||Portfolio managers use bottom-up analysis to identify companies with value enhancement potential from the lower categories:
- high return on investment, which expected value or their improving fundamentals are not included in the share price
- high return on investment, which are, due to a short-term event without long-term impact on cash flows, temporarily unpopular
- lower return on assets, whose future development is being estimated by the market to be pessimistic and for which a recovery is in sight
Also part of the research are analyses on environmental, social and governance factors (ESG), which influence the company. Portfolio managers invest in companies that use the ESG opportunities and manage ESG risks.
||The process is based on an integration of sustainability factors.
First step is a quantitative financial analysis. Moreover, it is checked whether a company is excluded due of exclusion criteria. Only companies that are interesting from a financial point of view, are then subjected to a comprehensive analysis.
In the qualitative finance analysis sustainability aspects are being considered in 2-fold respect.
- Analysts evaluate the business model of a company, estimate future cash flows and then calculate the fair value of a company. In estimating the future cash flow sustainability opportunities and risks are taken into account.
- For each sector have been described ESG-minimum standards as well as major risks and opportunities arising from the sustainability issues. For every company that is undergone a comprehensive analysis, the analyst judges the sustainability performance of the company based on the ESG standards. In this a business must at least reach a score of 5 (scale of 0-10).
For assessing the sustainability of a company, the following sources are being used: external sustainability ratings, sector studies by brokers, a tool for reviewing reputational risks, information from the companies that are requested directly by mail or in personal conversations.
Is a company involved in risky or controversial business, it is being evaluated specifically how the company addresses these risks. Financial and sustainability analysts discuss whether the company disclosed processes and risk management systems are sufficient to control risks adequately. If so, the company is investable.
If all elements of the test create a positive result and the estimated upside potential of the course is at least 25%, the company is being recommended to the portfolio manager for purchase.
|Research done by
||Vontobel is supported by external partners:
Asia: OWW, MSCI ESG, GMI, RepRisk / USA: MSCI ESG, GMI, RepRisk / Europe: Oekom, GMI, RepRisk / International: All / Switzerland: Inrate, GMI, Reprisk