Informally, sustainability is often only equated with environmental and climate protection. However, in the world of investment funds, sustainability goes way beyond that (What does investing sustainably mean?). Here, the ESG approach has taken root. It divides the term sustainability into three criteria – environmental, social, and governance – the so-called ESG criteria, and gives the term more structure as a result. Special assessment attributes and goals are assigned to each criterion. A precise sustainability analysis can be carried out based on these. Therefore, the ESG criteria result in greater transparency in the green financial market and provide orientation. We at Raiffeisen KAG can determine the Raiffeisen ESG Indicator based on these criteria. This indicator is our means of measuring sustainability for companies and funds. So what lies behind E, S, and G?
Environmental: This criterion primarily deals with how a company incorporates environmental aspects in its business activities, and what contribution it delivers to achieve general climate targets (such as those in the Paris Agreement). Here, environmental and climate protection, careful management of resources, and the use of renewable energy play a role.
What effort is put in to save energy and to reduce greenhouse gas emissions?
Does the company pay attention to environmental and climate protection at all points of its supply chain?
Is attention paid to the recyclability and reuse of products?
Social: This criterion covers a wide range of issues, from adhering to core human rights and labour laws in general – and also along the supply chain – to the actual conditions for staff. The company’s involvement in society and social engagement are also assessed.
What occupational safety and health standards does the company observe?
Are there possibilities for professional further education and training?
Are the wage policies fair and are there equal opportunities for women and men?
Governance: This may well be the deciding factor. For sustainable, ethical corporate governance forms the basis for the successful implementation of various activities relating to environmental and social aspects. Not only does it connect both criteria to each other; it also connects these to the corporate goal as such. Sustainable corporate governance provides the foundation for companies to safeguard themselves for the future.
Is sustainability management incorporated in the company?
Are transparent measures put in place to prevent corruption?
Is the compensation system for managers linked to achieving sustainability targets?
The ESG Indicator: our yardstick for sustainability
For Raiffeisen KAG, our own Raiffeisen ESG Indicator is the main indicator for the sustainability performance of a company or an investment fund. This indicator includes a considerably wider range of aspects than those already mentioned as examples. How is the ESG Indicator determined? To be able to assess ESG criteria for a company, we source extensive data and sustainability analyses from reputable rating agencies in addition to making use of own information obtained by the local Raiffeisen network. (How is sustainability measured?). This is then aggregated for each enterprise to form the Raiffeisen ESG Indicator. The range of possible indicators is from 0 to 100, with a higher number of points representing a higher sustainability performance.
To calculate the Raiffeisen ESG Indicator of a fund, the scores of the companies in which it is invested are weighted according to the share of the company in the fund assets as of the relevant reference date. You can look up what ESG Indicator is achieved by each of our sustainability funds in our sustainable investment magazine "Nachhaltig investieren", for example.
Our integrative sustainability concept
For a fund company such as Raiffeisen KAG, sustainability primarily means investing responsibly. Our integrative sustainability concept forms the basis for this, and the ESG criteria are a core component. Find out how Raiffeisen KAG promotes sustainability by means of this concept and thus exerts its influence and achieves results.
Two further tips
• People who want to find sustainable investment funds can also use the relevant quality seals as orientation. We have made a concise list of the most important ones.
• When sustainability alone is not enough for financial products such as investment funds: Impact investing goes beyond the pure ESG concept. Discover the focus of these investments.