a) Summary
No sustainable investment objective
This financial product promotes environmental or social characteristics, but does not have as its objective sustainable investment.
Environmental or social characteristics of the financial product
This asset management strategy promotes environmental and social characteristics within the meaning of Article 8 of the Disclosure Regulation.
Environmental and social characteristics are taken into consideration when making investment decisions, including for example climate change and pollution in the area of environmental, as well as working conditions, health and safety in the area of social. In addition, aspects in the area of corporate governance are taken into account.
Investment strategy
The asset management strategy aims to achieve long-term value growth with due regard to socially and environmentally responsible investment criteria. Investments are only made in securities that meet Berenberg’s sustainability criteria. ESG factors are integrated into investment decisions in order to ensure efficient risk management and to generate a sustainable, long-term return.
The investment process combines qualitative and quantitative ESG data, from both bottom-up and top-down perspectives, from various sources, e.g., detailed exchange with company management, expert opinions from industry experts as well as assessments of external sources.
Proportion of investments
The asset allocation of the asset management strategy and the extent to which it may take direct or indirect risk positions vis-à-vis companies can be found in the investment guidelines.
The category "Other investments" includes cash holdings as well as investments in products used for hedging purposes or portfolio balancing.
Monitoring of environmental or social characteristics
The attainment of the promoted environmental and social characteristics is monitored, among other things, by system-side checks for compliance with the binding elements of the investment strategy. The evaluation is based on data from external data providers that are provided automatically in our systems. Underlying screens for this automated external data are defined and regularly reviewed by the Berenberg Wealth and Asset Management ESG Office.
Methodologies
As part of the ESG exclusion process, companies are excluded on the basis of activity- and norm-based exclusion criteria. The Berenberg ESG exclusion criteria represent a minimum standard that companies must meet in order to be investable for the portfolio. Among others, companies which are directly involved in ongoing very severe ESG controversies are identified and fundamentally excluded from single security investments.
Data sources and processing
To attain the environmental and social characteristics promoted by the asset management strategy, the following data sources are used:
- Exclusions and controversy monitoring based on data provided by MSCI ESG Research.
- ESG opportunity and risk analysis is based on internal research, exchanges with the companies, and data from external ESG data providers including MSCI ESG Research and further, such as RepRisk.
- Regular review of active target funds within framework of a holistic qualitative and quantitative analysis based on input collected from external asset managers via internally developed questionnaire and personal discussions as well as sustainability assessments by recognised external agencies
Limitations to methodologies and data
There may be limitations on the retrieval of data from data providers such as MSCI ESG due to their lack of coverage in the universe for certain companies, data errors, or methodological shortcomings. Where such misrepresentations are suspected we conduct internal review and potentially engage with the data providers to limit the impact on how the environmental and/or social characteristics promoted are met.
Due diligence
In addition to reviewing legal and contractual requirements as well as analysing financial metrics, the environmental and social characteristics of portfolio positions are taken into account depending on the ESG elements implemented in the asset management strategy.
The Berenberg ESG exclusion criteria represent a minimum standard that companies must meet in order to be investable for the portfolio. The compliance with the Berenberg ESG exclusion criteria is monitored, among other things, by system-side checks for compliance.
In the event of severe ESG controversies as identified by the ESG controversy analysis of our external ESG data provider, the portfolio management engages directly with the company, in the case of both existing holdings and potential new investments, in order to analyse the controversy with the company and to make a final investment decision on this basis.
The ESG opportunity and risk analysis is based on internal research, exchanges with the companies, and data from external ESG data providers. In addition to ESG compliance, long-term profitability remains the decisive selection factor.
A due diligence is being performed as part of the data procurement process when selecting data providers by subject matter and technical experts, incl. evaluation of portfolio and benchmark universe coverage, review of providers’ underlying models and frameworks, comparison of provider data with internal analysis and assessments.
Engagement policies
Part of the ESG integration and analysis within the asset management strategy is our work in the area of active ownership; whereby, we – as investors – attempt to exert a positive influence on companies in regards to their handling of ESG aspects.
Designated reference benchmark
The asset management strategy does not currently use an index as a benchmark to determine whether the strategy is aligned with the advertised environmental and/or social characteristics.
b) No sustainable investment objective
This financial product promotes environmental or social characteristics, but does not have as its objective sustainable investment.
c) Environmental or social characteristics of the financial product
This asset management strategy promotes environmental and social characteristics within the meaning of Article 8 of the Disclosure Regulation.
Environmental and social characteristics are taken into consideration when making investment decisions, including for example climate change and pollution in the area of environmental, as well as working conditions, health and safety in the area of social. In addition, aspects in the area of corporate governance are taken into account.
d) Investment strategy
The asset management strategy aims to achieve long-term value growth with due regard to socially and environmentally responsible investment criteria. Investments are only made in securities that meet Berenberg’s sustainability criteria. ESG factors are integrated into investment decisions in order to ensure efficient risk management and to generate a sustainable, long-term return.
The investment process combines qualitative and quantitative ESG data, from both bottom-up and top-down perspectives, from the following sources:
- Regular active engagement and detailed exchange with company management.
- Company publications (e.g. sustainability reports) and independently commissioned studies
- Expert opinions from industry experts as well as assessments of media reports and other publicly accessible sources
- In addition, research from external data providers is used, including:
- Comparisons of ESG assessments and data with comparable companies.
- ESG reports on companies
- Overviews and assessments of controversies
- Corporate governance heat maps
- Business Involvement Screenings
In the first step, ESG exclusion criteria are applied to potential investments to ensure compliance with minimum ESG standards. The evaluation is based on the research of external ESG data providers, which is automatically made available in our systems.
As part of the ESG exclusion process, companies which are associated with certain products or activities are excluded. Such products or activities include, but are not limited to, controversial weapons, conventional weapons and the arms industry, coal mining and coal-based power generation, nuclear energy, so-called unconventional oil and gas, tobacco or pornography. Furthermore, companies that violate the United Nations Global Compact Principles (UNGC) or the International Labor Organization (ILO) Convention are excluded. ESG criteria are also considered when selecting and investing in government bonds. As a general rule, countries are excluded if they do not adhere to international environmental agreements – the Kyoto Protocol, Paris Climate Accord or Basel Convention – or if they have not ratified them. Moreover, countries that obtain a substantial part of their electricity from nuclear energy are excluded. No investments are made in countries without political stability or religious freedom. Countries that still practise the death penalty are also excluded. The Berenberg ESG exclusion criteria represent a minimum standard that companies and countries must meet in terms of ESG in order to qualify for portfolio investments.
Using a combination of internal ESG analyses as well as external data, qualitative and quantitative assessments are created based on the sources described above, leading to an investment decision.
ESG integration also includes our activities in the area of active ownership, in which we as investors try to exert a positive influence on companies with regard to their handling of ESG aspects. This includes so-called engagement, i.e. direct dialog with companies on specific ESG aspects. Within the framework of a structured engagement process, existing and/or potential ESG controversies as well as other ESG-relevant aspects are addressed. Based on this engagement, portfolio management can determine whether a company/issuer recognizes existing and/or potential issues and develops strategies to address them, as well as to identify ESG/sustainability opportunities.
Good corporate governance practices of the companies invested in will be assessed based on the following elements of the investment strategy:
- Application of norm-based ESG exclusion criteria and ESG controversy monitoring with exclusion of companies directly linked to ongoing very severe ESG controversies including governance practices and compliance with international norms based on Berenberg Wealth and Asset Management ESG Policy and ESG Exclusion Policy
- Engagement with portfolio companies linked to severe ESG controversies based on Berenberg Wealth and Asset Management Engagement Policy
- ESG analysis based on internal research, exchanges with companies and data from external ESG data providers, covering, among others, governance practices.
e) Proportion of investments
The asset allocation of the asset management strategy and the extent to which it may take direct or indirect risk positions vis-à-vis companies can be found in the investment guidelines.
#1 Aligned with E/S characteristics includes the investments of the financial product used to attain the environmental or social characteristics promoted by the financial product.
#2 Other includes the remaining investments of the financial product which are neither aligned with the environmental or social characteristics, nor are qualified as sustainable investments.
The category #1 Aligned with E/S characteristics covers: The sub-category #1B Other E/S characteristics covers investments aligned with the environmental or social characteristics that do not qualify as sustainable investments.
The category "Other investments" includes cash holdings.
f) Monitoring of environmental or social characteristics
The attainment of the promoted environmental and social characteristics is monitored, among other things, by system-side checks for compliance with the binding elements of the investment strategy. The evaluation is based on data from external data providers that are provided automatically in our systems. Underlying screens for this automated external data are defined and regularly reviewed by the Berenberg Wealth and Asset Management ESG Office.
The internal control of this monitoring and the underlying regulatory classification is carried out by Portfolio Management, the ESG Office, Compliance and Internal Audit, among others.
g) Methodologies
As part of the ESG exclusion process, companies are excluded on the basis of activity- and norm-based exclusion criteria. The Berenberg ESG exclusion criteria represent a minimum standard that companies must meet in order to be investable for the portfolio. Among others, companies which are directly involved in ongoing very severe ESG controversies are identified and fundamentally excluded from single security investments.
The attainment of the promoted environmental and social characteristics is measured through regular automated check on compliance with the binding elements of the investment strategy and with sustainability indicators based on these binding elements.
h) Data sources and processing
To attain the environmental and social characteristics promoted by the asset management strategy, the following data sources are used:
- Exclusions and controversy monitoring based on data provided by MSCI ESG Research.
- ESG opportunity and risk analysis is based on internal research, exchanges with the companies, and data from external ESG data providers including MSCI ESG Research and further, such as RepRisk.
- Regular review of active target funds within framework of a holistic qualitative and quantitative analysis based on input collected from external asset managers via internally developed questionnaire and personal discussions as well as sustainability assessments by recognised external agencies
To ensure data quality and to process data, the following measures are taken:
- A due diligence is being performed as part of the data procurement process when selecting data providers by subject matter and technical experts, incl. evaluation of portfolio and benchmark universe coverage, review of providers’ underlying models and frameworks, comparison of provider data with internal analysis and assessments,
- Furthermore, an engagement with data provider will take place in case of material changes to underlying data and/or data concerns,
- An automatic integration of provider data feeds into internal systems for portfolio management and monitoring purposes,
- Internal assessment and analysis of controversy data,
- As part of the ESG opportunity and risk analysis relevant data/ information from internal research is aggregated, exchanged with the companies, and validated with data from external ESG data providers.
- Input from external asset managers for review of active target funds within framework of a holistic qualitative and quantitative analysis is collected via internally developed questionnaire and personal discussions. This input is subsequently documented in an internal database, assessed for completion and analysed further within the framework. In case of missing or erroneous information, we may engage further with the respective asset managers and/or enrich with further externally collected information.
Estimated figures may be required e.g., in case of non-existent corporate disclosure and may be directly sourced from data providers. As coverage and methodologies changes and further develops, a proportion of data that is estimated cannot be given.
i) Limitations to methodologies and data
There may be limitations on the retrieval of data from data providers such as MSCI ESG due to their lack of coverage in the universe for certain companies, data errors, or methodological shortcomings. Where such misrepresentations are suspected we conduct internal review and potentially engage with the data providers to limit the impact on how the environmental and/or social characteristics promoted are met.
When analysing active target funds, we depend on the accurate transmission of data from the external asset managers. Here we carry out plausibility tests on a random basis and verify the information in personal interviews.
j) Due diligence
In addition to reviewing legal and contractual requirements as well as analysing financial metrics, environmental and social characteristics of portfolio positions are taken into account depending on the ESG elements implemented in the asset management strategy.
The Berenberg ESG exclusion criteria represent a minimum standard that companies must meet in order to be investable for the portfolio. The compliance with the Berenberg ESG exclusion criteria is monitored, among other things, by system-side checks for compliance. The evaluation is based on data from external data providers that are provided automatically in our systems. Underlying screens for this automated external data are defined and regularly reviewed by the Berenberg Wealth and Asset Management ESG Office. The ESG exclusion criteria are determined by the ESG Committee, which forms the ESG governance and oversight body within Berenberg Wealth and Asset Management and is composed of Wealth and Asset Management members and executives.
In the event of severe ESG controversies as identified by the ESG controversy analysis of our external ESG data provider, the portfolio management engages directly with the company, in the case of both existing holdings and potential new investments, in order to analyse the controversy with the company and to make a final investment decision on this basis. Existent and/or potential ESG controversies and other ESG-relevant aspects are addressed in a structured engagement process. Based on this engagement, the portfolio management can determine whether a company/issuer acknowledges existent and/or potential problems and whether it is developing strategies both to solve these and to identify opportunities related to ESG/sustainability.
The ESG opportunity and risk analysis is based on internal research, exchanges with the companies, and data from external ESG data providers. Relevant ESG issues are openly discussed or monitored within the investment team and in dialogue with the ESG Office. Based on a bottom-up approach, exclusion criteria are applied, and industry-relevant ESG criteria are analysed in a basic evaluation process to determine a sustainability profile of companies. In addition to ESG compliance, long-term profitability remains the decisive selection factor.
A due diligence is being performed as part of the data procurement process when selecting data providers by subject matter and technical experts, incl. evaluation of portfolio and benchmark universe coverage, review of providers’ underlying models and frameworks, comparison of provider data with internal analysis and assessments. An engagement with the data provider will take place in case of material changes to underlying data and/or data concerns.
k) Engagement policies
Part of the ESG integration and analysis within the asset management strategy is our work in the area of active ownership; whereby, we – as investors – attempt to exert a positive influence on companies in regards to their handling of ESG aspects. This includes, among other things, so-called engagement (i.e., direct dialogue with companies on specific ESG aspects). Existent and/or potential ESG controversies and other ESG-relevant aspects are addressed in a structured engagement process. Based on this engagement, the portfolio management can determine whether a company/issuer acknowledges existent and/or potential problems and whether it is developing strategies both to solve these and to identify opportunities related to ESG/sustainability.
More detailed information on our engagement approach can be found in the publicly available Berenberg Wealth and Asset Management Engagement Policy as well as the annual Berenberg Wealth and Asset Management Active Ownership Report.
l) Designated reference benchmark
The asset management strategy does not currently use an index as a benchmark to determine whether the strategy is aligned with the advertised environmental and/or social characteristics.