Responsibilty Scoring-Prozess

Sauren Finanzdienstleistungen GmbH & Co. KG’s Sauren Responsibility Scoring is a systematic evaluation tool for responsible investment decisions. The qualitative analysis of processes conducted as part of the Sauren Responsibility Scoring complements our firm’s proven qualitative fund manager analysis.

The Sauren Responsibility Process places the fund managers’ decision-making and investment processes at the center of the analysis. These are evaluated based on the importance given to environmental, social, and good corporate governance factors in the management of the respective fund portfolios. Fund managers are encouraged to support positive environmental, social, and ethical conditions or to work toward improving them, without being prescribed specific tools or criteria. In this respect, the Sauren Responsibility Scoring does not function as a seal of quality. Rather, the underlying methodology is a measurement tool designed to analyze the extent to which environmental, social, and corporate governance factors are taken into account in the respective fund. In addition, the target investments are examined to determine whether—and if so, how—the most significant adverse sustainability impacts are addressed in the respective target fund.

The Sauren Responsibility Scoring system systematically translates the qualitative findings of analyses in the areas of environment, social issues, and corporate governance into numerical values. The Sauren Responsibility Scoring system uses a scale ranging from -4 to +4. The more the decision-making process is influenced by environmental, social, and good corporate governance factors, the higher the score typically is. The analysis and assessment of the most significant adverse impacts on sustainability factors is part of the evaluation process.

The Sauren Responsibility Score resulting from this process can be reduced as part of the portfolio review by eliminating controversial portfolio positions.

Positive scores indicate that environmental, social, and corporate governance factors are taken into account in the target fund manager’s investment process. This can range, for example, from simple exclusion criteria and regular analyses of companies with regard to the aforementioned factors to dialogue and interaction with management, or even active engagement aimed at driving change at the corporate level. This also includes whether—and if so, how—the respective target fund manager addresses and takes into account the most significant adverse sustainability impacts. If these impacts are taken into account, an analysis is conducted of the design of the process for identifying and prioritizing the most significant adverse sustainability impacts at the level of the respective target fund, taking into account the fund’s specific investment focus. Factors considered here include, for example, the number of indicators covered by the target fund or the quality and plausibility of the information provided by the target fund manager regarding its investment process.

Managers who achieve Sustainable Responsibility Scoring values in the range of +1 to +2 typically view the consideration and analysis of environmental, social, and corporate governance factors in the investment process primarily as a means of assessing potential risks arising from the respective investment. Companies that do not operate sustainably may pose significant financial risks (e.g., increased risk of fraud due to weak corporate governance, environmental risks, etc.).

Scores in the range of +3 and +4 indicate that the manager goes beyond simply analyzing and taking existing risks into account in investment decisions; instead, he or she systematically seeks to improve transparency and drive change within companies. This can be achieved, for example, through appropriate voting behavior at annual shareholder meetings or even by actively influencing management. ("Active Ownership" through "Impact Investing").

Fund managers who do not give significant consideration to environmental, social, and governance (ESG) factors in their investment process, and whose portfolios do not differ significantly from a typical passive investment—such as the MSCI World Index—receive a neutral score of zero in the Sauren Responsibility Scoring. Typically, such funds do not take adverse sustainability factors into account at all.

Negative values typically indicate that the target fund portfolio contains a concentration of investments considered to be of questionable to critical quality. (e.g., companies from certain regions or industries such as oil and mining, or tobacco and certain types of weapons), which play no role or only a minor role in the investment process when considering environmental, social, or corporate governance factors. A negative Sauren Responsibility Score may also result from a fund manager who, in order to achieve higher returns, tacitly accepts or even deliberately accepts increased risks and negative consequences with regard to the aforementioned aspects as part of their investment process.

The Sauren Responsibility Scoring consists of a systematic, qualitative process analysis and a portfolio review of the target fund. Furthermore, the assessment examines whether adverse sustainability impacts are taken into account at the target fund level. For each of the three sub-areas (Environment, Social Issues, Corporate Governance) The respective Responsibility Score is determined based on the results of the process analysis and portfolio review. An overall Sauren Responsibility Score for a fund is then calculated using the individual scores from the three subcategories: environment, social issues, and corporate governance.

The process is generally applied to all sub-funds of the Sauren Fund (“umbrella fund”) as well as to the Sauren Dynamic Absolute Return Fund. Before being included in any of the aforementioned umbrella funds, all potential target funds undergo the Sauren Responsibility Scoring process. For each fund, an assessment is made of the extent to which the fund manager incorporates environmental and social factors, as well as principles of good corporate governance, into investment decisions. Furthermore, an evaluation is conducted to determine whether the respective target fund takes adverse sustainability impacts into account.

In this context, it may be the case that adverse sustainability impacts have not yet been taken into account for certain target funds. This is noted in the assessment for the respective target funds. They are available without restriction for investments in the Sauren sub-funds that qualify as funds under Article 6 of the Disclosure Regulation, and are available only to a limited extent for the Sauren Responsible Funds that qualify under Article 8 of the Disclosure Regulation and are suitable for clients with a sustainability preference within the meaning of Article 2(7c) of Delegated Regulation (EU) 2017/565.

The Sauren Responsible Defensive, Sauren Responsible Balanced, and Sauren Responsible Growth subfunds take the results of the Sauren Responsibility Scoring into account when selecting target funds. For the aforementioned Sauren Responsible funds, consideration of the most significant adverse impacts on sustainability factors is also established as a mandatory element of the investment strategy. Finally, a minimum of 5% of the portfolio is allocated to sustainable investments with environmental or social objectives in the sustainability funds. The proportion of sustainable investments with an environmental objective that do not comply with the EU Taxonomy amounts to at least 1%. The proportion of socially sustainable investments amounts to at least 1%.

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