ESG Engine

Corporate negative / exclusionary screening

Negative/exclusionary screening serves as the ESG Engine’s first step in choosing responsible investments in the corporate sphere. The process identifies and rules out companies associated with activities that do not meet specific ESG criteria. As mentioned above, these criteria may be based on ethical concerns or risk considerations. A key question is the extent to which a company might profit from sectors that an investor may deem controversial, and it is on this basis that the ESG Engine usually determines exclusions.

Controversial Sectors

Corporate norms-based screening

Norms-based screening focuses on concerns such as human rights abuses, child/forced labour, health and safety, environmental impact and issues around business ethics. Here, too, the ESG Engine uses a process that offers a powerful competitive edge. Crucially, our multi-provider model means it is not necessary to rely on a single “signal” about non-compliance. Instead, by drawing on a variety of inputs, the ESG Engine can seek confirmation and even reconfirmation of failures to meet international norms.

Sovereign norms-based screening

All of the strategies discussed so far can also be applied in a non-corporate setting. The flexibility of the ESG Engine means similar screening approaches can be used to gauge would-be responsible investments in around 200 sovereign nations. In these instances, crucially, norms-based tests are conducted at a sovereign level. They might assess compliance on issues such as corruption, human rights, child/forced labour, commitment to the Kyoto Protocol and the prevalence of democracy/autocracy.

International Norms

DWS ESG Assessment

Although sector and norms-based tests are essential, we believe responsible investing should take into account positives as well as negatives. This is why the ESG Engine also uses best-in-class screening, assessing hundreds of factors to produce aggregate rankings. From these we derive our proprietary DWS ESG Assessments which aim to identify the true ESG leaders and the true ESG laggards by peer group – ranking corporations against their peers by both sector and region

DWS ESG Assessments for Sovereigns

With sovereigns, just as with companies, the interrelations of various factors can be analysed to produce positive as well as negative outcomes. Using this approach, the ESG Engine produces the rankings from which we derive our proprietary DWS ESG Assessments for Sovereigns. Like our corporate ESG Assessments, our ESG Assessments for Sovereigns aim to identify the true ESG leaders and the true ESG laggards – in this case on a sovereign basis. This process also takes a peer-group approach, valuing emerging markets separately from their developed counterparts.

Best-in-Class ESG Assessments

PROTECTING THE PLANET: CLIMATE IMPACT PROFILING

The problem of global warming is high on the agendas of many investors who favour the integration of ESG considerations into their investment decisions. The ESG Engine reflects this by facilitating a detailed assessment of corporations’ impact on climate change. This involves the expert evaluation of numerous environmental factors, including carbon footprint, use of fossil fuels, carbon ratings and use of natural resources. One of our seven ESG data providers, Trucost, is an acknowledged market leader in this field of analysis.

CO2 and Climate:

• Carbon Footprint
• Carbon intensity
• Climate transition risk
• Water intensity