Regulation (EU) 2019/2088 ("Disclosure Regulation" or "SFDR" (Sustainable Finance Disclosure Regulation)) places an obligation on financial market operators, including investment firms, that provide portfolio management services, UCITS (Undertakings for Collective Investment in Transferable Securities) management companies and managers of alternative investment funds to disclose information about strategies for dealing with sustainability risks and potential and/or identified adverse impacts on sustainability.
ARTICLE 3 OF THE SFDR: TRANSPARENCY OF SUSTAINABILITY RISK POLICIES
As a long-term oriented investor, we embed ESG factors (aspects of sustainability which relate to Environmental, Social and Governance criteria) into the investment process throughout. Starting with an analysis of company-specific fundamentals carried out by our in-house Research team, each new investment idea is tested thoroughly for its quality. Only when a company generates high and secure returns over the long term and there are no serious ESG risks will an investment idea become a potential investment and therefore be added to the focus list. The portfolio managers may only invest in securities that are on these internal focus and/or guarantor lists (equities/bonds). This principle ensures that invested securities have been run through the in-house analysis process and therefore correspond to our own understanding of quality.
ESG factors are thoroughly taken into account as part of the in-house evaluation process and are assessed for opportunities and risks. As part of this process, each of the three factors (E, S and G) is considered from the perspective of a long-term investor in order to ensure that none of the aspects will have a negative effect on long-term added value. Sustainability risks are events or conditions in Environmental, Social and Governance areas, which, when they arise, could have significant actual or potential negative impact on the value of an investment. Sustainability risks can have a considerable impact on other types of risk, including, for example, the general price risk, operational risk, liquidity risk and currency risk, and are a contributing factor affecting the significance of these types of risk.
In order to be able to fully assess ESG factors, the team of analysts has access to external data sources, including company reports, ESG research data from third parties (MSCI) and a variety of other sources. This information is fed into the in-house CORE analysis process and helps to complete the picture or identify potential problems. It can provide and replace meaningful information to help assess ESG factors, but it is never a substitute for in-house analysis.
This also includes reviewing risks to reputation and climate-related physical risks and transition risks which may directly or indirectly impact the value of a company. The following points, among others, can be identified as illustrative benchmarks with a view to the ongoing analysis of target investments:
The multi-stage analysis process places particular emphasis on good, ethical corporate governance, which is important if a company is to undergo sustained growth. This increases the long-term prospects of a company and can only take place if environmental and social factors are taken into account. The following points are among those that can be identified as illustrative benchmarks:
By taking a fundamental approach when integrating ESG and by taking sustainability risks into account, Flossbach von Storch AG is fulfilling its fiduciary duties to the best of its abilities so as to be able to adequately classify the potential risks (and opportunities) of investment decisions.
ARTICLE 4 OF THE SFDR: TRANSPARENCY OF ADVERSE SUSTAINABILITY IMPACTS AT THE ENTITY LEVEL
The Flossbach von Storch Group is not taking any adverse impacts of investment decisions on sustainability factors into account at present. There market does not currently provide a sufficient level of relevant data needed for determining and measuring the adverse sustainability impacts. Starting on 30 December 2022 at the latest, information will be made available about whether and how the most important adverse impacts of investment decisions on sustainability factors are being taken into account.
ARTICLE 5 OF THE SFDR: TRANSPARENCY OF REMUNERATION POLICIES IN RELATION TO THE INTEGRATION OF SUSTAINABILITY RISKS
The strategies used by our company to integrate sustainability risks also feed into our in-house corporate organisational guidelines. Compliance with these guidelines is crucial for evaluating the work performance of our employees and therefore considerably impacts future salary progression. In this respect, the remuneration policy is commensurate with our strategies for integrating sustainability risks.
ARTICLES 8, 10, 11 OF THE SFDR: TRANSPARENCY OF THE PROMOTION OF ENVIRONMENTAL OR SOCIAL CHARACTERISTICS
If a financial product is classified as an Article 8 product pursuant to the SFDR, relevant information about the environmental and social characteristics will be available from Downloads.