Mayence Fair Value Bond Fund (fixed income fund) Absolute - PowerPoint PPT Presentation

SUSTAINABLE INVESTMENTS WITH HIGH ESG-QUALITY AND POSITIVE SDG-IMPACT SDG Evolution Flexibel (balanced fund) Mayence Fair Value Bond Fund (fixed income fund) Absolute Return-Strategies with european focus Suitable for conservative investors As at October 1 st 2019 Only for professional investors. No delivery to private investors. 1

ESG PORTFOLIO MANAGEMENT SUSTAINABLE INVESTMENTS WITH HIGH ESG-QUALITY AND POSITIVE SDG-IMPACT Agenda Overview of Sustainable Investments • Investment Process of ESG Portfolio Management GmbH • Investment Solutions: Our Funds • Summary • Contact • Attachments • 2

ESG & SDG SUSTAINABLE INVESTMENTS WITH HIGH ESG-QUALITY AND POSITIVE SDG-IMPACT ESG – Environmental, Social, Governance SDG – Sustainable Development Goals 2015 introduced by UN as „Agenda 2030“. 193 countries promised to work for these 17 goals: 3

Sustainable Investments Selecting corporations and countries with high positive Investments influence our SDG impact increases the environment and economy. portfolios‘ SDG impact. Selecting issuers with high We expect - beginning 2019 - ESG qualities reduces the the regulatory requirement negative impact and the risk to report ESG qualities and of investments. CO 2 -emissions Constructing sustainable Certifications for sustainability portfolios requires special such as UN PRI reporting and research, compliance to FNG-Siegel are gaining standards and dedicated importance investment processes 4

ESG in Germany – Sustainable Investments Sustainable Strategies in Germany (in bn. Euro) Source: Forum nachhaltige Geldanlagen FNG, Study 2019 5

ESG in Germany – Sustainable Investments Funds and Mandates (in bn. Euro) Source: Forum nachhaltige Geldanlagen FNG, Study 2019 6

Development of Sustainable Investments 2006 1898 2016 Impact-Investing is Founding of 2000 Introduction of SDG: Friends Fiduciary endorsed by Pension funds in Norway Rockefeller- 2010 193 countries agree to with sustainable and U.S.A commit to endowment 17 goals and 169 sub- investment Harvard starts sustainability goals guidelines Initiative for responsible investments (IRI) 2006 1986 Foundation of UN PRI Nuclear desaster in (Principles for 2009 2018 Tschernobyl Responsible Investing Bloomberg Founding ESG Portfolio Signatories‘ AuM: 4 tn. $ integrates significant 2012 Management GmbH 2001 sustainability news Morgan Stanley starts and ESG data Fondation: FNG the Investing with Forum Impact Platform (IIP) Nachhaltiger Geldanlagen e.V. 7

ESG Portfolio Management GmbH SUSTAINABLE INVESTMENTS WITH HIGH ESG-QUALITY AND POSITIVE SDG-IMPACT Focusing on Issuers Strict Exclusion Positive Impact High ESG Qualities Aiming for with low CO 2 - Criteria for Solutions towards Performance also of all portfolio emissions selecting the SDGs in difficult market positions corporations and environment using countries active risk management 8

ESG Portfolio Management GmbH SUSTAINABLE INVESTMENTS WITH HIGH ESG-QUALITY AND POSITIVE SDG-IMPACT Positive Impact Solutions High ESG Qualities Strict Exclusion Criteria Low CO 2 -emissions Active Risk Management SDG Evolution Flexibel Mayence Fair Value Bond Fonds Conservative balanced fund Conservative fixed income fund Equity weighting: average 30 percent Average credit rating min. BBB Majority in European corporations with high credit quality Selective investments in impact bonds Prudent portfolio construction Risk reduction with Put-options. 9

SDG Impact Measurement for SDG Evolution Flexibel 39.9% 19.0% 7.0% 5.0% 5.3% Source: MSCI ESG, October 2 nd 2019, own calculations 10

Beispiel Impact Bond: 2,25% Xylem INC. 2023 very positive Impact for SDG 6 Source: http://www.xylem.com • Xylem INC. is a designer, manufacturer and service provider for water and wastewater applications • The company addresses the full-cycle of water from collection, distribution and return to the environment • In February 2019 Xylem INC. received an ESG Rating upgrade to AAA from MSCI ESG. The reasons have been the further reduction of waste and the increasing focus on research and development of new products Both funds of ESG Portfolio Management invested in this bond 11

Example: Impact Equity: Novo Nordisk A/S Very positive Impact for 2 of the 17 SDGs Source: https://www.novonordisk.com/research-and-development.html • Global pharmaceutical company with focus on Diabetes (Insulin supply) • Novo Nordisk understands the SDGs as opportunities and uses them for orientation and implements them in their business strategy and processes • (https://www.novonordisk.com/sustainable-business/performance-on-tbl/more-about-how-we-work-and- report/the-sustainable-development-goals.html) The fund SDG Evolution Flexibel is invested in this equity 12

Example: Green Bond: 1,1% NRW 2034 Very positive Impact for 6 of the 17 SDGs Source: https://www.nachhaltigkeit.nrw.de/fileadmin/download/nrw-nachhaltigkeitsstrategie_broschuere.pdf • 15-year green bond of the state Nordrhein-Westfalen, volume EUR 2,25 bn. • The sustainability strategy of NRW includes goals like social fairness, alternative energy, climate protection and sustainable public transport • Moody‘s Aa1, S&P AA -, Fitch AAA • Issuance at March 6th 2019 at 99,835 (Swap + 10), price August 1 st 2019: 112.40 (Swap - 3) Boths funds of ESG Portfolio Management invested in this bond 13

Example ESG Risks: Vale, January 25th 2019 Tailings dam collapse of the mining company Vale near the brazilian town of Brumadinho 300 persons died Pollution of surrounding water Source: Der Spiegel, February 8 th 2019 14

Our ESG rating provider MSCI ESG assigned Vale a weak B rating even before the tailing dam collapse As the minimum ESG rating of our investments is BBB, we did not own any Vale bonds or equity Source: MSCI ESG, January 30 th 2019 15

The exclusions of our funds are extensive and strict: We control our exclusions with ESG Screen 17 (www.screen17.com) Corporates are excluded when they operate in the areas: Weapon production Nuclear energy Coal or fracking Oil sands Companies are excluded when they generate more than five percent of sales in the areas: alcohol, gaming, pornography, oil, tobacco, gene technology or animal testing Countries are excluded when they are involved in Severe controversies, death penalty, conflicting human rights, corruption (source: Transparency International), or conflicting with non-proliferation treaty, authoritarian regime (source: Freedom House Ranking) 16

Exclusions: Considering unwanted consequences Example 1: Example 2: Reduce carbon-emissions – Investments No tobacco in utilities are not allowed Question: Do you use heating in a cold Question: What about supermarkets? winter? Possible solution: Possible solution: No investment, if the company generates Only invest in utilities with highest more than five percent of sales with energy efficiency and best filter tobacco technology 17

Extremely high ESG Quality of our funds and transparent reporting • ESG Scores of 9,9 (Flexibel) and 10 (Mayence) are record results (Maximum:10) MSCI ESG Fund Finder: position 25 and 27 out of 130.000 funds • Flex receives 5 Morningstar Globes (highest sustainability assessment) • 81% of our positions in Flexibel and 79% of our positions in Mayence are ESG leader in their sectors (ESG Ratings AAA / AA) • 15% of the positions in Flexibel and 17% in Mayence got an upgrade, whereas we did not get any ESG downgrade in both funds‘ positions Source: MSCI ESG, October 2 nd 2019 18

Lower Carbon Footprint and transparent Reporting Development of the ESG quality, SDG impact and carbon emissions of the Flex Fund compared to the benchmark (iShares MSCI Europe ESG Screened UCITS ETF). *the historic CO 2 -Values are linked to the current (funds and benchmarks) and are calculated backwards for every corporation Source: MSCI ESG, October 2 nd 2019 19

Where does the performance come from? Performance sources of the SDG Evolution Flexibel • Possible net equity range -10% bis 60% (average ca. 30 %) • Bonds 65% and Cash/Gold (5%) Equities: Bonds: • Dividends Interest duration • • Equity exposure x equity-portfolio-beta x equity Managing interest duration and credit • market movement beta • Active management of equity allocation and equity Credit duration • beta Carry and roll down • • Alpha from title selection Alpha from title selection • • Fat tail risk management with equity puts 20

Where does the performance come from? Scenario analysis base case best worst (Equities+7%, (E+10%, Y flat, (E-10%, Y-1, Yields+0,5) Spreads -10Bp) Spreads +20Bp) Equity exposure x equity-portfolio-beta x equity market 2,3 3 -3 development Equity exposure x dividend yield (average: 2,5%) 0,75 0,75 0,75 Active Management of equity allocation and beta 0,5 0,5 0 Alpha from equity selection 0,5 1 -0,3 Fat tail management with equity options -0,1 -0,1 0,8 Interest duration (currently -2) 1 0 -2 Active Management of interest duration and credit beta 0,5 1 -0,5 Credit duration (currently 4) 0 0,26 -0,52 Carry and roll down 0,33 0,33 0,33 Alpha from bond selection 0,5 1 -0,3 Cash -0,03 -0,03 -0,03 Sum 6,3 7,7 -4,8 Source: own estimates and calculations Historic performance is no indication for future performance 21