Responsible investments. Sustainable returns.
Client demand for sustainable and impact investment opportunities has grown significantly in recent years. At Credit Suisse, we strive to create and facilitate investment products and services that generate environmental and social benefits as well as financial returns.
Sustainable investments have more than doubled in volume over the last five years, and the volume of impact investments has increased at an even faster pace. Credit Suisse has been active in this investment space for more than 16 years and, as a pioneer, continues to contribute substantially to the development of this market. Through our activities in this area, we also aim to support the realization of the UN's Sustainable Development Goals (SDGs). We have seen an especially strong rise in demand for sustainable and impact investment opportunities from institutional investors. In addition, private clients – particularly high-net-worth individuals, next-generation investors and millennials – are increasingly expressing their desire to use their capital to have a positive impact on the world. At the same time, charitable foundations are looking for ways to align their investments with their mission.
Our Impact Advisory and Finance (IAF) department was established in 2017 and combines all of Credit Suisse's sustainable and impact investing efforts around the globe within one organization, reporting directly to the CEO. The IAF department aims to facilitate investable projects and initiatives that have a positive economic and social impact while focusing primarily on generating a financial return for clients. Its mandate is to define, guide and coordinate all of the Group's activities in this sector for the benefit of institutional, corporate and wealth management clients. Its remit covers sustainable investments and impact investments where the primary focus is on generating a financial return.
Credit Suisse Global ESG Investment Principles
At Credit Suisse we believe that a responsible approach to business is a key factor in determining long-term success. Our ‘Global ESG Investment Principles’ are aligned with our core values and reinforce our conviction that an appropriate and disciplined consideration of ESG principles may positively contribute to the management of certain investment strategies and associated risks.
Credit Suisse's sustainable investment offering comprises portfolio solutions and products across a range of asset classes, including equities, fixed income, real estate, alternative investments, thematic investments and index solutions. We offer sustainable single and multi-asset solutions to private and professional clients across different regions, constantly broadening and aligning them more and more closely with the SDGs. Our solutions are designed to generate market rate returns in line with traditional portfolios while reflecting clients' personal values.
Our sustainable investment strategy considers ESG aspects in addition to traditional financial criteria. For single securities, we use a multi-strategy framework that allows our clients to translate their personal values into investment decisions. This new framework was created by a group of Credit Suisse specialists with expertise in the fields of sustainability, portfolio management and asset management, as well as by the office of the Chief Investment Officer and the IAF department. This group also regularly reviews the framework and suggests recommendations to align our approach with the latest industry developments.
Assets invested according to sustainability criteria at Credit Suisse rose to over CHF 25 billion by the end of 2018, reflecting continued growth in this area. In Asia, we surpassed the USD 1 billion mark for assets under management invested according to sustainability criteria. Reflecting our efforts to expand sustainable investing opportunities that generate a financial return for investors in Asia, Credit Suisse partnered with RobecoSAM in 2018 to launch the RobecoSAM Smart Mobility Strategy, which focuses on the electric vehicles value chain.
Compared to sustainable investing, which excludes non-sustainable areas or promotes leaders in ESG criteria, impact investing explicitly seeks to make a positive social or environmental impact in addition to generating a financial return. What sets impact investing apart from other sustainable investment practices is the intentionality of social and environmental impact and the measurement of these outcomes. Credit Suisse's impact investing business includes more than USD 7 billion of assets under administration (assets in investment funds and vehicles administered by Credit Suisse) and over USD 2 billion in client holdings. Impact investing activities at Credit Suisse include investments in small and medium-sized businesses with a social or environmental mission and the development of financial products, such as those designed to support smallholder farmers and high-potential students in developing countries.
Education is one area of focus of our impact investing activities. Our six Higher Education solutions, the last two of which were launched in 2017, are an example of this focus. In 2018, we partnered with PG Impact Investments to launch an offering that aims to improve the lives of underserved individuals by addressing societal challenges while generating financial returns, with a global strategy that focuses on emerging markets in particular. We also act as the impact advisor to the Asia Impact Investment Fund I L.P., which invests in fast-growing businesses that address social challenges across Asia.
In the area of financial inclusion, investments are designed to provide economically disadvantaged people – especially those in emerging markets and developing countries – with access to financial services. Our activities in this area benefited over 3.1 million people in 2018. We provide a range of advisory services and capital market transactions, as well as offering several global microfinance solutions, structured products and a private equity fund of funds. We are a member (and have a seat on the Boards) of the European Microfinance Platform, a network of about 130 organizations, as well as the Swiss Capacity Building Facility, a public-private partnership between the Swiss financial sector and the Swiss Agency for Development Collaboration (SDC). In addition, our Financial Inclusion Initiative (FII; formerly the Microfinance Capacity Building Initiative) helps to drive market development and innovation in this sector. The initiative aims to strengthen the ability of financial services providers to serve the increasingly diverse financial needs of people at the base of the income pyramid.
We are continuing to expand our activities in the area of conservation finance, a fast-growing environmental finance market focusing on the generation of long-term and diversified sources of revenue that can play a major role in ensuring biodiversity conservation and the health of natural ecosystems. In 2018, we held the fifth Annual Conservation Finance Investor Conference in New York City as well as our first Impact Roundtable in Lisbon that centered on marine conservation and the Blue Economy, whose aim is to create investment opportunities in this space.
We conduct a range of activities in green finance to achieve a positive impact on the environment while, at the same time, creating financial value for our clients. For example, in 2018 we successfully executed green bond transactions for GCL New Energy, Paprec Group, the North American Development Bank, Xcel Energy, Terna and ING. We are also active in the sustainability lending market and during 2018 we participated in a total of over USD 14 billion worth of sustainability-linked loans from a range of European borrowers. Through our Global Markets team, we launched our own Green Bond Index to complement our existing suite of corporate credit indices, reflecting the importance of the green bond product for buyside clients. In addition, we offer green finance products and services across a wide range of asset classes in wealth management and investment banking.
Throughout 2018, we conducted sustainability-related research across our divisions. Investment Strategy & Research within Investment Solutions and Products – a division in International Wealth Management – published several research updates on sustainability topics. In June 2018, our Equity Research Zurich team published an extensive update on its research into themes called supertrends, including new data on the incipient boom in clean vehicles as part of the "millennials" supertrend. In October 2018, Equity Research Australia published "The Age of Plastic", a study that examined the environmental impact of plastics and looked at different actors in the value chain.
The Credit Suisse Research Institute (CSRI) is Credit Suisse's in-house think-tank. It studies long-term economic developments that have a global impact within and beyond the financial services sector or may do so in the future. The CSRI publishes original research on topics ranging from economics and monetary policy to gender equality and consumer behavior.
In investment research, we publish global economic assessments and market outlooks in a range of reports. In 2018, we revised one of our core research publications for clients, originally published in 2017, which examined the role of corporate governance in family-owned companies. Previously, we also conducted assessments of the important role gender diversity plays in corporate performance and published the findings in our Gender 3000 study.
Credit Suisse also addresses ESG topics through thematic research. Credit Suisse Global Markets Equity Research has developed a method to calculate the probabilities of achieving implied returns in infrastructure investments. In our Global Markets division, Credit Suisse HOLT, a team focused on corporate performance and the valuation of listed companies, offers a governance framework that systematically scores 2,500 incentive plans based on their alignment with wealth-creating principles and pay-for-performance best practices. Credit Suisse's HOLT team is incorporating data on carbon emissions into its equity research platform, with the aim of allowing investors to assess carbon intensity and carbon-adjusted returns in conjunction with operating performance. The framework is being extended to cover water withdrawal and waste production. In addition, tools are being developed to model the impact of environmental factors on equity valuation across different scenarios.