Sustainability Quarterly

Sustainability Quarterly
Information for private clients
Issue 1/2014
This report has been prepared exclusively for
clients of Bank J. Safra Sarasin.
Contents
Trends
Green Bonds – more than just a buzzword
Reducing food wastage – an urgent
global challenge
4
5
Research
“Combination of fundamental and sustainability
analysis produces creative investment ideas”
Electricity storage – the missing
link in the energy revolution
Swiss cantonal banks – going back to their roots
Public covered bonds –
the debt crisis has left its mark
Focus:
Caixa Bank, ESM,
FMS, Kyocera,
Deutsche Post, SGS, Trina Solar,
Verbund, Pierre & Vacances
6
8
10
11
12
13
Appendix
Sustainability analysis methodology
Contacts
Publications
15
16
17
Trends Green Bonds – more than just a buzzword
Persistently low interest rates and the public debt crisis are prompting investors to look for new investment
opportunities in the fixed-income segment. One such alternative is “Green Bonds”, which are used to finance
solutions that are intended to make a contribution towards sustainable development. The solution attracting the
most attention on bond markets at present is the financing of measures to combat climate change.
Green Bonds are essentially conventional bonds.
However, the capital is used specifically to finance
sustainability projects, such as those contributing
towards reducing emissions or combating climate
change. The term to maturity for most of these bonds
is several years and the yields are between 1% and
5%, depending on the project in question. Almost 90%
of these issues have investment-grade status.
Because they have a different risk profile from
conventional bonds, Green Bonds can be used as a
diversification tool for investors’ portfolios. November
2013 saw the issue of the biggest Green Bond to date
by Électricité de France (EDF), with a volume of EUR
1.4 billion, a maturity of 7.5 years and an interest rate
of 2.25%. The funds raised will be used to finance
projects in the renewable energies sector. The issue
attracted huge attention from investors, and the bond
was oversubscribed twice.
The origins of Green Bonds
The Kyoto Protocol that came into force in 2005 laid
the foundation for a low-carbon economic system. By
agreeing to binding emission targets, countries are
committed to taking measures to reduce current
levels. Green Bonds are one way of financing these
projects. While these bonds have in the past been
issued mainly by development banks such as the
World Bank or the European Investment Bank, other
organisations have started using this instrument in
recent months. They include both large industrial
conglomerates such as EDF and commercial banks
such as Bank of America, Merrill Lynch and
Vasakronan. There are currently two different types of
Green Bonds. Those issued by development banks are
4|Sustainability Quarterly 1/2014 mainly used to refinance loans and do not therefore
present any project-specific risk. The second type are
asset-backed securities, where the bond’s interest
rate and redemption depend on the success of the
project.
Market growth and risks
The market for Green Bonds has grown by almost 50%
in November 2013 alone. The fact that most issues
are oversubscribed is a clear indication of the strong
market demand. But along with this success, a
number of challenges are also coming to light for the
first time. While most of the bonds issued are certified
by a third party, there is no other evidence of how the
funds are actually used in practice. Measures need to
be taken to prevent “green washing” in future and to
encourage the growth of this market. This has
prompted the launch of the “Climate Bond Initiative”,
a project to establish standards and a certification
scheme.
Outlook
The universe of bonds associated with solutions for
combating climate change has expanded and become
easier to invest in over the past few months. Although
Green Bonds only account for a small proportion of the
global market at present, they are set to grow.
According to an HSBC study on “Bonds and Climate
Change” last updated in 2013, the liquidity and the
size of this market will be substantial in future. This
trend will be assisted in particular by the wider
implementation of PRI targets in portfolios with fixedincome investments and the expectation of a new
global agreement on climate change as of 2015.
Trends Reducing food wastage –
an urgent global challenge
As demand for food is expected to more than double by 2025, the discussion of how to produce enough food to
sustain the growing population has become increasingly urgent. Today one third of the world’s food is wasted,
while 870 million people every day suffer from hunger caused by food scarcity.
One out of every eight people in the world suffers from
chronic undernourishment caused by food scarcity. This
number is very likely to increase as the population grows
faster than expected from the current figure of just over 7
billion to 9.6 billion by 2025 and 11 billion by 2100.
Merely producing more food by increasing production and
improving yields is no longer enough to secure food for
an extra 2.5 billion or so people in the coming decades.
We need to improve resource efficiencies across the
food chain, starting with food waste.
What does food wastage mean to us?
According to the United Nations Food and Agriculture
Organisation (FAO), every year 1.3 billion tonnes of food or one-third of all food produced worldwide for human
consumption - is lost (waste from producers and
manufacturers) or wasted (by retailers and consumers).
The associated annual environmental impacts and use of
resources mean that food wastage ranks as the third
largest carbon emitter after the USA and China (3.3
billion tonnes of CO2), while its blue water footprint is
three times the volume of Lake Geneva (250 km3), and
its land usage equates to 30 percent of the world’s
agricultural land area (1.4 billion hectares). FAO also
estimates the direct economic cost of food wastage of
agricultural products (excluding fish and seafood) to be
about USD 750 billion, equivalent to the GDP of
Switzerland. The prevention of food wastage can
therefore deliver significant environmental and economic
benefits.
Actions to reduce food waste in Europe
In the EU, food is one of three priorities where resource
efficiency needs to be improved. The food value chain
accounts for 17% of its direct greenhouse gas emissions
and 28% of material resource use. In October, a target to
halve edible food waste by 2020 was announced. In the
UK, the annual food waste generated is around 15
million tonnes or one-third of all food purchased (see
Fig.1). Recent data published by the UK’s largest food
retailer Tesco shows that every second bakery product is
wasted in its stores. In order to minimize food waste,
some leading retailers such as Tesco and Carrefour
donate food to charities, and also convert and process
food waste into animal feed and pet food. However, the
European Commission identifies lack of awareness
among consumers as one of the main causes of food
wastage. More initiatives to change consumer behaviour
are required, such as introducing products in smaller
portions, with re-sealable packaging, and clearer product
labelling.
Fig. 1:
Food waste in the UK
source: WRAP
Sustainability Quarterly 1/2014 | 5
Research “Combination of fundamental and sustainability
analysis produces creative investment ideas”
On 1 November 2013 Pierin Menzli took over as Head of Sustainable Investment Research at Bank J. Safra Sarasin.
In this interview he talks about trends in sustainability research, his future plans, and how to further develop the
well-established sustainability approach of Bank J. Safra Sarasin.
In the last few years the world of sustainable
investments has seen quite a few mergers among the
providers of sustainability information. What are the
implications for investors?
Pierin Menzli: This is ultimately good news for investors,
since it has not only created bigger, but also more
professional providers. Furthermore, this trend still has a
way to go. Better sustainability information – and more of
it – is becoming available for researching companies. On
the other hand, it’s important not to be dazzled by the
wealth of data. There is no “sustainability machine” into
which you simply feed your data so that it can churn out
really good investment ideas. Experience, curiosity and
detailed knowledge of sectors and businesses – along
with a lot of hard work – are still the main pillars of
fundamental company analysis. And this analysis must
always take into account environmental, social and
governance (ESG) aspects as well.
What does that mean for you in concrete terms in your
new role at J. Safra Sarasin?
P. M.: We analyse very carefully which tasks we perform
internally and which are better performed by external
partners. Collecting raw data, for example, can be done
more efficiently by external providers. Their teams often
contain more than 100 analysts and are very well
equipped when it comes to data quality and coverage of
companies. We concentrate on the analysis and
interpretation of information in order to make better
investment decisions.
What are your main reference points?
P. M.: Above all, our research – and the investment
products built upon it – must cater for the diverse needs
of our clients: investors with religious or ethical criteria
want to see their values reflected in the portfolio,
foundations want to see the purpose of their foundation
6|Sustainability Quarterly 1/2014 mirrored in the investment strategy, pension funds need
to fulfil their fiduciary obligations and avoid reputation
risks, and active investors are keen to improve corporate
governance through their engagement. In addition,
increasing numbers of institutional investors now see the
inclusion of ESG criteria as a key component of long-term
performance. We currently offer ethical investors a very
strong product range based on our “sustainability matrix”
approach. For other types of investor we work on flexible
ESG solutions in modular format and will soon be offering
suitable investment strategies.
How do you approach this?
P. M.: My priority is to make sure that sustainability
analysis is linked even more closely to financial analysis.
After all, the purpose of fundamental analysis of
companies is to identify and evaluate factors that add
value. And only the evaluation of all the relevant
information – from the company’s business strategy
through to aspects of good corporate governance and
environmental and social standards – produces
promising and sustainable investment ideas.
Which key themes and priorities do you intend to focus
on in your research in the near future?
P. M.: In future I would like to focus more on
sustainability themes that are both financially relevant
and measurable. This will effectively mean that we focus
on fewer themes, but we will produce more in-depth
research. These include, for example, the review of
management quality, the costs of environmental
emissions and the assessment of reputation risks.
Furthermore I would like to give more consideration to
sector-specific aspects in our fundamental analysis, such
as the costs resulting from stricter capital adequacy
requirements for banks, or reserves currently reported on
the balance sheets of oil and gas companies which
Research possibly can never be used due to the two degree global
warming target which the 194 members of the UN
Climate Convention have signed up to.
What motivated you personally to focus on
sustainability in your career?
P. M.: I am excited by the interplay between different
disciplines, specialisms and themes and tend to avoid
one-dimensional and dogmatic thinking – especially in
fundamental company analysis. A critical and clear view
beyond the confines of traditional financial analysis can
help one to identify risks at an early stage, think through
alternative scenarios and thereby deliver added value to
the customer.
Pierin Menzli was co-founder of
Contrast Capital, a consultancy
specialising in sustainable investments, and was former Head of
Research
at
SAM
Sustainable
Asset Management. He holds an
MBA, with a specialisation in
economics and ecology, from the
University of St. Gallen.
Sustainability Quarterly 1/2014|7 Research Electricity storage –
the missing link in the energy revolution
The energy revolution is already under way in many countries, with renewable energies playing an increasingly
important role. The existing grid infrastructure is therefore facing fresh challenges. One of these is the volatility of
the growing contributions from solar and wind energy, which need to be balanced out and adapted to current power
consumption. Given this backdrop, electricity storage will play a pivotal role in the future power supply.
Batteries for the energy revolution
In all the scenarios outlined in its “World Energy Outlook
2012”, the International Energy Agency (IEA) assumes
that the proportion of renewable energies as a
percentage of total electricity production is set to grow.
According to the IEA, this growth will range between 25%
and 48% up to 2035, depending on the overall political
conditions. Creating electricity storage capacities is
therefore the only long-term means for collecting surplus
electricity in an environmentally friendly and cost-effective
way and feeding it back to the grid as soon as electricity
demand requires it. The European Association for
Storage of Energy (EASE) distinguishes five different
electricity storage categories (see Fig. 2).
Fig. 2:
EASE storage categories
Category
Examples
Chemical
Hydrogen, synthetic natural gas
Electrical
Capacitors, superconducting magnetic
energy storage (SMES)
Electrochemical
Lead acid, lithium ion, nickel-metal
hydride, vanadium redox flow battery
Mechanical
Flywheels, compressed air (CAES),
pumped storage
Thermal
Hot water, molten salt, pebble bed
Source: EASE The term energy storage generally refers to all
technologies that allow electricity from a primary source
to be stored for use later on. The two key parameters
that define a storage solution are:

Energy quantity: this can range from a few watts to
hundreds of megawatts for large, centralised storage
systems.
8|Sustainability Quarterly 1/2014 
(Dis)charging time: the charging and discharge
function can range from seconds or milliseconds for
frequency stabilisation, to minutes or hours for
transfer of renewable electricity, to weeks or months
for balancing seasonal fluctuations.
Requirements and costs
Until recently, battery development was driven mainly by
the automotive industry with its work on electric and
hybrid vehicles. The main focus here is on reducing the
size and weight of the batteries in order to achieve a high
energy density. These criteria are less important in the
case of stationary storage systems for maintaining
network stability, increasing the use of solar power or
providing balancing power. Different types of
accumulators will be used in the future, depending on
which aspect is important: Energy content, energy
density, power density, number of cycles, safety, rapid
charging, convenience and – last but not least – price.
The green credentials of battery technology will also play
a major role in the future. Batteries currently cost around
USD 1,000 for each kWh of storage capacity. However,
the price of lithium-ion batteries is expected to fall by
35–50% by 2022. According to a scenario described by
Lux Research for grid storage systems, Li-ion batteries
could fall to USD 506/kWh by that time. Molten salt or
ZEBRA batteries may fall as low as USD 473/kWh. Li-ion
batteries will lose some of their market advantage over
the cheaper molten salt batteries in the area of largescale projects. However, thanks to their high energy
density, they are still the first choice for applications
where space is limited.
Research Investment opportunities in the electricity storage
business
In recent years, multinational energy companies have
become increasingly involved in the segments of
electricity storage, smart grids and energy management.
In a number of countries, storage projects have been
realised in partnership with local utilities. In Sicily, for
example, ABB – working in partnership with the utility
company Enel Distribuzione – has installed a battery
storage system capable of supplying around 2 MW of
electricity for 30 minutes. The system is designed to
stabilise the grid, improve power quality and provide peak
energy for short periods. In Italy, renewable energies –
particularly wind and solar power – supply around 30% of
total electricity consumption. Similar storage systems
based on NiCd or Li-ion batteries have already been
installed by ABB in Alaska and Switzerland. WEMAG, an
energy utility in the German state of MecklenburgWestern Pomerania, and the Berlin-based company
Younicos, which specialises in the grid integration of
renewable energies, have begun the construction of a
battery park to compensate for short-term grid
fluctuations in the state capital Schwerin. The Li-ion
storage with a capacity of 5 MW is due to come on
stream in September 2014 and should help to stabilise
the grid frequency and so integrate wind and solar power
reliably into the existing grid. The cell supplier Samsung
SDI guarantees the performance of the Li-ion cells used
in the system for the next 20 years. In the UK, a 6 MW
battery project was announced in September. In Japan, a
battery with a capacity of 60 MWh installed by Hokkaido
Electric will go into service in 2015. In this case a
vanadium redox flow battery is being built by Sumitomo
Electric Industries. It will store wind and solar power for
the island of Hokkaido, as it is not connected to the
mainland grid.
Fig. 3:
Selection of companies active in the energy storage
segment
Company (country)
Storage technology
ABB (CH)
Batteries / energy mgmt
Andritz Hydro (DE)
Pumped storage
Capstone Turbine Corp. (US)
Gas micro-turbines
Energizer (US)
Various battery technologies
GS Yuasa (JP)
Various battery technologies
Johnson Controls (US)
Various battery technologies
NGK Insulators (JP)
NaS batteries
Panasonic (JP)
Various battery technologies
Samsung SDI (KR)
SMA Solar (DE)
Voith (DE)*
*unlisted
Lithium-ion batteries
Batteries/
Inverters
Pumped storage
Source: Bank J. Safra Sarasin
Several projects are also being carried out in the area of
“power-to-gas” technology. This involves the integration
of renewable electricity into the natural gas grid. As well
as being used as a fuel for transport or as a source of
heating energy, hydrogen or gas can be stored and
converted into electricity at a later time.
Electricity storage is becoming an investment theme
The examples described here and the above-mentioned
companies highlight the many different possibilities in
the area of storage solutions. With the experience gained
and the economies of scale resulting from more
widespread use of storage technologies, a promising
growth market is opening up for the companies involved.
Electricity storage could therefore become an interesting
theme for investors before long.
New Sustainability Spotlight on electricity storage
The research paper “Electricity storage – the missing link
in the energy revolution” can be obtained free of charge
from the address provided on page 16.
Sustainability Quarterly 1/2014|9
Research Swiss cantonal banks –
going back to their roots
Today Switzerland’s 24 cantonal banks perform an important function in the national economy, just as they have
done in the past. In recent years, shrinking margins and the need to diversify have encouraged cantonal banks to
expand beyond their actual core business of providing banking services and look for alternative sources of income
abroad. With the failure of these ambitious expansion plans, the banks are now going back to their roots.
Drivers of the Swiss economy
The roots of Switzerland’s cantonal banks can be traced
back to the late 19th century. During this period, the
country’s rapid industrialisation boosted demand for
credit and this could no longer be met by the existing
banks. There was a shortage of capital especially in
traditional commercial sectors such as handicraft and
agriculture. Faced with this situation, the cantons
eventually decided to set up their own cantonal banks.
According to the mandate defined at the time, the
purpose of the cantonal banks is still mainly to cater for
the needs of private customers and to provide finance for
SMEs. Here most cantonal banks have the backing of a
fully-fledged state guarantee.
Forced to retreat due to failed expansion
The cantonal banks traditionally have very strong links to
the regional economy. But the search for additional
sources of revenue and the need to diversify a business
concentrated too heavily on mortgage lending
encouraged some cantonal banks to try and expand their
activities beyond the borders of their canton and their
original mandate. But an overestimation of their own
abilities and a lack of skills meant that many of these
initiatives ended in failure. In 2010, for example, Zürcher
Kantonalbank (ZKB) acquired Austria’s Privatinvest Bank
AG (PIAG). Shortly afterwards dubious business
relationships and fraudulent practices came to light at
PIAG. PIAG had to be restructured and recapitalised. At
the moment, several cantonal banks are in the headlines
due to their involvement in the US tax dispute. Gradually
the mistakes of the past are becoming public and the
banks are starting to rethink and retreat. For instance,
St. Galler Kantonalbank (SGKB) sold its Latin American
and Eastern European business in 2013.
From a sustainability perspective: above-average rating
The cantonal banks generally score higher than average
in Bank J. Safra Sarasin’s sustainability ratings. Their
business activity strengthens the regional economy. Key
features include close proximity to the customer and
good service, as well as a range of environmentally and
socially responsible products, such as green mortgages,
start-up financing, etc. However, there are some
significant differences between the players (see Fig. 4).
The US authorities are investigating ZKB and Basler
Kantonalbank (BKB) for actively assisting with tax
evasion. At least nine other cantonal banks are not ruling
out the possibility that they may have helped US citizens
to avoid paying tax in recent years. The Swiss regulator
FINMA has reprimanded BKB for lack of risk control in
dealings with a fraudulent partner. Both Waadtländer
Kantonalbank (BCV) and Luzerner Kantonalbank (LUKB)
have recently been involved in scandals as well. One
positive example is Basellandschaftliche Kantonalbank
(BLKB), which has a progressive sustainability policy and
a clean track record so far.
Fig. 4:
Sustainability ratings of selected cantonal banks
Source: Bank J. Safra Sarasin
10|Sustainability Quarterly 1/2014 Research Public covered bonds –
the debt crisis has left its mark
Public covered bonds are used for state funding. Our rating of public covered bonds not only assesses the
sustainability credentials of the issuers, and but also which countries are being financed. The sovereign debt crisis
is making a lasting impression on the volume of public covered bonds and the country allocation.
Indirect state funding
Banks use public covered bonds to refinance their state
loans business. Apart from loans to state authorities, the
cover pool can also include sovereign bonds and loans to
national and supranational financial institutions.
According to the European Covered Bond Council, public
covered bonds with a nominal value of around EUR 500
billion were in circulation at the end of 2012. This is 41%
lower than during the boom year of 2006. Because of
uncertainties created by the sovereign debt crisis and
stricter capital adequacy requirements, the state
financing business is increasingly losing its appeal for
banks. At the same time, there is still solid investor
demand for public covered bonds because of their
security.
covered bonds in question comes to EUR 348 billion.
There are significant variations from previous analyses of
the cover pool. For example: Germany’s share of the
cover pool has increased from 54% to 60% since 2010.
Over the same period, Italy’s share plummeted from
around 20% to just 4%. Ireland’s proportion dropped from
1.7% to 0.1%. In 2010 Greece accounted for 1.3% of the
pool, but is no longer represented at all. The shift in the
country allocation – combined with changes in the
country ratings – on balance results in a much better
sustainability rating (see Fig. 5). Overall, public covered
bonds with a nominal value of EUR 176 billion (51%)
have been rated as investable for sustainable portfolios.
Fig. 5:
Focal point of the cover pool for top issuers of
covered bonds
Analysis of the cover pool
Bank J. Safra Sarasin’s sustainability rating of countries
is a tried and tested instrument for assessing the
sustainability of sovereign bonds. The sovereign bonds
issued by sustainable countries have performed better
overall than those issued by non-sustainable countries
(see our Sustainability Spotlight “Sustainable countries
better at mastering the debt crisis” published in January
2013). Public covered bonds are ultimately an indirect
form of state funding. Here too, it is advisable to
consider the sustainability rating of the countries being
financed. To this end the centrepoint of the cover pool on
the sustainability matrix is worked out, with the countries
weighted according to their financing volume. The
centrepoint must be in the shaded area of the
sustainability matrix. In addition, the issuer must be
rated as sustainable.
Source: Bank J. Safra Sarasin
Significant shifts in the cover pool
The cover pool rating takes in 29 issuers from Germany,
Austria and France. The total nominal value of the
Sustainability Quarterly 1/2014|11
Research Focus
In this section we comment on selected sustainability ratings from the previous quarter.
Banks
Caixabank was established in 2011 following the
restructuring of Caixa, originally a Catalonian savings
bank. Over the past two years it has taken over several
Spanish regional banks including Banco de Valencia,
which the government was forced to nationalise in 2011.
Caixabank is now one of Spain’s biggest banks and has
operations nationwide. The takeover has resulted in
massive redundancies (almost 18% between 2011 and
2014 according to the business plan). In addition,
branches are being shut down in a bid to remove
duplication in the branch network. The bank is working
with the trade unions to try and ensure that job cuts are
implemented primarily through early retirement packages.
Caixabank’s redundancies and branch closures are lower
than the Spanish average. Caixabank has a good
environmental and social strategy and provides clear and
comprehensive reporting about sustainability themes. We
give CaixaBank an above-average sustainability rating.
Public Financial Institutions
The European Stability Mechanism (ESM) is the
permanent bail-out facility for euro area member states
and replaces the temporary backstop, the European
Financial Stability Facility (EFSF). Domiciled in
Luxembourg, the ESM is an intergovernmental
organisation incorporated under international law which
started operations in October 2012. ESM members (=
shareholders) are the 17 countries of the eurozone, with
their share of capital based on the ECB capital key (i.e.
that country’s proportion of the total EU population and
GDP). The subscribed capital amounts to EUR 700
billion. The ESM’s maximum lending volume is set at
EUR 500 billion. The ESM can not just offer support to
countries, but can also directly recapitalise banks in
eurozone countries. The money raised by ESM on capital
markets is put into a pool rather than being allocated to
individual aid projects. The ESM’s sustainability rating is
worked out from the country ratings of the EU member
states, weighted by their participation quota in the ESM.
The overall rating works out as average.
12|Sustainability Quarterly 1/2014 FMS Wertmanagement was created in July 2010 as a
“bad bank” to wind down the risk positions and the nonstrategic business entities of the nationalised Hypo Real
Estate (HRE), in a move intended to stabilise Germany’s
financial market. The original volume of the portfolio
exposures transferred from HRE was EUR 175.7 billion.
As at 31.12.2012 the portfolio still comprised 4553
positions with a nominal value of EUR 137 billion. FMS
has also taken over HRE’s liabilities. FMS is an
independent establishment under public law, both from
an organisational and economic perspective. FMS is
owned by the Federal Agency for Financial Market
Stabilisation (FMSA). FMS Wertmanagement falls under
what are known as the government’s “extra budgets”.
FMS debts are therefore counted as government debts
under the terms of the Maastricht Treaty. Since the
liabilities of FMS are ultimately those of the Federal
Republic of Germany, the FMS enjoys the same
sustainability rating as Germany (“high”).
Technology Hardware & Equipment
Kyocera is a diversified electronics group. Improving its
environmental credentials is one of the key objectives
stipulated for product development. The company has an
internal system for rating environmentally friendly
products. In this context Kyocera is a leading
manufacturer of specialist ceramic products which are
used in energy-saving LED lights, among other things.
While the focus is on products and processes that
reduce environmental impacts, the company provides
information on social aspects such as working conditions
in low-wage countries, but its reporting is very
fragmented and limited. Kyocera’s sustainability rating is
therefore more or less unchanged, at above average.
Logistics & Road Transport
Deutsche Post DHL is Europe’s biggest provider of
postal services and transports around 5% of the global
trade volume. From an environmental perspective the
company is a heavy emitter of global greenhouse gases
Research by virtue of its own fleet of vehicles and aircraft and its
numerous subcontractors (80%). Deutsche Post has a
dedicated climate protection strategy and ambitious
environmental goals. By 2020 it plans to increase its
overall carbon efficiency by 30% (compared to 2007
levels). Electricity from renewable sources accounts for
42% of the company's global electricity consumption. In
Germany the figure is as high as 92%. At the product
level Deutsche Post offers carbon-neutral mail and
logistics solutions, i.e. greenhouse gas emissions
resulting from the shipping of letters and parcels are
offset. Although the working conditions and relations with
trade unions are satisfactory, there are still some
shortcomings at international level. As a result, the
company’s rating is above average.
Miscellaneous Business Services
Société Générale de Surveillance (SGS) is the world’s
leading inspection, verification, testing and certification group. The company offers a range of services with direct
environmental benefits, such as the certification of
sustainable forestry products (e.g. FSC), quality
management audits for the transportation of hazardous
goods, laboratory analysis of toxic substances and
certification to various environmental standards. While
SGS still has room for improvement in the environmental
credentials of its own business activities, the services it
provides make a substantial contribution to sustainable
development, for example in the areas of energy
management, life sciences and eco-mobility. SGS’s
social performance has improved in recent years thanks
to a consolidated reporting system. SGS already has a
rating of above average, and this was increased slightly.
Renewable Energy
The Chinese company Trina Solar is a vertically
integrated, leading global provider of photovoltaics. Its
products include ingots, wafers, solar cells, solar
modules and other solar services. Trina Solar has
significantly improved its sustainability reporting in the
past and is keen to play an active role in the sustainable
development of the photovoltaics industry. The company
is now one of the industry’s top providers when it comes
to material and energy efficiency. It has managed to
significantly reduce its electricity and water consumption,
as well as its CO2 emissions. The company is currently
working on the refinement of monocrystalline solar cells,
whose efficiency is superior to conventional cells. Trina
Solar’s rating has been upgraded to above average.
Energy Utilities
Verbund AG is Austria’s biggest electricity provider and
supplies about 50% of the nation’s energy needs. The
company is one of Europe’s most environmentally
friendly electricity producers. In 2012 the company
generated 87% of its total electricity output from
hydroelectric power. The company’s business strategy
specifies that future investment will also be restricted to
the carbon-free energy sources of water and wind, as well
as the power transmission grid. Comprehensive
environmental management systems, along with
initiatives to certify the origin of electricity, underscore
the company’s commitment to climate protection.
Because of the measures described and the engagement
as part of the energy revolution, the rating of Verbund AG
has been upgraded to high.
Tourism & Leisure
The French company Pierre & Vacances offers a variety
of local tourism and property services in France and a
number of other European countries. These include
holiday resorts, hotels and apartments operated by
Pierre & Vacances itself. In the past the company has
updated and refined its approach to sustainability in
collaboration with WWF France. Apart from efficient
resource management, the other key features are a
commitment to respect the regional culture and the
natural environment, as well as making a contribution to
the development of the local economy. Concrete
measures include, for example, the use of local products
in its catering arm, or the promotion of sustainable
mobility (including car-free zones, bicycles, electrically
powered vehicles, across all its holiday resorts. The
company has therefore been included in the
sustainability universe of Bank J. Safra Sarasin with an
above average rating.
Sustainability Quarterly 1/2014|13
14|Sustainability Quarterly 1/2014 Appendix Sustainability Analysis Methodology
Matrix combines industry and company ratings
Our environmental and social analysis of companies is
based on a proprietary valuation method developed by
Bank J. Safra Sarasin. It incorporates two dimensions
which are combined in the Sarasin Sustainability-Matrix:


Industry rating: Comparative assessment of
industries using selected environmental and social
criteria.
Company rating: Comparative environmental and
social analysis of companies within their industry.
Only the companies positioned in the Sarasin investment
universe (shaded) qualify for Bank J. Safra Sarasin’s
retail sustainability funds.
Sarasin Sustainabilty-Matrix
Evaluation criteria
When assessing individual companies, we consider how
they handle the environmental and social risks specific to
their industry and exploit the relevant opportunities. The
main criteria are the same for all industries. They are
compared with the industry average in the company’s environmental and social profile and then aggregated into
an overall rating. The weighting of the main criteria and
the selection of the subcriteria are industry-specific.
Controversial activities
Certain business activities which are not deemed to be
compatible with sustainable development (e.g. armaments, nuclear energy, tobacco, pornography) can lead to
the exclusion of companies from the Sarasin sustainable
investment universe. The Fund’s Advisory Council makes
this selection for our retail funds
Information sources
The company rating is based on the company’s own
details, press reports and information from independent
institutions. The companies are contacted to clarify any
clarify open questions or contradictions. We do not use
standardised questionnaires.
Source: Bank J. Safra Sarasin
Sustainability Quarterly 1/2014|15
Appendix Contacts
Dr. Jan A. Poser
Head Asset Management
Tel. +41 (0)58 317 32 81
jan.poser@jsafrasarasin.com
Yvonne Emmerich-Weissflog
Management Support
Isabelle Van Dijck
Assistant
Tel. +41 (0)58 317 40 24
yvonne.emmerich-weissflog
@jasafrasarasin.ch
Tel. +41 (0)58 317 42 91
isabelle.vandijck@jsafrasarasin.com
Sustainable Investment Research
Client Services
Pierin Menzli,
Head Sustainable
Investment Research
Alexander Mülhaupt
Head Client Services
Tel. +41 (0)58 317 45 74
pierin.menzli@jsafrasarasin.com
Makiko Ashida
Tel. +41 (0)58 317 44 70
makiko.ashida@jsafrasarasin.com
Thomas Dietzi
Tel. +41 (0)58 317 62 49
thomas.dietzi@jsafrasarasin.com
Hong Loei Chan
Tel. +41 (0)58 317 35 39
hongloei.chan@jsafrasarasin.com
Philipp Gamper
Tel. +41 (0)58 317 34 97
philipp.gamper@jsafrasarasin.com
Mirjam Speidel
Tel. +41 (0)58 317 62 59
mirjam.speidel@jsafrasarasin.com
Ute Haibach Patrick Hasenböhler Tel. +41 (0)58 317 36 76
ute.haibach@jsafrasarasin.com
Tel. +41 (0)58 317 34 81
patrick.hasenboehler@jsafrasarasin.com
Andreas Holzer
Tel. +41 (0)58 317 40 38
andreas.holzer@jsafrasarasin.com
Barbara Janosi Tel. +41 (0)58 317 41 66
barbara.janosi@jsafrasarasin.com
David Kägi Klaus Kämpf
Philipp Mettler
Ennio Perna
Tel. +41 (0)58 317 34 82
david.kaegi@jsafrasarasin.com
Tel. +41 (0)58 317 47 80
klaus.kaempf@jsafrasarasin.com
Tel. +41 (0)58 317 41 24
philipp.mettler@jsafrasarasin.com
Tel. +41 (0)58 317 43 64
ennio.perna@jsafrasarasin.com
Michael Romer
Tel. +41 (0)58 317 34 84
michael.romer@jsafrasarasin.com
Rainer Skierka
Tel. +41 (0)58 317 34 98
rainer.skierka@jsafrasarasin.com
Dominik Studer
Tel. +41 (0)58 317 34 88
dominik.studer@jsafrasarasin.com
Michael Studer
Tel. +41 (0)58 317 37 45
michael.studer@jsafrasarasin.com
Bank J. Safra Sarasin Ltd.
sustainability@jsafrasarasin.com
www.jsafrasarasin.com/sustainability
16|Sustainability Quarterly 1/2014 Joëlle Buro-Epiney
Tel. +41 (0)58 317 43 07
alexander.muelhaupt
@jsafrasarasin.com
Tel. +41 (0)58 317 4824
joelle.buro@jsafrasarasin.com
Appendix Publications
Information & Communications Technology
Renewable Energy 2012
Energy Utilities
Water
Luxury goods
Automobile
Tourism
Banks 2011
Solar Energy 2011
Emerging Countries 2011
Sovereign Bonds 2011
Knowledge Society
Food Industry
Solar Energy 2010
Renewable Energy 2010
Emerging Countries 2010
Sovereign Bonds 2010
Solar Energy 2009
Automotive
Real Estate
Renewable Energy 2009
Solar Energy 2008
Energy Efficiency
Commodities
Solar Energy 2007
Medicinal Technology
Company Rating
Railway
Solar Energy 2006
Banks 2006
Industry Rating
Biofuels
Apple, Samsung & Co: interconnected with China – Sustainability Report of the
Information & Communications Technology (ICT) industry. Eckhrad Plinke, February 2013
Working towards a cleaner and smarter power supply – Prospects for renewables in the
energy revolution. Matthias Fawer, December 2012
The energy revolution presents new challenges – Sustainability Sector Report Energy
Utilities. Matthias Fawer, Eckhard Plinke, August 2012
Water – Elixir of life and investment theme. Matthias Fawer, Klaus Kämpf, Matthias
Priebs, May 2012
The quest for authenticy – Can luxury brands justify a premium price? Makiko Ashida,
May 2012
On the road to sustainability – Sustainability Report of the Car Manufacturing and Auto
Parts Industries. Eckhard Plinke, Gabriela Ries Hafner, February 2012
Taking things gently – Sustainability report of the tourism industry. Mirjam Würth, January
2012
Credit all used up – time for a sustainable dawn. Sustainability Analysis of the banking
industry. Antje Greiner, Dezember 2011
Solar industry: Survival of the fittest in a fiercely competitive marketplace. Matthias
Fawer, November 2011
Emergency – Healthcare in Emerging Markets. Andreas Holzer, October 2011
Sustainable fulfilment of sovereign obligations – Sustainability and performance of
sovereign bonds. Balazs Magyar, July 2011
Knowledge Society as a megatrend – Investment opportunities created by the
proliferation of information and know-how. Thomas Dietzi, June 2011
Food and sustainability: Will the seed bear fruit? Gabriella Ries Hafner, December 2010
Solar industry – Entering new dimensions. Matthias Fawer, November 2010
Renewable energies: evolving from a niche to a mass market. Matthias Fawer, August
2010
Emerging Sustainability – Sustainability analysis of emerging market companies. Andreas
Holzer, May 2010
The world in a dilemma between prosperity and resource protection – Sustainability rating
of sovereign bonds 2010. Balazs Magyar, March 2010
Solar industry – The first green shoots of recovery. Matthias Fawer, November 2009
Automotive: An industry powers ahead – Sustainability research report: Key themes and
company ratings. Gabriella Ries Hafner, September 2009
Sustainable Real Estate – Investing in bricks and mortar. Sustainability as a criterion for
investing in the real estate sector. Klaus Kämpf, Thomas Dietzi, September 2009
Renewable energies: sunnier times ahead, once storms have cleared the air. Matthias
Fawer, June 2009
Solar Energy 2008 – Stormy weather will give way to sunnier periods. Matthias Fawer,
November 2008
Energy efficiency – hidden capital. How investors can benefit from the "cheapest source
of energy". Eckhard Plinke, June 2008
Commodities – still a responsible investment? Eckhard Plinke, Dominique Ehrbar,
Andreas Holzer. Gabriella Ries, June 2008
Solar Energy 2007 – The industry continues to boom. Matthias Fawer, November 2007
A healthy future? An analysis of the sustainability of the medical technology industry.
Andreas Holzer, October 2007
Assessing corporate sustainability – Methodology of the Sarasin company rating. Eckhard
Plinke, July 2007
A multi-track future – An analysis of the social and environmental aspects of railways and
public transport. Gabriella Ries, March 2007
Solar energy 2006 – Light and shade in a booming industry. Matthias Fawer, December
2006
Banking on sustainability: An analysis of the social and environmental aspects
of international banks. Klaus Kämpf, November 2006
The Sarasin industry rating – Methodology and results of sector sustainability analysis.
Eckhard Plinke, September 2006
Biofuels – transporting us to a fossil-free future? Matthias Fawer, July 2006
To order copies of reports, please see contact address on previous page
Sustainability Quarterly 1/2014|17
Trademark information
J. Safra Sarasin (Logo), Sarasin Sustainable Investment and Sarasin Sustainability-Matrix are trademarks of J. Safra
Sarasin Group and are registered in a number of jurisdictions.
Important notice
This publication has been prepared by Bank J. Safra Sarasin Ltd. (hereafter "BSS") for information purposes only. It is
not produced by our Research Department. Therefore, the Directives on the "Independence of Financial Research" of
the Swiss Bankers Association were not applied. This publication contains selected information and does not purport
to be complete. This document is based on publicly available information and data ("the Information") believed to be
correct, accurate and complete. BSS has not verified and is unable to guarantee the accuracy and completeness of
the Information contained herein. Possible errors or in-completeness of the Information do not constitute legal
grounds (contractual or tacit) for liability, either with regard to direct, indirect or consequential dam-ages. In particular,
neither BSS nor its shareholders and employees shall be liable for the opinions, estimations and strategies contained
in this document. The opinions expressed in this document, along with the quoted figures, data and forecasts, are
subject to change without notice. A positive historical performance or simulation does not constitute any guarantee for
a positive performance in the future. Discrepancies may emerge in respect of our own financial research or other
publications of the J. Safra Sarasin Group relating to the same financial instruments or issuers. It is impossible to rule
out the possibility that a business connection may exist between a company which is the subject of re-search and a
company within the J. Safra Sarasin Group, from which a potential conflict of interest could result.
This document does not constitute either a request or offer, solicitation or recommendation to buy or sell investments
or other specific financial instruments, products or services. It should not be considered as a substitute for individual
advice and risk disclosure by a qualified financial, legal or tax advisor.
This document is intended for persons working in countries where J. Safra Sarasin Group has a business presence.
BSS does not accept any liability whatsoever for losses arising from the use of the Information (or parts thereof)
contained in this document.
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