News

In line with the interests of our clients, onValues has in the past years strengthened the focus on biodiversity risks and opportunities for nature-based business models in its advisory work.  These issues are not treated separately, but in the context of their interaction with other issues, including social justice, climate change and environmental pollution.

This translates into concrete advisory work that has in the past included:

• Helping a client develop and launch an incubator for nature-based ventures
• Supporting clients in introducing these issues in their proxy voting and active engagement strategies
• Monitoring asset managers' commitment and reporting in this area
• Identifying and vetting interesting private markets investment opportunities
• Facilitating farmland investments with a clear focus on organic and sustainable farming practices.

We are proud to announce that Ingeborg ('Inge') Schumacher has joined our advisors board.

Our advisors play a key role in providing strategic guidance, specialist know-how and inputs in ongoing client projects. We are convinced that, in an increasingly complex world, such collaborations between experienced professionals can greatly improve the quality of our advice.

Inge brings with her more than 25 years of experience in advising institutional investors and in developing and implementing sustainable investment strategies. We very much look forward to working with her!

onValues has in the past months intensified its support of clients wanting to align their portfolios with the Paris Agreement’s objective of limiting global warming to 1.5°C. We welcome the fact that investors’ focus is slowly but surely moving away from a backward-looking risk management to a more forward-looking consideration of both risks and opportunities involved in aligning own operations, products and supply-chains with a low-carbon future. We particularly encourage clients to use methodologies recommended by the Science Based Targets initiative, which provides a science-based framework to assess how the projected emissions of a company, its carbon strategies and targets translate into an implied temperature rise (ITR). We recognise the fact that ITR methodologies (and underlying data) are still far from perfect, but are confident that they will ultimately prevail because investors need simple metrics in order to effectively engage with portfolio companies.

Our founder, Ivo Knoepfel, has recently been appointed as chair of the Advisory Board of the Center for Sustainable Finance and Private Wealth (CSP), a research and teaching institution at the Department of Banking and Finance at the University of Zurich. CSP is unique in its position at the intersection of research and training, bringing together scientists, wealth owners, and investment professionals in order to generate knowledge and to mobilize capital toward impact. In the past years, CSP has trained hundreds of wealth managers and asset owners, with a particular focus on next-gens. Its ground-breaking research has helped understand the mechanisms through which asset owners can contribute positive impact in the real world. onValues is convinced that the critical voice of academia is needed to challenge the conventional wisdom of investors and improve impact investing practices, and is therefore proud to support CSP.

The International Energy Agency estimates that buildings and construction are responsible for nearly 40% of total direct and indirect CO₂ emissions worldwide, the largest contribution of all sectors. While much of the conversation is centred around reducing energy for heating, cooling and lighting of buildings (accounting for 28% of global CO₂ emissions), little attention is still being paid to the 11% of global CO₂ emissions caused by the manufacturing, transport, construction and disposal of building materials, also known as "embodied carbon". The share of embodied carbon tends to increase over time and it is therefore crucial to focus on solutions such as wood construction, recycled steel and low-carbon cement going forward if the world is to meet the Paris Agreement global warming goals.

At onValues we observe a trend towards higher allocations to real estate in our clients’ portfolios. We are therefore committed to helping our clients find ways to reduce the greenhouse gas intensity of this asset class, mainly by partnering with developers and asset managers that have set out to substantially reduce direct and indirect emissions in their portfolios and have defined clear targets for this.

Time is running out for averting catastrophic climate change. The recently released sixth report of the Intergovernmental Panel on Climate Change contains more precise and alarming predictions of expected climate disruptions based on direct observations of the changes already underway and on improved climate models. It is now clear that keeping the warming below 1.5°C, as laid out in the Paris agreement of 2015, would require the whole world, not just rich countries, to get net emissions of carbon dioxide down to zero before 2050 – a huge challenge for our political and economic systems.

In light of the urgency of the matter, we are assisting our clients in identifying ways in which their investments can support the alignment of our economies to a net-zero emission pathway. This includes forceful engagement strategies with large emitters in their portfolios, targeted investments in clean energy infrastructure and in carbon capture technologies, investments that enhance carbon sinks in soils and forests, and investments in companies providing break-through innovations.

onValues is stepping up its engagement in support of initiatives that contribute to understanding planetary boundaries and assessing their relevance for financial and investment decisions. In this context, our founder was recently invited to join the board of Global Footprint Network. The Network is famous for its comprehensive set of Ecological Footprint metrics and related advocacy. The Ecological Footprint continues to be the only metric that holistically compares human demand on nature against nature’s capacity to regenerate. It is based on simple, straightforward accounting – not on arbitrary scoring. Since its inception, Global Footprint Network has calculated Footprints of countries for each year that UN data has been available. Its engagement reach includes:

• global campaigns like Earth Overshoot Day that focus the conversation on resource security,
• the Footprint Calculator, which is used for different engagement programs,
• the #MoveTheDate platform that invites people to declare publicly the solutions they admire,
• direct engagements with companies, cities and countries turning Footprint results into powerful decision tools.

Milton Friedman’s 1970 essay, “The Social Responsibility of Business Is to Increase Its Profits,” has just turned 50 and this is prompting a range of initiatives calling for a shift to “stakeholder capitalism” responsible to workers, communities, suppliers and the environment as well as to investors.

A year ago, 181 CEOs members of the Business Roundtable pledged themselves to the stakeholder approach instead of the “shareholder supremacy” preached by Friedman. “It is good that the business community has awaked,” economist Joseph Stiglitz recently said in The New York Times. “Now let’s see whether they practice what they preach.”

One of the advocacy initiatives recently launched is Imperative21, whose goal is to champion an “economic system that is designed for interdependence, invests for justice, and accounts for all stakeholders”, as B Lab’s Jay Coen Gilbert, one of initiators of Imperative21 recently wrote in the New York Times.

The stakeholder approach has long been part of the framework that onValues uses in advising its clients. After 30 years of sustainable investing experience, we have enough evidence that professionally managing and taking into account stakeholder concerns is key to the long-term success of both companies and investors.

onValues is officially endorsing the Club of Rome's call to action to global leaders in relation to the ongoing Corona crisis.

It states that "[...] It is important to acknowledge that the planet is facing a deeper and longer-term crisis, rooted in a number of interconnected global challenges. [...] About 70% of [emerging infectious] diseases originate in animals (mainly wildlife). Their emergence results from human activities such as deforestation, expansion of agricultural land and increased hunting and trading of wildlife. [...] How leaders decide to stimulate the economy in response to the corona crisis will either amplify global threats or mitigate them. The risk is making nearsighted decisions that increase emissions and continue to degrade nature in the long term".

It concludes by calling on leaders to have the foresight to make their economic recovery plans truly transformative by investing in nature regeneration, low carbon development and sustainable agriculture and food systems.

The ongoing crisis is painfully reminding us of the vulnerability of our economies and global financial systems and is a wake-up call for strengthening the resilience of those systems. It is also a reminder of the urgency of reducing the risks of unconstrained climate change leading to more frequent shocks of this type in the future.

How can investors contribute to increasing the resilience of our economic and financial systems? First, align your investment portfolios to a scenario leading our economies to net-zero greenhouse gas emissions by 2050 at latest aimed at limiting temperature rise to 1.5°C above pre-industrial levels (e.g. by joining the UN-convened Net-Zero Asset Owner Alliance). Second, if your mandate permits, allocate a part of your capital to companies providing break-through innovations in areas such as clean energy, resource efficiency and the transition to a circular economy. Third, take a long-term approach to investing avoiding speculative investments and asset classes that destabilise financial markets. Fourth, take a forceful stewardship approach (with clear goals that if not met lead to divestment) in engaging with companies that are working against a transition to a more sustainable economy. Fifth, collaborate with other investors in shaping a more resilient architecture for our financial systems (e.g. through initiatives such as Principles for Responsible Investment, Climate Action 100+, the Institutional Investors Group on Climate Change, the UNEP Finance Initiative etc.).

The current crisis is ultimately strengthening the case for sustainable investing and could reveal itself as a powerful accelerator toward a more sustainable trajectory of our societies.

On behalf of RS Group, we looked at different ways in which financial markets and investors can contribute to reducing the destruction of tropical forests and the unsustainable use of land and oceans, while helping to mitigate climate change and to provide a livelihood to local communities for them to become stewards of local ecosystems. Given our economic system does not allocate a value to natural capital, it is almost impossible to design investment structures that will be financially attractive for commercial investors, unless concessionary capital or grants are used to de-risk or enhance returns. This is exactly what blended finance structures (e.g. structured funds, bonds and other vehicles) aim for.

Together with RS Group we found that more innovation is needed in the field and on 11 November 2019 RS Group and Convergence (a think-tank specialised in the field) launched a US$3 million design funding window for innovative and catalytic blended finance solutions focused on natural capital in Asia. By supporting the design of new blended finance structures, the window will draw new investors into this critical, but underfunded development area. Asia’s enormous economic growth in the last few decades has come at a high cost to its environment, leading to deterioration of land, freshwater, and marine ecosystems and exacerbating water and food insecurity and climate vulnerability. Globally, it is estimated that there is a US$200-300 billion gap per year to preserve the world’s last healthy ecosystems.

Switzerland was in the 1990ies an early mover in the field of sustainable investing. Examples include some of the first environmentally focussed funds, the birth of microfinance investment managers, large banks integrating ESG criteria in their credit risk assessment, the advent of the first sustainable stock market indices and, with the Ethos Foundation, the launch of one of the first collaborative stewardship initiatives in Europe.  A lack of leadership by the majority of asset owners in the country has slowed down this development until recently. But now, a new dynamism can be observed: sustainable assets under management are rapidly rising, with Swiss Sustainable Finance the sector has gained a strong voice and leading trade organisations including SwissBanking, Swiss Fund & Asset Management Association and Swiss Insurance Association now recognize that Sustainable Finance will be a key competitive advantage for the Swiss finance sector. This is well described in a recently published report by Swiss Sustainable Finance.  It mentions onValues as one of the leading investment consultancies supporting the growth of the sector by advising asset owners in their implementation of investment policies and processes.

We are honoured to provide strategic support to the PeaceNexus Foundation through our founder’s role as trustee of the foundation.  PeaceNexus provides key actors such as multilateral organisations, governments, non-profit organisations and business actors with expertise and advice on how they can make best use of their peacebuilding role and capacity to help stabilise and reconcile conflict-affected societies. Geographically it focuses on four regions – the Balkans, Central Asia, South East Asia and West Africa/the Sahel – where it supports both international and local peacebuilding organisations with strategy and organisational development advice. It also helps companies active in fragile states integrate a conflict-sensitive approach in their operations and in dealing with local stakeholders.

PeaceNexus is one of the few privately funded foundations fully dedicated to implementing the Sustainable Development Goal #16 aimed at “promoting peaceful and inclusive societies for sustainable development, providing access to justice for all and building effective, accountable and inclusive institutions at all levels”.  It recently explored ways to use its capital in support of the mission and seeded a new investment fund aimed at positive peace outcomes through engagement with the companies it invests in.  With this total portfolio approach, PeaceNexus is able to increase its impact in the field and to use synergies between the grant-making and investment side of the foundation.

For the second time, WWF Switzerland has released a detailed rating survey of Swiss pension funds’ policies and practices in the field of responsible investing. The analysis focuses on the 20 largest pension funds in Switzerland. Ivo Knoepfel of onValues was part of the panel of experts that provided guidance for developing the rating methodology.

The Swiss second-pillar pension system, representing around CHF 910 billion under management, or 133% of Swiss gross domestic product, carries enormous weight in further shaping the future of our economy.  The rating survey is meant to encourage and promote dialogue with respect to pension funds’ fiduciary responsibility for taking into account environmental, social and governance issues in their investment decisions.

The rating was carried out by Inrate and its Managing Partner Beat Zaugg (also member of the Advisory Board of onValues) said: “Every investment also has indirect environmental and social effects. These do not always have financial consequences in the short term, for example in the area of air traffic, where the external costs of global warming are borne not by the producer but by the general public. However, if these costs are internalized in future, pension funds that invest in these sectors will be exposed to investment and reputational risks”.

Few people know that today’s widely used ESG (Environmental, Social, Governance) acronym was created by onValues back in June 2004.  On behalf of a partnership between the Global Compact and leading financial institutions, we then produced the “Who Cares Wins” report which summarised recommendations by the financial industry to better integrate ESG issues in analysis, asset management and securities brokerage.  In the report, we chose to be specific about the issues addressed and not use broader terms such as sustainable or responsible investing.  For purely practical reasons, we introduced the acronym ESG instead of having to spell out “environmental, social and governance” multiple times in the report.

The Institutional Money magazine has recently interviewed our founder Ivo Knoepfel and published an article (only available in German) that looks back at the birth of ESG and how its use has evolved over time.

In two recent Forbes articles, Georg Kell, former head of the Global Compact, discusses the rise and future challenges of ESG investing. In the first article, he looks at the forces that have shaped ESG investing over the past 15 years. Since the acronym was first introduced in 2005 (in the landmark “Who Cares Wins” report authored by onValues), ESG investing has rapidly grown and today is estimated at over $20 trillion in AUM or around a quarter of all professionally managed assets globally.

In a further article, Kell asks if the case for corporate responsibility and ESG investing still holds in the face of rising populism and protectionism and a changing environment, where the assumptions of a fair level playing field based on rules and trust in public institutions may no longer hold. He argues that the forces that propel corporate sustainability forward are largely independent of policymaking and driven more by technology, transparency and resource scarcity which lead to financial drivers. “But only up to a point. Should the destruction of the international rule-based system become the new dominant way of policymaking, then all bets are off”, he adds. Kell concludes with an appeal to responsible business leaders to speak up and to use their influence to defend and strengthen the rule-based market system and the values that hold markets and humanity together.

It’s Spring and we feel more than ever motivated to contribute to initiatives aimed at aligning private wealth and financial markets to our society’s sustainable development goals! On top of what we can contribute through our consulting work, we therefore engage in collaborative initiatives and fora aimed at innovating, growing and mainstreaming sustainable approaches.  New engagements include the active role of Ivo Knoepfel in the Advisory Board of the Center for Sustainable Finance and Private Wealth at the University of Zürich and his role as speaker and moderator at this year’s pymwymic Impact Days, a gathering of leading European wealthholders engaged in investing for positive impact.  Ivo Knoepfel has also recently become a trustee of the PeaceNexus Foundation , whose aim it is to strengthen organisations committed to preventing conflict and building peace, and continues to act as an advisor to WWF Switzerland in relation to their benchmarking of Swiss pension funds’ responsible investment commitments.

Investing in sectors and companies with a high impact on the global climate is “dangerous for your portfolio’s health”, if we express it in similar terms as health warnings on cigarette packs. It is not only governments’ policies aimed at maintaining global warming within the 2°C mark, but also the rise of the shared economy, on-demand transportation and the new price competitiveness of renewable energies that will lead to tectonic shifts in the power, automobile, oil and other sectors. onValues helps clients align their wealth to the challenges ahead by focusing on investments that are part of the solution and not part of the climate change problem. We believe that it is not enough to avoid high-risk companies and to lower the portfolio’s carbon footprint (current emissions of portfolio companies). The main focus should be on investing in winning companies providing break-through products and services needed for a low-carbon future. Long-term investors will be able to generate superior financial returns and contribute to a better world.

On behalf of our clients, onValues has recently assessed the role of gold as part of a long-term investment strategy. Results of our analysis using price data for the last 20 years indicate that gold (measured in US-Dollars) did not outperform other ‘safe haven’ assets such as high quality government bonds in periods of pronounced stock market volatility. For non-US investors a volatile and generally weakening US-Dollar introduced exchange rate risks, frequently wiping out the occasional gains of gold holdings. We therefore cannot validate the common belief that gold is a good portfolio insurance based on recent history – especially for European investors. Moreover, the environmental and social impact of the gold industry needs to be taken into account. In extreme crisis situations, such as a global war or the collapse of global financial systems, gold could play a role as a store of value. For clients attaching a high likelihood to such events it could make sense to hold significant amounts of gold, but this would require a well thought through implementation plan, factoring in choices like physical denomination (coins, bars, jewellery), storage location (bank, external storage, at home) and security aspects when accessing and using the gold during crisis times.

Toniic Institute, the global action community for impact investors, has recently released “T100: Insights from the Frontier of Impact Investing”, a study showing aggregated data from 51 high net worth individuals, foundations, and family offices (including onValues clients). The data analyzed reveals that 100% values alignment can be achieved today in the portfolios of different types of investors, including those seeking market-rate returns. As part of the T100 project, Toniic also announced the launch of the Toniic Diirectory, a publicly accessible, peer-sourced catalogue of more than 1’000 impact investments made by its members, upon which the T100 findings are based. The directory is searchable by impact categories, impact themes, asset classes, management structure, liquidity profile, and impact geography.

Toniic also recently launched “T100: Insights from Impact Advisors and Consultants 2017” which shows the global landscape of dedicated impact investment consultants and advisors. 37 organisations from 12 countries, who work for 38 of Toniic’s members, open the door to their impact practices to demystify, inspire and activate both investors and the financial services industry. “What we see is a dedicated, articulate, optimistic, innovative, and definitely persistent group of entrepreneurial founders as well as large company intrapreneurs,” said Lisa Kleissner, co-founder of Toniic and its 100% Impact Network. “Beyond fulfilling their clients’ impact needs, they are building new impact products and services, and volunteering their time to strengthen and grow the impact ecosystem. All of them, while cognizant of the challenges, are optimistic there are solutions and a bright future for impact.”

Defining and managing a global portfolio’s currency allocation is a key factor in driving long-term risks and returns. In our consulting practice we often find that our clients (and the banks and asset managers that advise them) do not pay enough attention to currency exposures or, alternatively, focus too much on short-term considerations and market timing of exchange rates. onValues does not believe in short-term market timing and supports clients in defining a global currency allocation that is in line with their risk/return profile and is part of a truly long-term investment strategy. As an input, we use different approaches based on long-term scenarios and macro-economic indicators. We are critical of commonly used approaches based on currency allocations of global benchmarks such as MSCI’s World or All Country World indices, given the fact that many global corporations generate more revenues abroad than in their home country. In addition, onValues provides an ongoing monitoring of currency markets informing clients of likely major market dislocations. This, in turn, is an input for revising the client’s long-term currency strategy or for measures aimed at reducing downside risk.

In the past months onValues has increased its research activities focusing on investments in sustainable agriculture and food systems, also based on the interest that its clients are showing for this sector. From a financial point of view, investments in agriculture are interesting because of their real assets and yield generating character. From a social and environmental point of view, investments that take positive impact and ESG into account can contribute to food security and healthy nutrition, and reduce risks related to the use of pesticides and GMOs, to water availability, biodiversity loss and climate change. In identifying and assessing investments in the space, onValues can rely on its 15-year track-record and on a network of independent specialists. In the past, onValues has facilitated investor initiatives (see the Geneva conference in 2011 and the Principles for Responsible Investment in Farmland) and published proprietary research on the subject.

Peter Wüthrich was invited to speak at Prestel & Partner’s Family Office Forum to share onValues’ experience in advising clients interested in frontier market investments. Focusing on microfinance investments, he noted that - in spite of recent challenges - they can contribute to better diversification and alignment to family values in the context of family office portfolios. After giving an overview of the market and of the main market players, many of the family office managers in the audience were surprised to learn that some of the pioneers of microfinance investments are Swiss-based and offer a wide range of public and private investment funds with substantial assets under management.

Peter stressed the fact that investing into microfinance requires a long-term investment horizon and that past performance should not be the driving selection criteria for choosing a fund manager. A thorough evaluation of aspects like geographic focus, diversification, currency exposure and the fund’s investment process should be an integral part of the investment decision.

The past months have seen an increasing number of private wealth-holders going public with their engagement for integrating social and environmental aspects in their investments. An article by the Financial Times portrays Justin Rockefeller and other young members of historic dynasties that are taking their family offices into a new era of investing in line with their values. Annie Chen, a long-time onValues client, was portrayed in an August article in Barron’s and a Huffington Post blog in September. Ben Thornley, the author of the blog, notes how passion drives this new generation of investors and that “..institutional investors looking to high net worth individuals to shoulder the early-stage risk of impact fund managers, and for advisors to high net worth clients, understanding why and how the wealthy make impact investments is essential”.

During the past 30 years, financial markets repeatedly went through boom and bust cycles both in developed and emerging markets. Despite the asset price declines during bear markets, long-term investors who held on to their investments in equities and bonds still earned total returns that were well above long-term averages. Many investors have become used to the high returns of their investment portfolios and assume that future performance will be similar to what they observed in the past.

Several years ago already, onValues has started working with clients to derive more realistic expectations for future portfolio returns. Our analysis shows that the drivers leading to the exceptional returns of the past years are weakening and that asset returns will probably be below historical averages during the next decade. A recent McKinsey Global Institute report gives a good overview of the challenges ahead by taking a closer look at the driving forces of asset returns. The study concludes that in the recent past, asset returns were lifted by a unique but now fading combination of economic and business factors. Using a multi-factor approach with real economy and corporate fundamental factors, McKinsey argues that investment returns in the US and Europe over the next 20 years could be substantially lower – even in very favourable economic scenarios. These findings are consistent with those based on several other approaches seeking to forecast asset returns. onValues, for example, uses deviations from long-term asset valuation levels as one of the major determinants of future returns (see this previous news). Based on these signals we review our clients’ investment strategies, adjust expected asset class and portfolio returns, and are able to point to particularly attractive or unattractive investment areas.

Swiss pension funds still treat responsible investment mainly as an activity separate from other aspects of the investment process, rather than fully integrating environmental, social and corporate governance (ESG) considerations into investment decisions, according to a recent study by ShareAction and WWF Switzerland. This conclusion is based on a survey of the 20 largest pension funds in Switzerland, representing CHF281bn (€253bn) in assets, or around 36% of all Swiss occupational pension funds. Sonia Hierzig, research officer at ShareAction and author of the survey report, said: “The results demonstrate that, whilst the 20 funds we looked at do consider responsible investment, there’s a long way to go to adopt international best practice, particularly when it comes to transparency and climate risk management.” Ivo Knoepfel of onValues was part of the panel of experts that provided guidance for developing the survey methodology.

RS Group, the Hong Kong based family office, has just released a detailed report describing its six year journey in building a 100% sustainable and impact investment portfolio with the support of onValues. The report shows that, in addition to tangible social impact contributions, such a portfolio achieves financial returns and risk levels that are absolutely in line with traditional portfolios. In the introduction to the report, RS Group’s principal Annie Chen explains how important it was for her to align her wealth to her values and to use all forms of capital (grants and investments) in support of sustainable development in the context of a so-called total portfolio approach. onValues supported (and continues to support) RS Group at different levels: in defining a long-term strategy and asset allocation for the whole wealth, in selecting the best investment managers globally for each asset class, in regularly monitoring and reviewing the portfolio, in consolidating financial and impact information. During the launch event for the report, Annie Chen expressed her hope that by sharing her experience other family offices and investors throughout Asia will be motivated to engage in similar initiatives. More information can be found at the report's website.

The global wealth advisory industry is booming. Armies of banks, insurance companies, (multi-) family offices and asset managers now compete for the attention of asset owners, offering an unprecedented number of investment consulting services with varying degrees of quality. Disappointing investment performance and unappropriate advice have led to a lack of trust in financial consultants during a phase where unbiased advice is most needed. In collaboration with the consultant network Advisornet (co-founded by onValues), we recently organised a public workshop to discuss and further develop best-practices for the financial and investment consulting profession. About 40 practitioners took part in the event and shared their experience in striving for excellence in their profession. Prof. Dr. Thorsten Hens of the University of Zürich presented the academic state-of-the-art in investment consulting and compared this with the current offerings available at Swiss banks. He concluded that science offers robust guidelines for advisory processes which are currently only partially adopted by banks. This was followed by a panel discussion with experienced practitioners focussing on frequently encountered dilemmas during the advisory process and how to deal with them. How can we cope with weak governance at a client’s family office or institution? How do we react if a client is not prepared to cover the full cost of quality advice? How do we deal with well-known behavioural biases of clients? These were among the many issues discussed at the event which will be further explored in the context of our Advisornet engagement.

Ivo Knoepfel recently spoke at Pymwymic Impact Days*) about onValues’ experience in applying positive impact considerations to the entire wealth of clients, across all major asset classes. He stressed the importance of purpose and intentionality at different levels: at the level of single investments, of investment managers in charge of different parts of the portfolio, and when defining the strategy for the whole portfolio. In public markets, contributions to positive impact are often of a more systemic nature. Equity managers actively allocating capital to companies providing solutions to societal challenges and engaging with company management on these issues need to better report on the rationale and expected outcomes of their activities – Ivo Knoepfel stressed. He showed examples of asset managers and rating agencies that have developed frameworks to do so and reported on the experience of RS Group, a family office client of onValues, in applying an impact lens to their entire portfolio.
*) Pymwymic Impact Days is the leading European gathering of family investors and family offices engaged in the field of impact investing. This year it took place in Amsterdam on April 19 & 20.

onValues recently conducted a systematic search and selection process for German banks and asset managers that offer investment strategies based on sustainability criteria. The outcomes show that the German market still lags behind other European markets in terms of the quality of the strategies and services offered, although we were able to identify 2-3 institutions that meet our quality standards. Assessment criteria included: institutions’ strategic commitment to responsible business practices, the role of sustainability within their asset management as well as the risk-return characteristics of their main investment offerings. The analysis lead to the following main observations: Most financial institutions market sustainable services but only few demonstrate strategic, top management commitment to sustainability investments. Environmental, social and governance (ESG) criteria are rarely integrated into the overall investment process and in most cases added as an extra filter during the security selection process. There seems to be a certain standardisation of processes for using ESG criteria during security selection driven by the consolidation trend in the sector for independent ESG-research. Performance differences within asset classes are small, but vary significantly for balanced strategies, leading to the conclusion that asset allocation is a key driver of performance.

onValues has developed a set of long-term (20 years) and mid-term (3 years) scenarios as an input for developing investment strategies and contingency plans for clients. The long-term scenarios are used for strategy development and capacity building, the mid-term scenarios for implementing capital protection (and enhancement) strategies in the event of expected market dislocations. Whereas most investment advisors and asset managers focus only on economic data when defining investment strategies, onValues takes a broader view. Its long-term scenarios include assumptions on geo-political, economic, trade, innovation, demographic, social and environmental developments whose interaction then leads to certain outcomes at the level of the economy and of specific asset classes. The mid-term scenarios focus on turning points in market cycles that are triggered by economic realities and by the behaviour and perceptions of market participants. A system to monitor changes in market state that includes dimensions such as asset valuations, investor sentiment and internal market dynamics is used. onValues then works with clients to define measures aimed at protecting capital which is particularly important given the current risk of asset bubbles.

onValues has recently strengthened its macroeconomic and financial market research capabilities. The company now provides guidance on financial markets outlook based on a multi-dimensional analysis framework. Its approach aimed at better understanding mid- to long-term developments differs substantially from the short-term (3 to 6 months) focus of ‘market outlooks’ provided by banks and traditional advisors. This is in line with onValues’ focus on long-term orientated clients. Therefore onValues relies on the use of long-term data and valuation methodologies which have been proven to be robust over many investment cycles, i.e. decades. As an additional layer the framework monitors behavioral aspects of market participants thus capturing valuable information usually unrecognized in traditional financial market analysis. The onValues framework’s main goal is not to ‘time’ markets but to help clients identify ‘preventable surprises’ that can lead to substantial wealth destruction or unrealistic financial expectations.

onValues has in the past months continued its work in support of the foundation sector in Switzerland. Besides providing advice to several foundations for developing and implementing mission aligned investment strategies, onValues is also engaged in sector wide capacity building efforts. Ivo Knoepfel is an independent advisor of SwissFoundations' (the national association's) working group on Finances which regularly deals with mission investing matters. In the Swiss Foundations Report 2015 (only available in German and French), Nathalie Moral from the Arcas Foundation and Ivo Knoepfel present results of their recent survey of Swiss foundations and a feasibility study for program related investments in Switzerland. Ivo Knoepfel was also a speaker at the Swiss Foundations Symposium held in Zürich on 3 June 2015.

onValues is active in several international networks supporting leading families invest their wealth according to their values and for positive impact. In April, together with one of our partners, we organised for the second time a workshop on sustainable investing for 'next generation' wealthholders from six different European countries.  On 20-21 April, Ivo Knoepfel was a speaker at the pymwymic Family Days. He briefed a group of 30 family principals and over 50 family office representatives on strategies to better align family wealth with sustainability drivers and impact goals. pymwymic is one of the leading family networks in the field.

onValues is pleased to announce that, as of 1st of January 2015, Peter Wüthrich has joined onValues as a Senior Advisor and Member of the Management Board of the company.

onValues and Peter’s former company, Wüthrich, Henz & Co. Ltd., have been working together and sharing experiences in advising asset owners for a while now. Peter has also been a member of the advisory board of onValues. Over time, it became clear that the respective skills, networks and customer groups complement each other very well and that joining forces made sense.

Peter graduated with a Master's Degree in economics from the University of St. Gallen (HSG) and is a CFA- and FRM-Charterholder. With his long and successful track record in the Private Wealth Management industry, Peter is a seasoned investment specialist who will add value to our advisory services.

onValues continues its work with European foundations in this area. After the Brussels and Zurich meetings, onValues recently helped organise and moderate a third European foundation roundtable dedicated to sharing best-practices in better aligning foundations' capital management to their mission. The roundtable was sponsored by the Foundation for Future Generations and Fondation de France and consisted in two meetings: one dedicated to overall investment strategies and governance issues (13-14 March 2014 in Brussels) and another one focussing more on venture philanthropy and impact investing approaches (3-4 July 2014, also in Brussels). 20 foundations from eight countries participated in the meetings.

Reports on the two meetings (including presentations) can be found at:
March report, and July report

Swiss Sustainable Finance (SSF) aims to promote Switzerland as the leading centre for sustainable finance. More than 60 organisations – financial service providers, investors, research organisations, public sector entities and others – have joined forces to foster social and environmental aspects in investment and financing solutions. onValues has for many years supported this vision and participated in the working group that has prepared the launch of SSF.

Today, sustainable assets of CHF 57 billion are managed in Switzerland, a significant proportion of which is for international clients. Switzerland is also a hub for innovative impact investing strategies. A third of global microfinance investments, for example, are managed by Swiss players.

More information at www.sustainablefinance.ch

onValues has teamed up with other leading independent investment consultancies to launch Advisornet. Members of this network share similar values, i.e. professionality, integrity and independency in their work for asset owners (HNWI/family offices, foundations, pension funds etc.). One of the goals of Advisornet is to support research and foster a public dialogue on the role of and criteria for independent financial consulting.

Members of Advisornet currently include InvestorsDialogue (financial planning), Wüthrich&Henz (investment consulting), FourA (asset allocation), INREIM (real estate investing), onValues (investment consulting). The network is expected to grow to a level of about a dozen firms in the course of the next year.

In a case-study published by the Alliance Magazine, Katy Yung from RS Group and Ivo Knoepfel from onValues describe their work in helping RS Group incorporate climate change considerations in its entire investment portfolio. onValues has been supporting RS Group for years in further developing its sustainable investment strategy and moving its assets from traditional to ESG-inclusive strategies. The case-study shows how climate change risk and opportunity considerations have been integrated in different asset classes ranging from fixed income, to listed equity, private equity and alternative investments.

RS Group’s strategy rests on three pillars: Support (invest in climate change solutions); Avoid (divest from fossil fuel-intense industries); Engage (engage with investment holdings and share experiences with the broader community).

Download the article
«Alliance Magazine - Stewarding wealth» 

Read about our impressions from participating in the Global Impact Investing Network (GIIN) conference (10-11 Oct. 2013 in London) in the 'Latest from Alliance' Newsletter.

In a recently published article by Investment & Pensions Europe, Ivo Knoepfel shares onValues' assessment of investment opportunities in the growing impact investment market. Based on its research, onValues estimates that there is USD 70-90bn invested via impact strategies globally, of which about $15bn is microfinance and other themes in developing countries. Community and social investments in developed countries, mainly in the US, make up almost half of the total. A further $20-30bn is accounted for by parts of cleantech, infrastructure and other real assets that are classified as impact investments.  Through its proprietary research and databases, onValues helps clients assess the many managers active in the space. The article also includes interesting insights from leading organisations such as GIIN, Bridges Ventures and Social Finance.

Download the report
«IPE Article - Beyond microfinance» 

onValues contributed to the recently released white paper "Path to the Sustainable Financial Centre Switzerland" that contains a range of recommendations aimed at strengthening Switzerland's position as a leading global hub for sustainable finance. The paper was co-sponsored by Sustainable Finance Geneva (SFG) and The Sustainability Forum Zürich (TSF) and is based on extensive research and dialogue with over 50 key stakeholders. Among other inputs, onValues contributed a detailed benchmarking study comparing the relative strength of financial marketplaces such as London, New York, Luxembourg, Hong Kong, Singapore and Zurich in the broad sustainable finance space.

Download the report
«Path to the Sustainable Financial Centre Switzerland» 

A new report by onValues provides an overview of the organizations and associations active in sustainable finance in Switzerland. The report, entitled "Mapping Sustainable Finance in Switzerland", builds on previous work by onValues benchmarking international financial centres on sustainability. It presents descriptive statistics on 220 individual actors in all segments of the financial sector, including asset management, banking, research, pensions, insurance, academia, government and the voluntary sector. The report also lists 26 associations and platforms that coordinate activities among sustainable finance actors in Switzerland.

This research confirms that Switzerland enjoys a strong ecosystem of sustainable finance organizations with a high degree of interconnection. onValues hopes that this preliminary mapping exercise will be a first step toward enhanced coordination and will support the strategic positioning of sustainability within the broader Swiss financial sector.

Download the report
«Mapping Sustainable Finance in Switzerland» 

Peter Zollinger, member of the onValues advisory board and a partner at Globalance Bank, recently co-authored "The Ecological Debt Trap: Why Understanding Global Resource Constraints Helps Protect Families' Wealth" in Family Office Global magazine. In the article, Zollinger and David Hertig cite the fact that humanity currently uses 50% more resources than our planet can provide. They argue that understanding this growing "resource gap" will be key to preserving wealth over the coming 15, 20 or 30 years.

The authors describe how resource scarcity affects all asset classes. Given current market demands for uncorrelated real returns and cash generation, plus the accelerating political and technological reaction to resource scarcity, Zollinger and Hertig conclude that "sustainable real assets marry both aspects and are poised to deliver great results to long-term investors." They offer two showcase investment examples: waste-to-energy biogas in Western Europe and sustainable agriculture in Australia, each with projected 15% real returns per annum and cash flow generation starting in 2-3 years.

Download the article
«The Ecological Debt Trap» 

For the second year running, European foundations and foundation association representatives gathered to share their experience on "mission investing", an umbrella term that refers to the conscious consideration of mission in endowment investment decisions. The meeting was organised by onValues and co-hosted by the Mistra Foundation, EFC and SwissFoundations. Nearly 30 participants from nine European countries met in Zurich to share experiences, discuss challenges and look for practical actions to advance mission investing in the foundation sector.

The meeting report, "Putting mission investing to work", highlights a range of recommended actions for foundations, foundation associations and foundation advisors aimed at accelerating the uptake of mission investing in Europe. It summarises meeting insights on critical topics ranging from the strategic framing of mission investing as part of a foundation's post-financial crisis strategy, to advice on sourcing and implementing impact investments directly linked to a foundation's goals. The report also includes a section drawn from research on the rapidly evolving European landscape of mission investing and a section on current thinking on fiduciary duty in relation to foundation mission investment.

Download the report
«Putting mission investing to work» 

Over the past five years, the gold price has risen by almost 20% annually. Investors account for 40% of total gold demand and have been integral in driving gold prices to their current levels. In an article in the September 2012 issue of Investments & Pensions Europe, onValues Managing Director Ivo Knoepfel calls on investors to understand the role they play and the responsibility they bear in supporting the extraction of the precious metal. "Their perception is that they are a negligible player in gold and unlike the jewellery sector, industries and central banks do not carry any major responsibility," says Knoepfel. With contributions from the World Gold Council, pension funds and asset managers, the article discusses the environmental, social and governance (ESG) issues in gold production and introduces actions that investors can take to ensure an environmentally-friendly, conflict-free, socially sustainable supply of gold.

Download the article
«Extracting the true cost of gold - I&PE September 2012» 

The annual reference document of the Swiss foundation sector (Schweizer Stiftungsreport) this year includes a guest article by onValues MD Ivo Knoepfel on ways in which foundations can better align their investments to their mission. The article discusses the spectrum of options available to foundations ranging from program related investments to venture philanthropy, impact investments, and sustainable and responsible investments. It recognises the challenges that implementing such investments can pose to smaller foundations with limited resources and proposes more collaboration between foundations to overcome this, e.g. in the context of a newly formed working group of the SwissFoundations association.

Download the report
«Swiss Foundations Report 2012» (available in German and French only)

onValues and Forum Nachhaltige Geldanlagen Schweiz today published the results of the regular survey of the Swiss sustainable investment market per end of December 2011, which includes sustainable assets managed in Switzerland through funds, mandates and structured products. A total of 20 managers reported their assets under management in a range of different sustainable investment styles.

According to the survey, sustainable investment volumes in Switzerland remained steady at around 42 billion Swiss francs in 2011 despite the difficult market environment. In 2011, lower investment volumes in funds and structured products were offset by growth in mandates. Institutional investors strengthened their position at the expense of private investors, leaving each group with a fifty per cent share of the market. Bonds saw their market share rise by ten percentage points to 31 per cent in 2011, while equities' share of the market fell by the same amount and now stands at 53 per cent.

Looking at market trends, Ivo Knoepfel, the managing director of onValues and co-author of the study, points to the growing significance of ESG integration and active shareholder approaches: "Investments where shareholder voting rights are being exercised with consideration of ESG issues have once again grown sharply and have now reached the impressive level of 11.4 billion francs." He goes on to say, "Providers have begun integrating sustainability aspects into their financial analyses directly, so 9.1 billion Swiss francs are now invested in line with this approach. This development could be the key to a wider use of sustainable investments by occupational pension schemes in Switzerland." 

Download the report
«Sustainable Investments in Switzerland 2011»

Mistra, The Swedish Foundation for Strategic Environmental Research, has published the results of its 2011 review of external asset managers. The review, which was carried out by onValues on behalf of Mistra for the seventh consecutive year, examined the progress of Mistra's asset managers in integrating environmental, social and governance (ESG) issues into investment decision-making and active ownership. Following the review, onValues presented Mistra's Asset Management Committee with results and recommendations, and provided constructive feedback to the asset managers.

In 2011 Mistra's managers made notable progress in ESG integration and the development of more-sophisticated active ownership practices, particularly in the area of company engagement. The 2011 review also focused especially on Mistra's new emerging market and private equity managers. The report, downloadable below, provides details on manager progress in these and other areas of sustainable investment.

Mistra's SEK 2.7 billion (€300 million) endowment is invested through thirteen mandates and funds managed by nine different asset managers. Mistra explicitly requires the managers to take account of ESG issues. 

Download the public report
«Mistra Foundation Asset Management Review 2011»

One of Switzerland's largest pension schemes, the Swiss Post Pension Fund, recently implemented a CHF130m microfinance debt mandate based on onValues advice. This is probably one of the largest investments in microfinance ever done by a pension fund globally. Rolf Maurer, Investment Manager at the fund, told Responsible-investor.com that the mandate had been awarded as a long-term investment: "We began taking a closer look after our investment committee directed us to do so in 2010," he added. The fund carried out the initial research on the asset class via its own internal investment team. Maurer told Responsible-investor.com: "From the beginning it was clear to us that the investment had to be worth it from a social and financial standpoint. The internal study revealed that this was the case, both in terms of risk/return and especially diversification. This is why we went ahead". The fund subsequently hired onValues, working in cooperation with Ecofin, the Zurich-based investment consultant, to carry out the manager search for the mandate.

A group of PRI signatories and Global Compact LEAD companies are joining forces to improve the communication of ESG value drivers beyond reporting and make sure that sustainability performance is rewarded by financial markets. The goal of this project is to develop and refine content and process innovation around the communication of ESG value drivers at the company investor interface. Specialist consultancies Contrast Capital and onValues are providing project management and research support to this project.

Ivo Knoepfel won the award for Outstanding Contribution to Development in ESG at the TBLI Conference Europe 2011, which took place in London on November 10th.  Citing his selection, the judges panel said, "Mr. Knoepfel stands out by the continuous innovation that he brings to the market. He is always independent with a sharp mind and a good sense for new developments."  Also shortlisted for the award were James Gifford, Executive Director of the UN-backed Principles for Responsible Investment, Reto Ringger founder of SAM Sustainable Asset Management and Globalance Bank, and the organization Sustainable Finance Geneva.

In the coming weeks, onValues Managing Director Ivo Knoepfel will participate as a speaker or panellist in a range of investor meetings and conferences. This will allow us to share and refine our views on key investment trends with other investors and stakeholders. The events include:

• 24 October: "Doppelte Dividende", oekom, Zürich
• 25 October: "4th Schweizer Leadership Pensions Forum", FT Business, Zürich
• 31 October: "Nachhaltig in Rohstoffe investieren?", Forum Nachhaltige Geldanlagen, Zürich
• 1 November: "Swiss Equity Cleantech Day", Swiss Equity, Zürich
• 4 November: "Rating Responsible Finance", The Rating Initiative, Luxembourg.

onValues has released The Responsible Investor's Guide to Commodities, a report aimed to help institutional investors navigate the environmental, social and governance challenges of commodities-related investments. Investors gain exposure to commodities in various ways: derivatives, physical commodities, real assets such as forests and farmland, and debt and equity of companies active in the sector. The report launched today offers specific best-practice recommendations for each of those asset classes and also comments on the strategic allocation between commodities-related assets from the perspective of a responsible investor.

The role of investors in commodities markets will be increasingly critical and scrutinized as resource scarcity and demand growth continue into the future. This report aims to provide a starting point for investors to consider how to adopt practices that preserve their "license to invest" and contribute to long-term social and economic goals.

onValues received support for its commodities research over the past two years from the Swiss Federal Department of Foreign Affairs, the UN Global Compact and the Principles for Responsible Investment initiative.

Download the report
«The Responsible Investor's Guide to Commodities»

A group of institutional investors currently representing US$1.3 trillion in assets have launched the Principles for Responsible Investment in Farmland (the "Farmland Principles") with the goal of improving the sustainability, transparency and accountability of investments in farmland. onValues provided facilitation support to the working group that drafted the Principles.

The Farmland Principles offer institutional farmland investors best practice guidelines in the areas of environmental sustainability, labour and human rights, land and resource rights, business and ethical standards, and transparency. They were developed and endorsed by the following institutions: AP2 (Sweden), ABP (Netherlands), APG (Netherlands), ATP (Denmark), BT Pension Scheme (UK), Hermes EOS (UK), PGGM (Netherlands) and TIAA-CREF (USA), all of whom are signatories to the UN-backed Principles for Responsible Investment (PRI). These institutions will continue to work on implementing responsible investment in farmland via the PRI's newly formed Commodities Work Stream.

Download the Farmland Principles
«The Principles for Responsible Investment in Farmland»

Representatives from 20 European foundations met today in Brussels at the headquarters of the European Foundation Centre. The day's key question was: "How to mainstream mission-aligned investing at European foundations in 10 years?"

Mission-aligned investing enables a foundation to use its capital endowment for a social purpose while still safeguarding the financial health of the organization through a combination of responsible investments and impact investments. While some foundations and regions in Europe are advanced in this practice, in general European foundations lag other institutional asset owners in implementing investment policies that consider environmental, social and governance factors as part of standard investment analysis.

Participants in the workshop—entitled 360-degrees for Mission—discussed concrete steps to accelerate mission-aligned investing in Europe over the next decade. The workshop concluded that real opportunities for collaborative action among foundations exist and can resolve many of the remaining challenges facing foundation investors. A working group of the European Foundation Centre is currently being planned to continue making progress in this area.

360-degrees for Mission was co-hosted by the Mistra Foundation (Sweden), Fondazione Cariplo (Italy), and Fonds 1818 (Netherlands) and organized by onValues and the European Foundation Centre.

Download the meeting report
«360-degrees for Mission Meeting Report»

On June 17, 2011, onValues hosted an investor roundtable on the topic of: "Agri-investing for the long term: the investment case for responsible investments in agriculture". The meeting, which took place in Geneva, was co-hosted by the Swiss Federal Department of Foreign Affairs, the UN PRI and the UN Global Compact.

Over 60 experts from asset owners, asset managers, investment research and the public sector took part in what was likely the first event of this type dedicated to questions of responsible investment in agriculture and commodities. The discussion focused on issues related to farmland investments, commodity derivatives and listed equities in the agricultural value chain.

"Responsible investment in agriculture is a necessity, not an option" argued one investor. While a healthy diversity of views was expressed during the day, participants clearly articulated a strong economic rationale for considering environmental and social factors in agricultural investments. In this critical sector, participants agreed, investors can take steps to act as a positive and stabilizing force in agricultural markets in view of contributing to global food security.

Download the meeting report
«Agri-investing for the long term»

onValues has authored a report for the Mistra foundation entitled 360-degrees for Mission: How leading European foundations use their investments to support their mission and the greater good.  The report will allow foundations to learn more about sustainable and responsible investment (SRI) and impact investment, and to take practical steps to implementing these approaches in the management of their capital endowments.

The report highlights eight European foundations that use their investments to advance their mission and still generate strong financial returns.  Detailed case studies on the Church of Sweden, Deutsche Bundesstiftung Umwelt, Dreilinden, Fondation du Luxembourg, Fondazione Cariplo, Fonds 1818, Friends Provident Foundation, and Mistra show both the challenges and the rewards of SRI and impact investing, and provide the reader with direct advice from the personal experience of foundation officers and trustees.

360-degrees for Mission comes at a time of renewed interest in how foundations invest their money.  The report directs readers to the variety of resources that can help foundations establish investment practices that are financially sound and enhance the contribution to their mission.

Download the report
«360-degrees for Mission»

The past ten years have witnessed a significant growth in microfinance and other financial services targeting the needs of the world's poor. A group of leading investors has publicly endorsed the Principles for Investors in Inclusive Finance (PIIF) committing to fair treatment and protection of the interests of the ultimate clients - low-income households and small and medium-enterprises. This is particularly important given that poorer clients are often disadvantaged by asymmetries in financial knowledge, power, and influence. The Principles were developed in collaboration with Her Royal Highness Princess Máxima, the UN Secretary-General's Special Advocate for Inclusive Finance for Development, with the UN-backed Principles for Responsible Investment and in consultation with Consultative Group to Assist the Poor (CGAP) and several key industry players. Ivo Knoepfel, onValues' Managing Director, was invited to become a member of the Steering Committee that will supervise the implementation of the Principles.

View the PIIF here:
«Principles for Investors in Inclusive Finance»

Forum Nachhaltige Geldanlagen Schweiz and onValues today published the results of the regular survey of the Swiss sustainable investment market per end of December 2010, which includes sustainable assets managed in Switzerland through funds, mandates and structured products. A total of 21 managers reported their assets under management in a range of different sustainable investment styles.

Per end of 2010 the sustainable market reached a new high of 42 billion CHF, which corresponds to an increase of 23% compared to the same value per end of December 2009. On average, net inflow in sustainable funds amounted to approximately 3.6% in the course of 2010. In comparison, the average comparable Swiss fund experienced a net outflow of the same order of magnitude.

Retail/private banking investors have further expanded their majority position in the market (57% of the total market, compared to the 43% of institutional investors). Equity, with its share of 63%, remains the most important asset class having slightly increased its market share compared to last year.

Not much has changed in terms of the use of different sustainable investment approaches, but the use of active proxy voting has notably increased. 44% of respondents reported that they are planning introducing a proxy voting policy that includes sustainability issues for the entire assets managed by their institutions in the coming years.

Download the report
«Sustainable investments in Switzerland 2010»

In collaboration with the Swiss Federal Department of Foreign Affairs, the UN PRI and the UN Global Compact, onValues has today published a report focusing on the environmental, social and governance (ESG) issues involved in different types of commodities investments.  The report shows that the issues at stake and available management options for institutional investors vary greatly between investments in commodity derivatives, in physical commodities, in real productive assets or in the equity of public companies.

To successfully navigate this complex landscape, long-term investors should consider the ‹systemic› effects of rapidly growing institutional investment in commodities. The report includes a series of practical recommendations aimed at reducing the risk that derivatives investors impact commodity price levels and volatility. The report is critical of investments in physical commodities: they lead to investors competing with industry in already tight markets, hoarding commodities with no productive use and directly influencing prices. Holdings in productive assets such as farmland, on the other hand, can be managed to a high degree of ESG performance, but require a commensurately high degree of investor expertise, while public equity stakes can be used as the basis for shareholder engagement.

Besides listing a series of possible actions for responsible investors, the report also highlights areas for further research and engagement.

Download the report
«Responsible investment in commodities»

On behalf of the Swedish foundation Mistra, onValues has initiated a project aimed at assessing how leading European foundations use sustainable and responsible investments (SRI) and so-called «impact investments» to better align the endowment management to their mission. Research shows that foundations can invest in SRI without negative repercussions on financial returns. Foundations also have the possibility to directly contribute to their missions through the emerging field of impact investments, which aim to create a tangible social return while preserving invested capital.

The report resulting from the project will showcase European foundations that have adopted SRI or impact investment strategies in support of their missions. Through detailed case studies and personal interviews with foundation trustees and managers, the report will extract key messages for other foundations considering this process.  Alongside these case studies, the report will convey basic information on the challenges of implementing SRI and impact investing and point to resources for further support.

This is the first report to focus specifically on responsible investment at European foundations and onValues plans to present its findings widely. Further information will be available in spring 2011.

On behalf of the Swedish foundation Mistra, onValues convened – for the sixth consecutive year – leading institutional investors, service providers and academic researchers to assess best-practice in a specific domain of sustainable investing. This year, the workshop focussed on the state-of-the-art of shareholder engagement and on the approaches and techniques used by investors to influence company ESG performance, in view of further improving their effectiveness. The questions addressed during the workshop included the following:

• What are the key factors that contribute to effective engagement?
• What can be said about the effectiveness of different forms of ‹delegated› engagement
  (e.g. delegation to service providers, to collaborative initiatives, to asset managers)?
• How can different engagement approaches be combined to maximise effectiveness
  (‹portfolio approach›)?
• What can a small asset owner with limited resources do to maximise its impact?

Key lessons learned from the workshop can be found in the summary report below:

Download the report
«Engaging Effectively – Summary»

In the coming months, onValues will facilitate a series of meetings at which institutional investors will address emerging issues relevant to their investment management and active ownership strategies:

On 26 August 2010, on behalf of the Swedish Mistra Foundation, onValues will convene a meeting of Scandinavian and international investors focussing on the latest insights in the field of shareholder engagement.

On 28 September 2010, onValues will moderate the plenary panel discussion of the 11th International Sustainability Leadership Symposium in Zurich focussing this year on ‹Financing the Transformation to a Low-Carbon Economy›.

On 6 October 2010, in the context of the annual meeting of the UN Principles for Responsible Investment initiative in San Francisco, onValues will facilitate a session on ‹Responsible investments in commodities› that will discuss the challenges and opportunities of this emerging asset class.

In collaboration with the UN Principles for Responsible Investment secretariat, the UN Global Compact and the Swiss Federal Department of Foreign Affairs, onValues has started a project aimed at assessing environmental, social and governance issues related to this growing investment field and at developing a series of practical recommendations for responsible investors. The project will look at commodities exposure across different asset classes, including direct investments in commodities futures and indirect exposure through equity and real asset holdings (e.g. forest and agricultural land). In a first phase, leading asset owners, asset managers, commodity traders and producers, governmental organisations and NGOs are being interviewed in view of understanding their approach to commodities investments.

onValues today published the results of the regular survey of the Swiss sustainable investment market per end of December 2009, which includes sustainable assets managed in Switzerland through funds, mandates and structured products. A total of 19 managers reported their assets under management in a range of different sustainable investment styles.

After the decline experienced in 2008 due to the financial crisis, the Swiss sustainable investment market has in 2009 returned to the strong growth pattern observed in previous years. Per end of 2009 the sustainable market had reached and surpassed again the peak volume experienced before the financial crisis. The size of the sustainable market per end of 2009 was 34.1 billion CHF (funds, mandates, structured products), which corresponds to an increase of 63.4% compared to the same value per end of December 2008. If we take sustainable funds only, the assets increased by 54.4%. In comparison, the Swiss fund provider assets under management for comparable fund categories increased by 12.2% in the period December 2008 to December 2009.

Sustainable funds experienced a considerably higher cash inflow than the market average in 2009. Net asset inflow in sustainable funds was approximately 22.9%, compared to 4.5% experienced by the average Swiss fund provider in 2009. Funds account for approximately 55%, mandates for 40% and structured products for 5% of the total sustainable investment market volume, with only small changes in the relative share compared to the previous year. Retail / private banking investors have further expanded their majority position in the market (55.4% of the total market, compared to the 44.6% of institutional investors). Equity with its share of 61.5% remains the most important asset class in the sustainable market, having somewhat reduced its market share in favour of fixed income investments compared to last year.

The ‹Neue Zuercher Zeitung› has today published a critical assessment of certain trends and practices observed in the investment consulting world. In particular, the newspaper criticises the lack of transparency and potential conflicts of interests related to investment consultancies offering own asset management services and products or recommending those of «preferred partner» banks.  It is worthwhile in this context highlighting the characteristics that make onValues a truly independent investment consultancy: a) the company is fully management owned, b) it does not offer own investment products, c) it does not accept any kind of retrocession or hidden fee (such as database fees) from asset management institutions, d) it excludes «preferred partner» relationships with any asset management institution.

View the NZZ article (German only): «Pensionskassenberatung im Interessenskonflikt»

The European Social Investment Forum has recently released a report that provides an overview of the growing role of investment consultants in supporting asset owners define and implement responsible investment (RI) strategies. The study shows that service development relating to RI is a recent phenomenon amongst investment consultants but growing quickly. It highlights the role played by boutique consultancy firms that are focused completely on RI advice, as opposed to larger consultancies that only recently have started to look into the area, RI advice being only a small part of their business. onValues, one of the oldest fully dedicated consulting firms in this space, is portrayed in a separate case-study in the report.  A similar report has been released for North America by the US Social Investment Forum.

In a recent article, ‹Investments & Pensions Europe› assesses current trends in the Swiss institutional investment market with regard to the integration of environmental, social and governance (ESG) criteria. The article is based on an interview with Ivo Knoepfel, managing director of onValues.

Recent investments by APG, PGGM and TIAA-CREF, among others, have put microfinance investments on the radar screen of pension funds looking for innovative ways to further diversify their portfolio. But a lot of questions remain about the viability of these investments, their long-term risk and return profile, and the capability of the microfinance market to absorb growing pension fund investments. To understand how leading European pension funds already invested or considering investing in microfinance assess the current state and future prospects of microfinance, onValues interviewed pension funds from seven European countries on behalf of the World Microfinance Forum Geneva. The report summarising results from the survey was released today in Geneva.

Download the report
«Ends meet - Current state and future prospects of European pension funds’ investments in microfinance»

Increasing numbers of institutional investors are going on record to state that they believe that ESG issues will have a material impact on their financial performance. However, some believe that the way asset owners are structured, including their internal governance and how they measure and pay external asset managers, may be obstacles to truly long-term behaviour.

In June 2009 onValues facilitated a workshop for investment professionals and academics on this very topic on behalf of Mistra, The Foundation for Strategic Environmental Research. The workshop addressed the challenges of the asset owner-manager relationship in two stages:

1. Understanding how investors take decisions, how they are influenced by prevailing beliefs, and which behavioural biases are most dangerous for the long-term investor; 2. Presenting and refining better long-term models for the asset owner-manager relationship
 
Workshop participants expressed strong opinions on the changes needed to encourage long-term investment behaviour, including:

• Measuring asset managers' financial performance over rolling periods of at least three years
• Putting a greater emphasis on the manager selection process: asset owners should spend more time evaluating the quality of processes and people at the asset manager using transparent, systematic criteria
• Above all, the owner needs to give his managers the feeling that they are trusted: the ‹climate of fear› often found in institutional asset managers is highly damaging to long-term investment

The detailed conclusions of the workshop can be found in the report below.

In collaboration with the German NGO Germanwatch, onValues this week published a report that assesses the observed and expected impacts of the current financial crisis on the financial industry’s efforts to integrate ESG and climate change-related issues in investment decisions. The report was distributed at this week’s Bonn climate change talks. Over the short term the authors expect set-backs in the industry’s efforts in this area. These set-backs will be particularly pronounced if the crisis persists for a longer time period, i.e. if financial markets do not stabilise by the end of 2009. The Copenhagen Climate Conference in December 2009, in combination with an ongoing financial crisis, could become the ‹make or break› tipping point for the market’s continued efforts to integrate ESG and climate issues, at least for the short- to mid-term. The mid- to long-term prospects for integration, on the other hand, are seen as positive given a series of strong underlying trends, among others the change in attitude of the US market and the increasing manifestation of the financial implications of environmental and climate change impacts.

Mistra, The Foundation for Strategic Environmental Research, has published a summary of its 2008 review of external asset managers. The review, which was carried out by onValues on behalf of Mistra, investigated the steps forward taken by Mistra's asset managers in their integration of ESG issues into investment decision-making and active ownership. Following the review detailed feedback was presented to Mistra's investment committee, and constructive criticism shared with the asset managers. The public summary (downloadable below) summarises the key findings as a measure of transparency and accountability to Mistra's stakeholders.

The 2008 review, the fourth of its kind, observed that in most cases the ESG component had a positive or no effect on financial return, with risk levels that were in line with the reference portfolio chosen by the manager. The strong showing of Mistra's managers on active ownership was also notable, with 66% of the managers receiving the top rating for engagement with companies on ESG and broader strategic issues.

Mistra's endowment, which is currently valued at SEK 2.8 billion (US$ 350 million), is invested through eleven mandates and funds managed by eight different asset managers. All the investment management agreements explicitly require the manager to take account of environmental, social and governance issues.

onValues today released results of the latest survey of the Swiss sustainable investment market. The report shows that, due to the financial crisis, the strong growth trend experienced by the sustainable investment market in the past years has been stopped and for the first time since inception of the survey the market has contracted considerably.  The size of the sustainable market per end of 2008 was 20.9 billion CHF (funds, mandates, structured products), which corresponds to a decrease of 38.7% compared to the same value per end of December 2007.  If we take sustainable funds only, the assets decreased by 35.3%. In comparison, the Swiss fund provider assets under management for comparable fund categories decreased by 40.2% in the period Dec. 2007 to Dec. 2008.

The asset inflow in existing and new sustainable funds in 2008 (especially in lower-risk broadly diversified equity, strategy and fixed-income funds) more than compensated the outflow (especially pronounced for some higher-risk theme funds).This resulted in a net asset inflow in sustainable funds of approximately 8.5%, compared to a net outflow of 6.4% experienced by the average Swiss fund provider in 2008. In relative terms, the net inflow experienced by microfinance and fixed-income/strategy funds was particularly marked.

Today the final report of the Who Cares Wins Initiative, entitled ‹Future proof? Embedding environmental, social and governance issues in investment markets›, was launched at the World Economic Forum Annual Meeting in Davos, Switzerland.
The report contains a detailed assessment of the industry's progress in the field and a series of strategic recommendations to advance the integration of ESG issues into mainstream investment decision-making and ownership practices. The report was authored by onValues and sponsored by IFC, the UN Global Compact and the Swiss Government. It builds on more than four years of engaged discussions among industry practitioners that took place under
the Who Cares Wins umbrella.

Download Report
«Future Proof? Embedding environmental, social and governance issues in investment markets»

The four-year review report prepared by onValues was presented at a meeting of sell-side and independent research providers and EAI members in Paris. It provides a detailed analysis of the progress made in terms of the volume and quality of extra-financial research since the EAI's inception in 2004. The report concludes that EAI has been very successful in helping extra-financial research establish itself and that in a next phase this type of research should aim at expanding its reach and becoming a part of the mainstream offer.

To support this aim, EAI is joining forces with a larger and more international initiative: the Principles for Responsible Investment (PRI). The PRI has announced that it will launch the first global, non-commercial database, dedicated to showcasing investment research that includes material environmental, social and governance (ESG) issues. onValues is supporting PRI in designing and testing the database.

Ivo Knoepfel and Gordon Hagart are among the co-authors of a new book entitled, ‹Sustainable Investing: The Art of Long Term Performance›. Bringing together leading practitioners from around the world, the book examines the state-of-the-art in ESG-inclusive investments, and their prospects for the years ahead.

The book (ISBN: 1844075486) is available through the usual retail channels, including Amazon

At a meeting in Maastricht on 18 September 2008, the UN Principles for Responsible Investment in collaboration with the European Centre for Corporate Engagement (ECCE) launched the first global academic network dedicated to research on ESG issues in investment. Leading research institutions including Boston College, ECCE, Saint Mary’s College, Umea University, Gothenburg University and University of St. Andrews took part in the launch event. onValues and Mistra presented lessons learned from the academic programme on sustainable investments that was launched by Mistra already in 2005, and highlighted practitioners’ requirements for this type of academic research.

For further information: www.corporate-engagement.com

On 12 June 2008 onValues ran a workshop on environmental and social issues in real estate investments on behalf of Mistra, The Foundation for Strategic Environmental Research.

Workshop participants believe that E&S issues will increase in importance in the future due to, among other factors, rising resource prices, regulatory incentives aimed at combating climate change, and the renewed market focus on fundamentals after the real estate boom years. Participants noted that the financial costs and benefits of resource efficiency investments are not evenly distributed among different actors (owners, tenants, developers, other agents) and that this represents an important (but not insurmountable) barrier to investments in this area.

Participants also highlighted the fact that resource efficiency is not the only value driver. Better locations, increased occupant comfort, brand and reputation leading to higher building values, occupancy rates and rental yields can all make significant contributions to increasing the return and reducing the volatility of real estate investments (and should be explained better by developers).

The workshop report below includes an introductory chapter on the relevance of environmental and social issues from the point of view of real estate investors, as well as a summary of the most interesting findings from the presentations and discussions.

The US$ 14 trillion Principles for Responsible Investment (PRI) Initiative recently published its second assessment that captures in significant detail how signatory investors are integrating environmental, social and governance (ESG) issues within investment decision making and ownership practices. Selected key results include:

• 32% of respondents said they would now revisit relationships with service providers in light of ESG issue-related capabilities. A 68% increase on the number of signatories willing to do this last year.
• 70% of signatories ask companies to produce standardized reporting on their ESG policies, practices or performance
• Principle 1 of the PRI, which focuses on incorporating ESG issues into investment analysis and decision making was ranked the most difficult to implement.

The market for sustainable investments in Switzerland continued its strong growth in 2007 according to research by onValues. In spite of financial market turbulence, the total market volume increased by 67% in the period between end of 2006 and end of 2007 reaching a volume of CHF 30 billion (CHF 34 billion if also assets managed in Switzerland on behalf of foreign clients and subsidiaries are included). Assets managed in sustainable funds and other collective vehicles grew 92% in the same period, while the total Swiss fund market saw its volume decrease by 1%.

In a separate survey, the Swiss market for sustainable theme investments was assessed in detail for the first time. Assets under management for the three most important themes (climate change, renewable energy / energy efficiency and sustainable water) amounted to CHF 21.7 billion per end of 2007, of which CHF 9.7 billion included an analysis of the environmental, social and governance performance of holdings in addition to selecting companies on the basis of their theme exposure. The strong growth of investments in the still relatively young climate change theme is particularly notable.

In the May 2008 edition of Environmental Finance magazine Ivo Knoepfel and Gordon Hagart explain why the rash of data showing the growth of socially responsible and sustainable investments should be treated with caution.

onValues has recently assessed investment opportunities in sustainable timberland on behalf of its clients. Some of our thoughts and conclusions are summarised in an article in the April 2008 edition of Global Pensions magazine. Ivo Knoepfel of onValues points out that investment managers and investors will have to look more closely at environmental and social issues related to timber production in the future, given that investments are increasingly taking place in emerging and developing countries. Environmental and social certification schemes support investment decisions, but their growing number and quality poses a challenge.

The investment case for energy-efficient and sustainable real estate is the topic of a January 2008 article by Ivo Knoepfel and Gordon Hagart in the Global Pensions Magazine. The authors argue that higher energy prices and environmental constraints will be a powerful source of new opportunities and risks in real estate. They describe how the ability of new building technologies to achieve higher occupant comfort, healthier indoor environments and improved resource efficiency has direct positive impacts on the investment case for sustainable buildings, and how a small number of leading institutional investors are already using these trends to their financial advantage.

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Global Pensions Magazine article

Ivo Knoepfel onValues managing director, participated in the 2nd Corporate Responsibility Conference in the context of the 10th Euro Finance Week on 22 November 2007. In his presentation he shared results of an analysis of the growing volume of sell-side and independent research focussing on climate change issues. While most of the research still focuses on impacts from regulatory developments (e.g. risks and opportunities related to the EU emissions trading system), he observed that an increasing body of research assesses business opportunities related to new products and technologies, and risks (and opportunities) related to the physical impacts of a changing climate. Positive is also the fact that the coverage of sectors and regions continues to widen, as well as the time horizons of researchers’ analysis. In the same session, representatives from Germanwatch and the Potsdam Institute for Climate Impact Research presented a stochastic approach based on Bayesian risk analysis that analysts can use to evaluate the impact of uncertain input factors on company valuations.

For further information: http://www.climate-mainstreaming.net/2007-11-22d.htm

At the event, hosted by Mistra (the Foundation for Strategic Environmental Research) and moderated by onValues, leading institutional investors, asset managers, investment and academic researchers took an in-depth look at key ESG issues at the company and country level in emerging markets, priority areas for engagement with companies and ways in which academic research can support the work of practitioners. The discussions were based on the findings of the earlier ‹Who Cares Wins› event held on 5 July 2007 and were aimed at exploring the issues in more depth and integrating them in investment decisions. A selection of lessons-learned includes (a detailed workshop report will be made available shortly):

• Corporate governance at the company level was seen as the best starting point for integrating ESG issues in emerging markets investments, because of its usefulness as a proxy for overall management quality – not just in dealing with risks but also with opportunitie
• The importance of visiting companies and being able to contextualise ESG information was stressed. Where the investor (or an agent acting on his behalf) is not able to meet directly with companies, the only ESG research likely to add value was found to be basic corporate governance work and checking for major breaches of international norms
• Other important ESG issues highlighted were rising costs and shortages of energy and water (both a source of risks and opportunities)
• Quality of disclosure on ESG issues (particularly voluntary disclosure that goes beyond legal requirements) was seen as a proxy for the company's willingness to be transparent and treat all investors fairly, and for overall management quality
• In conclusion, workshop participants also stressed investors’ increasing exposure to ESG issues in emerging markets through their investments in multinational companies with growing production and sales volumes in those markets.

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«Emerging markets investments: do environmental, social and governance issues matter?»

The Swiss market for ESG-inclusive investments continues to show strong growth, according to a biannual market survey produced by onValues. Swiss assets (including funds, mandates and structured products) that are managed with the explicit inclusion of environmental, social and governance issues totalled approximately CHF 25 billion at the end of the first half of 2007. This represents an increase of 39% relative to the volume per end of 2006, and a doubling of ESG-inclusive assets in the past 12 months. Interesting trends observed are the increasing share of private client investments and the strong growth of new products with a focus in sustainable themes such as climate change, water and alternative energy.

This was the topic of the fourth annual Who Cares Wins event which brought together more than 80 investment professionals from leading asset owners, asset managers, investment research and consulting institutions. It took place on 5 July 2007 in Geneva and was facilitated by onValues on behalf of the Federal Department of Foreign Affairs, the International Finance Corporation and the UN Global Compact. The goals of the event were to 1) assess the importance of environmental, social and governance (ESG) issues in emerging markets investments; 2) showcase and reinforce best-practice in the consideration of ESG issues in asset management and investment research; 3) identify opportunities for future developments and collaboration in this area.

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New Frontiers in Emerging Markets Investment

The Enhanced Analytics Initiative (EAI), an alliance of asset owners and managers who collectively represent more than 1.9 trillion (US$ 2.6 trillion) in assets, commissioned onValues to produce a case study of the quality of investment research on mergers and acquisitions (M&A). The study investigated whether research providers covering M&A transactions are addressing the full range of issues that may be material to long-term investors. Depending on the type of M&A activity, these issues might include the impact of combining different corporate governance regimes and corporate cultures, the role of management, potential impacts on intangible assets, and environmental liabilities acquired in a transaction. The study's main conclusions are presented in the public summary report below

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Summary report on EAI case study

The survey per end of December of 2006 shows an impressive increase in the size of this market compared to the previous year (17.9 billion compared to 10.6 billion CHF). The survey covered 21 providers and different investment products and services (funds, mandates, structured products). The growth in volume of ESG-inclusive funds in 2006 (+55.7%) was more than five times as big as the growth of the overall Swiss fund market. An increasing interest by private banking clients and the growing demand for structured products and funds dedicated to sustainable themes, such as alternative energy and water, were seen as being main drivers for this development.

In the latest edition of the Environmental Finance magazine, Gordon Hagart and Ivo Knoepfel provide an overview and assessment of current trends in the ESG-inclusive investment field. More sophisticated applications of environmental, social and governance (ESG) information to a wider range of asset classes and financial products could mean that in future ESG issues increasingly become drivers of financial product innovation rather than niche concerns, argue the authors.

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Environmental Finance article

The Enhanced Analytics Initiative (EAI) yesterday announced the results of its latest evaluation of investment research providers, which is based on analysis provided by onValues. On the eve of its second anniversary, the Initiative has seen a surge in new members in the past months and now represents total assets under management of €1.8 trillion. The EAI is an international collaboration between asset owners and asset managers aimed at encouraging better investment research, in particular research that takes account of the impact of extra-financial issues on long-term investment. The EAI incentivises research providers to provide better analysis of extra financial issues within mainstream research.

For further information on EAI: http://www.enhanced-analytics.com

Three of the most influential climate policy and economics research institutions – the ‹Potsdam Institute for Climate Impact Research›, ‹Germanwatch› and the ‹Deutsches Institut für Wirtschaftsforschung› (DIW) – have launched a multi-year research programme on the risks (and opportunities) that climate change and carbon mitigation strategies are expected to pose to the financial industry. onValues is part of the consortium and will contribute dedicated research and support. As part of a first set of research tasks, onValues has assessed the way in which sell-side investment research is dealing with these aspects and developed a conceptual framework through which carbon and climate risks could better be factored into current stock valuation models. Special attention was dedicated to dealing with the intrinsic uncertainty related to these aspects.

onValues contributed to the organisation of an event on 10 November 2006 at the Palais des Nations (the United Nations Office at Geneva) that discussed expanding the range of ESG-inclusive investment strategies offered by private banks. The meeting, which was hosted by the United Nations Environment Programme Finance Initiative (UNEP FI), assembled senior executives from a range of international private banking institutions. The challenges of improving ESG-inclusive investment services for private clients are detailed in a UNEP FI publication prepared by onValues, which can be downloaded below.

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«Unlocking Value: The scope for environmental, social and governance issues in private banking»

For further information on UNEP FI: http://www.unepfi.org

For the third year in a row, onValues is organising a closed-door meeting of over 50 financial institutions leading the integration of environmental, social and governance (ESG) issues in investment processes and research. This year’s event will examine the communication of financially-material ESG issues at the interface between companies and financial analysts. Confirmed corporate participants include senior representatives of BASF, BT, Hoffmann-La Roche, Holcim, Nestlé, Rio Tinto and Shell. Financial services sector participants include CEOs / CIOs from asset owners and managers and Heads of Research from the sell side. The event is co-sponsored by the Federal Department of Foreign Affairs, the International Finance Corporation and the UN Global Compact.

In a recent article published by the leading Swiss financial newspaper Neue Zürcher Zeitung, Peter Zollinger from SustainAbility and Ivo Knoepfel from onValues analyse current trends pointing to a more active ownership approach by large asset owners, namely pension funds. Initiatives such as the Principles for Responsible Investment and the Enhanced Analytics Initiative are described. onValues is increasingly supporting clients in this field, e.g. on issues related to exercising equity voting rights and active engagement with companies.

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Neue Zürcher Zeitung article (in German)

For further information about: onValues Active Ownership services

In June 2006 onValues coordinated a workshop on behalf of Mistra, The Foundation for Strategic Environmental Research, on the integration of environmental, social and governance
(ESG) issues into fixed income investment. The workshop was stimulated by the apparent mismatch between the research devoted to understanding the financial impacts of ESG issues in the fixed income domain and that in equities (in a climate of large and growing allocations to fixed income asset classes by institutional investors).

The key questions posed by the half-day workshop were as follows:

• What is the state of the art in the integration of ESG issues into investment research and asset management in corporate fixed income securities?
• What are the current approaches to ESG issues for investors in non-corporate debt?
• How can fixed income investors benefit from the 'head start' of equity investors in this domain? In which areas might their investment decisions differ?
• What possibilities exist for fixed income investors to engage with investee companies and other issuers of debt?
• How can academic research support the work of industry practitioners in this field?

Please find the outcomes of the workshop on the Mistra website by downloading the following document: