Investment strategies for <br> sustainable investments

Investment strategies for
sustainable investments


Investing assets sustainably

There are various ways to invest sustainably: for example, by investing with sustainable banks or in sustainable investment products. In these cases, ecological and social guiding ideas are translated into concrete criteria in order to use the invested capital for the benefit of sustainable social development.

While sustainability strategies are defined for responsible investments at the corporate level, this approach also exists at the product level. The latter is disclosed in the fund documents. But what actually distinguishes a sustainable investment? We would like to show this using the example of the MSCI ESG Rating and our partner for sustainable investments Arete Ethik Invest AG.

ESG refers to the consideration of environmental, social and governance criteria.

MSCI is the abbreviation for Morgan Stanley Capital International, a financial services provider that calculates numerous international sector and country indices. These are of great importance to many financial players as a benchmark.

The MSCI ESG Research & Rating

Investment products along ESG criteria

MSCI ESG Research is a global leader in environmental, social and governance (ESG) sustainability research and ratings. The associated MSCI ESG rating is designed to measure a company's resilience to long-term, industry-standard, as well as material ESG risks. As part of this, MSCI uses a rules-based methodology to identify industry leaders and laggards that are exposed to ESG risks. These market participants are ultimately rated equally on how they manage risk. ESG ratings range from frontrunner (AAA, AA), average (A, BBB, BB) to laggard (B, CCC).

In the MSCI ESG Fund Rating, over 200 fund metrics are used to assess ESG attributes of funds. These include sustainable impact metrics, value alignment metrics, and ESG risk metrics.

They measure funds' engagement with publicly traded companies that address social-ecological challenges in areas such as "clean technology" or "access to healthcare," among others.

These metrics are intended to help value-oriented investors to make ethical investments. They are used to consider exclusion criteria. In this way, investors can avoid companies that are active in the arms industry, e.g. as manufacturers of weapons, or are involved in human rights violations.

They are also designed to help investors understand funds' exposure to ESG-related risks. The focus here is on limiting financial costs associated with the scarcity of livelihoods, such as water, or the regulation of carbon emissions.

Summary: The metrics are intended to provide investors with measurements of the positive and negative environmental and social impacts of the investment, as well as to enable European investors, who are subject to Regulation (EU) 2016/2011, among other regulations, to evaluate funds. For example, one metric measures the diversity of a board. This involves determining the weighted average percentage of women on the boards of the fund's holdings. Another metric, meanwhile, calculates the weighted average percentage of issuers in a fund that conflict with one or more of the UN's Sustainable Development Goals and are thus exposed to the MSCI ESG Controversies methodology. These include the core areas of environment, product quality and human rights, labor rights, and governance.

Thus, it is clear that sustainability cannot be reduced to climate issues according to a risk-oriented understanding. Other environmental and social trends can also pose serious financial risks for the companies under supervision. From the perspective of the German Federal Financial Supervisory Authority (BaFin), all ESG risks should therefore be taken into account. This also has implications for the investment universe. After all, MSCI rates equities and fixed-income securities, loans, mutual funds, ETFs and countries. And ratings help in fund construction.

Sustainable wealth management from 25,000 euros

MSCI sustainability research

We at Hauck Aufhäuser Lampe also use MSCI sustainability research in our asset management. In October 2020, for example, we switched our entire investment strategy to this ESG-compliant investment approach. This means that you can invest sustainably in asset management starting at 25,000 euros, via our digital wealth management service Zeedin. The investment strategy is always based on MSCI's sustainability research. Client portfolios are continuously checked for ESG compliance and securities that violate the ESG criteria are excluded.



"Sustainable investments generate just as good a return as "classic" investments, you just have to find the right ones for yourself. After all, one's own investment behavior and the associated financing of companies has a major impact on our environment."
Kerstin Jungmann, Team Head Digital Wealth Channel Zeedin

Individual ethical-sustainable wealth management starting at 150,000 euros

Together with our partner Arete Ethik Invest AG

In addition, from 150,000 euros we offer the possibility of concluding an ethically-sustainable individual securities wealth management agreement. Here, we continue to rely on the expertise of Arete Ethik Invest AG (formerly Hauck & Aufhäuser (Schweiz) AG). Our partner company in Switzerland launched the first sustainability fund in continental Europe. We offer their Prime Value funds unchanged and successfully in individual asset management. Your investment strategy is based on the security selection of an independent ethics committee. If you would like to have special sustainability criteria included in your portfolio, we are also open to a customized criteria application.

Responsibility & return

Many studies show that ethical-sustainable investments do not have to sacrifice returns - if they are prepared and monitored just as carefully and professionally as conventional investments. For the development of our ethical-sustainable investment products on a mandate or fund basis, we combine financial and ethical-sustainable analysis methodologies

The investment process

Securities with sustainable business models and growth prospects are proposed to the Investment Committee. In parallel, the Ethics Committee evaluates the ethical orientation of the issuers and thus defines the investment universe with its decisions. The independent Ethics Committee, which continuously monitors compliance with the defined ethical standards, is made up of renowned experts from various fields. We then quantify the financial return and risk prospects using our own valuation models. We invest when the risk-return profile is promising and the investment appears sensible from the point of view of diversification and risk spreading. We monitor the performance of the securities and the funds on an ongoing basis.

Sustainable value creation

The aim of our investment ethics and policy is to ensure safe and profitable, but at the same time socially and ecologically responsible investment behavior geared to sustainable corporate value creation. We are also committed to this through our membership of industry associations and our social commitment.

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