Research provider |
Zurich Cantonal Bank |
| Research |
Zurich Cantonal Bank's Environmental and Social Research bases its evaluations of equities and bonds on environmental and social criteria. The sustainability analysis for companies is primarily based on the sector leader approach. Using comprehensive criteria, companies that show exceptional performance in social responsibility and environmental issues are identified in every sector worldwide.
So-called sustainability innovators are also selected. These are small- and midcap companies which offer particularly innovative products that make a real contribution to a more sustainable society. In the bond sector, too, Zurich Cantonal Bank offers a Sustainable Investment Universe. Specific analytical approaches were developed to evaluate groups of issuers such as states/member states, cities and supranational financial institutes/special purpose banks.
Broad-based information gathering
First, all relevant publications, such as environmental, social and company reports, are analysed. Despite the improvement in quantity and quality, the information published by the companies is generally insufficient for a comprehensive sustainability analysis. The team acquires additional information by means of questionnaires and direct dialogue. Other sources of information include the reports and databases of specialised research providers in the US and Japan. Indepth media research is also carried out for each company. Media databases are used which cover more than 8000 sources and permit very specific searches.The acquisition of information is rounded out by contacts with nongovernmental organisations such as environmental protection groups and unions.
Multi-level selection process
A multilevel analysis is carried out to select the sector leaders. An initial, short analysis within the sector separates the wheat from the chaff. The remaining companies and debtors are analysed in detail, and the best are added to the Sustainable Investment Universe.
Constant monitoring
If a company or issuer is included in the Sustainable Investment Universe, the analysts continuously evaluate information on them. Events that could have an impact on the environmental and social rating are researched in greater detail. If the existing rating must be reconsidered, the company is placed on a watch list. The watch list procedure involves contacting the company and investigating the event. The environmental and social rating is updated regularly at least every two years.
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| Criteria |
Exclusion criteria
The exclusion criteria are screened at the beginning of the analysis. Their scope and form are defined together with the client.
Sector leader
The criteria which are examined in the analysis are organised into six sector specific areas. The following overview includes examples of the roughly 130 criteria from the six areas:
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Company policy: Sustainable corporate management in the company policy and strategy, corporate governance guidelines, membership in organisations, environmental and social reporting.
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Management processes: Structure of environmental management system, audit programmes, management of social issues, training.
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Operations/Production: Trends in energy consumption, emissions, waste volumes etc., contaminated sites, objectives.
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Products: Guidelines on design for environment, implementation of life cycle analyses, product takeback and recycling, environmental and social labels.
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Employees: Working conditions (wages, job security, etc.), supportive measures for family and women, trend in employee satisfaction, illness and accidents.
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External stakeholders: Dialogue with stakeholders (authorities, NGOs, etc.), standards for suppliers, good relations with customers, regulations governing business ethics. |
Bonds
The analysis of countries is based on 50 environmental and social indicators relating to major environmental problems and key social issues. As far as the environment is concerned, for example, CO2 emissions, the number of endangered species and the ratification of international treaties are assessed. On the social front, topics such as human rights violations, political rights, corruption and distribution of income are evaluated. City ratings are based on environmental issues such as power, traffic or water and, in the social area, topics such as education, healthcare and poverty. The analysis of issuers in the supranational financial institutes and special purpose banks category focuses, first, on the actual financial activity and, second, on the social and environmental guidelines applied.
Innovators
Sustainability innovators are small to medium-capitalised companies which produce goods or provide services that create major ecological and/or social added value. We have defined five areas of activity for the selection of innovators: energy, resources, food/consumption, mobility and services. Companies are evaluated that make a substantial contribution to solving the problems related to the specific areas of activity.
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| Ranking- / Rating-System |
Sector leaders
Every question in the questionnaire and the six topics receive a different weighting depending on their significance. For each question, points are given for performance. The calculation of the weighting and the number of points produces an end result in the form of a percentage. This percentage is translated into a nine-level rating ranging from C to AAA.
Following the company evaluation, a concise, two-page sustainability report is published which includes the rating and discusses the strengths and weaknesses of the company in the various areas.
Bonds
In rating countries for sustainability, a ranking is assigned based on the evaluation of a total of 50 individual indicators. A comprehensive publication on this topic also describes the rating of the various countries. If a country qualifies for inclusion in the Sustainable Investment Universe, the country's member states are included too.
Ratings are also assigned for the best issuers from a sustainability standpoint in the areas of supranational financial institutes and special purpose banks, as well as for cities.
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| Quality Management |
ZKB carries out the following measures to ensure the quality of its information and the evaluation process:
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Standardised procedures for gathering and evaluating information
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Information is exchanged with and controlled by the councils of the fund products
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Cooperation and exchange of information with various non-governmental organisations
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Disclosure of the analysis process and the research results
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All evaluated companies are informed of the result and are able to provide feedback
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The bank has strict internal regulations governing exchange of information with other departments (Chinese walls) and other aspects of independent analysis
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Zurich Cantonal Bank is involved in various working groups and associations committed to the further development of sustainable investment products | |
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