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.
The growing need to combine prosperity with environmental, social and governance (ESG) considerations has already started transforming patterns of consumption, the political and regulatory landscape for businesses and the world of investing. Consumers, clients and investors are essentially calling on companies to take greater account of long-term externalities and to help preserve natural capital and finite resources. As a result, businesses across all sectors are seeking to create more sustainable business models that address the risks and leverage the potential of this transformation.
Credit Suisse has been a pioneer in the area of sustainable and impact investing for more than 17 years. Today, we continue to contribute substantially to the development of this market, as well as integrating broader societal trends into our products and services. Credit Suisse views finance not as an end in itself but rather as a means to realize ambitious objectives, and we strive to lead the way in supporting clients as they adapt their business models and join the transition to a more sustainable economic system.
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. 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 reports directly to the CEO and combines all of Credit Suisse's investment activities in sustainable investing around the globe within one organization, while defining the firm's sustainability 24 strategy relating to these efforts. 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 as well as SDG-oriented thematic and impact investments where the focus is on generating a financial return.
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 profes-sional clients across different regions, constantly broadening and aligning them more and more closely with the applicable SDGs. We design solutions that aim to generate market rate or higher returns, by adding ESG factors to allow for better-informed investment decisions, while also reflecting our clients’ personal values and taking into account long-term externalities of their portfolios for people and the planet.
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 val-ues 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 44 billion by the end of 2019, reflecting continued growth in this area.
SDG-oriented thematic and impact investing
SDG-oriented thematic and impact investing encompasses investments in sustainability themes and in enterprises that seek to make a positive social and/or environmental impact in addition to generating a financial return. These strategies offer clients exposure to fast-growing sectors such as electric vehicles, education and water. A growing number of investors are using the SDGs as a reference point to align investments and impact goals and are working with investee companies to measure the impact of their products and services.
Impact investing is the subset of strategies that can demonstrate the contribution that investors in particular can make to the impact of enterprises. These investments are typically part of private market strategies that see investors directly finance the growth of impactful companies and aim to deliver measurable improvements in the sustainability performance of the underlying investments.
Credit Suisse focuses on impact investments that demonstrate the intention to deliver impact based on a clear strategy of change and that are able to measure such impact in a tangible way. Key factors that set impact investing apart from other sustainable investment practices include:
- the intentionality of social and environmental impact;
- the strategy to reach such impact;
- the investor's contribution to the impact (also referred to as “additionality”);
- the measurement of impact outcomes.
Due to the lack of a common standard defining such impact, the International Finance Corporation (IFC) introduced the Operating Principles for Impact Management in 2019. The Principles establish a framework for impact investing focused on ensuring that impact considerations are purposefully integrated throughout the investment lifecycle. Credit Suisse believes that transparency and a common understanding of standards in impact investing are crucial to developing this market, and we decided to be a part of this initiative as a founding signatory.
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.
At end-2019, Credit Suisse's SDG-oriented thematic and impact investing business included more than CHF 8 billion of assets under management, of which over USD 4 billion are in the area of impact investing.
Green and Sustainable Transition Bonds
Credit Suisse supports the Green Bond Principles and is a partner to the Climate Bonds Initiative (CBI). In September 2019, we launched a "Sustainable Transition Bonds" initiative in collaboration with the CBI to develop a new concept framework. The framework aims to ultimately lead to a more inclusive segment of the public bond markets that helps facilitate, accelerate and support corporate transition pathways.
From 2013 to the end of 2019, we supported the issuance of over USD 30 billion of sustainability-related debt financing products such as green bonds, sustainability bonds, climate action bonds and bonds linked to the SDGs as well as green certificates of deposit and commercial paper. We are also active in the sustainability lending market and during 2019 we participated in a total of over USD 20 billion worth of sustainability-linked loans.
Access to finance
We structure investments that are designed to provide economically disadvantaged people – especially those in developing countries – with access to financial services. By providing these essential services, we believe that we can help unlock inclusive growth. We offer a number of products that address this – for example, our six higher education solutions are designed to provide funding to talented students from frontier markets to get loans for advanced education, the majority of whom have no alternative source of funding.
In the area of financial inclusion, our investment activities benefited around 1.5 million people in 2019. Our Financial Inclusion Initiative (FII) 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. To this end, we support the development of new products and services focusing on themes such as education, agriculture and gender diversity.
Renewable energy, advisory, capital markets and project finance
Our Investment Banking & Capital Markets division serves clients through a range of products and services, including advisory services related to mergers and acquisitions, restructurings and spin-offs, as well as debt and equity underwriting of public offerings and private placements. We have wide-ranging expertise across the area of renewables such as solar, wind, geothermal, biomass, biofuels, fuel cells and energy efficiency.
Throughout 2019, 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. For example, in 2019, research into the evolution of sustainable investments from a niche market into a core area of interest for asset owners looked into the sustainability issues considered most important by specialists from a broad range of sectors, including finance, energy, technology and real estate.
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 the area of investment research, we publish global economic assessments and market outlooks in a range of reports. In 2019, we revised one of our core research publications for clients, 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 study entitled “The CS Gender 3000 in 2019 – The changing face of companies”.
Credit Suisse also addresses ESG topics through thematic research. For example, the ESG Research report “Sustainable Investment Strategies” analyzed ten themes that represent broad exposure to the SDGs – including renewable energy, education and infrastructure – and the publication "The ABCs of ESG" provided an overview of the increasing focus on ESG and why it looks set to dominate investors' agendas in the years ahead. 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 over 4,000 incentive plans based on their alignment with wealth-creating principles and pay-for-performance best practices.