Erste Asset Management Investment Blog

Socially sustainable investment – how does it work?

Socially sustainable investment – how does it work?
Socially sustainable investment – how does it work?
Beitrag teilen:

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.
👉 More information

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.

RESPOND TO THE ARTICLE

WICHTIGE RECHTLICHE HINWEISE

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.