With a fund volume of EUR 5.3 billion (as of March 2022), Raiffeisen-Nachhaltigkeit-Mix is the largest sustainably managed Austrian retail fund. The fund invests with broad diversification in bonds and equities of responsible companies and governments. An interview with Thomas Motsch, lead fund manager of Raiffeisen-Nachhaltigkeit-Mix, about the sustainability orientation, or rather ESG approach, of the fund.
How does Raiffeisen-Nachhaltigkeit-Mix apply the sustainability approach in its equity holdings?
Thomas Motsch: We follow a proprietary and very comprehensive sustainability approach. This includes exclusion and negative criteria as well as positive criteria, incorporates an extensive stakeholder evaluation, defines key performance factors, contains an analysis based on the UN’s Sustainable Development Goals, and also employs our own Raiffeisen ESG score. Unlike the approaches of many other investment firms, it also includes regular communication with the companies on doing business in a socially responsible manner (shareholder engagement) and corresponding voting behaviour at annual general meetings.
According to which criteria does the fund management select the individual assets?
Thomas Motsch: As I already talked about, we calculate our own ESG score based on a wide range of data. This sustainability rating is combined with metrics and details about the company’s financial situation. A security is only eligible for inclusion in the fund portfolio if the scores in both areas are good – though the fund is not unaffected by general market developments – and when certain minimum standards are met.
How do you make your bond picks?
Thomas Motsch: The Raiffeisen ESG score* applies to the entire company. So, there is no difference in the assessment of equities and corporate bonds from the same issuer. Sovereigns are subject to a separate set of criteria because they cannot be evaluated and categorised in the same manner as corporates.
What industries are interesting for the fund management from a sustainability perspective?
Thomas Motsch: There are some sectors that we do not invest in on principle, such as tobacco, weapons, and gambling. We act very selectively in others, for example utilities where we exclude generators of nuclear energy. But in general, we see the sustainability trend spreading through more and more industries, of course to different extents and at different speeds. The fund management searches for and finds companies almost everywhere that conduct their business in a more responsible and sustainable manner than their competitors or that develop innovative sustainability solutions. The latter are often of particular interest to us and can be found in areas such as renewable energy, recycling, and IT.
Lately, markets have been affected by the Russian invasion of the Ukraine. How did the fund management deal with this issue?
Thomas Motsch: The war in the Ukraine affects all of us deeply. The human suffering there is particularly distressing. Yet the impact on capital markets in general, and on the fund in particular, remains relatively limited. There were no – and still are no – investments in Russia and Ukraine in the fund. Some of the companies that the fund invests in have factories or offices in those two countries, but the impact for our portfolio companies is rather low on the whole. The increasing commodity prices as a result of the Russian invasion – particularly for oil and gas – have a much greater impact. Many more companies are affected by this; however, we generally do not invest in the most energy-intensive companies and sectors in Europe.
Another current topic is rising inflation rates, which have reached levels not seen in a long time. What impact do these have on the fund?
Thomas Motsch: Central banks are trying to get a grip on inflation rates by means of interest rate hikes. However, this environment is difficult for bond investments. For this reason, we are trying to counteract this by reducing the interest rate risk. Even in the area of equities, though, there are distortions in some cases. Here, some of our favourite companies and sectors have generally been sold off since the beginning of the year. However, we used the opportunity to increase holdings in selected positions at a good price.
The fund is now one of the largest sustainably managed retail funds in Europe.
The fund has a balanced portfolio with a relatively stable allocation of 50% equities and 50% bonds.
The fund has won a number of national and international awards.
What you should pay particular attention to
Investments in funds are subject to the risks that are typical of securities markets (equities and bonds). This naturally also applies to companies with a marked focus on sustainability.
So, before you make a decision to opt in, please seek advice regarding the opportunities and risks of a particular fund. We recommend that you attend an advisory meeting.
*) Raiffeisen-ESG-Score: Raiffeisen Kapitalanlage-Gesellschaft m.b.H. continually analyses companies and countries with the help of internal and external research providers. Together with an overall ESG assessment including an ESG risk assessment, the results of the sustainability research are converted into the so-called Raiffeisen ESG Score. The Raiffeisen ESG Score is based on a scale of 0-100. The assessment is made in consideration of each company’s respective branch of business.