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Information regarding our approach to sustainable finance where we provide investment services
The information presented here describes Julius Baer International Limited’s approach to sustainable finance where we are providing investment advisory, insurance advisory or discretionary investment management services. This information is generally structured in the manner set out in the EU Sustainable Finance Disclosure Regulation, which first came into effect in the EU on 10 March 2021, although it should be noted that this Regulation does not have any legal effect in the UK.
Julius Baer offers a variety of different advisory and discretionary investment management mandates to suit our clients’ needs. Our standard range of mandates is focused on achieving the client’s investment objective without any formal consideration of environmental, social or governance factors (these are our ‘Standard Mandates’).
We also offer a number of discretionary investment management mandates which take into account environmental, social or governance characteristics (‘ESG characteristics’) in seeking to achieve a client’s investment objectives and we are currently in the process of expanding our range of investment advisory mandates in a similar way (these are our ‘Sustainability Mandates’).
Unless otherwise indicated, the information below describes our investment processes for Standard Mandates.
Integration of sustainability risks
The value of an investment may be affected by a wide range of factors. One of these factors would be the occurrence of an environmental, social or governance disaster. Such an event would be likely to have a material negative impact on the value of an investment. We refer to the risks arising from such environmental, social or governance events as “sustainability risks”.
We have not fully integrated an assessment of “sustainability risks” into our investment advisory, insurance advisory or discretionary investment management processes. However, we are continuing to implement new policies and procedures to more fully integrate an assessment of “sustainability risks” into our processes, and will publish further information on these developments as it becomes available.
When providing investment advice under a Standard Mandate, we are able to provide clients with sustainability-related information for the following types of investments:
- we carry information on ‘ESG ratings’ and ‘ESG controversies’ from our ratings providers for shares and bonds within our research-covered range (where such data is available)
- we carry information on ‘ESG ratings’ for mutual funds in our recommended fund range
- we carry a number of ESG-scored IShares ETFs within our exchange-traded fund range.
Clients are welcome to request ESG-related information from our advisers when requesting advice, according to their preferences for their portfolio.
When making discretionary investment decisions under a Standard Mandate, we have access to ‘ESG ratings’ and ‘ESG controversies’ from our ratings providers for shares and bonds within our research-covered range (where such data is available), and ‘ESG ratings’ for mutual funds in our recommended fund range.
No consideration of sustainability adverse impacts
Investment or insurance advice that we provide, and investment decisions that we make, may have an effect on some or all of the following factors: environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters. We refer to these factors as “sustainability factors”.
We do not consider the adverse impacts on these “sustainability factors” in our investment advice, insurance advice or discretionary investment decision-making.
We are unable to consider these sustainability factors in a comprehensive and coherent manner, either due to a lack of data from potential investee companies or, where such data does exist, due to the fact that the quality is suboptimal. We are monitoring, and will continue to monitor, developments in this area and will re-evaluate our position on a periodic basis.
Sustainability risks can affect investment returns
When providing investment advice, insurance advice or making discretionary investment decisions we are able to select from a clearly defined universe of investments that have been carefully chosen for inclusion on the Julius Baer platform (and in that respect we advise on a ‘restricted’ range of investments).
However, our investment universe is not screened to exclude all investments that could potentially be affected by the occurrence of an environmental, social or governance disaster – which we refer to as a “sustainability risk”. Such an event would be likely to have a material negative impact on the value of an investment. If a client’s portfolio contains an investment which suffers such an event, the impact on a client’s portfolio could be very significant, depending on the severity of the sustainability risk and the size of the affected holding in the portfolio (amongst other factors). Investors should be aware of this risk and carefully consider its implications.
Information about our remuneration policy
We recognize the importance of environmental, social and governance sustainability elements throughout our business activities, including our compensation systems. In accordance with the Group’s standards, sustainability is reflected in various aspects of our compensation systems at regional, divisional and individual levels through proper governance, performance measurement standards (around values, client satisfaction and employee development) and risk management considerations.
Our compensation schemes are designed to ensure compliance with global rules and regulations and the sustainability considerations embedded within them, while specifically incorporating location-specific guidelines, in support of a sound risk culture. Compensation decisions include assessments of financial-, market-, legal-, risk-, and compliance-related metrics to ensure compensation properly reflects both, internal and external factors. We also employ a compensation deferral mechanism, with risk-adjusted performance metrics, to deter excessive risk-taking. Socially, we operate various initiatives related to talent management, workforce diversity, and employee satisfaction, which we strengthen each year to help us attain our Employer of Choice goals and support our sustainability aspirations. At the individual level, all employees are held to high conduct standards via our Code of Ethics and Business Conduct (redefined in 2020) and are specifically measured on their ability to reflect our core Values (Care, Passion, and Excellence) and Risk Behaviours in their business activities.