Sustainable funds: Earning returns with ESG criteria

Using a sustainable fund to take care of the oceans and receive a return

The Credit Suisse RockefellerSM Ocean Engagement Fund partners with select companies in their commitment to the world's oceans. With its ESG criteria, the sustainable fund not only helps protect the oceans, but its dedication to the seas also improves returns for its investors.

Protecting the oceans is one of the ESG criteria

When investors think of environment, social, and governance (ESG) investing, the oceans don't normally come to mind. Yet, our oceans are a central basis for human and animal life. They supply food, provide a habitat, and serve as an ecological buffer against the long-term effects of climate change. The oceans absorb 93 percent of the heat we generate and are responsible for removing 25 percent of the world's CO2 from the atmosphere. In addition, the oceans produce a large portion of the oxygen on Earth – more than twice as much as the rainforests.

At the same time, the oceans are an important economic factor. If they were merged, they would be the seventh-largest economy on the planet. However, the oceans are in dire straits today. Plastic pollution, careless disposal of wastewater, and overfishing of the oceans are pushing this precious ecosystem to the brink. Global warming is also contributing to a rise in sea levels and threatening the livelihoods of millions of people around the globe. The sustainable "Blue Economy" investment concept describes the economic potential of the oceans as well as the need to focus on preserving it.

Making an impact with a sustainable fund

Within this framework, investors will find opportunities for how they can act in a forward-looking manner while still having a positive impact. With sustainable funds and a focus on ESG criteria, they can achieve this goal. When picking their investments, they will find it pays off to give preference to strong engagement – that is, exercising their rights as investors.

This investment strategy has many advantages. Investors can give companies an incentive to improve their competitive position by converting to more sustainable business models or avoiding regulatory risks – for example, by upgrading the equipment in their company. When this strategy is applied successfully, companies and investors are generally rewarded with share prices that outperform others.

ESG strategies ensure profits in the long term

ESG strategies ensure profits in the long term

Note: Elroy Dimson, Paul Marsh, and Mike Staunton: Credit Suisse Global Investment Returns Yearbook 2021

A commitment to helping protect the oceans

By making a commitment, sustainable investment funds pursue the goal of influencing the behavior of companies and achieving sustainable results in environmental matters. Leading issues are climate change, human rights, and diversity in the workforce. For example, the Credit Suisse RockefellerSM Ocean Engagement Fund places its emphasis on the three issues outlined below with a high-conviction portfolio that concentrates on the most promising equities:

1. Preventing environmental pollution

In this area, the focus is on pollution of the oceans. One possible commitment is, for example, the demand for changes to product compositions or a switch to alternative forms of packaging.

2. Transitioning to a low-emission economy

Investors can have a positive effect on CO2 emissions. This includes the reduction of greenhouse gases or the promotion of a transition to alternative forms of energy.

3. Protecting the oceans

To counteract the exploitation of our oceans and coastal areas, investors can support more sustainable fishing practices at fisheries. Limiting wastewater dumped by fertilizer producers or developing coastal conservation programs are other areas being addressed.

sustainable fund generates better average yield

High-conviction portfolio across three subthemes

Asset allocation of the Credit Suisse Rockefeller Ocean Engagement Fund

Last data point: August 31, 2020

Source: Credit Suisse AG

A sustainable fund with an innovative approach

When selecting companies, the Credit Suisse Ocean Engagement Fund categorizes portfolio companies according to their business activities. So-called Ocean Leaders are companies that distinguish themselves with an existing, long-term commitment to the health of the oceans, while Ocean Endangerers receive a poor report card with respect to ocean health and are excluded from the portfolio.

In addition, there are companies that are designated as Ocean Solutions and are ready to transition to a sustainable Blue Economy. Lastly, there are the Ocean Improvers, which have the intention of mitigating environmental risks and more heavily expanding solution-oriented operating segments and offer what is probably the greatest opportunity for engagement.

ESG criteria are now indispensable

In recent years, publicly traded companies that devote themselves to ESG issues have become increasingly popular with investors. From 2014 to 2016 alone, the amount of assets under management expressly tied to their engagement shot up 41 percent. In Europe, this approach is ranked the third most popular strategy among responsible investments.

When it comes to the subject of sustainability, it should now be clear to investors that ESG criteria and profitability are not mutually exclusive. Engagement is the most direct way to have a positive impact and encourage companies to use more environmentally friendly production methods.

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