Sustainability

Please note: this is a translation of mandatory information published in German. In case of doubt the German version applies.

What are sustainability risks?

Sustainability risks, also known as ESG risks, are events or conditions in the three areas of environment, social affairs and governance whose occurrence could have a negative effect on the value of an investment. These risks can affect individual companies just as much as whole industries or regions.

Examples from the three areas

• Environment: as a consequence of climate change, extreme weather events occurring more frequently could represent a risk. This is also referred to as physical risk. One example would be an extreme period of drought in a particular region. Water levels on transport routes such as rivers could fall so far that the movement of goods is impaired.
• Social: in the social area, risks could arise for example from a failure to comply with employment law standards or with health protection.
• Governance: examples of risks in the area of governance are failures of tax honesty or corruption within companies.

Including sustainability risks in advisory work (Art. 3 SFDR)

In order to include sustainability risks in our advice, the information made available by providers, meaning financial market participants, and by their financial products is taken into account when selecting them. Providers that manifestly have no strategy for including sustainability risks in their investment decisions may not be offered.

Where taking sustainability risks into account in an investment decision means recognisable advantages or disadvantages for the client, this is set out separately as part of the advice where applicable.

Each provider gives information on how sustainability risks are taken into account in its investment decisions in its pre contractual information. Clients can raise questions about this before any contract is concluded.

To assess sustainability risks the financial adviser uses, among other things, additional information from service providers, associations or organisations that specialise in evaluating these risks. As a matter of principle, the broadest possible diversification of investment across financial products, and where applicable within a single financial product, is recommended with regard to sustainability risks as well.

Consideration of adverse impacts on sustainability factors (Art. 4 SFDR)

As part of the advice, the principal adverse impacts of investment decisions on sustainability factors are taken into account. This is done on the basis of the information made available by the providers on their own sustainability and, where applicable, on the sustainability of the particular financial product. At present such consideration can only be partial, because the information provided by the providers is still being built up and may as yet be rudimentary.

Remuneration policy in relation to sustainability risks (Art. 5 SFDR)

The remuneration for arranging financial products is not influenced by the sustainability risks involved.

Pre contractual information on the advisory process (Art. 6 SFDR)

When advising on financial products, sustainability risks are included by using the pre contractual information provided by the provider. Despite sustainability risks being taken into account, it cannot be ruled out that the occurrence of a sustainability risk has a negative effect on the return of the financial product.

This note applies to the advisory documentation as well.