Climate-compatible shares

Salm-Salm Nachhaltige Aktienstrategie

Since the Paris Climate Agreement it is evident that investors, in their function as asset owners and capital providers, bear a high level of responsibility in combating climate change. Global equities are a core component of any investment portfolio. We are convinced that the greatest potential for greater sustainability and climate protection lies in this core global allocation.

The Salm-Salm Sustainable Equity Strategy was launched in 2016, immediately after the historic Paris Climate Agreement was signed. The equity fund aims to track global equity returns by investing in established companies that have recognized the need to adapt their business models and have a convincing climate and sustainability strategy. The selection process is based on the climate targets agreed in Paris.

The fund is suitable for all investors who want to adapt their core equity allocation to the new circumstances. Global equities with high balance sheet quality, low financing costs, solid dividend payments and a strong commitment to a <2degree Celsius world.

The result: for five years, the fund has successfully delivered a global equity market performance and met demanding climate and sustainability standards. If all companies operated as those allocated in the fund, the global warming may by less than 2.00 degrees Celsius.

Investment process

Economic optimization


Our investment strategy is based on an active-fundamental investment style. At its core is an equity valuation matrix developed by us, which is based on a multi-factor model that incorporates company-specific data, macroeconomic data and information on the sustainability and climate compatibility of companies.

Based on a hybrid bottom-up/top-down approach, we consider both classic value and growth factors and metrics, such as P/E ratio, KCF, KBV, return on equity, dividend yield, payout ratio, brand, business model, M&A activity, innovative strength, etc. Subsequently, these indicators are combined into an overall score.

Our goal is to ensure a global, systemic and largely sector-neutral return on shares, however without following the same regional distribution requirements that apply to global stock indices, such as the MSCI World.

At the same time, our goal is to ensure significant CO2 savings of up to 90%, risk-adjusted and without sacrificing global equity performance. This is possible through prudent allocation and fine-tuned selection of assets.


Selection criteria include:

Market capitalization, company size, volatility, credit quality, single stock and country risks, credit rating and critical review of  rating agencies through internal rating process, business model, competitive situation, growth & cyclicality, management quality, innovation capability, balance sheet & capital structure, equity and debt, cash flows, degree of diversification of revenue sources, Use of funds (CapEx), "equity story", P/E absolute & relative to peers, combination of top-down market view and bottom-up analysis, regional & sectoral, primary market activity, liquidity (secondary market, diversification, relative attractiveness (sector & peers), themes & trends, business cycles, political environment, M&A activities and stock-specific features.


The responsible treatment of humans, nature and the environment is deeply anchored in our beliefs and our understanding of values. In 2012, this set of values was transparently set out for the first time in a sustainable investment process. Since then, we have also been a signatory to the PRI (Principles of Responsible Investment). The sustainability (ESG) concept is enormously complex and has evolved tremendously since the first definitions (Brundtland Report 1987). Thus, we also continuously adapt to new insights, measurement methods and necessities. The path to better sustainability and the active assumption of responsibility beyond the economic factor is our aspiration. From defining initial revenue thresholds, complete exclusions of controversial business practices and models, and a strict best-in-class approach, we have continued to refine our process. In 2016, we took the decisions of the Paris Climate Conference as an opportunity to integrate climate protection into our investment process. We are continuously developing the measurement and reduction of the carbon footprint across all our portfolios. In particular, we are proud to be able to measure the impact of our investments on global warming in degrees Celsius together with the Frankfurt-based company right.based on science. Global warming may be less than two degrees Celsius if all companies operated in the same way as those we allocate.

 

 

 

 

 

 


CO2 footprint Analysis: Since 2017/18, equity and convertible bond research has systematically collected data to determine the CO2 footprint. Since 2019, these are  published on the factsheets and the website. In doing so, the CO2 footprints of the respective sustainable mutual funds are set in relation to those of their respective benchmarks.

With this approach, Salm-Salm & Partner essentially pursues three goals:

 

  1. The CO2 footprint is determined as a KPI (key performance indicator), which is to be reported on regular and comprehensive basis. The aim is to create the greatest possible publicity. Clients should be able to track the CO2 profile of both funds at any time.
  2. The CO2 footprint should be significantly lower than that of the respective benchmark in order to convince clients of the advantages of active investment strategies.
  3. The CO2 footprint should decrease continuously over time until it reaches a level that is no longer reducible or only reducible by applying additional strategies and measures.

Future 1.5-degree Celsius climate path: At the point where the CO2 footprint ends - since it generally only provides information on historical emission values, we begin to measure these and manage our portfolio according to the (future) "Paris Climate Accord Compatibility".

The "XDC" model of our strategy partner right. based on science - a Frankfurt-based FinTech that won the German Sustainability Award - offers a forward-looking view of the climate profile of companies. The guiding question is what influence the company has on global warming (so-called "inside-out" perspective). Therefore, the model serves as a tool for the positive assessment of eligible companies.

The aim is to determine the "Paris compatibility" or the "2 degree Celsius compatibility" of eligible companies, for which an XDC, i.e. a measure expressed in degrees Celsius is determined instead of the common CO2 footprint, e.g. "1.6 degrees Celsius".

Along this internal target, we "cast" global equity strategies into a "transition portfolio":

  1. Stocks with large positive delta (i.e., with negative target divergence) are removed from the universe or the stock portfolio,
  2. Stocks with small positive delta are preferred - all else equal - in the construction process. The shares of companies with negative delta (i.e. with positive climate effect) and/or low positive delta are to increase from year to year ("ratchet mechanism").
  3. Stocks with a significantly negative delta are identified and, if possible (i.e. if financially suitable), acquired directly or at least considered on an ongoing basis.

In addition, we examine whether, and if so, to what extent, XDC may be integrated into existing risk, performance or other analysis models (and weighted accordingly).

The basis for all these steps is the existence of the largest possible overall universe of shares - a criterion that is generally present in the case of global equities.

Sustainability approach

Awarded the Austrian Ecolabel

by the Austrian Ministry of the Environment

 

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Awarded with the Eurosif Transparency Logo

for more transparency in the sustainable investment market

 

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Exclusion criteria

Exclusion of controversial business areas and practices.

MSCI ESG

With over 40 years of experience in sustainability analysis, a strong partner for our research process.

 

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right. based on science

The Frankfurt-based company right. based on science evaluates the contribution of our fund to climate change in degrees Celsius.

 

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Best in Class

Our approach is to invest in the companies that are leading the way and implementing sustainable aspects in an exemplary manner.

 

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Compatible with Finanko criteria

the Austrian Bishops' Conference and the Religious Communities of Austria

 

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Classified according to Article 8 SDFR

of the EU Disclosure Regulation

 

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Share Classes

Sustainable Equity Strategy I

WKN: A2ARDG

ISIN: LU1480732285

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Sustainable Equity Strategy V

WKN: A2ARDF

ISIN: LU1480732103

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Sustainable Equity Strategy R

WKN: A2ARDH

ISIN: LU1480732368

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Sustainable Equity Strategy USD

WKN: A2N4VQ

ISIN: LU1860403762

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