Sustainable investing with impact – many people would first think of the environment in this context. However, you can invest your money sustainably from a social perspective as well. How does this work? We asked Bernhard Selinger, the fund manager of the ERSTE FAIR INVEST social impact equity fund, about this.
(Please note: investing in securities involves risks as well as opportunities).
When we think of sustainability, we tend to think of the environment rather than social issues. Why do you think socially sustainable investing will become more important?
We launched ERSTE FAIR INVEST in 2021. The timing was no coincidence: the coronavirus pandemic highlighted many social problems, such as working conditions in global supply chains and healthcare. And the subsequent crises, such as the outbreak of war in Ukraine and high inflation, also had a serious impact on us as a society.
This is where socially sustainable investment enters the picture: we invest specifically in companies that contribute to a more socially just, i.e. in some ways “fairer” society.
“Fair” is already part of the name of the fund, but what does this term actually mean to you?
“Fair” is a multifaceted term. We have deliberately chosen a holistic approach for the fund and are looking at all aspects of well-being.
This may be on a personal level, where each of us needs different things for our personal well-being. From sport and healthy eating to pets as a contribution to mental balance, we invest in companies in the fund that enrich our lives in the long term.
The area of work is also very important. We believe that companies with a diverse group of satisfied employees and a balanced ratio of female and male managers are more successful in the long term.
On a social level, this is about fair opportunities, broad access to education, financial inclusion and literacy, as well as social infrastructure as building blocks for a fair society with a high standard of living.
How do you decide on the composition of the portfolio, and what are the criteria for asset selection of ERSTE FAIR INVEST?
In collaboration with data providers, we create a basic universe for all our impact funds to ensure that the securities perform above average in terms of ESG issues and that there are no violations of key guidelines or corporate scandals. This universe is subject to constant expansion and updating – there are currently around 4,000 assets in the investment universe.
Starting from this universe, we then proceed by hand, so to speak. No special index as benchmark, no automatic set of rules for key figures – none of that. Instead, we have an idea or vision of the social impact we want to achieve and then try to find those companies that cover this area as well as possible. We therefore spend a large part of the time with respect to fund management analysing companies according to both economic and social criteria. Social impact in particular is a very complex topic where, as with many exciting topics, there is often no one-dimensional result.
That is why we have also tried to put the whole thing on as broad a data basis as possible and to utilise a vast array of sources, among them quantitative data from research providers (e.g. number of women on the supervisory board or in management), data from NGOs on working conditions and possible violations in the supply chains of companies or in the area of employee satisfaction and corporate culture, and qualitative data on comparison portals where employees rate the companies themselves. You can see that a wide variety of data and a lot of analysis is needed to capture this complex topic and to feel comfortable with the asset selection.
Socially responsible investing with
ERSTE FAIR INVEST
The social impact fund ERSTE FAIR INVEST focuses on the social topics of sustainability and thus on the “S” in ESG.
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Can you give us an example of a company with a positive impact in which ERSTE FAIR INVEST invests?
For the fund, impact means that we want to contribute positively to society – in other words, we want to change something for the better. In the healthcare sector, this could be a pharmaceutical company such as Gilead Sciences, which, for example, supplies HIV drugs in emerging countries at cost price, giving millions of people access to treatment options. (Please note: the company mentioned here has been selected as an example and does not constitute an investment recommendation.)
But this is just one of many exemplary companies in the fund that contribute positively with their business model.
Are the invested companies profitable, and how sustainable are their business models?
We make sure to invest in solid and successful companies that also assume social responsibility. These companies not only do the right thing, but also benefit on the bottom line.
This also makes intuitive sense: competitive advantages through well-trained and satisfied employees are the key to long-term corporate success – for example, many industries are highly dependent on skilled labour. In addition, in many economies, service account for a large share of total output. This is a long-term trend that will further increase the importance of human capital as a competitive factor.
Consumers are also becoming more aware of social issues, which in turn means greater demand for companies that can prove, for example, that their global supply chain are free from human rights violations.
And last but not least, if responsible behaviour can also prevent corporate scandals, which not only cost a lot of money but also cause far-reaching reputational damage, this also creates a very good basis for long-term business success.
Focus on social topics
The fund’s goal is to invest in well-managed companies that make an active contribution to the positive development of society with their products and services. The focus of the fund is divided into three central areas:
Work
Society
Healthcare
Work
Aspects such as fair working conditions and remuneration or diversity & inclusion play an important role when it comes to labour.
Society
The topic of society covers a wide range of issues such as access to education, financial inclusion and social infrastructure in cities.
Healthcare
When it comes to healthcare, the focus is on access to healthcare services and care as well as general matters relating to a healthy lifestyle.
Please note: where portfolio positioning of funds is disclosed in this document, it is based on market developments at the time of preparation of the document. In the context of active management, the stated portfolio positioning may change at any time.
Notices ERSTE FAIR INVEST
Benefits for investors
- Broadly diversified investment in equities from global equity markets
- Participation in ecologically, ethically, and socially acting companies
- Active selection of companies where we identified a particular degree of social utility on the basis of a pre-defined selection process
- Chances of attractive gains
Risks to bear in mind
- The price of the fund may be subject to significant fluctuations
- Due to investment in foreign currency, the value of the fund may be affected by foreign exchange fluctuations
- Capital loss is possible
- The following risks may be of particular relevance to the fund: credit risk, counterparty risk, liquidity risk, deposit risk, derivative risk, and operational risks. For comprehensive information on the risks of the fund, please refer to the prospectus and to the information for investors according to sec. 21, part II, chapter “Risk notices” of the Austrian Alternative Investment Fund Managers Act
The fund pursues an active investment policy and does not follow a benchmark. The assets are selected at our discretion, without any constraints to the latitude of judgement on the investment company’s part. Please bear in mind that investing in securities involves risks as well as the aforementioned opportunities.
For further information on the sustainable structuring of ERSTE FAIR INVEST and information in line with the Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector and the Taxonomy Regulation (Regulation (EU) 2020/852), please refer to section 12 and the Appendix, “Sustainability Principles”, of the current prospectus. When deciding to invest in ERSTE FAIR INVEST, all characteristics or objectives of ERSTE FAIR INVEST as described in the fund documents should be taken into account.