ESG

For all of Metzler Asset Management GmbH’s equity, corporate bond and multi-asset funds, exclusion criteria are applied based on 120 international norms and conventions. The data stems mostly from MSCI ESG Research. In case of an infringement of one of these standards, we exclude the company from our investment universe. In MSCI ESG Research's controversy scheme, this corresponds to a "red flag".

At the client's request, we include additional criteria in the investment process, for example based on data from ISS-ESG.

ESG integration aims to improve the risk/return profile of funds by incorporating key sustainability aspects into traditional investment analysis. For example, we quantify in economic terms  how the following aspects affect business success:

• ESG scores from MSCI ESG Research
• Sector-specific key performance indicators (KPIs)
• ESG aspects of corporate business models

Metzler Asset Management GmbH has entered an agreement with Columbia Threadneedle Investments to handle dialogue and voting rights. Columbia Threadneedle Investments and the portfolio managers at Metzler address business-relevant ESG challenges in their discussions with companies. Columbia Threadneedle Investments also exercises proxy voting rights. Columbia Threadneedle Investments prepares reports on these activities and the milestones achieved, some of which we incorporate into ESG reporting for our clients.

We continuously improve ESG integration by means of ESG controlling. In addition, Metzler Asset Management has been offering comprehensive ESG reporting since January 2018 based on the most important key indicators (KPIs) and broader sustainability approaches, greenhouse gas emissions, the most serious breaches of international norms and conventions, as well as dialogues and proxy voting activity.

ESG reporting on Metzler Asset Management's mutual funds can be found under Fund Prices & Documents.

Sustainability has played an important role at Metzler Asset Management for more than 20 years. Since 2016, we have been fully integrating ESG aspects for all fundamental and discretionary funds in order to further enhance the risk-return profile of the funds (not guaranteed or warranted). Due to classification according to Article 8 of the EU Disclosure Regulation, investors can rest assured that sustainability risks are sufficiently taken into account as part of portfolio and risk management. This also enables forward-looking investing based on investment strategies that are already geared towards the ESG target market and in line with MiFID II.

In order to make this visible to the outside world, numerous Metzler funds now bear the term "sustainability" in their names.

The sustainability aspects integrated in these funds refer to the so-called ESG factors: environmental, social and governance. The securities and investment shares held by these funds must be selected in accordance with the principles of sustainability and are classified based on the sustainability criteria defined by the company. Analyses, assessments, data and/or other information from external service providers can be taken into account.

Depending on this classification, certain issuers are included in the fund's investment universe – or excluded from it if there have been violations of the sustainability principles. The data sources currently used are research results from MSCI ESG Research and/or our own assessments.


ESG integration and exclusion criteria for companies

As part of a holistic ESG approach, sustainability aspects are taken into consideration in an ESG integration process in order to reduce company-specific risks (e.g. reputational risks) and identify opportunities (e.g. from climate change). Investments are made only in companies that are considered sustainable according to a specified filter.

Investments in certain securities are excluded if they

• violate one of over 100 internationally recognized standards. These include in particular the United Nations Global Compact and the United Nations Guiding Principles on Business & Human Rights.
• originate from companies that engage in controversial business areas beyond the defined threshold, e.g.:
  • companies that generate more than 5% of sales with electricity from thermal coal;
  • companies that generate more than 5% of sales via thermal coal or uranium mining;
  • companies that operate nuclear power plants or generate more than 5% of sales by manufacturing essential components for nuclear power plants;
  • companies that generate more than 5% of sales by producing crude oil and natural gas using non-conventional methods (fracking, oil sands);
  • companies that generate more than 5% of sales by producing and trading military equipment;
  • companies that generate more than 5% of sales with end products like cigarettes or cigars.

Ecological and social factors as well as aspects of good corporate governance

The ESG integration process systematically takes several environmental and social indicators into account – in addition to the information used to assess corporate governance. These indicators include, for example, compliance with the principles of the UN Global Compact, the responsible use of labor, sales generated using climate-friendly technologies, and the structure and quality of the company’s Supervisory Board. In addition, there is regular active dialog with companies on environmental and social topics.

Consideration of all these criteria allows us to select issuers with good management of environmental and social topics and with business models that can be classified as sustainable in the long term and in line with the aforementioned ESG criteria. ESG reports with transparent information on environmental and social portfolio indicators are available for all sustainability mutual funds and can be found at www.metzler.com/asset-management under the heading "Fund Prices & Documents". These reports also include a comparison with a reference index and show the development of the respective portfolio over time.

ESG integration and exclusion criteria for countries

As part of a holistic ESG approach, sustainability aspects are taken into consideration in order to reduce risks and identify opportunities. Investments are made only in countries that are considered sustainable according to specified criteria. Criteria for exclusion include:

a) Management of ESG risk factors based on ESG ratings for countries

b) Access to political rights and civil liberties

c) Extent of corruption

d) Peace status

e) Frequency of money laundering cases.

The ESG Policy of Metzler Asset Management GmbH, which can be found in the publication Overview of ESG guidelines and reports, provides information on the methods for assessing, measuring and monitoring environmental and social aspects, on the impact of sustainable investments, on the data sources and criteria for assessment, and on sustainability indicators for measuring environmental and social aspects.

ESG reports are updated monthly and provide investors with the desired transparency as to the sustainability of their investments:

• Evaluations based on significant ESG risks and opportunities (e.g. from MSCI ESG Research)
• Evaluations based on broad ESG assessments (e.g. from ISS-ESG)
• Analysis of a portfolio's carbon footprint 
• Analysis of controversies at the various ESG data providers
• Evaltation engagement (company dialogues and voting)

• Bundesverband Investment und Asset Management (BVI): The team at Metzler Asset Management GmbH exchanges views on ESG issues regularly with other members of the Bundesverband's ESG working group. This includes integrating the guidelines on responsible investing into the BVI's rules of conduct.
• CRIC e. V.: Metzler Asset Management GmbH has been a full member of CRIC e.V. since August 1, 2018. The association's main areas of activity include engagement, research and awareness raising for sustainable investments in society, politics and business.
• Forum Nachhaltige Geldanlage (FNG): Metzler Asset Management GmbH has been a member of the FNG since 2002. The aim is to raise awareness of sustainable investment solutions and thereby trigger a positive steering effect for investments.

• Columbia Threadneedle Investments: Metzler Asset Management GmbH has been working with Columbia Threadneedle Investments (until July 3, 2022 BMO Global Asset Management) since 2014 on the topic of "Dialogues and voting rights".
• ISS ESG: Metzler Asset Management GmbH has been working with ISS-ESG since 1999 for client-specific ethical or sustainable exclusion criteria and/or "best in class" approaches for managing special funds.
• MSCI ESG Research: Since 2016, Metzler Asset Management GmbH has been obtaining data for ESG integration and for analyzing "very severe controversies" primarily from MSCI ESG Research.
• Net Zero Asset Managers Initiative: In November 2021, Metzler Asset Management GmbH joined the international initiative, which aims to commit the asset management industry to a more active role in the fight against climate change. It is managed by the United Nations-supported Principles for Responsible Investment (UN PRI) and five other founding partner investor networks.
• Principles for Responsible Investment (PRI): In 2012, Metzler Asset Management GmbH was one of the first German asset managers to sign the Principles for Responsible Investment (PRI), which were established in 2005 on the initiative of the United Nations as a voluntary commitment by the signatories.