SFAMA, the Swiss Funds and Asset Management Association, has launched a series of recommendations that would guide asset managers to include sustainability criteria into their investment processes.
SFAMA has teamed up with the Swiss Sustainable Finance (SSF) association to draw up the recommendations.
Last week, IPE revealed in an interview with SSF’s CEO Sabine Döbeli the association was working with SFAMA to publish a document with a list of advice on sustainable asset management.
Döbeli said the Swiss market is prepared to continue to embrace sustainability as a mainstream approach for investments, although a number of asset managers are still at the start of the journey.
In a joint statement, SFAMA and SSF specified that the recommendations, technical in nature and focused on governance, investment policy and strategy, risk management, transparency, and reporting, are intended in particular for organizations that are still at the early stages of environmental, social and governance (ESG) integration.
The organizations suggest asset managers should consider material sustainability factors to define target allocation for the different asset classes on a strategic level, while on a tactical level sustainability information could influence top-down decisions relating to sectors or markets at a given point in time, according to the document listing key messages and recommendations for sustainable asset management.
Asset managers could also decide to apply ESG factors purely in their bottom-up processes, integrating ESG criteria in the assessment of individual portfolio holdings.
Markus Fuchs, managing director at SFAMA, said: “Asset managers are aware of the importance of ESG factors, and the industry knows its responsibility in terms of facing up to global challenges. Sustainability has to be part of an asset manager’s DNA.”
SFAMA and SSF also defined the best approaches to take according to asset classes, depending on the motivation of the investment.
If the motivation is promoting sustainable development, for example, active voting and shareholder engagement is highly relevant for private equity, impact investing for alternatives, microfinance and private debt, and a best-in-class approach suits equities best.
If the goal is to improve the risk-return profile of the investment, ESG integration is highly relevant for real estate, corporate bonds and equities.
“In a globalized economy, the success of corporate strategies is increasingly dependent on ESG factors. Integrating them into financial analysis and risk management activities can contribute to increasing profitability and minimizing risk,” said Döbeli.