Banking Responsible Investments Products & Services
The demand from clients for products and services that incorporate environmental, social and governance aspects is rising steadily. At Credit Suisse, we offer investors a broad range of investment products and services that aim to benefit society and the environment, such as impact products and green bonds.
A growing number of individual clients, charitable foundations and institutional clients such as pension funds are seeking to combine financial returns with positive social or environmental impacts. Credit Suisse continues to expand its range of products and services that focus on environmental and social benefits.
In 2017, we established the Impact Advisory and Finance Department (IAF), which aims to facilitate projects and initiatives that have a positive economic and social impact as well as generating a financial return. IAF reports directly to the CEO and directs and coordinates activities across the Group. By enabling and advancing impact investing and sustainable business activities across the Group, IAF seeks to benefit wealth management, institutional and corporate clients.
Impact investing is about actively placing capital in enterprises that generate a financial return and make a measurable, positive impact on society and/or the environment. Credit Suisse's impact investing business includes around USD 3.3 billion of assets under administration (assets in investment funds and vehicles administered by Credit Suisse) and over USD 670 million in client holdings as of end-2017. 2017 also marked the 15th anniversary of impact investing at Credit Suisse.
Financial inclusion includes the provision of access to financial services for people at the base of the income pyramid. We have been a leader in microfinance and financial inclusion since 2002, with around USD 2.9 billion of assets under administration, of which around USD 413 million are client holdings that are used to fund microfinance institutions. This includes a range of investments for private and institutional clients. We also offer several global microfinance funds, structured products and a private equity fund of funds.
In higher education, we provide support for high-potential students from underprivileged backgrounds. We provide them with access to a college education through investment products, thus giving them better employment prospects and opportunities to earn a higher income. Our six Higher Education Notes, the latest two of which were launched in 2017, are an example of these activities. In addition, we 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.
Conservation finance refers to capital that is invested in an ecosystem in order to generate one or several cash flows. This structure permits the underlying natural capital to be protected in the long term while at the same time providing the investor with a financial return. Market-based mechanisms applied to date have primarily been based on strategies directly associated with an ecosystem – e.g., compensation payments – or on indirect approaches, such as the certification of sustainably produced goods from a particular ecosystem. Our research suggests that wealthy individuals, institutional investors and even mainstream retail investors could supply as much as USD 200-300 billion of investment capital per year needed to preserve the world's most important ecosystems.
Credit Suisse has been active in this area since 2014, when we launched the Nature Conservation Notes, a product which consist of investments in sustainable agroforestry and ecosystem conservation, as well as a portfolio of sustainable bonds. The Notes make it possible to support conservation activities in around 10-15 countries and economic development of local communities through the revenues generated by projects financed by the Althelia Climate Fund, a Luxembourg-based impact fund. Financial returns are generated for the fund's investors through the sale of sustainably certified commodities as well as from payments for ecosystem services. Social and environmental impacts are generated through the financing of community-based organizations, biodiversity and water conservation, as well as climate change mitigation. Since 2015, we have annually hosted and co-organized a conservation finance investor conference at our offices in New York, and in 2016 – in addition to co-authoring the reports "Conservation Finance – From Niche to Mainstream" and "Levering Ecosystems" – we were one of the founding members of the Coalition for Private Investment in Conservation (CPIC). More information on CPIC can be found on our Agreements and Memberships website.
We promote responsible production methods by supporting smallholder farmers in achieving better trading conditions and by guaranteeing a minimum price for their produce. Furthermore, the Asia Impact Investment Fund I L.P., invests in fast-growing businesses that address social challenges across Asia. Credit Suisse acts as impact advisor to the fund.
In the area of social enterprises, we provide financial support for small and medium-sized businesses that pursue social objectives.
To make more balanced and sustainable use of the world's natural resources, there is a clear need to access new sources of energy, raw materials, and clean technologies. The financing of investments that support environmentally sustainable development – a sector known as green finance – is thus gaining in importance and scale.
Our green finance activities cover a wide range of asset classes designed to positively impact the transition to a low-carbon and climate-resilient economy, drawing upon the expertise of various specialist departments across our divisions. In the area of wealth management, for example, our offering comprises a number of funds focused on sustainability and sustainable real estate as well as products and services in conservation finance. In investment banking, we provide advice for buyside and sellside clients in mergers and acquisitions, project and corporate finance, as well as debt and equity underwriting of public offerings and private placements. Credit Suisse has been involved in around 100 transactions with a value of USD 77 billion in the area of renewable energy since 2010. Furthermore, we supported clients on a number of green bond issuances in 2017. In our Global Markets division, Credit Suisse's HOLT team is working on 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. Finally, Credit Suisse Energy Infrastructure Partners, an investment manager specialized in investments in the European energy sector, focuses on direct investments in the capital-intensive elements of the value chain, such as energy transmission, generation, storage and efficiency.
Another area of green finance is Green Bonds. Green Bonds are a fixed income solution to contribute to combating climate change and environmental degradation. A Green Bond is like any other bond, except that the use of proceeds is limited to projects or assets that deliver clear environmental benefits. At Credit Suisse, we finance various activities that accelerate our clients' transition towards becoming more sustainable. Some of our clients' activities are funded through our new Green Bond program, which is governed by our Green Bond Framework. The framework is consistent with the Green Bond Principles, which we endorsed in 2014, and is designed to meet the highest standards of transparency and disclosure. In 2017, we helped the Swiss waste management company "Helvetia Environnement" to place its first corporate green bond in 2017, and we supported the Swiss Canton of Geneva in issuing the first municipal green bond denominated in Swiss francs.
Sustainable investment has been a fast-growing market segment in recent years, with an especially strong increase in demand from institutional investors, charitable foundations and younger clients. Institutional investors in particular have been identified in studies by think-tanks and academics as driving the increasing demand for sustainable investment.
Based on each client's values and objectives, we offer sustainable investment solutions that take account of sustainability criteria to combine the goals of financial returns with social and/or environmental impact. This offering includes strategic advice, portfolio health checks, advisory and discretionary mandate solutions and individual sustainability portfolio reports We are constantly working on broadening our sustainability offering in developing new product solutions across asset classes and in the area of customized sustainable discretionary as well as advisory mandates in particular.
When screening and constructing portfolios, we use a combination of sustainable investment approaches. The exclusion approach avoids investments in companies tied to certain areas of business that may be considered controversial from an environmental, social or governance (ESG) perspective, such as gambling. The norm-based approach reduces a portfolio's exposure to companies involved in controversial activities. The best-in-class approach identifies companies that perform well in terms of ESG criteria within a peer group by assessing their ability to successfully manage ESG issues such as CO2 emissions or labor standards. The portfolio's sustainability profile may be further improved through investments that are related specifically to sustainability aspects such as energy efficiency, water, education or health care.
To complement our solutions offering, we have also addressed the topic of sustainability through single sustainable investment products, such as the Credit Suisse (CH) Sustainability Fund Balanced CHF, the Credit Suisse (Lux) European Climate Value Property Fund, the CSIF (Lux) Equities Emerging Markets Sustainability Blue, and the CSIF III World ex CH Sustainability Index Blue – Pension Fund.
Credit Suisse Global Real Estate (formerly Real Estate Investment Management) regards sustainability as an essential requirement when managing and developing its real estate holdings. Its active sustainability strategy is designed to address challenges in a business increasingly impacted by stricter regulation.
Throughout 2017, we conducted sustainability-related research across our divisions. For example, Investment Solutions & Products Research in the International Wealth Management division published several research updates on sustainability topics. In May 2017, the team launched a set of research themes called Supertrends. These are long-term trends we expect to be of importance particularly to investors with a multi-year investment horizon.
The Credit Suisse Research Institute (CSRI) is Credit Suisse's in-house think-tank. It studies long-term economic developments, which have a global impact within and beyond the financial services sector or which may do so in the future. The CSRI publishes original research on topics ranging from economics or 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 2017, one of our core research publications for clients examined the role of corporate governance in family-owned companies.
Credit Suisse also addresses environmental, social and governance (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. Credit Suisse HOLT, a team in Equities 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. Investors gain insights into a firm's strategy, changes to that strategy and the quality of its board.