Sustainable investments, like all other investments on the capital market, are not free of risks. Sustainability risks are events or conditions from the ESG areas of the environment, social affairs and corporate governance, the occurrence of which could have a negative impact on the value of the investment. These risks can affect individual companies as well as entire sectors or regions. For example, an increase in extreme weather events as a result of climate change could pose a risk (physical risk).
An example of this would be an extremely dry period in a particular region. This could cause the levels of transport routes such as rivers to fall to such an extent that the transport of goods could be impaired. In the social sphere, risks could arise, for example, from non-compliance with labour law standards or health protection. Examples of risks in the area of corporate governance include non-compliance with tax honesty or corruption in companies.
Our strategies for dealing with sustainability risks
Disclosures in accordance with Art. 3 para. 1 of the Disclosure Regulation (EU Regulation 2019/2088)
Inclusion of sustainability risks in our investment decision-making processes in asset management
As a bank, we want to make a contribution to a more sustainable, resource-efficient economy with the aim of reducing the risks and effects of climate change in particular. In addition to observing sustainability goals in our corporate organisation itself, we also see it as our task to sensitise our customers to sustainability aspects in the way they structure their business relationship with us.
Environmental conditions, social upheaval and/or poor corporate governance can have a negative impact on the value of our customers' investments and assets in a number of ways. These so-called sustainability risks can have a direct impact on the net assets, financial position and results of operations as well as on the reputation of the investment properties. As such risks cannot ultimately be completely ruled out, we endeavour to identify and, where possible, exclude investments in companies that have an increased risk potential.
Sustainability risks are taken into account in our investment decision-making processes primarily through the selection of financial instruments. As part of the product selection process, the investment committee responsible for product selection and investment strategies decides which financial instruments are to be included in the portfolios, taking specific product characteristics into account. We see specific exclusion criteria as a suitable way of implementing this requirement. We use the 10 principles of the UN Global Compact in conjunction with the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. This is based on a threshold value of 10 per cent. The protection of human rights, the abolition of child labour, the elimination of forced labour and the promotion of environmental awareness are thus always incorporated into investment decisions. Our data provider for all sustainability issues is ISS ESG.
We have set up an ESG Committee as a group of experts to consider sustainability issues. It is an interdisciplinary body in which members from various departments are represented. The ESG Committee monitors regulatory requirements, exchanges information, compares market practices, discusses implementation and change requirements and advises the Executive Board. The committee meets regularly. The results are recorded in minutes. The members of the ESG Committee receive training at least once a year in order to fulfil their duties.
Adverse sustainability impacts at company level
Disclosures in accordance with Art. 4 para. 1 lit. a) Disclosure Regulation (EU Regulation 2019/2088)
Consideration of the main adverse impacts of investment decisions on sustainability factors
Please refer to the PDF document ‘Statement on the main adverse impacts of investment decisions on sustainability factors’ below for our declaration pursuant to Art. 4 para. 1 lit. a) Disclosure Regulation.
Our remuneration policy in connection with the consideration of sustainability risks
Disclosures pursuant to Art. 5 (1) of the Disclosure Regulation (EU Regulation 2019/2088)
Inclusion of sustainability risks in our remuneration policy
Sustainability is very important to us. We have therefore set ourselves the strategic goal of integrating environmental and social aspects into the long-term development of Sutor Bank. We ensure that the remuneration of our managers and employees is in line with this objective. Our remuneration does not incentivise us to take sustainability risks. In addition, we support the corporate objectives by taking sustainability aspects into account in the target agreements for the variable remuneration of relevant managers and employees.
Our company's strategies for incorporating sustainability risks are also incorporated into our internal organisational guidelines. Compliance with these guidelines is decisive for the evaluation of our employees' work performance and therefore has a significant influence on future salary development. In this respect, the remuneration policy is in line with our strategies for incorporating sustainability risks.
Transparency in the consideration of sustainability risks
Disclosures in accordance with Article 6 of the Disclosure Regulation (EU Regulation 2019/2088)
Results of the assessment of the impact of ESG risks on returns
The consideration of a large number of different sustainability risks should reduce the sustainability risk with regard to individual assets and our portfolios as a whole and may therefore have a neutral to positive effect on the expected return. It cannot be completely ruled out that sustainability risks may nevertheless have a negative impact in individual cases. We currently only sell Art. 6 products.