"The finance sector plays an important role in achieving climate goals"

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"The finance sector plays an important role in achieving climate goals"

Beatrice Stadler, ESG Manager at the Vita Collective Foundation, and Fabio Oliveira, ESG Manager at Zurich Invest Ltd, reveal the significance of sustainability in investment processes, how ESG criteria can be established and assessed, and what role the finance sector can play in achieving the climate goals from the Paris Agreement.
The finance sector plays an important role in achieving climate goals
Fabio Oliveira is ESG Manager at Zurich Invest Ltd. Zurich Invest Ltd is a wholly owned subsidiary of Zurich Insurance Company Ltd. It manages assets worth more than 38 billion Swiss francs and is also the manager of the Zurich Investment Foundation. In addition, it is the asset manager for many investment categories of various joint foundations existing under the umbrella brand "Vita," which work with Zurich to offer occupational pension plans for companies.

Beatrice Stadler is ESG Manager at the Vita Collective Foundation. Almost 23,000 companies with more than 138,000 employees trust in the occupational retirement provision of the Vita Collective Foundation. The latter takes care of investing the retirement assets, while Zurich is responsible for risk insurance and service.

ESG stands for Environmental, Social, Governance – three important dimensions of sustainability and measuring sticks for the operational activities of a company.

Zurich Invest Ltd and the Vita Collective Foundation have each created a new post for an ESG Manager. What was the underlying background and what prompted you to apply for this position?

Beatrice Stadler: The Vita Collective Foundation is further expanding its Sustainability area – including with the position of ESG Manager. I am an expert in the real estate area, where the subject of sustainability has long been seen as extremely important. After all, real estate causes a substantial portion of carbon dioxide emissions worldwide – and at the same time, these can be tangibly reduced through greater energy efficiency. This means that real estate can make an important contribution to global climate protection. I also try to live as sustainably as possible on a personal level, but as ESG Manager at a joint foundation of this size I can achieve considerably more. That is my motivation.

Fabio Oliveira: I too applied for this position primarily because I have a strong interest in, and commitment to, the topics of sustainability and ESG investments. I have previously been involved with various sustainability projects at Zurich Invest Ltd. As one of our four strategic core initiatives, sustainability is also of huge importance for the company. This strengthened my conviction that I can achieve a lot with colleagues in the ESG area. I definitely wanted to accept this challenge.

What are your main tasks?

Beatrice Stadler: My job is to implement the sustainability philosophy and the climate strategy defined by the Foundation Board. This means that my area of work is very broad and covers all investment categories. The focus lies on real estate, equities and bonds. In concrete terms, this means that the Vita Collective Foundation acts as the asset owner and applies its influence to ensure greater sustainability. One example of this is our effect-oriented investment in the area of "senior housing". Alongside Zurich Invest Ltd, we are also planning to join an engagement pool. This is all about joining forces with other investors to have a stronger influence together. This could, for example, mean interacting with companies more and supporting them in their sustainability endeavors. It is more effective to initiate positive development rather than simply excluding companies outright from the start. The Confederation's long-term climate strategy to 2050 is our guide, and we are very aware that the finance sector plays an important role in the achievement of the climate goals.

Fabio Oliveira: Among my main tasks are strategy development in the area of sustainability and responsible investment, the ESG analysis of our investment vehicles, and the ESG monitoring of our external investment managers as well as their reporting to our regulators, our existing customers and our potential customers. The engagement pool mentioned by Beatrice is also keeping me very busy at present. The collaboration with other investors will enable us to conduct a dialog with various companies. This will ultimately achieve more – as we can act similarly to a major shareholder.

From your perspective, what are the main goals of your company in relation to ESG?

Beatrice Stadler: The Vita Collective Foundation devotes itself to a worry-free financial future for insured persons – and to balanced and secure occupational retirement provision. It acts as an active and responsible investor and takes account of both financial and sustainable aspects in its decisions. Key elements include governance, i.e. good corporate management, and the impacts of corporate actions on climate change. We view real estate as part of impact investing.

Fabio Oliveira: We want to integrate ESG aspects into all business activities – into our processes, products and services. In addition, we want to make an active contribution to climate protection and drive forward the energy transition. Finally, we want to have a tangible, positive influence through our products, services and investments in the ESG area. In various workshops with our key customers and interest groups, we have developed our three investment principles – ESG Integration, Impact Investing and Advancing Together.

What distinguishes a company that has a convincing sustainability strategy? What do its core elements look like?

Beatrice Stadler: It is important that there is a clear strategy. So the company should assess the entire value creation chain of its products to see where the corresponding levers are with respect to sustainability and how ESG aspects can be integrated at each point. Upstream and downstream emissions should also be analyzed. Finally, ESG criteria should be anchored in the strategy. We make sure of this when entering into a dialog with a company in the context of our engagement.

Fabio Oliveira:
From my perspective, there are five elements to an effective sustainability strategy:
first of all, a sustainability strategy can only have an effect if management and key customers are involved and help to realize the strategy. For this purpose, different expectations should be gathered, any conflicting goals should be resolved and a shared understanding should be developed. Second, a sustainability strategy should always be anchored in the corporate strategy and in the vision and values. Third, measurable goals, measures and KPIs need to be defined. The fourth – and probably the most important – factor is integrating managers and employees and winning them over for the topic. The more the sustainability strategy is practiced within the corporate culture, the more successfully and quickly the goals that have been set will be achieved. Fifth, it is important to provide transparent reports regularly regarding the extent to which the strategic goals have already been achieved.

Sustainability and ESG are booming – why?

Beatrice Stadler: The consequences of climate change have already become evident. Extreme weather events are now much more frequent on the whole and so the general population is more aware of them. The Paris Agreement with its 2050 climate strategy provides a clear timetable for limiting the global increase in temperatures.
These developments should have led to investors increasingly focusing on sustainable financial products and providers expanding their product range accordingly. Anyone who invests in sustainability now is investing in future industries. At the same time, there are many more technologies that support sustainability. This means that environmental protection has developed from a cost driver into a field that generates new business prospects. The pandemic also works in favor of sustainability because more liquid resources are available – and thanks to remote working and the increase in digitalization, topics such as business flights are gaining a different meaning.

Fabio Oliveira: I would just like to add to Beatrice's remarks: The Paris Agreement means that every company and every asset will be impacted by climate change and the collective actions taken to combat it. Likewise, it is of key importance for the investment decisions of investors. Another important drive are investors themselves. On the one hand, they are clearly taking greater note of ESG risks and placing huge emphasis on actively reducing these within the context of sustainable returns. On the other hand, the need of investors to achieve social or ecological effects via impact investing has increased significantly. The Swiss Responsible Business Initiative has demonstrated that the call for companies to control the entire value creation chain as well as possible and to ensure ESG standards has grown within the population.

As an investor, what do I gain from this? Why are ESG investments good for pension funds? How do SMEs and the insured benefit from them?

Beatrice Stadler: Broadly speaking, taking account of ESG factors in the investment process can be considered part of the Vita Collective Foundation's fiduciary due diligence. Due to the increased awareness of climate change, the insured are also increasingly concerned about their retirement provision assets being sustainably invested. In the Paris Agreement, it is stated that finance flows are to be directed in a climate-compatible way. As a major investor, the Vita Collective Foundation can therefore also make a contribution to reducing greenhouse gas emissions through the integration of ESG aspects in the interests of the insured.

Fabio Oliveira: Risks in the portfolio can also be reduced – and investors benefit from an active dialogue with the companies in which investments are made, as well as from the exercising of voting rights at shareholders' meetings on specific ESG topics. This active engagement is important and puts pressure on companies to make progress. As part of the same approach, companies that face acute social, human-rights-related, ethical or ecological challenges are excluded from the portfolios. Through impact investing, in the form of green bonds for example, a positive, measurable and sustainable impact can be made for society and an attractive return can be generated at the same time.

How do you personally invest? Sustainably?

Beatrice Stadler: To achieve climate neutrality by 2050, it is essential to replace fossil fuels with renewable energy sources. The element hydrogen, particularly its storage, will play an important role in this, which is why I am supporting the development of this technology. I have also invested in digital technologies, which advance sustainable developments in many areas.

Fabio Oliveira: I also invest sustainably. I do so by means of a socially responsible investing equity fund, which only invests in companies that have outstanding ESG ratings with a focus on combatting climate change. I also invest in a target investment fund with Zurich Invest, which takes account of various sustainability approaches such as ESG integration and impact investing.
Beatrice Stadler, ESG Manager at the Vita Collective Foundation

Beatrice Stadler

ESG Manager at the Vita Collective Foundation

Fabio Oliveira, ESG Manager at Zurich Invest Ltd

Fabio Oliveira

ESG Manager at Zurich Invest Ltd.

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