Investing involves risks. You’ll often hear both ‘return’ and ‘risk’ uttered in one sentence. The more risk you take, the higher your potential return. But it can also turn out less well. If a risk occurs, it can cause your value of plan assets to fall and even result in a (large) negative return.
A specific type of risks are the sustainability risks. These risks are related to sustainability aspects such as: climate change, loss of biodiversity, water scarcity, chemical pollution in air, water or on land, waste, social and community issues, human capital and organisational behaviour.
These sustainability aspects can lead to various risks such as:
- Transition risks. These risks are caused by changes in policy, legislation and technology during the transition to a more sustainable economy.
- Reputational, operational and physical risks for companies, institutions and governments if they are unable to adequately manage these risks.
Companies that pay more attention to the existence of sustainability risks and try to reduce them can create added value for their shareholders. An investor who has to choose which companies to invest in will choose companies that create the most (added) value.
Within the Zwitserleven funds, ACTIAM decides which companies to invest in. By taking into account sustainability-related topics and information, a broader view of the companies is created. This improves investment decision making, which can ultimately lead to better returns.
"Integrating our assessment of sustainability risks and opportunities leads to better-informed investment decisions and better risk-adjusted returns over the long term."
- ACTIAM
Deployment of instruments
By using specific instruments, ACTIAM ensures that there are fewer sustainability risks within the Zwitserleven funds. ACTIAM applies four instruments:
- Exclusion policy (U);
- Usage of ESG-scores (ESG);
- Engagement Policy (E); and
- Voting policy at shareholders' meetings (S).
Chapters 4.2, 4.2.3, 4.3 and 4.4 of the prospectus for Zwitserleven Investment Funds and Zwitserleven Institutional Investment Funds provide more information on these instruments.
The table below gives an overview of a number of important sustainability risks assessed by ACTIAM and a description of how they affect the (added) value of a company. You can also see which instruments ACTIAM uses to limit exposure to this risk within the Zwitserleven funds. And ACTIAM's indication as to whether limiting these risks contributes positively or negatively to the expected long-term return.
More risk factors
The value of the Zwitserleven funds fluctuates with changes in the prices of the financial instruments invested in. All financial instruments are exposed to the risk of price changes. Price changes may be the result of various risk factors. The risk factors listed on this page are just a selection.
In order to manage the relevant risks to which the fund is exposed, the fund manager employs and maintains systems, procedures, reports and audits, risk profiles and investment restrictions as laid down. The section entitled 'Risk Management' in the prospectus describes how the aforementioned risk management is organised. The prospectus of the Zwitserleven funds also contains a list of risk factors that are significant and relevant to participants. Including the possible consequences and their likelihood.