"As part of our role as a fiduciary advisor for our clients, we are a firm believer in the impact and benefits of ESG - related investments.

Petra Pflaum
CIO for Responsible Investments

Sustainable investing is gathering momentum

Over the past 2 years ESG investing grew

25%

globally[1]

ESG AuM in the U.S. now represents over

20%

of all assets under professional management [1]

Europe and the U.S. represent over

90%

ESG assets under management globally [1]

Sustainable Finance Report, Issue #2

Issue #2 of our sustainable finance report examines how ESG investing is gathering momentum. We show how ESG investing has progressed from risk management and a downside protection tool towards more positive motivations such as the search for yield and diversification. We examine the prospects for the U.S. renewable energy sector, where we expect investment will continue to expand due to improving technologies as well as commitments at a state and corporate level. We also explore how climate change is creating risks and investment opportunities across all sectors and asset classes for example in clean transportation and energy efficiency. We show how the real estate sector has some of the strongest reasons for incorporating sustainability into investment decision making, and we estimate the proportion of a global real estate portfolio with the strongest green building policies. We also highlight the growth in the microfinance sector which is being driven by its risk, return and diversification properties. As ESG legislation and regulatory initiatives are becoming more widespread, investors are also incorporating these requirements as a means to enhance their investment processes.

Responsible investment styles and the regulatory environment

58 countries representing over 85% of global GDP have implemented regulations or guidelines on sustainability reporting, ESG integration or exclusions illustrating the growing reach of ESG regulation around the world. Regulation has in part been responsible for the various types of ESG investment styles which in Europe at least have been dominated by negative exclusion screens. Going forward we see more positive and financially motivated factors driving ESG investing.



ESG Regulation

Measures to address climate risk in investment portfolios

Future climate risks threaten powerful economic and financial shocks with implications for equity and fixed income portfolios. Indeed climate change and inter-related environmental issues have consistently been on and have risen up the World Economic Forum’s Global Risks Reports. We see significant investment opportunities across all sectors and asset classes for example in clean transportation and energy efficiency.



 

           Climate Risk Report

The search for yield and the U.S. renewables sector

Investor interest towards real assets is on the rise as investors seek out yield. In this environment the U.S. renewable sector stands out given rapid technological innovation and falling costs across the sector. This has meant the U.S. renewables sector, which employs 800K, is one of the fastest job creating sectors of the U.S. economy. This is consequently triggering a significant transformation of the U.S. power generating sector, which we expect will continue whether the U.S. is inside Paris or not.



 

U.S. Renewables

Developments and new horizons for sustainable real estate

Real estate is the asset class with amongst the strongest reasons for incorporating sustainability into investment decision making. Landlords and tenants are increasingly learning of the financial benefits of reducing the energy and carbon intensity of buildings with the positive spill-over effects in terms of tackling climate change. Cities and governments have also a role to play by improving urban infrastructure and reducing urban sprawl.



 

Real Estate

Diversification and the global microfinance sector

2.0 billion working adults or half the world’s adult population have no access to financial services. Microfinance is part of the solution to assist in delivering many of the Sustainable Development Goals such as ending poverty, delivering food security and promoting gender equality. As a result, microfinance and financial inclusion more broadly has the power to unlock significant economic potential for many emerging market accounts.  



 

Microfinance

Tobacco’s investment returns and societal costs

Conclusion

Investors have become increasingly aware of the importance of such issues as climate change, resource scarcity, labor rights and corporate governance to financial returns. We believe this helps to explain the growth in assets under management (AuM) that are classified as Environmental, Social and Governance (ESG). A quiet revolution has been underway in the responsible investment arena for over a decade. Its imprint is seen in the growth in various ESG investment styles.

Sep 01, 2016

Statement of compliance with the UK Stewardship Code

Deutsche Asset Management UK strives to establish, maintain and develop genuine partnerships, not only with its clients but with the wider communities and societies in which we live and work. It is our responsibility as an investment manager to publicly disclose relevant policies related to our stewardship responsibilities; this includes our Conflicts of Interest Policy as well as a Proxy Voting Policy. Effective oversight is a key component of our stewardship responsibilities and we ensure that monitoring and disclosure of transactions and voting activities is performed in line with local jurisdiction.

Jul 17, 2018

Slavery and Human Trafficking Statement

This Statement is made by Deutsche Bank AG and its relevant subsidiary undertakings pursuant to Section 54 of the United Kingdom's Modern Slavery Act 2015 (The "Act").

Mar 01, 2019

Corporate Governance & Proxy Voting Policy

We at DWS take our fiduciary duty to our client investors very seriously and act in the sole interest of our clients.

1. as of March 2017

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