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The future is sustainable. Now our local offering is as well.

Credit Suisse Asset Management is expanding its offering to include index funds on the Swiss equity market and on CHF bonds. The addition of the CSIF (CH) Equity Switzerland Total Market ESG Blue and the CSIF (CH) Bond Switzerland AAA-BBB ESG Blue has taken our range to a total of 22 sustainable index funds, which marks the consolidation of our position as one of the leading providers of sustainable index funds in Switzerland.¹

March 8, 2021

Sustainability is at the heart of many investment decisions. Financial products with an ESG2 focus are exhibiting tremendous capital growth worldwide – a trend that is likewise being reflected in booming numbers in Switzerland. The market for sustainable investments in Switzerland increased seventeen-fold from 2010 to 2019 (see Figure 1). So it’s high time to launch the first sustainable index fund on the novel SPI® ESG and SBI® ESG indices. This represents a milestone for a market as challenging as Switzerland.

Figure 1: Strong growth of ESG investments in Switzerland: Sustainable investment funds and mandates3

The launch of the CSIF (CH) Equity Switzerland Total Market ESG Blue and the CSIF (CH) Bond Switzerland AAA-BBB ESG Blue closes the final gap in our sustainability offering across all regions and asset classes.

The three-stage ESG methodology of SIX

The three-stage selection process at SIX, which is aligned to international ESG standards, has the potential to improve the risk/return profiles of individual investment portfolios. At the same time, it fulfils a long-standing need on the challenging Swiss market: to meet the strong demand on the part of investors for a broader array of sustainable index solutions.

The ESG data are compiled and continually updated by Inrate – a research institute based in Switzerland with more than 30 years’ experience and around 50 analysts. All 214 SPI® shares and some 99% of the CHF bond market are covered transparently and in detail.

Table 1: Risk/reward profiles: SPI® ESG Index versus SPI® Index

The ESG rating has a scale ranging from A+ to D–. Swiss companies with a rating of C+ or better over the preceding three months make it into the ESG index. In a second step, companies whose earnings from critical sectors constitute more than 5% of total earnings are excluded. These critical sectors are weapons, armaments, genetic engineering, nuclear power, coal power, oil sands, alcohol, tobacco, gambling, and adult entertainment. Finally, norm-based screening checks that the companies are compliant with SVVK6 requirements. If a company is featured on the SVVK exclusion list, it is removed from the index.

SPI® ESG equity index

The new SPI® ESG Index is a subset of the SPI® Index. The comparative values tell a similar story. The average ESG rating of the sustainable counterpart at the end of 2020 was B (8.22), while that of the SPI® Index was also B (8.16). Their sector allocation is almost identical as well. The SPI® ESG Index covers around 98% of the market capitalization of the SPI®. Consequently, both Swiss indices demonstrate a very similar performance. 

When applying the ESG methodology, in the first step, currently around 68 stocks fail to make the grade due to an inadequate ESG rating (≤C) in the index. The next step filters out an additional three companies that are engaged in controversial business areas. Another four stocks are not included in the index because insufficient data are available. No stocks are excluded as a result of the norm-based screening, however. In total, therefore, 75 stocks do not make it into the SPI® ESG Index. That equates to around one-third of companies in the SPI®. Thus, the total number of stocks in the SPI® ESG Index is 139.

When applying the three-stage ESG methodology of SIX, the SPI® ESG Index exhibits only minimally higher volatility than the standard index and a slightly higher dividend return (see Table 1). Thanks to the SPI’s® relatively high ESG score, the tracking error is very low.

Index Solutions

Credit Suisse Index Funds, or CSIF for short, has stood for precision, daily liquidity, and minimized investment costs since 1994.
 

SBI® ESG bond index

The basis for the newly created SBI® ESG Index is the Swiss Bond Index SBI®. The SBI® has replicated the performance of the CHF bond market since 1996 and provides real-figure information about interest rates on the Swiss capital market. Historically speaking, the SBI® already has a high ESG score, therefore, the ESG Index undergoes only mild changes. The sustainable counterpart is additionally characterized by its low tracking error. Both the SBI® Index and the SBI® ESG Index have a high average rating of AA. The ESG rating of the SBI® is B (8.08), while that of the SBI® ESG Index is B+ (8.65). The SBI® ESG Index likewise exhibits diversified sector allocation, with a corporate bond component of 23%. The SBI® ESG Index is reweighted at the end of each month, just like the standard index.

In the case of the SBI® ESG Index, the three-stage ESG selection process rules out a total of 19% of issuers, equating to 67 stocks with an index weighting of 6.79%. When the ESG rating is applied, in the first step this results in 54 issuers being excluded.In the next step, another two issuers are dropped because of profits generated in critical sectors. Eleven issuers fail to make the cut due to insufficient data. Norm-based screening does not result in any exclusions because no issuer features on the SVVK exclusion list.

When applying the ESG methodology, the SBI® ESG Index exhibits only slightly higher volatility than the standard index and a slightly inferior turnover (see Table 2). The yield is likewise only slightly lower. The simulated historical data extend back to December 2016. Thanks to the SBI®’s relatively high ESG score and moderate ESG adjustments, the tracking error is very low.

Table 2: Risk/reward profiles: SBI® ESG Index vs. SBI® Index7

ESG investing

More interesting insights about sustainable investing are just one click away.

The topic of sustainability is an extremely high priority for Credit Suisse Asset Management across all investment areas. A holistic sustainability approach can effect positive changes and play a decisive role in generating above-average investment returns for clients over the long term. We have taken another major step toward our goal of expanding and rounding out our ESG product range with the launch of the two new funds: CSIF (CH) Equity Switzerland Total Market ESG Blue and CSIF (CH) Bond Switzerland AAA-BBB ESG Blue, which replicate the novel ESG indices from SIX. Our investment expertise in this area lies in index funds both with and without mandate, direct investments, and indexed equity, bond, gold, and mixed portfolios. We currently manage over 100 index funds with assets totaling more than CHF 160 billion. We are committed to keeping our clients continually informed about the orientation of their portfolios with regard to ESG criteria (both absolute and relative to a benchmark). The key ESG criteria are therefore published monthly in a separate fact sheet.

General risks of index funds

  • The funds do not offer capital protection. Investors may lose some or all of the capital they invest.
  • The fund’s investments are exposed to market fluctuations.
  • The funds do not significantly outperform their benchmark indices.
  • Shares are subject to market, sector, and company-specific risks that may result in price fluctuations.

The product’s investment objectives, risks, charges, and expenses, as well as more complete information about the product are provided in the prospectus (or relevant offering document) which should be read carefully before investing.

Table 39

krempel-tilman.jpg

Tilman Krempel

Portfolio Manager Index Solutions Equity

Sandra L. Ottenburg

Portfolio Manager Index Solutions Fixed Income

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1 Source: Morningstar. Data as of 31.12.2020.
2 The abbreviation ESG stands for environmental (E), social (S), and governance (G). More information available at credit-suisse.com/am/esg. For further information about the ESG investment criteria, please visit credit-suisse.com/esg.
3 Sources: Swiss Sustainable Investment Market Study 2019, Swiss Sustainable Finance, and University of Zurich (2019). 
4 Regulation (EU) 2019/2089 of the European Parliament and of the Council of 27 November 2019 amending Regulation (EU) 2016/1011 as regards EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks. 
5 Source: SIX, data from 31.12.2014 to 31.12.2020. Simulated past performance and financial market scenarios are not reliable indicators of future performance.
6 SVVK-ASIR: Swiss Association for Responsible Investments.
7 Source: SIX, data from 31.12.2016 to 31.12.2020. Simulated past performance and financial market scenarios are not reliable indicators of future performance.
8 Contains inclusions and exclusions.
9 Source: Credit Suisse, data as of 31.01.2021.

CREDIT SUISSE ASSET MANAGEMENT (Switzerland) Ltd.
Source: Credit Suisse, if not indicated otherwise.
Unless explicitly stated otherwise, all figures in this document were compiled by Credit Suisse Group AG and/or its affiliates with the greatest of care and to the best of its knowledge and belief.
 
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