As intermediaries between investors and capital-seeking companies and organizations, financial institutions can help to ensure that capital is invested sustainably, both from an environmental and a social perspective.
Investors play a very important role when it comes to taking greater account of sustainability in the economy. If they stop investing in the activities of companies and organizations that are socially or environmentally damaging, their financing costs increase and in extreme cases, they may have to halt their activities altogether. If investors simultaneously channel their capital into companies and projects that have a positive impact on the environment and society, these benefit from lower capital costs and thus have a competitive advantage.
As an investor and investment advisor, LGT endeavors to combine good financial performance with its environmental and social targets while taking into account the principles of good corporate governance. You can watch the video to see what the four main approaches to sustainable investing are.
As a logical consequence, we systematically exclude investments that pose significant environmental, social and governance risks from our investment universe. The Group has not invested in companies involved in the manufacture or trade of controversial weapons since the beginning of 2012. This exclusion extends to companies that produce or sell landmines, cluster bombs and munitions, nuclear weapons, biological and chemical weapons, or white phosphorus and uranium bombs.
We are also convinced that our investment behavior can play an active role in the fight against environmental destruction and climate change. Climate change threatens our way of life, results in significant costs and exacerbates social tensions and inequalities in many countries. Research shows action must be taken urgently.
LGT supports the goal set out in the Paris Agreement of limiting global warming to 2° Celsius above preindustrial levels. We have therefore decided to exclude companies that produce coal and generate power from coal from our investment universe Group wide. Coal-based power generation is not compatible with a scenario that limits global warming to 2° Celsius or less.
It is still very difficult for private investors to understand how sustainable an investment really is and how their investments impact the environment and society. In the financial sector, ESG criteria (E stands for environment, S for social and G for good corporate governance) have become established key assessment indicators; however, for non-professional investors, accessing and interpreting this data is not easy. Studies have shown that – in addition to reservations about performance, which are demonstrably unfounded – the lack of access to reliable sustainability information prevents private individuals from investing more in sustainable investments.
LGT has introduced a sustainability rating to support its clients when making investment decisions in a way that takes ESG criteria into account: the LGT Sustainability Rating for equities, bonds, funds and ETFs. The rating is carried out using an in-house rating tool that has been successfully used manage the LGT sustainability funds since 2009. The individual investment instruments are awarded one star (poor) to five stars (excellent) for their sustainability quality based on the ESG score achieved. This gives clients access to easy-to-understand information about the sustainability quality of their investments and enables them to make their investments more sustainable.
Sustainable investment funds have been part of LGT’s product range since 2009. Since 2019, we have also been offering our private clients actively managed portfolio management solutions with a focus on sustainability. The aim thereof is to have a positive impact on people and the environment while at the same time creating long-term financial value.
Institutional investors are systematically taking sustainable financial products into account– LGT has also been mindful of applying sustainability criteria in its investment activities for many years. Since 2003, a clause on responsible and sustainable investing has been an integral part of many of LGT’s investment programs. As a result, we systematically exclude investments that pose significant risks in the areas of the environment, society and governance (ESG criteria).
We also actively exercise voting rights for all our equity funds. Our decisions are based on internal provisions and Swiss and international corporate governance rules, such as the principles of the UN PRI.
In 2009, we started to build our range of sustainable funds by launching a number of equity and bond funds. Over the past ten years, we have worked systematically to expand this offering. Today, it comprises over 15 funds in various asset classes. For these funds, we select securities of companies or countries with high sustainability standards and exclude controversial products and behavior (e.g. tobacco, weapons or child labor). Using our proprietary analysis tool, the LGT ESG Cockpit, we assess corporate governance, environmental and social aspects as they relate to the various issuers.
Screening is not limited to individual securities – entire portfolios can also be assessed according to sustainability criteria and compared with other portfolios or market indices. An important aspect here is the impact of companies’ business activities on the environment. Investors increasingly want to know how CO2-emission-intensive their portfolio is and to invest in a low-carbon economy.
LGT also measures the environmental footprint of its funds. The following comparison of the LGT Sustainable Equity Strategy with the MSCI World Index shows that the companies in the LGT portfolio have a much smaller negative impact on the environment than the benchmark index.
(t CO2eq./mln USD)
Further information on this topic can be found in the LGT Sustainability Report 2019 (PDF)
The objective of impact investing is to have both a financial and a quantifiable environmental and/or social impact. Philanthropic commitments, on the other hand, focus on supporting organizations that contribute to the well-being of people and the planet without targeting a financial return.
With impact investing, you invest specifically in companies whose products and services have a positive impact on people and the environment. For example, these companies help mitigate climate change. Our sister company Lightrock offers LGT clients a global private equity platform that invests in companies that use new technologies and business innovations to bring about systemic change towards a more sustainable future.
For more information, please visit Lightrock
The LGT Venture Philanthropy Foundation (LGT VP) was founded on the initiative of H.S.H. Prince Max von und zu Liechtenstein. The aim of the foundation is to improve the quality of life of disadvantaged people and to provide them with good prospects for the future. Through donations, LGT VP supports social organizations and companies around the world that offer an effective solution to a social or environmental problem. For such organizations, the transfer of knowledge and access to networks are just as important as financial contributions.
Philanthropic commitments aim to achieve a maximum social and environmental return – this is the motivation behind such investments. Financial returns are not targeted.
Learn more at LGT Venture Philanthrophy
Tycho Sneyers, Managing Partner at LGT Capital Partners
“For a number of years, LGT has been taking advantage of its leading position as an investor in private equity funds to ensure that the whole sector focuses more on social and environmental values.”