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Sustainability.

Invest Responsibly.


What is ESG?

What is ESG?

ESG stands for Environmental (e.g. energy consumption, water usage), Social (e.g. healthcare, education) and Governance (e.g. remuneration policies, board governance). ESG factors form the basis for the different responsible investing approaches.

ESG investing started in the 1960s as socially responsible investing, with investors excluding stocks or industries from their investment portfolios in accordance with their business activities like tobacco or nuclear weapons involvement.

Along with standard financial analysis, many investors are now trying to incorporate ESG factors into their investment process.

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Why is ESG important?

ESG can allow firms to foster a meaningful change in the global economy, and in the communities in which we live and work. We believe that ESG analysis leads to more effective investment solutions that address global challenges and create sustainable value for our clients.

The integration of ESG factors is used to enhance traditional financial analysis by identifying potential risks and opportunities beyond technical valuations, providing data on issues such as potential reputational risk or identifying firms which are adapting to meet new market challenges. It is important to note that the main objective of ESG integration remains financial performance. 

We believe our role as an institution is about much more than financial returns. We aim to create positive impact in the world through a responsible approach to investment and stewardship that values all stakeholders.

Laurent Ramsey
Laurent Ramsey Group Managing Partner and co-CEO, Pictet Asset Management
Did you know? Assets in Asia sustainable funds reached
36.3 bn
USD in June 2021, increased 327% from last year
Source: Morningstar: “Global Sustainable Fund Flows”, 2020.06 and 2021.06.

Do you think ESG may impact investment performance negatively?

Busting 5 ESG investing myths

Myth 1: ESG comes at the expense of investment performance.

 

This is the most common misconception.

An analysis of over 2,000 academic studies on how ESG factors affect corporate financial performance found ‘an overwhelming share of positive results’, with just one in ten showing a negative relationship. Meta studies suggest that in most research papers, there was a positive correlation between ESG performance and corporate financial performance, including stock prices. These provide evidence that ESG issues can be financially material to companies’ performance and potentially to alpha, especially during the pandemic.

S&P analyzed 26 ESG ETF funds and mutual funds with over $250 million in AUM during 5 March 2020 to 5 March 2021, 19 of them beats S&P 500 over the same period. The is just the latest piece of the mounting evidence.

Source: S&P Global Market Intelligence, 2021.04

 

Myth 2: ESG is a new asset class or new sector.

No, it is not.

ESG are non-financial factors that help investors to identify materials risks and growth opportunities in their analysis process. ESG factors form the basis for the different responsible investing approaches which includes: exclusion, ESG-integration, core standard and best-in-class etc. It applies to all the asset classes across investment decision-making process. 

Myth 3: ESG issues are mostly about environmental issues and climate change.

Not exactly.

As its name tells, ESG covers environmental, social and governance. Through active ownership and different responsible investing approaches, fund managers are able to analyse and assess the companies in their screening process, e.g. the board accountability, human capital, climate change etc.

Myth 4: Only institutional investors invest in ESG.

Not exactly.

In recent years, ESG investing has progressed to cope with the spiraling demand of institutional and retail investors, together with public sector authorities that would like to better integrate financial risks and opportunities into their investment decision-making process, so as to generate long-term value. According to Morningstar, assets in European sustainable funds have surpassed the EUR 1 trillion milestone end of 2020, growth rate was almost 10 times from the past decade. Demand is driven by increased interest in ESG issues from both institutional and retail investors.

When in comes to ESG investing, OECD report shows that institutional investors focused on the benefits of ESG investing for financial returns and risk management, whereas end-investors are more concerned with portfolio alignment with societal values.

Source: OECD, ESG investing: Practices, Progress and Challenges, 2020; Morningstar: European Sustainable Funds Landscape: 2020 in Review, 2021.02.

 

Myth 5: Impact investing, responsible investing and ESG investing are inter-changeable

No, the three concepts are NOT interchangeable.

Responsible investment refers to any investment approach, integrating environmental, social and governance factors (ESG) into the selection and management of investments. There are many different forms of responsible investing, such as best-in-class investments, ESG integration, exclusionary screening, thematic investing and impact investing.

ESG investing has been generalized to describe different approach in responsible investing. ESG are non-financial factors that help fund managers to identify risks and opportunities in their analysis process, and these factors form the basis for the different responsible investing approaches.

Impact investing is one of the approaches within responsible investment. It intended to generate a measurable, beneficial social and environmental impact alongside a financial return.

Disclaimer
The information and data presented in this material are for information purposes only and are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments in any jurisdiction. Investment involves risk. Past performance is not a guarantee or a reliable indicator of future performance. Before making investment decision, investors should refer the offering documents. The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Information, opinions and/or estimates expressed in this material reflect a judgment at its original date of publication and are subject to change without notice. They are not prepared for any particular investment objectives, financial situation or requirements of any specific investor and do not constitute a representation that any investment strategy is suitable or appropriate for an investor’s individual circumstances or otherwise constitute a personal recommendation. Any index data referenced herein remains the property of the Data Vendor. Data Vendor Disclaimers are available on www.am.pictet in the “Resources” section. If in doubt, please seek independent advice.

This material has not been reviewed by the Securities and Futures Commission or any other regulatory authority. The issuer of this material is Pictet Asset Management (Hong Kong) Limited.

 

Responsible investing

Responsibility is embedded in everything we do

Responsibility is central to our way of thinking. It’s in the way we manage our clients’ investments and in the way we conduct our activities, all with the long-term in mind.

Over the past 216 years since the creation of the Pictet Group, there have been only 45 partners, each with an average tenure of over 21 years. This unique structure as a partnership has given us the stability and the independence to take the long view. In so doing, we consider not just the needs of today’s generation but also those of tomorrow’s.

Our responsible milestones

Our Responsible Actions

We are committed to these three ambitions before 2025:

1) to significantly reduce the environmental impact of our activities and investments;

2) to fully integrate ESG factors and active ownership into all investment processes; and

3) to be a leading provider of responsible products and solutions.

Below are some of the actions we have taken to achieve these goals.

Pictet Group initiatives

Source: Pictet Group, as of 2020.

How are ESG risks integrated into fundamental research and day-to-day investment decisions?
Pictet Asset Management employees share their involvement in responsible investing.

Pictet Asset Management, November 2019

Key Initiatives

Pictet Group Achievements

Disclaimer
The information and data presented in this material are for information purposes only and are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments in any jurisdiction. Investment involves risk. Past performance is not a guarantee or a reliable indicator of future performance. Before making investment decision, investors should refer the offering documents. The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Information, opinions and/or estimates expressed in this material reflect a judgment at its original date of publication and are subject to change without notice. They are not prepared for any particular investment objectives, financial situation or requirements of any specific investor and do not constitute a representation that any investment strategy is suitable or appropriate for an investor’s individual circumstances or otherwise constitute a personal recommendation. Any index data referenced herein remains the property of the Data Vendor. Data Vendor Disclaimers are available on www.am.pictet in the “Resources” section. If in doubt, please seek independent advice.

This material has not been reviewed by the Securities and Futures Commission or any other regulatory authority. The issuer of this material is Pictet Asset Management (Hong Kong) Limited.

 

Responsibility is in our DNA

In the below video, Marie-Laure Schaufelberger, Head of Group ESG and Stewardship at the Pictet Group, explains why our business model and unique governance have created a culture of long-term thinking inherently linked to sustainability. She considers the biggest challenges for the financial industry: we need robust ESG data and a change in the mindset to ensure sustainable practices become embedded in investor thinking.

Learn more about the Pictet Group’s responsible vision and its 10 levers of action:
LevelsAction.jpg

Disclaimer
The information and data presented in this material are for information purposes only and are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments in any jurisdiction. Investment involves risk. Past performance is not a guarantee or a reliable indicator of future performance. Before making investment decision, investors should refer the offering documents. The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Information, opinions and/or estimates expressed in this material reflect a judgment at its original date of publication and are subject to change without notice. They are not prepared for any particular investment objectives, financial situation or requirements of any specific investor and do not constitute a representation that any investment strategy is suitable or appropriate for an investor’s individual circumstances or otherwise constitute a personal recommendation. Any index data referenced herein remains the property of the Data Vendor. Data Vendor Disclaimers are available on www.am.pictet in the “Resources” section. If in doubt, please seek independent advice.

This material has not been reviewed by the Securities and Futures Commission or any other regulatory authority. The issuer of this material is Pictet Asset Management (Hong Kong) Limited.

 

Responsibility is embedded in everything we do, starting with our investment framework.

1. ESG integration into investment processes and risk management

Integration of ESG factors and sustainability risks have become the norm in our investment processes. Across research, investment decisions and risk management, we include environmental, social and governance factors when evaluating both corporate and sovereign issuers.

2. Responsible products and solutions

We continue to develop investment strategies that provide capital to companies that aim to have a positive impact on society or the environment. We also support those companies that strive to mitigate the negative externalities of their products, services, operations and supply chain.

3. Active ownership

We strive to engage with issuers that fall short of our expectations – either directly or through collaborations with other investors. Where necessary, we will escalate to Board representatives, vote against management or support shareholder resolutions. Depending on the severity of the concern and the issuers’ capacity or willingness to adopt generally accepted standards of best practice, we may choose to sell the investment. 

4. Client disclosure

Where relevant data are available, we report on the ESG characteristics of client portfolios and the impact of active ownership activities. Where data are missing, we encourage issuers to report according to international standards.

5. Research and thought-leadership

We are committed advocates of responsible investing and play an active role in supporting organisations that promote responsible finance and sustainable investments. We also see it as our mission to educate investors about responsible and sustainable investment practices, which is why we use our experience across key environmental and social themes to publish targeted research and help raise awareness and capital for a sustainable transition.

Spotlight on our ESG scorecard

At every stage of our research, investment decisions and risk management, we include high-quality environmental, social and governance data when evaluating corporate issuers. We have developed a proprietary ESG Scorecard showing ESG risks and opportunities to inform investment decisions and active ownership activities.
ESG HK

Spotlight on our responsible investing strategies

Our ESG binding strategies (equivalent to Art. 8 SFDR*) consider ESG factors such as sustainability risks and principal adverse impacts, and promote environmental and/or social characteristics.

For those investors looking to have a specific and measurable impact, our positive impact strategies (equivalent to Art. 9 SFDR*) consider ESG factors and target activities that contribute to environmental or social objectives, such as providing solutions to climate change, energy transition or water scarcity.

Click here to find out more about our product range

Disclaimer
The information and data presented in this material are for information purposes only and are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments in any jurisdiction. Investment involves risk. Past performance is not a guarantee or a reliable indicator of future performance. Before making investment decision, investors should refer the offering documents. The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Information, opinions and/or estimates expressed in this material reflect a judgment at its original date of publication and are subject to change without notice. They are not prepared for any particular investment objectives, financial situation or requirements of any specific investor and do not constitute a representation that any investment strategy is suitable or appropriate for an investor’s individual circumstances or otherwise constitute a personal recommendation. Any index data referenced herein remains the property of the Data Vendor. Data Vendor Disclaimers are available on www.am.pictet in the “Resources” section. If in doubt, please seek independent advice.

This material has not been reviewed by the Securities and Futures Commission or any other regulatory authority. The issuer of this material is Pictet Asset Management (Hong Kong) Limited.

 

Seize the opportunities, have a positive impact
Our solutions

What would be your main motivation to invest in sustainable strategies?

Responsible investment strategies at Pictet Asset Management

Clean energy GEO  human
 nutrition   smart city   Timber
water GTO  

The above strategies comply with SFC’s requirement to Green or ESG funds*, which may adopt common ESG investment strategies such as screening (positive or negative screening), thematic, ESG integration and impact investing. To substantiate “invest primarily”, the SFC would expect:

  • for a fund adopting screening strategies or thematic investment strategies, it should demonstrate that at least 70% of its total net asset value is invested in securities or other investments reflecting the stated green or ESG related investment focus; or   
  • for a fund adopting other strategies, such as ESG integration or impact investing, it should demonstrate to the SFC, on a case-by-case basis, how the fund could comply with this requirement.

Source: SFC, List of Green and ESG Funds, 2021

Video: to achieve potential returns and create positive impact, you may explore these solutions

VIDEO   

Clean Energy

Clean Energy is increasingly vital to the lives of people, industries and nations across our planet. Clean energy promises a smarter future, not just in power generation, but a range of innovative technologies and applications.

 

Global Environmental Opportunities

Our wellbeing and health is directly linked to our environment. By investing in companies that make a positive contribution to society and the environment we can create better living for all.

vIDEO3
  Video4

Nutrition

Invest in the solutions to help secure the world’s food supply and provide better nutritional value to the global population.

 

SmartCity

Smart cities use technology for sustainability. It will make urban living better, more connected and more sustainable.


  Video

Timber

Timber is one of the world’s oldest resources. More than ever, this resource has to be managed sustainably. As demand for timber and wood products rises, pressure grows to conserve stocks, and it’s a resource that is likely to increase in value.

 

Global Thematic Opportunities

One single platform to the best of Pictet Asset Management’s thematic franchise.


 

20-year of thematic investing

In twenty years of thematic environmental investing, Pictet Asset Management has been the pioneer. Our water strategy was the first, and we have two decades of expertise.

 

 


Disclaimer
The information and data presented in this material are for information purposes only and are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments in any jurisdiction. Investment involves risk. Past performance is not a guarantee or a reliable indicator of future performance. Before making investment decision, investors should refer the offering documents. The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Information, opinions and/or estimates expressed in this material reflect a judgment at its original date of publication and are subject to change without notice. They are not prepared for any particular investment objectives, financial situation or requirements of any specific investor and do not constitute a representation that any investment strategy is suitable or appropriate for an investor’s individual circumstances or otherwise constitute a personal recommendation. Any index data referenced herein remains the property of the Data Vendor. Data Vendor Disclaimers are available on www.am.pictet in the “Resources” section. If in doubt, please seek independent advice.

This material has not been reviewed by the Securities and Futures Commission or any other regulatory authority. The issuer of this material is Pictet Asset Management (Hong Kong) Limited.

 

The SFC green and ESG fund list is compiled based on confirmations and representations provided by the respective management companies that these SFC-authorised funds comply with the requirements set out in the circular, which include the name of the scheme, investment threshold, disclosure requirements and ongoing monitoring. The SFC has not independently verified the effectiveness of the investment strategies, investment selection processes, investment portfolios and management or the criteria used to achieve the stated green or ESG investment focuses adopted by these products. The list of green and ESG funds does not constitute an official recommendation of these products or a guarantee of their green or ESG attributes or related performance. The SFC authorisation involves the review of whether a product meets the relevant legal and regulatory requirements, which set out certain impartial benchmarks.The SFC has not independently verified the offering documents and will not be responsible for any error, omission or inaccuracy.
Seize the opportunities, have a positive impact
Learning centre
Did you know? There are 320 sustainable funds in Asia ex-Japan, which is 
3x
than a year earlier.
Source: Morningstar: “Global Sustainable Fund Flows”, 2020.06 and 2021.06

What are the UN sustainable development goals?

The sustainable development goals are a set of global social, environmental and economic targets, agreed by the United Nations in 2015 for its member countries.

Initially designed for policy makers and governments, the SDGs are now being embraced by businesses as they try to report on their sustainability efforts and credentials. 

In the financial services sector, investors also want to know how the companies in their portfolio are exposed to the SDGs. However, so far, very little standardisation in company reporting is available. Some companies only focus the communication on their own strong points, carry out assessments at a very superficial level or outright “greenwash” their own unsustainable activities.

The 17 goals of the UN's Sustainable Development Goals
SDGPoster-2019withoutUNemblem.jpg

Source: UN, 2021

How do we apply the framework at Pictet Asset Management?

At Pictet Asset Management, our thematic investment team identifies investment themes that lay at the intersection of megatrends. Our sustainability-themed strategies follow impact objectives that are captured to an important degree by the SDG framework. Often, our thematic universes have a close link to at least one or more SDGs based on the nature of their investable universe. This allows us to provide a foundation for a viable investment framework despite the inefficiencies of companies’ SDG reporting. 

The set of goals outlined can provide a foundation for a viable investment framework despite the reporting and impact measurement challenges. For example, most of the strategies in our thematic franchise are directly aligned with one or multiple SDGs in particular, while having cross-links with other SDGs.

Our investors want to know whether the companies we invest in are helping to build a better future.

Di Patrizi Luca
Luca Di Patrizi Head of Intermediaries

Glossary

Active ownership
This refers to investors addressing concerns of environmental, social and governance (ESG) issues by voting on such topics or engaging with corporate managers and boards of directors.

Best-in-class
Investment approach based on a sustainability rating in which a company's or issuer's environmental, social and governance (ESG) performance is compared with the ESG performance of its sector peers. All companies with a rating above a defined threshold are considered as investable. 

ESG
ESG stands for Environmental (e.g. energy consumption, water usage), Social (e.g. talent attraction, supply chain management) and Governance (e.g. remuneration policies, board governance). ESG factors form the basis for the different responsible investing approaches.

ESG integration
The explicit inclusion by asset managers of ESG (Environmental, Social and Governance) risks and opportunities into traditional investment strategies based on a systematic process and appropriate research sources.

Engagement
Investor-led dialogue with issuers on ESG matters with a view to share potential concerns, seek additional information, enhance public disclosure and/or influence behavior.

Exclusions
An approach excluding companies, countries or other issuers based on activities considered not investable. Exclusion criteria (based on norms and values) can refer to product categories (e.g. weapons, tobacco), activities (e.g. animal testing), or business practices (e.g. severe violation of human rights, corruption).

Exclusionary / Negative Screening
An investment strategy excluding companies, countries or issuers on the grounds of activities considered as not investable. Exclusion criteria can refer to product categories (e.g. weapons, tobacco) activities (e.g. animal testing) or practices (e.g. severe violation of human rights, corruption). They can also be based on personal values (e.g. gambling) or on risk considerations (e.g. nuclear power).

Impact investing
Investments intended to generate a measurable, beneficial social and environmental impact alongside a financial return.

Proxy voting
A ballot cast by one person on behalf of another. One of the benefits of being a shareholder is the right to vote on certain corporate matters. Since most shareholders cannot, or do not want to, attend the annual and special meetings at which the voting occurs, corporations provide shareholders with the option to cast a proxy vote. 

Responsible investment
Responsible investment refers to any investment approach, integrating environmental, social and governance factors (ESG) into the selection and management of investments. There are many different forms of responsible investing, such as best-in-class investments, ESG integration, exclusionary screening, thematic investing and impact investing. They are all components of responsible investments and have played a part in its history and evolution.

Thematic investing 
Investment in businesses contributing to sustainable solutions both in environmental and/or social topics. In the environmental segment this includes investments in renewable energy, energy efficiency, clean technology, low-carbon transportation infrastructure, water treatment and resource efficiency. In the social segment this includes investments in education, health systems, poverty reduction and solutions for an ageing society.

Disclaimer
The information and data presented in this material are for information purposes only and are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments in any jurisdiction. Investment involves risk. Past performance is not a guarantee or a reliable indicator of future performance. Before making investment decision, investors should refer the offering documents. The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Information, opinions and/or estimates expressed in this material reflect a judgment at its original date of publication and are subject to change without notice. They are not prepared for any particular investment objectives, financial situation or requirements of any specific investor and do not constitute a representation that any investment strategy is suitable or appropriate for an investor’s individual circumstances or otherwise constitute a personal recommendation. Any index data referenced herein remains the property of the Data Vendor. Data Vendor Disclaimers are available on www.am.pictet in the “Resources” section. If in doubt, please seek independent advice.

This material has not been reviewed by the Securities and Futures Commission or any other regulatory authority. The issuer of this material is Pictet Asset Management (Hong Kong) Limited.