The focus of foundations should be that their objectives are not undermined by any investment activity as this might annul any effect; so a foundation’s purpose should be aligned with and supported by selective as well as purposeful investments. Nevertheless and especially in this low-interest-rate environment, foundations also face the challenge of generating attractive returns. But specifically this environment also makes it relevant for all foundations to apply a sustainable perspective and engange in relation to their investments.
Furthermore, ESG reporting obligations for foundations are within reach. Key figures such as ESG (environmental, social, governance), controversies or climate footprint measure sustainability and are becoming an integral part of financial risk management. Voluntary action is increasingly giving way to legal obligations.
No worry – Measuring the social footprint of the foundations capital is possible. The focus is on identifying the so-called ESG criteria. Each company in a portfolio is linked to a set of sustainability specifications. Based on this, foundations can easily create a dedicated “ESG foundation check” taking their specific requirements and specification into account. By doing so, companies with involvement in a range of products and business activities that might be subject to investment restrictions can be identified.
Transparency is the first step. Therefore we are proud to announce our second ESG-Compass for foundations; Taking the increased market involvement into account, with even more data, new ESG portfolio attributes and a couple of new innovations. This year’s study screens more than 60 funds for their ESG characteristics: Risk, Impact and Value. The research takes a closer look at endowment funds that are marketed (and sold) to foundations in Germany.
To independently compare and in order to efficiently score those mutual funds, the powerful “ESG Analytics Tool” of yourSRI.com has been used.
The key facts:
- ESG-Risk: 80% of all screened funds are rated “A” or higher. The average ESG-score across all categories is above 6.0
- Value: 60% of the funds examined are UN-Global Compact “non-compliant” with a small part (1-2%) of their portfolio holdings.
- Impact: Equity funds – over 50% of equity funds have a significant impact. Mixed and bonds – the majority of funds have an average or low impact. In the case of bonds, 40% are even at an insignificant level.
Together with our partners we endeavour to promote and raise awareness concerning trends and issues in the field of responsible investing, aiming for greater transparency, comparability and measurability. And that’s exactly the aim of this publication.