Erste Asset Management Investment Blog

Searching for the hair in the (chicken)soup

Searching for the hair in the (chicken)soup
(c) istock

Traditional key ratios like cash flow, growth rates etc. are good enough for many fund managers to substantiate a purchase decision. That is not the case at Erste AM: here, we take many additional factors relating to sustainability into account.

High cash flows, low debt, strong growth rates, and an attractive coupon, complemented by market leadership in the domestic market and competitive advantage due to very low production costs. Most traditional fund managers would have all the reasons they needed to buy this share or bond. However, it is not by accident that Erste AM has one of the biggest sustainability teams in the German-speaking region, so numerous additional questions need to be answered first:

  • How does the poultry producer fare with its employees and the local community?
  • What about animal welfare and the disposal of wastewater and animal faeces?
  • Does the company have an independent Supervisory/Advisory Board, does it run an aggressive tax savings programme?

Intensive research has revealed that numerous NGOs have levied severe, such as the contamination of groundwater. And the local population gets surrounded by large factories rather than involved in the expansion plans.

This does not only cause odour nuisance, but also heavy traffic by chicken trucks. Rumours are that those who protested were being bullied. The company is domiciled in the tax heaven Cyprus. More than enough reasons for the ESG analysts of Erste AM to qualify the company as non-investable.

Bones in the chicken breast

Two years on, new research as part of the regular ESG updates of the covered companies has revealed that there is more than the proverbial bone to pick with this company. The ESG analysts of Erste AM found an entire bone in the chicken breast. What is this all about?

Non-EU companies are subject to strict import quotas as far as chicken breasts are concerned. However, these quotas do not apply to inferior meat such as chicken breasts that have not been fully trimmed of their bones. But if this meat is imported into the EU and the bone is subsequently removed there, the inferior Ukrainian chicken meat suddenly turns into an EU-produced chicken breast. This is clearly not in line with the intentions of the legislator.

More than just a search for the hair in the soup

An ESG analysis is of course much more than just a search for the hair in the soup. It is also about uncovering opportunities, like AUGA Group shows convincingly – a company we introduce in a separate article of this ESG Letter. In order to be able to identify these opportunities and risks, one needs experienced ESG analysts who are not only capable of asking critical questions, but also the right ones.

Another requirement are fund managers with the expertise and enthusiasm to work with these additional pieces of ESG input and to integrate them into their investment process. I am humbled and at the same time very proud to take over as head of the ESG team, which has proven over the past years that it has all the above-mentioned characteristics under one umbrella.

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



Legal disclaimer

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 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 A summary of the investor rights is available in German and English on the website 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

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.

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