The Sustainable Investment Approach for KfW‘s Liquidity ......4 Current sustainability ratings of...
Transcript of The Sustainable Investment Approach for KfW‘s Liquidity ......4 Current sustainability ratings of...
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The Sustainable Investment Approach forKfW‘s Liquidity Portfolio
April 2017
Germany and Europe face challenges from megatrendsKfW is fully committed to the concept of sustainable development
KfW's Sustainable Investment Approach / April 2017
For us, entrepreneurial activities and social responsibility go hand in hand. Through its financing activities, KfW supports the improvement of economic, ecological and social living conditions at the local, national, European and global level with a view to contributing to sustainable development. For us, sustainability means the establishment of viable, self-sustaining economic structures.
Globalisation / technical progressGlobalisation / technical progress
DemographicchangeDemographicchange
Environmental and climate protectionEnvironmental and climate protection
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KfW's Sustainable Investment Approach / April 2017
Sustainability approach at KfW
KfW Group
KfW – Sustainability principles
Declaration on respect for human rights in KfW’s business activities
Data based on new business 2016
Demographic change
Environment and climate protection
Globalisation /technical progress
Trend-independent promotional topics
12%
44%
18%
26%
In-house environmental protection
Responsible procurement
Stakeholder dialogue & staff
Sustainable portfolio management
Public CorporateGovernance Code
Broad sustainability management system
Prevention of corruption and money laundering
KfW Foundation
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Sustainable Banking
OperationsLending Business Governance & CSR
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Current sustainability ratings of KfW
› Sustainalytics: 85 points out of 100, second rank among 343 banks worldwide
› Oekom Research: „Prime“ mark-up among the group of best-rated financial institutions. The
sustainability rating is C+ (on a scale ranging from D- to A+)
› imug: Rating BBB on a scale ranging from AAA to D. KfW is among the top 9 out of 109 assessed
financial institutions
90 scores
Stand: 19.04.2017Disclaimer: The ratings given here are opinions of various rating agencies. KfW assumes no liability for their accuracy, validity or timeliness. The information published here isintended for the general information of our investors and is not a recommendation to buy, hold or sell KfW bonds.
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KfW's Sustainable Investment Approach / April 2017
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The UN-PRI initiative
Principles forResponsibleInvestment
› A financial initiative of the United Nations Environment Programme (UNEP)
and the UN Global Compact
› Development of a framework for responsible investing
6 principles
› Integrate the consideration of environmental, social and governance (ESG)
issues into investment decision-making
› Transparent communication and raising awareness on sustainability issues
in the capital market
Signatories
› Currently more than 1600 institutional investors, asset managers and
financial service providers – 61 from Germany
› More than USD 60 trn assets under management
KfW's Sustainable Investment Approach / April 2017
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Elements of KfW‘s sustainable investment approach
1. ESG-Integration 3. Engagement2. Exclusion Criteria
Exclusion criteria substantiallybased on the IFC Exclusion List
› Best-in-Class approach: Only investment in bonds of issuers whose sustainability score is among the best 80% of the respective sector.
› The sustainability evaluation is based on sustainability ratings provided by a sustainability rating agency.
› Investments only in bonds from issuers who are in compliance with the exclusion list
KfW's Sustainable Investment Approach / April 2017Picture credits: KfW-Bildarchiv / photothek.net
Sector
› The sustainability rating of an issuer is crucial for a potential bond investment.
› Dialogue with the issuers on a regular basis
KfW’s liquidity portfolioaround EUR 25 bn
Goal
› Securing KfW‘s liquidity
› Sustainableinvestment
Strategy
› Pure fixed incomeportfolio
› Buy-and-hold strategy
› Risk managementvia rating and termdiversification rulesand bankwide singleborrower limitframework
Asset classes
› Government bonds
› Covered bonds
› Financials
› Bonds issued bygovernment-relatedissuers and agencies
› ABS
KfW's Sustainable Investment Approach / April 2017
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Outlook
› Introduction of the new best-in-class approach: send out a powerful signal to the issuers
› Engagement: intensify communication and dialogue with issuers
Collaboration in the PRI-workstream „Fixed Income“
Work together with other PRI signatories regular meetings of the German PRI network
Enhance sustainability practices of issuers and capital market participants!
KfW's Sustainable Investment Approach / April 2017
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Contact
KfW's Sustainable Investment Approach / April 2017
Treasury
Doris Kramer
Investment Strategies,
Sustainability
Ext.: - 3531
Marion Marinov, CFA
Investment Strategies,
Sustainability
Ext.: - 4131
KfW Bankengruppe
Palmengartenstrasse 5-9
60325 Frankfurt am Main
Phone +49 69 7431 - Exthttps://www.kfw.de/nachhaltigkeit/KfW-
Group/Sustainability/Sustainable-
Banking-Operations/Sustainable-
Investment/2016_Sustainable-
Investments.html
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Annex: The 6 PRI principles
We will incorporate ESG issues in investment analysis and decision-
making processes
We will each report on ouractivities and progress towards
implementing the Principles
We will promote acceptance and implementation of the Principleswithin the investment industry
We will work together to enhanceour effectiveness in implementing
the Principles
We will seek appropriatedisclosure on ESG issues by the
entities in which we invest
We will be active owners and incorporate ESG issues into ourownership policies and practices
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Annex: ESG (Environmental, Social and Governance ) criteria fornon-governmental issuers
Environment
› Formal environmental policy
› Environmental managementsystem
› Programmes and targets toreduce GHG emissions
› Programmes and targets toincrease renewable energy use
› Carbon intensity trend
› % primary energy use fromrenewables
› Environmental & socialstandards in credit and loanbusiness
› Sustainable financial services
Social
› Policy on freedom of association
› Formal policy on the elimination of discrimination
› Programmes to increase workforce diversity
› Employee turnover rate
› Activities in sensitive countries
› Employee incidents
› Collective bargaining agreements
Governance
› Policy on bribery and corruption
› Whistleblower programmes
› Signatory to UN Principles for Responsible Investment
› ESG reporting standards
› Policy on money laundering
› Disclosure of directors‘ remuneration
› Board independence
› In-house team dedicated to responsible investment/finance
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Annex: ESG (Environmental, Social and Governance ) criteria forsovereign issuers
Environment
› Land degradation
› Air pollution
› Trend total annual CO2 emissions
› Percentage of energy from renewable sources
› Coal use
› Ocean health
› Water productivity
› Risk exposure to natural disasters
Social
› Education
› Infant mortality
› Food security
› Level of peace
› Gender equality
› Income equality
› Child labour
› Political rights
› Youth unemployment
Governance
› Voice and accountability
› Rule of Law
› Government effectiveness
› Regulatory quality
› Agricultural regulation
› Habitat protection
› Sustainable energy
› Expenditure on education and healthcare
› Treaties and conventions
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Annex: Exclusion criteria for non-governmental issuers
KfW's Sustainable Investment Approach / April 2017
1. Production or activities involving harmful or exploitative forms of forced labour or child labour as defined in the ILO
core labour standards.
2. Production, use of or trade in pharmaceuticals, pesticides/herbicides, chemicals, ozone depleting substances and
other hazardous substances that are subject to international bans.
3. Trade in animals or animal products that are subject to the provisions of CITES (Convention on International Trade
in Endangered Species of Wild Fauna and Flora).
4. Production of cosmetics etc. involving testing on animals.
5. Commercial logging operations for use in primary tropical moist forests.
6. Production of wood or wood products other than from sustainably managed forests (enterprises with less than 50%
FSC-certified production are excluded, FSC – Forest Stewardship Council).
7. Production or trade in controversial weapons or important components for the production of controversial weapons
(anti-personnel mines, biological and chemical weapons, cluster bombs, radioactive ammunition, nuclear weapons).
8. Production or trade in tobacco.
9. Drift net fishing in the marine environment using nets in excess of 2.5 kilometers in length.
10. Controversial forms of gambling: operation of casinos, production of devices or other equipment for casinos or
betting offices or companies that generate turnover via online betting. (So-called "short odds" are defined as
"controversial forms of gambling").
11. Any business activity involving pornography.
12. Production or distribution of racist, anti-democratic and/or neo-Nazi media.