A very boozy Christmas

Who doesn’t know it – sitting together in a boisterous atmosphere, with a glass of champagne in your hand. Or two. Christmas is the celebration of joy, of Christmas markets, and of excessive alcohol consumption: a good reason for us to dedicate this ESG Letter to the topic of alcohol.

When you talk to someone about sustainability, the answer is often that an investor has to forego a certain amount of yield for sustainable forms of investments, with the Vice Fund almost inevitably serving as evidence: a US fund that invests exclusively in tobacco, gambling, arms, and alcohol companies. The message behind it seems clear: an investment in alcohol is obviously the exact opposite of a sustainable (responsible) investment.

What are the main issues in terms of sustainability when it comes to alcohol? The first one is definitely the issue of the social responsibility of companies as they are handling alcohol. The company faces the question of responsibility from a multitude of angles.

Alcopops and binge drinking

Let’s discuss the issue of alcohol marketing. Who is the target? How is alcohol portrayed? Are there products that target certain groups in particular who should actually not be drinking alcohol or who are at risk of developing a problematic consumer pattern? Just think of the intensive discussion about alcopops and binge drinking a few years ago, which was all about those questions.

Another issue is the access to alcohol. In Austria, the law stipulates who has access to alcohol. How compliant are companies? This question concerns more the retail sector and the hotel, gastronomy, and leisure industry rather than the producing sector. This is not simple at all, given that one has to weigh social against corporate responsibility. Even better if companies succeed in this tightrope walk and take responsibility.

Alcohol is challenging to businesses also because many are directly affected by alcohol abuse. According to estimates, 4 to 6% of the Austrian population suffer from alcoholism. This means that statistically, more than 10,000 enterprises have at least one alcoholic among the staff. That, too, is a challenge for businesses from a social and economic perspective.

This adds to the challenges in production. 200 years ago, working on a sugar cane plantation was tantamount to a death sentence. Hardly anyone would survive that sort of work for more than a few years. While we are luckily past those days, the sugar cane harvest is still not exactly a walk in the park (N.B. sugar cane is one of the most important raw materials for the production of alcohol). On top of that, there are classic environmental questions that range from the carbon foot print to water consumption and the cultivation of monocultures.

The good thing about alcohol, from a sustainable investor’s point of view, is that one does not need it. Just compare the performance of the Vice Fund over the past five years with our Erste Responsible Stock America, and you will see that vice has not paid off. I hope you will find this ESG Letter informative and exciting, and that it will lift your spirits without the use of spirits.

Gerold Permoser

 

Read more articles from this issue of our ESG letter here.

^*ESG stands for Environmental, Social and Governance“ – These are the three broad categories according to which companies are examined in sustainable investment.

 

^{Legal note:
Prognoses are no reliable indicator for future performance.}

 

This document is an advertisement. Unless indicated otherwise, source: Erste Asset Management GmbH. The language of communication of the sales offices is German and the languages of communication of the Management Company also include English.

The prospectus for UCITS funds (including any amendments) is prepared and published in accordance with the provisions of the InvFG 2011 as amended. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in conjunction with the InvFG 2011.

The currently valid versions of the prospectus, the Information for Investors pursuant to § 21 AIFMG, and the key information document can be found on the website www.erste-am.com under “Mandatory publications” and can be obtained free of charge by interested investors at the offices of the Management Company and at the offices of the depositary bank. The exact date of the most recent publication of the prospectus, the languages in which the key information document is available, and any other locations where the documents can be obtained are indicated on the website www.erste-am.com. A summary of the investor rights is available in German and English on the website www.erste-am.com/investor-rights and can also be obtained from the Management Company.

The Management Company can decide to suspend the provisions it has taken for the sale of unit certificates in other countries in accordance with the regulatory requirements.

Note: You are about to purchase a product that may be difficult to understand. We recommend that you read the indicated fund documents before making an investment decision. In addition to the locations listed above, you can obtain these documents free of charge at the offices of the referring Sparkassen bank and the offices of Erste Bank der oesterreichischen Sparkassen AG. You can also access these documents electronically at www.erste-am.com.

N.B.: The performance scenarios listed in the key information document are based on a calculation method that is specified in an EU regulation. The future market development cannot be accurately predicted. The depicted performance scenarios merely present potential earnings, but are based on the earnings in the recent past. The actual earnings may be lower than indicated. Our analyses and conclusions are general in nature and do not take into account the individual characteristics of our investors in terms of earnings, taxation, experience and knowledge, investment objective, financial position, capacity for loss, and risk tolerance.

Please note: Past performance is not a reliable indicator of the future performance of a fund. Investments in securities entail risks in addition to the opportunities presented here. The value of units and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your units. Persons who are interested in purchasing units in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to § 21 AIFMG, especially the risk notices they contain, before making an investment decision. If the fund currency is different than the investor’s home currency, changes in the relevant exchange rate can positively or negatively influence the value of the investment and the amount of the costs associated with the fund in the home currency.

We are not permitted to directly or indirectly offer, sell, transfer, or deliver this financial product to natural or legal persons whose place of residence or domicile is located in a country where this is legally prohibited. In this case, we may not provide any product information, either.

Please consult the corresponding information in the fund prospectus and the Information for Investors pursuant to § 21 AIFMG for restrictions on the sale of the fund to American or Russian citizens.

It is expressly noted that this communication does not provide any investment recommendations, but only expresses our current market assessment. Thus, this communication is not a substitute for investment advice, does not take into account the legal regulations aimed at promoting the independence of financial analyses, and is not subject to a prohibition on trading following the distribution of financial analyses.

This document does not represent a sales activity of the Management Company and therefore may not be construed as an offer for the purchase or sale of financial or investment instruments.

Erste Asset Management GmbH is affiliated with the referring Sparkassen banks and Erste Bank.

Please also read the “Information about us and our securities services” published by your bank.

Subject to misprints and errors.