Private clients of LGT can determine at a glance now how sustainable the equities, bonds and funds are that they hold in their portfolios, Andrea Ferch from LGT says in an interview with finews.com.
Andrea Ferch, what exactly is the sustainability rating?
The LGT Sustainability Rating is an indicator for the sustainability of investment instruments. It creates transparency in terms of the sustainability characteristics of equities, bonds, funds and ETFs (exchange traded funds) using five rating categories ranging from one star (poor) to five stars (excellent).
The rating is determined based on an analysis of the investment vehicle’s underlying companies and countries using over 20 criteria relating to the areas environment, social and corporate governance. The assessment of the various criteria results in an ESG score for each stock or bond, which is then translated into the LGT Sustainability Rating.
Why is LGT introducing this new rating?
Our clients are showing a growing interest in integrating sustainability into their investments. They are no longer looking only at financial performance, but also want to make a positive contribution to the environment and society, and toward sustainable development.
«It is our duty to have a proactive influence on the social and environmental impact of our business»
Our sustainability rating can serve as an important guide in this area. For LGT, sustainability is an important and integral part of the corporate strategy. We consider it our duty to have a proactive influence on the social and environmental impact of our business.
Over the last few years, we have therefore very systematically integrated social and environmental aspects into our business activities and our product range group-wide. With the introduction of the LGT Sustainability Rating, we are resolutely further pursuing this approach.
What are the advantages of the LGT Sustainability Rating for your clients?
The LGT Sustainability Rating informs clients in an easy to understand manner about the sustainability characteristics of investments and offers them additional guidance when making investment decisions.
«Saving energy and natural resources, for example, helps to keep costs down»
The rating can be used to assess individual stocks or bonds, but also entire portfolios, and helps to compare different investment vehicles in terms of their sustainability. The LGT Sustainability Rating makes it possible for investors to align their portfolios in a sustainable manner.
Can investors improve their returns by taking the LGT Sustainability Rating into account when making investment decisions?
We are convinced that the long-term economic success of a company depends to a high degree on conducting its business activities in an environmentally and socially responsible manner. Saving energy and natural resources, for example, helps to keep costs down, and the fair treatment of employees encourages long-term loyalty to the company and good performance.
«All of these factors have a positive impact on the long-term success of the company»
If a company takes its responsibility for the environment and society seriously, this also promotes its reputation, and thus strengthens the brand. All of these factors have a positive impact on the long-term success of the company and therefore also on the investment performance of investors.
On the other hand, by taking into consideration non-financial criteria, investors can avoid risks that could arise through investments in companies that for example are faced with having to pay high fines as a result of environmental destruction, and lose clients and shareholders due to reputational damage. There are a large number of studies that attest to the positive connection between sustainability and investment performance.
Andrea Ferch is Head Fund Research at LGT Bank and leads the project responsible for introducing the sustainability rating at LGT Private Banking.
