Mar 20, 2019 Equities

Let others do it for you

If you want to invest money sustainably, you have to scrutinize every security - all of which requires time, effort and expertise. Actively managed ESG funds can be a practical solution for private investors.

  • Active ESG fund management eases investors’ workload
  • DWS filtering system guarantees a sustainable selection
  • DWS makes it easier for companies to be responsible
4 min. to read

If you want to be green, you have to take the pain. This is what a lot of investors think is true of building a sustainable portfolio. After all, endless hours of research and analysis lie in store for them as they do their due diligence: Does this company really take the environment into consideration? Does it act responsibly towards its employees? Does it invest in questionable businesses? There are so many questions around ESG criteria (environment, social and governance) that must be answered before you can buy a share or a bond.

Most ESG funds in Germany are actively managed

Active fund management saves investors work

For investors who can’t (or simply won’t) do this work, there is a solution: investing in an ESG fund can save considerable time and effort. Actively managed funds (funds in which a specialist fund manager decides which securities are bought) are especially popular among ESG investors. Of the 433 sustainability funds in Germany, more than 90 percent are actively managed products, according to the rating agency Scope Analysis.[1]

Fund managers examine sustainability

When selecting sustainable securities, fund managers look very closely at whether firms take certain ESG criteria into account. DWS has developed a filtering engine (the ‘ESG Engine’) to facilitate the process of compiling portfolios that are as sustainable as possible. Every company must pass a number of tests before it can become part of a sustainable fund.

Similar to the process of panning for gold, the software first sifts out the coarse stones: companies that have a questionable environmental and social track record, have a large CO² footprint, manufacture weapons, or make a large part of their turnover from tobacco or nuclear power, for example. DWS obtains the necessary data from the world's leading sustainability data providers, including Oekom and Sustainalytics.


Total number of ESG funds in Germany

Short process for ESG latecomers

Companies that remain ‘in the pan’ after the exclusion procedure are assessed by DWS according to a best-in-class approach: analysts filter out companies in each industry that are more sustainable than their competitors and rank them from ‘A’ for ESG pioneers to ‘F’ for ESG latecomers. The fund managers sift out the worst 25 percent of these companies and the securities that remain are eligible for DWS funds.

To help companies maintain or raise their sustainability rating and improve wherever possible, DWS itself takes an active role. Fund managers will address grievances by discussing them with management or at the annual general meeting, for example. To reflect the growing importance of ESG, DWS has employed a chief investment officer (CIO) for responsible investing since 2017. His remit is to optimize and further develop DWS’ sustainable investment strategy.


Number of which are actively managed funds

Sustainability throughout the investment universe

DWS now manages almost 30 billion Euros’ worth of assets that are invested in ESG-approved funds (mainly actively managed equity, bond and multi-asset funds).[2]  While sustainable strategies generally have a positive impact on a company's share price (Sustainable Investment in the black), securities that invest according to strict ESG criteria are not immune to temporary price losses. But with professionals taking care of business, investors can be confident that their money has been carefully placed using a well-thought-out ESG strategy.

All statements of opinion reflect the current assessment of DWS International GmbH and are subject to change without notice. Forecasts are not a reliable indicator of future performance. Forecasts are based on assumptions, estimates, opinions and hypothetical performance analysis, therefore actual results may vary, perhaps materially, from the results contained here. Past performance, actual or simulated, is not a reliable indication of future performance.

DWS International GmbH as of March 20, 2019

CRC 065519  (03/2019)

Related Content

1. Scope Analysis, Sustainable Investment funds: from niche themes to megatrends, 2017

2. Multi-Asset: an investment approach that takes into account various asset classes, e.g. equities, bonds, alternative investments, etc.

CIO View