11/09/2019 - Funds: DWS Concept DJE Responsible Invest
Richard Schmidt, Head of Absolute Return of DJE and Co-funds manager of the DWS Concept DJE Responsible Invest
Sustainability as a matter of principle
Human rights, responsible corporate governance or environmental protection - sustainability is of great importance for DJE. In an interview, Richard Schmidt, co-fund manager of the DWS Concept DJE Responsible Invest explains the approach of DJE.
Sustainable investment is en vogue. How can the meaning of sustainability be described in a way that everyone understands and what needs to be taken into account (exclusion criteria)?
The aim of sustainable behavior should be to avoid any negative impact on the lives of other people and future generations. Sustainability in the investment world does not only refer to the environment but also to the fields of social affairs and corporate management. A sustainable remuneration system for board members, for example, should not be arranged for the short term; a sustainable workplace guarantees healthy working conditions for employees etc. Nevertheless the environment and in particular CO2 reduction is of outstanding importance for DJE.
Do you expect green investing to gain further importance within the forthcoming years?
We see green investing as a growing trend that is likely to increase in importance. The pressure for green investing had initially arisen at the political level and was then transferred to large institutional investors in the form of regulatory pressure.
An important milestone was the Paris Climate Agreement of 2015 where a globally binding agreement was concluded with the aim of limiting the Earth's temperature rise to 1.5 degrees by 2050. With the rise in sea levels, the increasing devastation of vast stretches of land, the intensification of hurricanes, droughts and floods the trend towards green investment is gaining further momentum.
Climate change is also noticeable in Germany: in the dry summer of 2018, shipping on the Rhine had to be stopped partially, East German farmers had enormous crop failures and the drinking water reserves from reservoirs were coming to an end. These events will not remain the exception but will increasingly affect us all.
Is sustainability also becoming increasingly popular among private investors?
Sustainable investment products have not yet reached private investors to the extent that could be assumed in view of climate events. On one hand private investors are under no regulatory pressure to invest their savings in sustainable products and on the other hand many financial agents still have very little green advisory expertise. Only when private investors are clearly made aware that sustainable investment is also a profitable investment the demand for sustainability funds will increase.
Is sustainable investing also attractive in terms of returns?
In recent years numerous studies have been carried out comparing sustainability funds with conventional funds. It has become clear that sustainability funds perform just as well or better than comparable non-green products.
An important aspect here is that sustainable investing prompts many investors to make profitable investments in so-called super trends. This involves investing in companies that benefit, for example, from the super trends of an ageing society, electric mobility or health. In the DWS Concept DJE Responsible Invest, for example, the trend towards fuel cells and hydrogen technology plays a major role.
Does sustainability contribute to reducing the risks of an investment?
Sustainability helps to ensure that the investment aspects of a company are viewed more holistically and that the investment risk is ultimately reduced. Whereas in the past the focus was on sales, profitability and valuation, now a variety of sustainable aspects are added. In the environmental field these can include: water and energy management, type of product packaging, biodiversity, etc. Social issues include data security, working conditions, supply chains, pay and consumer protection. Considering all these points for your investment decision a much more comprehensive picture of the company is given reducing the risk of misjudgment.
What role does sustainability play for DJE?
DJE is a signatory to the United Nations Principles for Responsible Investment (UNPRI). Since 2018, our entire range of funds and asset management have been directed towards compliance with cross-cutting sustainability criteria such as environmental protection, human rights and labor standards - we have firmly anchored these criteria in the investment process and follow them with conviction.
An important tool for fundamentally oriented investors such as DJE is to address ESG weaknesses vis-à-vis high-ranking corporate representatives. This process, called "engagement", can have a much more direct impact on the company than, for example, the simple application of exclusion criteria.
How do you ensure compliance regarding these sustainability criteria?
In order to systematically ensure compliance with sustainability principles we work with MSCI ESG Research the leading international provider of environmental, social and governance analyses and ratings. The entire stock universe is analysed using MSCI ESG filters including CO2 emissions relative to sales, land and raw material consumption, water quality, biodiversity and corruption.
In this way we can exclude companies that violate the UN Global Compact - a global pact between companies and the United Nations to make globalization more social and ecological. This reduces the company-specific investment risk by avoiding risks caused by violations of human and labor rights or environmental pollution.
What concepts or investment solutions do you offer in this area?
As mentioned above the entire range of funds is geared towards compliance with the UN Global Compact and excludes manufacturers of controversial or ostracised weapons such as cluster bombs and landmines as well as companies whose turnover is generated more than five percent by the manufacture of military equipment.
With the DWS Concept DJE Responsible Invest, however, we go much further: This is a mixed fund with a focus on - at least 25% - shares and bonds of sustainably managed companies, so-called "green bonds". Companies that exert a positive influence on society through products, processes or special commitment are considered sustainable. In addition the fund may only invest in companies whose CO2 emissions are within very strict limits. This CO2 filter is considered one of the strictest in the field of sustainability funds and manifests itself in a very low carbon footprint at fund level. Green bonds are bonds whose proceeds flow into previously defined green projects - these can include reforestation projects, the establishment of recycling cycles or the improvement of drinking water treatment. This makes the fund one of the most sustainable offers in the entire fund industry.
Funds Profile: DWS Concept DJE Responsible Invest
Note: All information published is for your information only and does not constitute investment advice or other recommendation. Long-term experience and awards do not guarantee investment success. Securities are subject to market-related price fluctuations which may not be compensated for by the active management of the asset manager or investment advisor. This information cannot replace a consultation. All information has been provided with care and to the best of our knowledge at the time of preparation. Despite all due care, the data may have changed in the meantime. Further information on opportunities and risks can be found on the website www.dje.de. The sales prospectus and further information are available free of charge in German from DJE Investment S.A. or at www.dje.de The fund management company is DJE Investment S.A. DJE Kapital AG is the distribution agent.