ESG investing ESG investment criteria
Credit Suisse Sustainable Investing Framework
The Credit Suisse sustainable investing framework is used to differentiate and characterize investment strategies in our offering that qualify as ESG compliant. The framework offers the following range of criteria and tools to measure, manage and improve the ESG performance of our sustainable offering.
Exclusion criteria (equity and fixed income)
Our approach to sustainable investing begins with clearly defined exclusion criteria. Sectors and companies that are proven to have a detrimental impact on society or the environment will be excluded from our investment universe. Manufacturers of controversial weapons such as land mines and cluster bombs, as well as manufacturers of nuclear, biological and chemical weapons, are excluded from all our products (passive and active).
In our sustainable strategies, companies that derive more than 5% of their revenue from weapons such as conventional weapons and firearms, nuclear energy, tobacco, gambling or adult entertainment are excluded as well. In addition, a revenue limit of 30% applies to investments in coal (coal mining and coal-based electricity generation). We reserve the right to lower this threshold over time in order to reflect the transition towards a low-carbon society.
In addition, companies that are involved in one or multiple very severe controversies such as child labor, bribery or fatal accidents are also excluded. We work with external data providers to assess the exposure of firms to such business involvement or controversial behavior.
ESG Integration (equity and fixed income)
In our sustainable investment strategies, we actively integrate sustainability insights in our investment decisions in combination with our financial analysis and portfolio construction. We are convinced that material ESG indicators can provide complementing information with regard to opportunities and risks of an investment decision. Therefore, we strive for giving a greater weighting to ESG criteria that are likely to exert a positive impact on risk-adjusted investment returns over the long run (such as a company’s innovativeness).
Our systematic approach to ESG integration into investment processes varies depending on the asset class and the intended characteristics of the respective investment strategy. We use a range of external ESG research providers and rating agencies in combination with our in-house sustainability and financial analysis to create ESG integrated investment decisions that meet financial and sustainability objectives alike.
Real estate investment products from Credit Suisse Asset Management are ESG-compliant if they receive at least three out of a maximum of five stars in the annual real estate ESG benchmarking conducted by GRESB (Global Real Estate Sustainability Benchmark). Furthermore, sustainable real estate funds must take part in the following three core ESG initiatives established by Global Real Estate: (1) building certifications, (2) building optimizations, and (3) ESG performance measurement by GRESB.
Active ownership (Voting and engagement)
Influence is exerted on a company’s business operations (active ownership) by actively exercising voting rights at annual general shareholder meetings (proxy voting) based on our voting policy. In addition, we maintain an ongoing, open dialogue with companies that are particularly exposed to controversial business areas or practices in order to contribute to the transition towards a more sustainable economy. We are convinced that active engagement and voting exert a positive influence on the quality of the firms in our investment portfolios and therefore reduce sustainability related business risks as well.
Reporting and transparency
Information such as ESG rating distributions and exposure to companies involved in controversial business activities are disclosed in special ESG fact sheets at the portfolio level. The fact sheets transparently show the extent to which the investments in a portfolio conform with the sustainability criteria set by Credit Suisse.
A maximum of 20% of a sustainable investment portfolio may be invested in securities of entities where no ESG related information is available. This particularly applies for asset classes for which at this point in timeESG criteria are insufficiently defined (such as hedge funds and commodities), or which are not yet covered by external data providers.We expect this limit to be lowered over time with the better availability of ESG concepts and coverage around such investments. In any case, non-covered parts of a sustainable investment portfolio are transparently declared in the ESG reporting of the portfolio.
Additionally, a portfolio manager may decide to invest in a company that does not meet certain exclusion criteria, or deviate from the product-specific ESG integration process, if we actively engage with the firm on the respective issue, or if there is clear indication for corrective actions taken by the firm to resolve the issue of concern.