Information about Saxo’s sustainability risk policy
This policy outlines Saxo’s approach to integrating Environmental, Social and Governance (ESG) factors within its investment risk management. Sustainability risk is of increasing importance. If this is not managed, it can have multiple consequences, including financial, legal and reputational. As Saxo includes sustainability risks in its investment framework, it helps us identify and manage potential adverse impacts to the environment and to human rights, as well as the associated risks affecting our clients and us. Saxo offers different products including managed sustainable solutions for clients. This Policy is reviewed periodically and updated when necessary to reflect changes in circumstances and actual practice.
The objective is to take sustainable risks due to environmental, social or governance events into consideration in the investment decisions.
From a due diligence perspective, Saxo integrates the sustainability factors into the investment process. This includes an assessment of the likely impacts of sustainability risks on the financial return. Sustainability risks means if an environmental, social or governance event occurs could cause an actual or a potential material negative impact on the value of an investment.
The use of ESG criteria may affect performance and therefore ESG investing may perform differently compared to a non-ESG benchmark that do not use such criteria. The relevant exclusions might not correspond directly with specific investors own subjective ethical views.
Sustainability risks may have an impact on long-term risk adjusted returns for investors. Assessment of sustainability risks is complex and may be based on ESG data which is difficult to obtain and may be incomplete, estimated, out of date or otherwise materially inaccurate. The impacts resulting from the realisation of sustainability risks may be numerous and may vary upon the specific risk, the region, sector and type of assets.
Examples of each type of ESG risk could include the following:
- Environmental: climate change - ‘stranded assets’ risk
- Social: human rights - operating unethical and illegal working conditions
- Governance: transparency & integrity - lack of appropriate board oversight and decision making structures
Saxo will put appropriate processes in place to monitor, assess and manage the potential and actual impact of ESG risks on individual funds and portfolios on an ongoing basis. In evaluating a fund or portfolio on ESG criteria, Saxo is dependent upon information and data from third parties.
As Saxo works with asset managers to construct portfolios, part of the due diligence process is to judge the ESG framework the asset manager has in place, e.g. the staff involved regarding ESG matters, engagement and portfolio ESG risks.
The main risk is that the asset managers should have the right tools (e.g. data) in place to make the right investment decisions - e.g. excluding specific companies for a fund taking ESG into account - as this could have an impact on investment returns.
Last updated: 10th March 2021