Letztes Update: 28. September 2023
This post was created in collaboration and with the support of Freya Savings. The content reflects my own opinion.
There is now a wealth of information and financial products on the subject of sustainability in equity funds. And sustainable bonds are also slowly catching up. When it comes to commodities and real estate, on the other hand, private investors will find little to nothing. That’s exactly what I talked about with new Pillar 3a provider Freya Savings, which recently launched its sustainable retirement app. In addition to the two founders Roman Gaus and Rolf Kutos, David Gartmann from the Graubündner Kantonalbank (GKB) took part in the discussion. Graubündner Kantonalbank acts as a partner bank of Freya Savings.
Interview
What sets your sustainable pillar 3a apart from the competition?
Roman: We consistently align the entire investment strategy across all segments (equities, bonds, real estate, alternative investments) with sustainability. Other providers only do ESG screening on the equity side. On the bond side, they then hold only government bonds and corporate bonds without ESG screening. As a result, portfolios are not consistently sustainable. At Freya, all equipment is subject to a sustainability check. As a result, we have included bonds issued by development banks in the portfolio alongside government bonds, for example.
Another difference is that customers can put together a personal meaning profile. It is important to us that users engage with the topic of sustainability and consciously choose two of five sense profiles. These are in the realm of the Sustainable Development Goals (SDGs), the 17 United Nations (UN) Sustainable Development Goals (SDGs).
Rolf: Our portfolios are implemented with passive funds. And in each asset class, we chose the fund with the highest sustainability rating. We only made compromises if a fund is traded very rarely or is still very small. Through this rigorous selection, we exclude approximately 75% of the investment universe. Other providers do take a sustainability solution, but just not necessarily the one at the highest level. Such solutions with a rudimentary sustainability filter are then just rather “sustainable light”.
David: Within the basic investment, we only focus on ESG leaders. As a result, the CO2 footprint of the products used is significantly lower than for the standard indices. We are also involved in exchanges with fund providers. This gives us, as Freya Savings and GKB, the opportunity to make a difference in the market.
Other sustainable suppliers exclude raw materials as a matter of principle. In your portfolios, gold accounts for 4%. Why did you decide to use gold?
David: Gold is a good diversifier that provides some risk protection even in uncertain times. We must not forget: Pillar 3a is a pension product. Our goal is not to implement the greenest strategy at all costs, but rather to create a balanced, well-diversified investment strategy that complies with important sustainable principles while being optimally positioned in terms of risk and expected return.
Roman: We also want to introduce investors to investing for the long term, and to do that we need to talk about the security aspect. Gold offers good protection against inflation and contributes to diversification, because gold is negatively correlated to most other asset classes. Moreover, it is widely accepted that gold belongs in a “safe” pension product.
Rolf: You also have to see that gold mining and production are in a constant state of change. In recent years, the entire gold market has evolved extremely. In the future, we will see all gold production become traceable. In the funds we use, we not only look at what sustainability criteria are applied in the individual stages of gold mining and processing, but for us it is at least as important where the development is going. With our gold product, Zürcher Kantonalbank can already track large parts of the gold production, from the mine to its vault. And in a few years, the fund used should contain only fully “Traceable Gold”.
When I look at the factsheets as a private investor, especially the Swisscanto gold fund, I don’t read anything about sustainability.
David: The topic of sustainability can only be advanced if the fund providers provide sound reporting and appropriate marketing material. The asset management industry needs to step up its game. Slowly it’s evolving, but I don’t think we’ll be where we want to be and should be today for another two to three years.
Roman: The entire fund industry needs to focus more and more on the end customer. The more we look at sustainability and ask the right questions, the more likely we are to see movement on the issue. For me, this is also a form of commitment.
The market for sustainable financial products is very dynamic, with new products being launched all the time. At Freya Savings, do you have a set rhythm of reviewing the products you use and replacing them with newer “greener” ones if necessary?
David: All products at Freya Savings have gone through the selection process of Graubündner Kantonalbank and of course we have a continuous monitoring process that measures and evaluates performance on a monthly basis. We also keep a watch list of competing products and compare them.
At least once a year, we conduct a major review in which we critically examine the products we use. Particularly with themed funds, we check to see if those are still the topics that customers are concerned with or if we should include others. Finally, we are in constant exchange with the ETF providers, and when they launch new products, we are actively informed.
Rolf: We also analyze the sustainability of the funds we use and look to see if there are more sustainable or now cheaper alternatives at the same sustainability level. We review this at least quarterly. And if necessary, we exchange the funds.
Themed ETFs that cover future topics (e.g., smart city infrastructure, healthcare innovation, digital security…) follow fashions to some degree, and fashions can change relatively quickly. Why do you think I should bet on such thematic ETFs in my Pillar 3a, where I have a long investment horizon?
Roman: With the five focal points available for selection, we have deliberately focused on megatrends that we believe will all be successful in the long term and have not chosen fashionable topics such as “cannabis” or “crypto”, which are subject to strong short-term cycles and strong price fluctuations.
Within the five focus areas, the energy and sustainable infrastructure theme is likely to be more subject to larger fluctuations because stocks in the clean tech sector generally face high volatility and the index is still relatively young. Accordingly, investors should certainly be committed here for the long term.
In the next post, we’ll take a closer look at the challenges of sustainable investing in gold and real estate and which funds Freya Savings has chosen. You can find it here.
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