The Sauren ESG scoring by Sauren Finanzdienstleistungen GmbH & Co. KG offers a new, systematic evaluation for sustainable investment decisions. The qualitative analysis of the sustainability processes that is performed as part of the Sauren ESG scoring dovetails perfectly with our company’s tried-and-tested qualitative fund manager analysis.
Sauren ESG investment strategy: the Sauren ESG process
The Sauren ESG process puts fund managers’ decision-making and investment processes at the centre of the analysis. These processes are evaluated based on the importance attached to sustainability aspects in the management of the fund portfolio concerned. This encourages fund managers to support positive environmental, social and ethical conditions or to work towards an improvement without prescribing specific tools or criteria for them to use. In this respect, the Sauren ESG process is not designed to serve as a seal of quality. Rather, the underlying process is a measurement process that aims to analyse the extent to which ESG aspects have been taken into account in the fund concerned. It is also examined whether, and if so how, target funds manage principal adverse sustainability impacts.
The Sauren ESG scoring systematically translates the findings resulting from qualitative analysis of environmental, social and governance aspects into values. Sauren ESG scoring is based on a scale ranging from -4 to +4. The greater the attention paid to sustainability aspects as part of the decision-making process, the higher the score tends to be. The scoring process also includes an analysis and evaluation of principal adverse impacts on sustainability factors.
The Sauren ESG score that emerges from the process can be reduced as part of the subsequent portfolio check to reflect controversial portfolio positions.
Positive values indicate that sustainability aspects are given due consideration in the target fund manager’s investment process. This can include, for example, straightforward exclusion procedures, regular company analyses looking at ESG factors, dialogue and interaction with the management team, or even active engagement with the aim of driving change at company level. It also includes whether the target fund manager pays attention to principal adverse sustainability impacts and, if so, how these impacts are accounted for. If they are, an analysis is conducted as to how the target fund identifies and prioritises them, and how this identification and prioritisation relates to the fund’s investment focus. Amongst other things, this analysis involves the number of indicators covered by the target fund together with the quality and plausibility of the target fund manager’s assumptions regarding the investment process.
In the Sauren ESG scoring, values in the range from +1 to +2 are typically achieved by managers who see the consideration and analysis of ESG aspects during the investment process as relating, in particular, to the analysis of potential risks resulting from the investment concerned. Companies that do not act sustainably can be associated with considerable financial risks (e.g. increased risk of fraud due to poor corporate governance, environmental risks, etc.).
Values in the range of +3 and +4 show that managers are systematically trying to increase transparency and initiate changes at companies beyond the mere analysis and consideration of existing risks in the investment decision. They may do this through appropriate voting behaviour at annual general meetings, or even by actively moving to influence management (from active ownership to impact investing).
Fund managers who do not give any real consideration to sustainability aspects in the investment process and whose portfolios do not stand out in any way compared with a typical passive investment, such as the MSCI World Index, are assigned a neutral value of zero in the Sauren ESG scoring. In such funds, adverse sustainability factors are typically not taken into account at all.
Negative values typically mean that the target fund portfolio contains an accumulation of investments that are considered questionable to critical (e.g. companies from certain regions or industries, such as oil and mining or tobacco and weapons) and that sustainability aspects either play no role at all, or only play a minor role, in the investment process. A negative Sauren ESG score can also arise in a scenario in which a fund manager agrees to accept, or even deliberately accepts, increased risks and adverse sustainability implications in their investment process in order to achieve a higher return.
The Sauren ESG scoring comprises a systematic, qualitative process analysis and a portfolio check on the target fund concerned. It also includes an assessment of how adverse sustainability impacts are considered at target fund level. The individual ESG score is calculated for each of the three sub-areas (environment, social, governance) as the result of the process analysis and portfolio check. The individual scores for the three sub-areas, environment, social and governance, are used to calculate a fund’s overall Sauren ESG score.
The Sauren ESG process is applied to all sub-funds of the Fonds Sauren umbrella fund. Before they are included in one of the aforementioned fund of funds, all potential target funds undergo the Sauren ESG scoring. This process looks at each individual fund to determine the extent to which the manager includes environmental aspects, social aspects and principles of sustainable corporate governance in their investment decisions. It also assesses whether adverse sustainability impacts are given due regard.
It may be the case that certain target funds do not yet account for adverse sustainability impacts, and this will be noted in the assessment of the target fund concerned. Such funds are eligible for investment without restrictions for Sauren sub-funds that qualify as SFDR Article 6 funds, but restrictions do apply for Sauren sustainability funds that qualify as SFDR Article 8 funds and are suitable for clients with sustainability preferences within the meaning of Article 2 (7c) of Delegated Regulation (EU) 2017/565.
The Sauren Nachhaltig Defensiv, Sauren Nachhaltig Ausgewogen and Sauren Nachhaltig Wachstum sub-funds reflect the results of the Sauren ESG scoring in their target fund selection. These three sustainability funds are also required to consider principal adverse impacts on sustainability factors as part of their investment strategy. Finally, a minimum share of 5% of sustainable investments with environmental or social objectives is implemented in the sustainability fund. The proportion of sustainable investments with an environmental objective that do not comply with the EU taxonomy is at least 1%. The proportion of socially sustainable investments is at least 1%.
This is a marketing communication. Please refer to the current sales prospectus and to the Key Information Document, before making any final investment decisions.
This information constitutes neither an offer nor a solicitation to buy shares of any investment funds. Comprehensive information regarding opportunities and risks can be found in the current sales prospectus. Any investment application will be made solely on the basis of the information contained in the Key Information Document, the sales prospectus for that fund including all the terms of contract, the management regulation and the investment conditions, the most recently published and audited annual report and the last unaudited semi-annual report, which can be obtained in German from Sauren Fonds-Service AG, P.O. Box 10 28 54, 50468 Cologne, Germany (or online at www.sauren.de) and the custodian IPConcept (Luxemburg) S.A., société anonyme (or online at www.ipconcept.com) free of charge. The management company can decide to de-notify the arrangements made for the marketing of the funds pursuant to Article 93a of Directive 2009/65/EC and Article 32a of Directive 2011/61/EU. Further information on investor rights is available in German on the management company's website at https://www.ipconcept.com/ipc/de/anlegerinformation.html.