ESG Advisory from A to Z

Since the 1990s, the question “Why ESG?” has never been answered with such a unanimous reply. Today, investors’ goals and the world’s need for action—the big picture—are clearer than ever. However, when you get into the details, complexity increases, and with it, the uncertainty about getting active with ESG investing: “How do I find an ESG investment that’s right for me?”

Find out how ESG Advisory can help you with these investment questions.

Seize opportunities, avoid mistakes

Today, companies that operate sustainably represent more than just a “feel-good” investment opportunity. Investing in such companies allows you to better assess risks and focus on long-term performance.

E for Environmental

The “E” in ESG focuses on a company’s environmental aspects. This includes factors such as its:

greenhouse gas emissions,
for example, in its production activities and products,
compliance with environmental standards,
resource efficiency,
among many others.

Added value for investors

ESG assessments are closely related to a company’s future success. This is because environmental risks can boomerang, coming back around and harming a company at a later date.

Take, for example, a company that for cost reasons ignores the environmental pollution it is causing, but later is required to rectify the damage, at great expense. Factors like this can have an impact on future profitability, potentially reducing share price and dividend payouts.

“Companies that recognize and tackle the environmental risks associated with their activities can secure a competitive advantage for themselves in the long term.”

Simon Fössmeier, Senior Equity Analyst ESG

OUR advisory solutions

ESG meaning illustrated: The “E” in ESG stands for the environmental aspects of sustainability

S for Social

The “S” in ESG examines how a company behaves towards society. This includes factors such as its:

attractiveness as an employer,
guarantee of providing equal opportunities to its employees,
controversial products and supply chains,
as well as numerous other factors.

Added value for investors
“If companies only see society as made up of potential customers, they run the risk of disregarding important aspects of social sustainability.”

Ulrike Theus, Investment Advisor ESG

Businesses today are expected to respond to social trends and even political dynamics.

Decisions that respect the impact on different population groups enhance a company’s public image, increasing consumers’ preference for the company and reducing the likelihood of boycotts. Recruiting new employees is also easier. And where employee satisfaction is high, it is not uncommon to find productivity and value creation improving as well.

Political dynamics can affect markets, production, and supply chains alike. Companies that do not jeopardize a society’s need for security, or are less likely to be caught in the crossfire of geopolitical interests, have an advantage here.

This is why analysts consider societal factors to be important indicators of a company’s potential.

Discover more reasons

G for Governance

The last letter, the “G” in ESG, is the one that attracts the least attention from the public. For investors, however, aspects of a company’s corporate management and culture play an important role. This includes factors such as:

transparency in its business activities,
the composition of its top management and their remuneration,
prevention measures it has taken against fraud or corruption,
and many others.

Added value for investors

“Inadequate governance can become the root cause of a global scandal.”

Lukas Wäger, Head Private Clients ESG Center

A company is not only kept on the right track by its people, but also by its established processes, structures, and control mechanisms. The term “corporate governance” takes this constellation into account. How does a company decide what is right and what is wrong for the company? What principles are even subject to a company decision in the first place?

For example: Should financial returns be maximized for shareholders? Or should customers, employees and the community equally benefit as well?

A company’s ability to prioritize and balance risks and business opportunities depends, among other factors, on its corporate governance.

In the context of ESG, the area of governance is the one with the most extensive data available. This is because, unlike environmental and social impacts, analysts have been assessing corporate leadership and how it influences corporate success for decades.

OUR advisory solutions

ESG meaning illustrated: The “G” in ESG stands for governance, including aspects of a company’s corporate management and culture

ESG: Three letters—three aspects of sustainability

E for Environmental

The “E” in ESG focuses on a company’s environmental aspects. This includes factors such as its:

greenhouse gas emissions,
for example, in its production activities and products,
compliance with environmental standards,
resource efficiency,
among many others.

Added value for investors

ESG assessments are closely related to a company’s future success. This is because environmental risks can boomerang, coming back around and harming a company at a later date.

Take, for example, a company that for cost reasons ignores the environmental pollution it is causing, but later is required to rectify the damage, at great expense. Factors like this can have an impact on future profitability, potentially reducing share price and dividend payouts.

“Companies that recognize and tackle the environmental risks associated with their activities can secure a competitive advantage for themselves in the long term.”

Simon Fössmeier, Senior Equity Analyst ESG

OUR advisory solutions

S for Social

The “S” in ESG examines how a company behaves towards society. This includes factors such as its:

attractiveness as an employer,
guarantee of providing equal opportunities to its employees,
controversial products and supply chains,
as well as numerous other factors.

Added value for investors
“If companies only see society as made up of potential customers, they run the risk of disregarding important aspects of social sustainability.”

Ulrike Theus, Investment Advisor ESG

Businesses today are expected to respond to social trends and even political dynamics.

Decisions that respect the impact on different population groups enhance a company’s public image, increasing consumers’ preference for the company and reducing the likelihood of boycotts. Recruiting new employees is also easier. And where employee satisfaction is high, it is not uncommon to find productivity and value creation improving as well.

Political dynamics can affect markets, production, and supply chains alike. Companies that do not jeopardize a society’s need for security, or are less likely to be caught in the crossfire of geopolitical interests, have an advantage here.

This is why analysts consider societal factors to be important indicators of a company’s potential.

Discover more reasons

G for Governance

transparency in its business activities,
the composition of its top management and their remuneration,
prevention measures it has taken against fraud or corruption,
and many others.

Added value for investors

“Inadequate governance can become the root cause of a global scandal.”

Lukas Wäger, Head Private Clients ESG Center

A company is not only kept on the right track by its people, but also by its established processes, structures, and control mechanisms. The term “corporate governance” takes this constellation into account. How does a company decide what is right and what is wrong for the company? What principles are even subject to a company decision in the first place?

For example: Should financial returns be maximized for shareholders? Or should customers, employees and the community equally benefit as well?

A company’s ability to prioritize and balance risks and business opportunities depends, among other factors, on its corporate governance.

In the context of ESG, the area of governance is the one with the most extensive data available. This is because, unlike environmental and social impacts, analysts have been assessing corporate leadership and how it influences corporate success for decades.

OUR advisory solutions

Four reasons arguing for ESG

What’s in it for you?

Investors have always been concerned that their money should be invested the “right” way. Moreover, their personal preferences, values, and convictions are increasingly important factors in their investment decisions.

By taking ESG criteria into account when investing, you are taking active steps to align your personal investment goals with aspects of sustainability. Here are some key reasons why:

Trendlinie zeigt nach oben, denn ESG lenkt Finanzströme um: der EU Action Plan fördert Anlagen mit positivem ESG Rating

1. Competitive advantage

The EU Action Plan aims to redirect financial flows in such a way that they promote sustainable development. This is creating a competitive advantage for companies that are rated positively as ESG investments. In the long term, it ought to be easier for them to secure financing on favorable terms.

Icon für "richtig oder falsch", zeigt das Ziel von ESG, Risiken beim Anlegen zu reduzieren

2. Controlling risks

Investors who take ESG factors into account can reduce their risk. Which is why we promote investment strategies that follow ESG principles. Doing so can help prepare your portfolio for the future and that of your children.

Icon einer Hand mit Blatt. ESG Beratung hilft, beim ESG Investing persönliche Überzeugungen zu erfassen

3. Investing based on conviction

Do you believe your money should flow into companies that are really living up to their responsibilities? ESG investing makes it easier for you to identify such companies and more accurately reflect your convictions when investing.

Close-up of the Vontobel headquarters building. This is where ESG Advisory meets corporate responsibility

4. Vontobel Sustainability Positioning

As a globally operating investment firm, Vontobel wants to play a responsible, active role in the sustainable transformation of the economy and society. This is reflected both in its investment philosophy and in its own operational processes and governance.

We offer specific investment solutions focusing on companies and industries that contribute to sustainable transformation. In this way, Vontobel manages the financial risks associated with this transformation process and creates new opportunities for investors.

Six commitments to sustainability

Dennis Podszius

Senior Relationship Manager, ESG Investment Specialist

“What does sustainability mean for you personally?”

This is the first question we always ask our clients. Because no matter where they prefer to take measures in their own private life – for example, by driving an electric vehicle, eating less meat, or recycling more – our experience shows that many clients prefer to base their investments on their own convictions. So we want to make sure to reflect these as much as possible in their portfolio.

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Our ESG Advisory in detail

What you can count on

Händedruck als Icon: Vontobels ESG Expertise geht Hand in Hand mit Research und Fonds externer Partner

Vontobel experts and best-in-class partners

At Vontobel, our in-house investment experts support you with up-to-date analyses so you can make informed investment decisions. They not only recommend our own sustainability funds, but also advise you on selecting funds offered by third-party providers, and on individual securities. For this reason, we cooperate with best-in-class partners for research and external funds.

Icon einer Lupe: ESG Monitoring stellt Standards sicher und zeigt die Performance von ESG Portfolios

Monitoring and transparency

Your ESG investments are continuously monitored by our expert teams. If your portfolio is no longer in line with the standards you have defined, we can alert and advise you.

Kompass Icon: ESG Gesetze ändern sich laufend, ESG Beratung weist den Weg durch ESG Bestimmungen

Navigating through the jungle of different ESG approaches

The number of approaches to ESG is increasing—and so is the volume of regulations concerning transparency and other requirements. In this ever-growing jungle of new developments, we provide you with transparent information. Of the different ESG factors and principles, which ones are relevant to you? We answer this question with your individual sustainability preferences in mind, taking comprehensive consideration of all the relevant regulatory obligations.

Icon mit Schweizerkreuz: Vontobels Analysten integrieren bei einer Schweizer ESG Anlage das ESG Rating in die Kursziele

In-house ESG approach to Swiss equities

Our experts for Swiss Equities analyze around 100 companies operating in a wide variety of sectors. Their structured method of determining price targets takes ESG criteria and share recommendations into consideration—instead of merely sticking an “ESG label” on a particular share. In this way, ESG criteria are given greater, more precise weight.

Please note: The type and scope of consulting services may vary depending on your country. We will be happy to inform you in detail.

Ideas for ESG investing

Supplement your investment decisions with ideas and criteria from the field of ESG investing. At Vontobel, you have the freedom to weight this additional perspective individually. It is like adding another layer, with ESG Advisory and expertise.

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FAQ: Understanding sustainable investing and ESG

Here you will find answers to the most frequent questions our experts are asked about ESG and sustainable investing.

What are the risks of ESG investing?

Read the answer

While there are many different providers who issue ratings for individual securities and funds, they do not all consider the same factors—and thus they may not arrive at the same ratings. This means there is a risk that the specific criteria that are important to you as an investor might not be adequately covered.

This is why it makes sense to discuss making targeted investments in individual equities with an ESG expert. This way, the information basis for a decision can be broadened with research.

ESG is not always a top priority on investors’ agendas

Many of the issues that an ESG framework focuses attention on are structural Megatrends, for example climate change. This issue shares the characteristic with other megatrends that it will still be relevant ten or fifteen years from now. However, some market cycles play out in such a way that a specific megatrend may not be at the top of investors’ agendas; other events of global scope take center stage. This leads to fluctuations in ESG investments. The war in Ukraine and the COVID pandemic are the most recent examples—with negative and positive effects respectively.

Is there a difference between ESG and sustainable investing?

Read the answer

The short answer is that ESG creates the framework in which an investment can be evaluated according to aspects of sustainability.

In practice, sustainability is often gauged in comparative terms (“best-in-class” approach). ESG ratings play an important role in this comparison. How well is a company minimizing the risks emanating from its activities? Depending on the provider, ESG ratings range from CCC (the lower limit) to AAA (the top rating). If you take these into account when making investment decisions, then you are, by definition, practicing ESG investing. And the stricter the selection process is, the more the financial products selected are contributing toward meeting sustainability objectives.

In principle, companies are considered sustainable if their activities do not use up more resources than can be replenished. However, this resource-neutral ideal state is hardly ever reached today. Even the United Nations consciously speaks of sustainable development, making clear that progress towards the goals is in focus, not just the goals themselves.

Sustainable investing in its purest form is geared towards these goals.

Is it always necessary to evaluate a company on all three ESG criteria?

Read the answer

An ESG rating always takes all three dimensions into account, i.e., risks relating to the environment (E), social issues (S), and corporate governance (G). This is why an investment does not automatically score equally well in all three evaluations.

In addition, many rating agencies weight E, S, and G differently, depending on the industry. In the case of financial equities, for example, environmental risks are less of a focus than in the case of industrial companies. How useful this weighting is also depends on how much it corresponds to personal convictions. This subject is accordingly controversial¹—especially when companies cannot be clearly assigned to one particular sector.

In our Swiss Equity Research, the Vontobel ESG rating gives equal weight to all three dimensions. This makes it easier to compare different securities. It also takes into account the fact that good environmental risk management is hardly possible if the company is not managed well overall, or if the social risks of its activities are not minimized.

Thematic funds also exist that specialize in social or environmental issues. Accordingly, they are focused on E or S.

1
The Economist (July 2022): Special report “The signal and the noise” (registration required).

Can ESG investing really make a difference?

Read the answer

Yes. However, “making a difference” is interpreted in different ways.

In the strictest interpretation, only "impact investing" achieves a sustainable effect that is consistent, comparable, and transparently measurable in terms of advancing sustainable development. Often, progress toward reaching the 17 Sustainable Development Goals of the United Nations is cited as a required aim in order to count as an “impact.”

Unfortunately, the misconception that ESG investing is automatically impact investing stubbornly persists, even in Switzerland.²

Although investment opportunities in the area of impact investing are growing rapidly, they still remain limited in scope. For this reason, many investors choose to initiate smaller-scale portfolio improvements by considering ESG, but not limiting themselves to impact investing.

Also interesting in this context

Under the title “Impacts and risks associated with current investment behaviour,” the Swiss Federal Office for the Environment (FOEN) had a study carried out into “how effective” the ESG approach is with regard to climate issues. The conclusion is cautiously positive—but underlines that “many individual decisions can add up to a larger effect.” Verbatim, the authors’ summary includes the following:

“The review concludes that (1) ESG ratings can reflect company impact when they focus on impact materiality rather than financial materiality, (2) dedicated ESG funds tilt their holdings towards ESG leaders, but many institutional investors who have committed to ESG integration do not, (3) there is some evidence that an ESG premium exists, but it remains uncertain whether it is economically meaningful, and (4) managers readily address low-hanging fruit but hesitate to undertake larger investments to appeal to ESG investors…. Nevertheless, the strength of ESG integration lies in its scale, so even uncertain and small impacts may add up to a meaningful effect.”

More about the authors

To the study (PDF)

—

2
Empirical study by the Swiss Finance Institute and researchers from ETH Zurich (2022) on the level of knowledge in Swiss households about sustainable finance and the factors influencing sustainable investing. Original title: “Sustainable Finance Literacy and the Determinants of Sustainable Investing.” (View PDF via Social Science Research Network).

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How can you integrate ESG into your portfolio as easily as possible? Our experts will be happy to contact you for an initial ESG consultation—with no obligation on your part:

+41 58 283 63 02

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