task Force on Climate-related Financial Disclosures (TCFD): Signatory (2020) - Consistent climate-related financial risk disclosures
- FAIRR: Member (2021) - Animal agriculture
- ICGN (International Corporate Governance Network): Member (2021) - Governance
- Science Based Targets Initiative (SBTI): Signatory (Pictet Group) (2021) - Climate
- Net Zero Asset Managers Initiative: Signatory (Pictet Group) (2021) - Climate
- ESG Data Convergence Project: Steering Committee member (Pictet Group) (2021) - ESG metrics
- UN Principles on Responsible Banking: Signatory (Pictet Group) (2021) - Sustainable/responsible banking
- UK Stewardship Code 2020: Signatory (2022) - Stewardship standards
- Institute of International Finance (IIF): Research Partnership: Bonds that build back better (2022) - Green, transition, social, sustainability & sustainability-linked bonds
- Responsible Investing Association (RIA): Member (2022) - Canada's industry association for responsible investment
- Ceres Valuing Water Finance Initiative: Signatory (Pictet Group) (2022) - Water
- Finance for Biodiversity Foundation: Member (Pictet Group); participants in the Impact Assessment and Engagement Working Groups. (2022) - Biodiversity
- Taskforce for Nature-related Financial Disclosures (TNFD): Member of TNFD Forum (Pictet Group) (2022) - Risk management and disclosure framework on nature-related issues
- UN Global Compact: Signatory (Pictet Group) (2022) - Global sustainability principles
Source: Pictet Asset Management, [April 2023]
Other industry associations:
- Asset Management Association Switzerland (AMAS): Member (Pictet Group), Member of the Distribution, Taxes Specialist Committees (1993) - Swiss Asset Management industry development
- German Investment Funds Association (BVI): Member (2004) - German Asset Management industry development
- International Capital Markets Association (ICMA): Member (xx) Securities market
Furthermore, Pictet, together with Swiss Sustainable Finance, was leading an initiative to put pressure on index providers to remove controversial weapon manufacturers from mainstream indices. The initiative, launched in August 2018, secured the backing of 174 signatories controlling over USD 9.7 trillion and including international asset owners and managers (as of January 2020). This initiative has now been closed due to inclusion of controversial weapons exposure disclosures in draft RTS and EU Benchmarking regulation.
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