Investment solutions Balanced Solutions
Complying with sustainability criteria is one of the conditions investors can stipulate for their portfolios. In most cases they have other criteria in mind as well. Examples include the portfolio’s composition in terms of asset classes, the risks taken, sectors to be excluded, regions on which to focus, or other criteria.
A strategy whose starting point is a balanced approach across various dimensions seems ideally suited to taking ESG criteria into account, either as a core focus or an added extra. Many investors see adherence to ESG criteria as a positive in itself. This can be due to intrinsic motivation of the individual investor, akin to paying a different price for organic produce at the supermarket. In addition, many institutional investors are subject to restrictions in relation to responsible investment based on articles of association or their stakeholders’ requirements.
A balanced approach to ESG – a compelling combination
The aim is to achieve a balanced solution that takes account of investors’ preferences, the targeted risk/return profile, and the current market situation in constructing and continuously adjusting a broadly diversified portfolio. This offers a framework ideally suited to implementing an ESG-focused approach that deviates only marginally from the tried-and-tested investment process. It provides investors with a sustainable portfolio without significant shortfalls in returns – and with even the potential for excess returns – versus a conventionally managed portfolio.
Elements of a holistic approach to ESG
A holistic approach involves more than just the widespread exclusion criteria. It is important that positive selection criteria are also incorporated into the investment process. Exercising voting rights as part of active ownership and dedicated ESG reporting are other key elements of a holistic approach.