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Swiss foundations: major potential to implement sustainable investing on an ambitious scale
A study by Lombard Odier and proFonds has shown that most charities in Switzerland invest according to sustainability principles. These principles, however, are not reflected in practice. Their approaches and methodologies leave considerable scope for improvement. There are five areas in particular where foundations can be proactive:
Roughly 80% of the foundations polled stated that they invest sustainably, and 70% consider sustainability in their investment decisions. They expect the percentage of sustainable investment to rise further over the next three years.
But this clear commitment to managing foundation assets in a sustainable and ESG-focused way is not being followed through to its conclusion. The survey demonstrates a disconnect between the driving motivation for sustainable investing and the ESG investment approaches used. The main reason cited is lack of time, resources and expertise. The scale of action required is evidenced by the fact that only 11% of foundations have a comprehensive investment strategy that includes ESG guidelines.
While they place great importance on the positive impact of their investments on the environment and society, foundations are not engaging actively enough with portfolio companies to win them over to sustainable corporate governance.
Around half of those questioned deal with the ESG investment strategy and the search for suitable investments themselves. Banks do not yet seem to be actively involved in advising foundations.
As it stands, there is much work to be done when it comes to sharing sustainable investing best practice between foundations; the majority of those surveyed (78%) showed no interest in working with others to achieve sustainable results. Foundations also believe that both the quality and quantity of information and training on sustainable investing leave something to be desired. Two-thirds of those questioned are either dissatisfied or do not know whether the information and training are sufficient. Increased efforts in this realm should therefore be a priority.
“As players focused on the common good, foundations automatically have a major responsibility to manage their operations sustainably. They may have addressed sustainability and climate change in the initial stages, but due to their structure they often lack the means and tools to implement these aspirations in their investment practices. However, we need a campaign on sustainable investing by foundations, in order to achieve sustainability and climate protection goals as quickly as possible in all sectors,” is how Dr Maximilian Martin, Global Head of Philanthropy at Lombard Odier, sums up the results.
“The study allows us to draw foundations’ attention to potential gaps and to put forward targeted proposals for closing them,” adds François Geinoz, President of proFonds.
Lombard Odier and proFonds have come up with the following five proposals to better integrate sustainability into foundations’ investment strategies:
1.Refine the current investment strategy and use all available levers: Working with exclusions does not go far enough. Sustainable investing means more than just not investing in some sectors or business models.
2. Clarify the meaning of sustainable investments internally: If foundations are to successfully implement sustainable investment strategies, they need to define what sustainable investing means for them and why they are committing to it.
3. Make reporting meaningful and relevant: The difficulty of creating reliable and meaningful reporting metrics is one of the key factors generally hindering sustainable investing. Foundations could therefore hire specialists to help them make better investment decisions and improve results.
4. Dismantle barriers to accessing and disseminating best practice: Foundations could rely more heavily on banks and other specialist intermediaries to compensate for their lack of sustainable investing expertise, and share their learnings to help other foundations make progress.
5. Use the strength of voluntary activities in the foundation sector: Swiss foundations should reflect on how they can use the unique, market-oriented environment in which they operate, along with their effective self-regulation, to break new ground and thus achieve better sustainable investment results.
“Foundations’ commitment to ESG is impressive. If they manage to close the gaps in their conceptual and operational implementation, their impact will increase hugely. But for that they need sufficient resources to build up expertise with specialist partners,” comments Andreas Arni, Head of Switzerland at Lombard Odier.
About the study
Lombard Odier carried out a study of the sustainable investment activities of Swiss foundations and associations in collaboration with proFonds, the umbrella association for charitable foundations in Switzerland. The study was based on an anonymous online survey of a total of 33 managers at Swiss foundations, followed up with a series of individual interviews. Alpha Financial Markets Consulting provided support in designing and evaluating the survey and in the meetings with experts.
Important information
This media release has been prepared by Bank Lombard Odier & Co Ltd, a bank and securities dealer authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA) (hereinafter "Lombard Odier"). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This media release is provided for information purposes only. It does not constitute an offer or a recommendation to enter into a relationship with Lombard Odier, nor to subscribe to, purchase, sell or hold any security or financial instrument.
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