Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013
ESG Regulations

31598

Metzler Asset Management’s CIO instructs all 25 portfolio managers to become ESG certified by end-2020

RELATED TOPICS​

By Jan Wagner – German wealth manager Metzler has instructed its portfolio managers to become certified in sustainable investing and is rolling out a new ESG toolkit as it fully embraces the strategy, says CIO Rainer Matthes (pictured).

By Jan Wagner – German wealth manager Metzler has instructed its portfolio managers to become certified in sustainable investing and is rolling out a new ESG toolkit as it fully embraces the strategy, says CIO Rainer Matthes (pictured).

Like Switzerland, Germany is home to several banks that cater to the investment needs of wealthier clients. These wealth managers are referred to as ‘private banks’ in Germany, and one of the oldest is Bankhaus Metzler in Frankfurt. Founded in 1674 by textile dealer Benjamin Metzler, the private bank has remained family-owned ever since. 

Having been in business for over three centuries says a lot about how well a bank is run. It’s no surprise then that Metzler has attracted numerous institutional clients looking for an asset manager that not only offers investment skill but (very) long-term stability. Metzler says that of its EUR50 billion in assets under management (AuM), 70 per cent comes from institutional clients, notably ecumenical institutions, pension funds and corporate investors.

Metzler also offers institutional investors a strong commitment to sustainable investing, or ‘ESG’ as it is known in industry jargon. It was one of the first asset managers in Germany to join the Principles for Responsible Investment (PRI) in 2012. It has taken its membership in the PRI very seriously and is close to fully embracing the strategy – as IAM discovered in a recent interview with Rainer Matthes, CIO at Metzler Asset Management. 

Says Matthes: “Currently, more than half of AuM – that is all discretionary equity and fixed income mandates – is managed on an ESG basis. Due to the prior absence of liquid ESG futures, our portfolio managers could not fully incorporate sustainability considerations into their strategies.” Matthes is also aware that several ESG futures have been launched, adding: “Once it makes economic sense, we will liaise with our clients and offer solutions that incorporate ESG futures.” 

In the meantime, the CIO has instructed Metzler’s 25 portfolio managers to become certified in sustainable investing by the end of next year. 

Such ESG certification is offered by the European Federation of Financial Analysis Societies (EFFAS), and it precludes the need for a separate team of ESG analysts. 

“Even today, I require all my portfolio managers to consider ESG factors. If they choose not to consider them for a particular investment, they must justify why not,” says Matthes. As part of the investment process, Metzler’s portfolio managers rely on ESG data the house obtains from providers like MSCI but, naturally, also on fundamental company data and the overall economic outlook. 

In terms of how Metzler sustainably invests, the bank relies on a mix of exclusions and engagement with companies. Regarding the exclusions, Matthes says: “We don’t exclude specific sectors, but instead exclude companies that violate universally accepted norms like those enshrined in the United Nations Global Compact (UNGC) and the related Guiding Principles on Business and Human Rights.” 

Metzler is also active on the engagement front, with its portfolio managers having held 250 meetings with company executives on a range of issues, including ESG in 2018. Metzler’s engagement efforts are also supported by Canada’s BMO Global Asset Management, which held over 500 company meetings on behalf of the private bank in 2018. 

Matthes is confident that its embrace of sustainable investing should, in the long run, help it enhance the risk-adjusted performance of its entire portfolio. He refers to a back test showing that Metzler’s exclusions of companies that violate UNGC norms enabled it to generate seven basis points of outperformance vis à vis the MSCI World benchmark between January 2007 and January 2017. 

The private bank has also previously told IAM that, in its view, a company that respects ESG criteria benefits from such things as greater energy efficiency, good labour relations and an overall positive reputation. The upshot of all this is less volatility in the company’s share, and hence a more robust portfolio, the bank says (see previous article). 

Further underscoring his seriousness about sustainable investing, Matthes recently hired two well-known ESG specialists in German asset management. The specialists, Daniel Sailer and Jan Rabe, are in charge of Metzler’s new ESG office and as such oversee the bank fully embracing the strategy. To promote Metzler’s newly acquired ESG credentials, Sailer and Rabe have developed a new tool box for investors which they call ‘QbrickS’ and which is depicted as the iconic Rubik’s cube. 

Asked to illustrate the concept, Matthes says: “QbrickS is an investment tool that embeds individual preferences related to sustainability into a top-down, macro-inspired yet discretionary allocation process.” He adds: “If an institutional investor wants to address climate change, seek exposure to growth companies and expects interest rates to remain unchanged in the short term, QbrickS can assess if the relevant portfolio is in line with those requirements. It also supports an alignment should that be necessary.” 

Such dedication to a principle like sustainability shows why Metzler is not only one of Germany’s oldest private banks, but also one of its most respected. 

Latest News

The trading and investment platform eToro has extended its proxy voting feature to all stocks..
C8 Technologies, the London-based fintech founded by former BlueCrest Capital Management partners Mattias Eriksson and..
DWS has announced the latest development in its strategic growth push in Alternative Credit with..

Related Articles

The trend of private equity firms acquiring businesses in the professional services sector continues with CVC Capital Partners eyeing a possible buyout of EY’s Italian consulting branch...
The trend of private equity firms acquiring businesses in the professional services sector continues with CVC Capital Partners eyeing a..
Pension funds
UK defined benefit (DB) pension plan sponsors could have access to GBP 1.2 trillion in surplus assets over the next decade, industry research reveals...
UK defined benefit (DB) pension plan sponsors could have access to GBP 1.2 trillion in surplus assets over the next..
Tim Crawmer, Payden & Rygel
Tim Crawmer and Frasat Shah of Payden & Rygel write that higher yields are attracting more demand from investors. Also, given that equities had a strong year last year, big funds have taken some chips off the table in equities and put them into fixed income...
Tim Crawmer and Frasat Shah of Payden & Rygel write that higher yields are attracting more demand from investors. Also,..
Lady justice
Top marks for the Pensions Regulator (TPR) whose efforts to improve resilience in the UK pension funds’ liability-driven investment (LDI) strategies received glowing commendations from the Bank of England in its March report...
Top marks for the Pensions Regulator (TPR) whose efforts to improve resilience in the UK pension funds’ liability-driven investment (LDI)..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by