Vontobel has become the first certificate provider in Switzerland and Germany to apply ESG criteria and sustainability analysis to the underlying securities of its structured certificate product range.
Customer demand for sustainable products that take ecological and social factors into account along with governance is rising continuously, according to Roger Studer (pictured), head of Vontobel Investment Banking.
‘The classification of our certificates according to ESG criteria is a reaction to constantly increasing customer demand,’ said Studer. ‘Through identification with the ESG logo, we not only promote alternative investment classes, but once again underline our pioneering spirit in the field of certificates.’
With the ESG theme set to continue to gain in importance the Swiss bank ‘has subjected its own product range in the field of certificates to an examination according to ESG criteria’.
Going forward, Vontobel will examine each underlying security for standard exclusion criteria excluding, for instance, companies that invest in nuclear energy or weapons, in the case of certificates linked to stocks. In a second step, sectors and companies are evaluated according to sustainability criteria. This means that the lower the sector evaluation, the higher the company evaluation has to be to ensure it can be classified as sustainable. In the case of a product with several underlying securities, all have to be qualified as sustainable to receive the ESG label, according to Vontobel.
Certificates whose underlying securities meet Vontobel’s ESG criteria will now display the bank’s ESG logo and ‘can simply be selected via a new filter in the product search’.
According to Vontobel, investment products are only sustainable if the investor participates in the rising prices of the underlying security, since ‘only then is the sustainable development associated with the underlying security supported’.
Leveraged products and products where the investor bets on falling prices of the underlying security will not be rated as sustainable. In its home market, The Swiss bank has 13,726 live non-flow products worth an estimated US$7.9 billion and 11,309 live leverage structures worth an estimated US$899.7m. In the German market, Vontobel has 343 live non-flow products worth US$1.2 billion, 43,673 flow products worth US$699.96m and 573,349 leverage products worth US$1.09 billion.