Our Sustainable Investment Process
We integrate sustainability into each step of our Sustainable Investment Process. The investment process comprises the following five steps:
Bank J. Safra Sarasin's Sustainable Investment Process at a Glance
The Industry Analysis identifies long-term investment drivers, which differ between industries. It focuses on understanding how industry structure and demand or supply dynamics drive competitiveness, assessing the industry’s drivers of profitability and identifying the key industry metrics. These include sustainability mega trends such as climate change or demographical change. Among the ESG key issues of each industry, we identify those that are potentially financially material.
The Sustainability Analysis assesses and compares a company’s ability to manage its ESG risks and opportunities relative to its industry peers. Several ESG key issues are common to all industries: in particular the governance issues such as board structure, remuneration, shareholder ownership & control rights. Other key issues are more important in some industries and/or specific to only a few industries (e.g. carbon footprint or water risk). The methodology takes these differences into account by selecting and weighting key issues by sector on the basis of Bank J. Safra Sarasin’s Industry Analysis.
The Sustainability Analysis allows the Bank to produce two scores (company ratings and respective industry ratings) which can be combined and displayed in the Bank’s proprietary Sarasin Sustainability Matrix®. In exposed industries with low sustainability ratings, such as oil and gas or materials, companies must achieve a high company rating to be included in the sustainable investment universe, whereas in less-exposed industries (e.g. telecommunication, IT) companies must only achieve an average company score to be included. The x-axis of the Sarasin Sustainability Matrix® displays the industry rating score between 0 (low) and 5 (high). The y-axis displays the company rating score between 0 (low) and 5 (high). The shaded area contains Bank J. Safra Sarasin’s sustainable investment universe. The white area underneath contains the companies which the Bank excludes from the universe due to insufficient sustainability ratings.
Sarasin Sustainability Matrix®
Sustainable Investment Analysis
The third step of the investment process, the Sustainable Investment Analysis, draws on the fundamental understanding of the industry which Bank J. Safra Sarasin acquires in the first step “Industry Analysis”. In this step, Bank J. Safra Sarasin identifies the industry- specific financially material sustainability aspects which the Bank integrates into its investment analysis. It uses both qualitative and quantitative tools.
The Portfolio Construction process relies on a quantitative multifactor risk model to construct portfolios and to control external risks.