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Responsible investment Third-party customer funds
Third-party customer funds

As an asset manager, we align our investment strategy with the needs of our customers. The ultimate goal of our investment strategy is to obtain a result which is as great and sustainable as possible. Within this goal, we integrate the principles of responsible investment into our investment process. We are convinced that this will have a positive impact on the risk/return profile in the long run by reducing reputational risks, potential legal risks and the associated negative financial results.

Our customers benefit from our responsible investment strategy. The scope of our responsible investment policy covers liquid investments, bonds and alternative investments such as senior secured loans. If necessary (e.g. due to a lack of ESG data), we adapt the responsible investment policy to suit the asset class concerned.

We apply our responsible investment policy
* Based on the data of the data provider MSCI, if available. Investments without a corresponding data basis are not excluded from the investment universe. Figure: Baloise Responsible Investment Policy
* Based on the data of the data provider MSCI, if available. Investments without a corresponding data basis are not excluded from the investment universe. Figure: Baloise Responsible Investment Policy

Our responsible investment (RI) policy consists of three strategic pillars:

1.   ESG integration*

We believe that the integration of ESG factors makes economic sense and will have a long-term positive effect on the risk/return profile. Within the framework of our RI policy, new investments in securities with an ESG rating lower than B (according to MSCI data) are not part of the investment universe.

* Based on the data of the data provider MSCI, if available. Investments without a corresponding data basis are not excluded from the investment universe.

If passive infringements occur, for example due to rating downgrades, these are systematically assessed by the Responsible Investment Committee (RIC) once a quarter, and measures are applied where required.

We also provide our portfolio managers with dedicated ESG information so that they can take it into account in their investment decisions.

2.    Exclusion

We wish to avoid reputational and long-term default risks. We also understand that certain investments are not compatible with a responsible investment policy and therefore require special assessment.

As a result, Baloise Asset Management has been using exclusion criteria when it comes to manufacturers of controversial weapons for years. In particular, we follow the recommendations of the Swiss Association for Responsible Investments (SVVK – ASIR) and have fully adopted the published exclusion list. We also apply the following MSCI screens:

  • Cluster bombs (revenue threshold of 0%)
  • Landmines (revenue threshold of 0%)
  • Biochemical weapons and systems (revenue threshold of 0%)
  • Depleted uranium weapons (revenue threshold of 0%)
  • Blinding laser weapons (revenue threshold of 0%)
  • Weapons – non-detectable fragments (revenue threshold of 0%)
  • Incendiary weapons (revenue threshold of 0%)
  • Nuclear weapons (revenue threshold of 1%)

Luxembourg law, i.e. the obligatory exclusion of cluster bombs, is also taken into account.

We also exclude companies involved in the coal industry (at least ten per cent of their total turnover) and unconventional oil and gas producers (at least ten per cent of their total turnover) as part of our climate strategy and, as a result, as part of our efforts to achieve Sustainable Development Goal No. 13 (combating climate change).

Companies with a high volume of stranded assets, i.e. assets which pose a financial risk in light of the revolution in the way energy is produced, alongside insufficient management of the risks arising from this development (e.g. charges for CO2 emissions), will be excluded too.

3.   Active ownership

As part of our active ownership strategy, Baloise Asset Management pursues three types of active ownership strategies, as shown below:

Figure: Baloise Active Ownership Strategy

1.   Collaborative corporate dialogue

Baloise Asset Management works together with other (institutional) investors to talk to companies about ESG practices. This approach is particularly effective when it comes to ESG issues that affect an overall sector, e.g. cutting CO2 emissions, access to medication, deforestation, etc. in which a collective presence vis-à-vis companies can enhance the effect of the engagement.

The following criteria are relevant to the selection of activities in the area of collaborative engagement:

  • We select the specific engagements according to their significance and relevance. We strive to engage in and positively influence ESG issues that also play a role in investment analysis within our investment decision process and are considered to be materially relevant.
  • We select specific engagements in which we can have a highly positive impact in collaboration with other investors.
  • We select specific engagements in which we can contribute to sustainable development in general in collaboration with other investors.

Collaborative corporate dialogue is achieved through participation in initiatives. These initiatives are selected according to the focus issues, and are confirmed and coordinated internally by the Baloise Active Ownership Council.

2.   Public policy engagement

Baloise Asset Management pursues political engagement at the sector level through its involvement in leading initiatives for sustainable investment and organisations such as the Swiss Insurance Association (SIA), the Asset Management Association Switzerland (AMAS), the Principles for Responsible Investments (PRI) and Swiss Sustainable Finance (SSF). These organisations maintain contact with policymakers and other stakeholders with a view to promoting the consideration and integration of relevant ESG issues at the regulatory level. BAM is convinced that policymakers have a significant impact on the sustainability and stability of the financial markets, and play an important role in regulation and in the relationships between companies, investors and society.

3.   Proxy voting

Baloise Asset Management considers proxy voting as a third strategy within active ownership, and, in particular, exercises the voting rights associated with Swiss shares within the framework of the assets entrusted to it, on the part of the insurance company. We follow the principles of good and ethical corporate governanc.

Transparency

With our active ownership strategy, we are committed to transparency. The Annual Report 2021 details our activities in this area and explains how they are integrated into our strategy. The report is available in the download section. 

Downloads Baloise Responsible Investment Policy pdf - 356 KB The Baloise Active Ownership Strategy pdf - 67 KB The Baloise Climate Strategy pdf - 70 KB Baloise Active Ownership Report 2021 pdf - 430 KB
With particular emphasis on the climate: The Baloise Asset Management Climate Strategy

Climate change and the resulting effects, such as an increased likelihood of natural disasters along with the damage these cause, are key to our long-term investments. It is in our interest to keep environmental risks as low as possible while also achieving a positive impact on the environment in order to sustain it for us all in the long term. Our dedicated Baloise Asset Management Climate Strategy is embedded in Sustainable Development Goal (SDG) No. 13 (combating climate change).

The Baloise Asset Management Climate Strategy comprises four strategic pillars, as shown below. The climate strategy forms an integral part of the Baloise responsible investment strategy.

Figure : The Baloise Asset Management Climate Strategy

1.   Exclusion

As far as exclusion is concerned, the threshold for turnover generated by coal is set to be reduced to ten per cent due to the high level of CO2 emitted during combustion and extraction. In addition to this, producers of unconventional oil and gas will be excluded where this activity exceeds the turnover threshold of ten per cent due, among things, to the large amount of CO2 consumed during extraction and the major risks posed to the environment during production. Companies with a high volume of stranded assets, i.e. assets which pose a financial risk in light of the revolution in the way energy is produced, alongside insufficient management of the risks arising from this development (e.g. charges for CO2 emissions), will be excluded too.

2.   ESG integration

As part of the second pillar, portfolio management is supplied with dedicated data relating to the environment, society and governance (ESG). It also has access to the MSCI ESG Low Carbon Transition Score and other dedicated climate indicators, so that it can take these into account in its investment decisions. The Low Carbon Transition Score measures the degree to which a company has aligned itself to the low carbon transition. Companies with a high Low Carbon Transition Score are more strongly aligned to the low carbon transition than companies with a lower score (score: 0–10). Other indicators include, for instance, carbon intensity or the Scope 1/2/3 emissions of the individual companies.

3.   Commitment

As part of the Baloise Active Ownership Strategy, Baloise Asset Management engages in active dialogue with companies on specific and general issues impacting climate change. In doing so, it is underlining its commitment to increased transparency on the part of companies with regard to climate performance indicators.

4.   Transparency

Baloise Asset Management is committed to reporting transparently on its climate strategy and the consequences of this. This is done, on the one hand, on portfolio level. For example, we create a CO2 footprint report every year which shows our portfolio in comparison to the benchmark. It shows comparisons between the effective and the comparative portfolios for Swiss equities, European equities and our bond portfolio (Swiss equities: Swiss Market Index (SMI); EUR equities: Euro Stoxx 50; bonds: Barclays Global Aggregate Bond). In our portfolios, we exhibit significantly lower CO2 intensity (as at: 31 December 2020).

What’s more, as part of the Baloise Group, BAM will also implement the guidelines of the Taskforce for Climate-related Disclosure (TCFD).

 

Dealing with ESG risks

Baloise Asset Management is confident that incorporating sustainability risks into the investment process will have a positive impact on the risk/return profile and that it will be able to reduce sustainability risks with the potential to have a financial impact.

Baloise Asset Management acknowledges that sustainability risks can be significant, which is why it includes them in the investment process from day one, as described above.

In order to give them further consideration, the company refers to the ESG scores published by MSCI Ltd. The scores are prepared based on the materiality of sustainability risks and opportunities, i.e. the MSCI ESG rating model is based on a risk and opportunities model: How can sustainability factors affect the company’s long-term success in both positive (opportunities) and negative (risks) terms? Those sustainability risks and opportunities that have a financial impact on the company’s success are selected for each subsector.

The company uses the aggregated ESG rating for the individual companies/shareholdings. This is the aggregated weighted average of the individual key issue scores (of which there are approximately 37) and the company ratings, normalised by sector. The key issues cover three pillars, environment (“E”), social (“S”) and governance (“G”) and the ten topics developed based on these pillars (e.g. climate change, human capital or corporate behaviour).

High transparency for our customers

We want to provide our customers with a high level of transparency about our products and the consideration of responsible investment. For example, we display the RI policy on the monthly fact sheets of our investment funds. 

Overview of our responsible investment products

Companies can find detailed information about the specific products here.

Private investors can find details about our products here.

The Baloise product range

The Baloise Investment Funds fall under Art. 6 of the European Sustainable Finance Disclosure Regulation (SFDR) with the exception of BFI Positive Impact Select, which falls under Art. 9.

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