When managing assets sustainably, we set high sustainability standards for the companies, countries and organizations in which we invest. Our criteria are based on the analyses of Oekom Research, one of the world’s leading research and rating agencies in the sustainable investment sector. In addition, our clients are able to shape the investment guidelines of their portfolios by contributing their own positive and negative lists.
Sustainable investment products and strategies: Creating value by investing responsibly
Deutsche Bank is a competent partner for people who want to invest their money responsibly and have their assets managed with a high level of expertise and in accordance with sustainability criteria.
In the light of unpredictable stock markets and constant fluctuations in seemingly safe asset categories, taking responsibility for assets – your own or assets entrusted to your care – has become extremely challenging. This issue is compounded by strict requirements that are placed on the sustainability of the investment products. Given this environment, more and more, more and more clients are opting for professional asset management.
The Asset and Wealth Management division of Deutsche Bank offers sustainable investment products and investment strategies. It always takes the interests of specific clients into account and therefore highlights various aspects of sustainable investing.
€ 3.72 bn
of assets under management in investment funds managed according to ESG criteria
“As a company, we take the line that companies are more successful on the stock exchange when they pursue a responsible approach. Responsible actions in environmental and social terms should have equal weight to economic interests. So, by definition that is in the interest of our clients.”
Our specialists for sustainable asset management
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Wealth Management: Investment products for wealthy individuals, families and institutions
Sustainable asset management in the Wealth Management division of Deutsche Bank means that the client determines the overall direction and we take care of the management and implementation of what has been specified. Our clients have a number of options and can:
- Invest in securities with a sustainability profile, developed with Oekom Research, a leading rating agency for sustainable investments.
- Define investment criteria for their own portfolio themselves by specifying certain exclusion criteria.
- Invest in certified sustainable investment funds from external providers in addition to our own sustainability funds.
- Realize philanthropic goals with their investments, for example through foundations.
Asset management with sustainable investments
Philanthropic wealth management
We help wealthy individuals and organizations that want to contribute to social development through their philanthropic commitment to set up foundations. We help them to structure and manage foundation assets. We also handle administrative tasks relating to foundation management.
Individually tailored products
Taking sustainability considerations and personal ethical restrictions into account is important for our clients. Thanks to many years of experience, we are able to translate individual priorities into specific financial goals and concepts. In this way, we provide wealthy investors with access to investments in many future-oriented and sustainable projects – such as solar farms – that will benefit future generations.
Sustainable investment funds
The range of sustainable investment options we offer also includes external providers’ investment funds. We carefully examine potentially suitable investment products and select a product that is precisely tailored to the client’s needs and is a sensible option in the context of the investment objectives (Best Advice Approach).
Closed-end investments with a sustainability focus
Selecting investments with a sustainability focus is also important for closed-end investments, through which our clients can invest in:
- Photo-voltaic facilities in the sunniest regions of Europe
- Globally diversified portfolios of forest stands, forest management and the timber industry
- Stock exchange-listed companies with a focus on climate protection and green technology
- Green buildings (real estate properties that use energy, water and materials efficiently).
€ 700 mn
of sustainable assets managed in individual portfolios, mutual funds and special theme funds in Germany
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Asset Management: Managing assets for our clients
Individuals and institutions increasingly view environmental, social and governance risks and opportunities as significant for long-term returns. Interest in dedicated drivers of ESG services such as inclusion of ESG factors in the investment processes, exclusions
of specific activities such as cluster munitions and participation at companies’ annual general meetings in particular is growing. This interest also extends to our high-net-worth clients, family offices, churches and foundations. Responding to these
developments, we are expanding on our previous involvement in the ESG field.
As a responsible investor, we believe that the integration of ESG into our investment processes is part of our fiduciary duty. Not only do we analyze the ESG performance of companies we invest in, but we also support projects that tackle climate change or improve food security through our advisory mandates for impact investment funds.
Globally, the ESG market accounts for nearly US $14 trillion, which indicates that approximately one fifth of all professionally managed assets incorporate ESG factors. Of these assets, 89% are comprised of institutional assets while retail assets make up the remaining 11%.1
At the end of 2013, we managed and advised on €5.1 billion assets incorporating ESG criteria and themes (2012: €4.5 billion), representing less than 1% of total assets under management, or €923 billion. Factors that contributed to this increase include intensified consulting and advisory services for churches and foundations regarding sophisticated ESG-mandated solutions.
Anchoring responsibility in asset and wealth management
The ESG Head Office is not only responsible for the coordination, development and strengthening of our ESG investment capabilities, but also the implementation of our new ESG strategy across the entire Asset and Wealth Management division. Three pillars define this strategy:
- Risk management: produce in-depth ESG research to support investment decisions and to reduce investment and business risks.
- Governance: roll out consistent ESG policies and procedures for all asset and wealth management to ensure that all employees are aware of available information and comply with processes.
- Value creation: identify existing product gaps and develop new, responsible products and services.
To demonstrate our commitment to responsible investing, our asset management business signed the United Nations’ Principles for Responsible Investing (PRI) in 2008. We report our activities and progress towards implementing the Principles according to the PRI Framework. As required by PRI, our 2013 report will be publicly available for the first time.
Based on the historically greater prominence of responsibility as an investment theme in Europe, we have mainly focused on applying the Principles in our European activities. Going forward, we seek to apply them in other regions as well.
Incorporating ESG analysis into investment processes
We strongly believe that an ESG approach contributes to better investment decisions. It adds an extra dimension to investment analysis, helping us to better understand individual companies and the business environment they operate in.
We provide our equity and bond analysts and portfolio managers with ESG ratings data in our research portals, alongside conventional financial and market data.
The UN Principles for Responsible Investment (PRI)
- We will incorporate ESG issues into investment analysis and decision-making processes.
- We will be active owners and incorporate ESG issues into our ownership policies and practices.
- We will seek appropriate disclosure on ESG issues by the entities in which we invest.
- We will promote acceptance and implementation of the principles within the investment industry.
- We will work together to enhance our effectiveness in implementing the principles.
- We will each report on our activities and progress towards implementing the principles.
Reliable database: independent key figures
4,000 companies and 130 countries
Facts and figures
business analysis indicators
Our ESG rating method
Our ESG research process
Our analysts and portfolio managers are provided with raw ESG data and detailed reports on more than 4,000 listed companies and on 130 countries by external research providers. Company data covers topics such as environmental management, workers’ rights and quality of reporting and disclosures. Country data includes social standards and treatment of natural resources. In addition, our staff receives carbon-specific data on 2,500 companies from an external research firm.
We use this raw data to create ratings based on companyspecific priorities. Each company is rated on a scale from A to F as compared to the median for the respective regional investment universe. The rating therefore indicates how well a company is managing the ESG risks and opportunities compared to its regional peers.
ESG investment products for new asset classes
Our institutional investment business develops specialized products – such as fixed income – for new asset classes. This business area supports the approach of the UN Principles for Responsible Investment (UN PRI) aimed at incorporating ESG criteria to a greater extent in problematic asset classes using a debt strategy for emerging markets. The investment funds that we have issued in accordance with these principles include ESG Emerging Markets External Debt, ESG Total Return AAA High Grade Fixed Income, and Environmental Corporate Credit.
Our US and European entities have participated in proxy voting for our retail and institutional equity funds for more than a decade. In 2013, we internationalized our European proxy voting policy so that it accounts for the global exposure of our European mutual and institutional fund entities. For the corresponding US entities, we apply similar guidelines to all investee companies, which are tailored to regional requirements. As part of enhancing our ESG commitment, we have increased our focus on governance issues in our proxy voting activities.
We also provide portfolio managers and analysts with guidance on ESG issues to be raised at company meetings, including key questions on the role of ESG in company strategy and the supply chain, social and environmental policies as well as other areas of stakeholder interest.
We encourage constructive, active verbal and written dialogue with companies on any matters of corporate governance and control that could be subject to interpretation. We focus our engagement on companies that are below average in our rating system or contravene internationally agreed standards like the UN Global Compact. All voting results (“proxy voting”) of our Europe-based funds are now published on our website.
Advancing ESG implementation
Within the investment industry, we actively seek to advance ESG implementation – especially in Europe, where we participate in the activities of some of the most influential bodies regarding ESG investments such as Eurosif and Efama.
This year, we contributed to Deutsche Börse’s recommendations for capital market communication on sustainability and worked with the International Integrated Reporting Council, which published its reporting framework at the end of 2013.
To broaden understanding of ESG investing, we published the White Paper “Environmental, social and governance (ESG) data: Can it enhance returns and reduce risks?” The paper explains the concept of ESG investing and highlights investment benefits. The author recommends full consideration of ESG by any institutional or private investor, viewing it as a longer-term strategy that can enhance investment returns and reduce risks by capitalizing on insights into the business relevance of specific ESG factors.
We also encourage companies to position sustainability at the heart of their business, continuing to jointly award the German Investor Prize for Sustainable Business (Deutscher Investorenpreis für verantwortliches Wirtschaften) with the DuMont-Verlag publishing house. The award recognizes companies that demonstrate outstanding success in incorporating ESG matters into their core business activities. Volkswagen and the packaging and bottling machine manufacturer Krones won the awards in 2013 thanks to their environmental commitment and human resource performance.
Special theme funds: resource and energy efficiency
Some of our global investment funds meet the demand of private and institutional investors for investments in resource and energy efficiency. For those funds, we analyze in particular those ESG factors that are relevant for the thematic orientation of the fund. In accordance with an active equity selection process, we use a multi-level screening procedure in order to identify our investment-compatible universe and a concentrated “Alpha Pool”. This summarizes the companies that have a major or growing proportion of their business activities in the relevant industries and fulfil the corresponding ESG requirements and exclusion criteria. The ESG criteria are used in addition to key financial indicators and liquidity tests. In the course of our company analysis, we also conduct regular discussions with the executive management, visit production plant locations and evaluate relevant industry information. In this context, we also analyze adherence to good corporate governance and fulfilment of social responsibility in order to take non-financial values into consideration. For these investments, we exclude companies that primarily operate in business sectors that are categorised as controversial right from the outset. For example, companies in the defence, tobacco, or adult entertainment industry. Companies that are not considered compliant with the Principles of the UN Global Compact are also not included in the fund.
Particularly private individuals and families with extensive asset structures often want to put their convictions and objectives into practice in their financial investments as well and promote social and ecological causes. Typically, those client groups have a more long-term investment horizon than other investors, because they generally would like to preserve their assets for future generations. Almost automatically leading to the application of an ESG geared investment strategy.