DWS will strengthen its stewardship practices by introducing “Smart Integration”, a pioneering approach to ESG integration that goes beyond previous industry standards. Developed before COVID-19, it is expected to become even more important as the pandemic’s fallout reinforces the need to build back our economy in a responsible and sustainable manner. As an initial step, the new process will apply to approximately a fifth of DWS’ total global Assets under Management, targeting non-ESG focused funds in particular. “Smart Integration” will in the course of year be further rolled out to ensure greater ESG integration across the broader investment platform of DWS.
Engagement as our most powerful fiduciary tool
DWS will use its proprietary ESG Engine to leverage best-in-class research data and artificial intelligence to identify potential portfolio risks, primarily companies with high climate transition risks and those that violate international norms. Using this analysis empowers DWS to act proactively and engage companies with the highest risk exposure, not only to help clients build more responsible investment portfolios, but to also ensure that the firm is fulfilling its responsibility to contribute towards a more sustainable economy, society and environment for the future.
Asoka Woehrmann, CEO of DWS said: “The dialogue with companies on corporate strategy – engagement – is the most powerful tool we have as a fiduciary asset manager to make a positive impact on ESG practices. I am proud that with the introduction of “Smart Integration” DWS has set up an own overarching taxonomy to apply its influence. This is a major step forward towards becoming an ESG leader in our industry.”
Adopting a more sophisticated approach to ESG integration
The sophisticated approach of “Smart Integration” raises the bar for higher sustainability standards in investment management as well as companies that DWS invests in, marking significant progress from the top-down sector exclusions approach.
In practice, DWS analysts and portfolio managers will apply “Smart Integration” through a process centered on robust research, professional expertise and strong engagement:
- Utilizing the ESG Engine to identify, and objectively analyze issuers in all sectors with high climate transition risks and violators of international sustainability standards
- Ranking the identified companies by highest risk exposure, instead of excluding entire sectors
- Incorporating such risk analysis on these companies into investment decisions advised by internal experts
- Engaging with high-risk companies as advised by internal experts, including regular dialogue with companies’ senior management to influence action for improvement
- Excluding companies from the DWS investment universe as a last resort if they fail to act
“Smart Integration” will initially be implemented for actively managed mutual funds in liquid investment strategies domiciled in EMEA. Avoiding companies with excessive climate transition risk may lead to lower carbon intensity in DWS’s Active investment platform as well as better risk adjusted returns for investors. This is because severe ESG risk takers tend to be associated with a higher likelihood for significant adverse consequences on their financial position or reputation.
For further information please contact:
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About DWS Group
DWS Group (DWS) is one of the world's leading asset managers with EUR 700bn of assets under management (as of 31 March 2020). Building on more than 60 years of experience and a reputation for excellence in Germany and across Europe, DWS has come to be recognized by clients globally as a trusted source for integrated investment solutions, stability and innovation across a full spectrum of investment disciplines.
We offer individuals and institutions access to our strong investment capabilities across all major asset classes and solutions aligned to growth trends. Our diverse expertise in Active, Passive and Alternatives asset management – as well as our deep environmental, social and governance focus – complement each other when creating targeted solutions for our clients. Our expertise and on-the-ground-knowledge of our economists, research analysts and investment professionals are brought together in one consistent global CIO View, which guides our investment approach strategically.
DWS wants to innovate and shape the future of investing: with approximately 3,500 employees in offices all over the world, we are local while being one global team. We are investors – entrusted to build the best foundation for our clients’ future.