Inyova’s way of incorporating sustainability risks into investment decisions
Contribution to being more sustainable
Inyova was established to contribute to a more sustainable, resource-efficient economy, with the aim of reducing the risk and impact of climate change in particular. In addition to observing sustainability goals in the Inyova organisation itself, we also believe it is our job to raise awareness among our investors of sustainability aspects when structuring the business relationship that exists with us. In the context of asset management, we enquire about our investors’ sustainability wishes and requirements for implementation.
Environmental conditions, social upheavals and/or poor corporate governance can have a negative impact on the value of our investors’ investments and assets in a number of ways. These ‘sustainability risks’ can have a direct impact on the asset structure, financial condition and earnings, as well as the reputation of the investments. Since such risks cannot ultimately be completely ruled out, we have developed specific strategies for the financial services we offer to identify and limit sustainability risks.
Evaluating & Limiting risks
To limit sustainability risks, we try to identify and (if possible) exclude investments in companies that exhibit an increased risk potential. With specific exclusion criteria, we believe we are in a position to align investment decisions with environmental, social or corporate values. We generally use valuation methods that are recognised on the market for this purpose.
Identification of Sustainable investments
The identification of suitable investments may on the one hand – in the case of the bond part of the Inyova portfolios – consist of investing in investment funds whose investment policy is already equipped with a suitable and recognised sustainability filter to reduce sustainability risks. The identification of suitable investments to limit sustainability risks can also – in the case of the equity part of the Inyova portfolios – consist of using recognised rating agencies and data providers for purposes in asset management. The specific details can be found in the individual agreements and chosen handprint and footprint topics of the investor, as well as the investor’s exclusion criteria.
Inyova’s Organisational Guidelines
Inyova’s strategies for incorporating sustainability risks are also incorporated into the company’s internal organisational guidelines. Observance of these guidelines is decisive for evaluating our employees’ work performance. In this respect, the remuneration policy is in line with our strategies for incorporating sustainability risks.
Sustainability risk control
Provided that we succeed in identifying companies with increased risk potential and excluding them from an investment, the residual sustainability risks should only have a minor negative impact on the return and should not deviate significantly from the general market risk. Sustainability risks that are not apparent to us in the identification process described above may have a significantly greater impact on returns.
Statement on considering adverse effects on sustainability factors
Investment decisions may have adverse effects on the environment (e.g. climate, water, biodiversity) and on social and labour issues, and may also be detrimental to the fight against corruption and bribery.
As a matter of principle, we have a considerable interest in fulfilling our responsibility as a financial service provider and in helping to avoid such effects in the context of our investment decisions. We consider sustainability criteria as described in our whitepaper.
Inyova already endeavours to implement all given legal requirements to the best of its knowledge based on the current situation, and (according to our understanding) essentially fulfils the requirements. However, specific bureaucratic framework conditions and essential legal issues are still unresolved to some extent.
To avoid legal disadvantages, we are therefore currently prevented from making a legally binding public statement on how we take the adverse effects on sustainability factors (environmental concerns, etc.) into account in the context of our investment decisions. So, at this point, we can only state that – at this time and until further clarification is provided – any adverse effects on sustainability factors shall only be considered as described in our sustainability strategy and whitepaper.
However, we explicitly declare that this handling does not change our willingness to contribute to a more sustainable, resource-efficient economy with the aim of particularly reducing the risks and effects of climate change and other environmental or social injustices.
Explanation and description of Inyova portfolios’ environmental or social characteristics and targeted sustainable investments
With its portfolios, Inyova offers the opportunity to include different environmental and social handprint and footprint topics, as well as exclusion criteria according to the investors’ requirements.
The Inyova whitepaper outlines how Inyova builds customer portfolios, with a particular focus on the role of sustainability criteria along the following three dimensions: the ‘handprint’ – what a company does, the ‘footprint’ – how they do it, and the ‘exclusion criteria’ – business areas and activities customers are able to exclude. It details how exactly we define each individual handprint, footprint, and exclusion criterion, how we assign these dimensions to companies within our investable universe, and how these dimensions are combined with financial criteria to create a personalised investment portfolio.
Broad market indices (such as the S&P 500, STOXX Europe 600 or DAX Index) are used as equity benchmarks, as the goal is generally to achieve a return in line with the broad market.
The methods for identifying environmental and social characteristics are based directly on company key figures or characteristics (see the whitepaper) and are thus ensured by continuously monitoring the Inyova investment universe.
There is an opportunity for investors to focus on the companies’ ‘carbon footprint’; see the whitepaper.