Method and Data
Evaluating sustainability risks is fundamental to our traditional financial analysis and investment process. These risks encompass environmental, social, or governance (ESG) related events or conditions that can potentially have a material negative impact on the investment’s value. Over time, sustainability risks may influence financial risks, thereby affecting the values of investments.
At Ress Capital, our goal is to invest in companies whose operations foster a positive, long-term impact on the societies in which they operate. In our sustainability analysis, we consider potential negative consequences of investments for sustainable development. Considering negative consequences in the investment process can lead to benefits not only in financial markets but also strengthen the resilience of the entire economy and the stability of the financial system.
To measure the achievement of environmental or social characteristics Ress Capital uses the following indicators:
- Number of insurance companies that contribute to social cohesion
- Number of insurance companies that do not contribute to social cohesion
- Number of insurance companies that follow international norms and conventions
- Number of insurance companies that violate international norms and conventions
To ensure that the life insurance companies within the fund, where the life insurance policies are held, comply with international agreements and standards, the fund conducts portfolio screening four times a year. In this screening, we aim to ensure compliance to global norms for environmental protection, human rights, labor standards, and anti-corruption.
Data sources and processing
To evaluate potential sustainability-related risks, screenings of the portfolio are conducted based on ESG risk rating data from an external and independent provider, Sustainalytics, which is a part of Morningstar. Life insurance companies are analysed from a sustainability perspective both during the investment period and regularly after the investment is made. Our analysis is grounded in both quantitative and qualitative assessment.
The ESG risk rating, sourced from Sustainalytics, provides an absolute measure that enables comparisons among companies and industries worldwide. Ranging from 0 – 100, where zero represents the lowest risk. The ESG risk rating categorises companies based on the level of risk. It ranges from negligible to severe, providing a clear indication of how well a company is managing ESG-related risks.
The information collected is an ongoing process where changes in sustainability risks and performance are followed up and considered on a quarterly basis. Our conviction to invest in certain policies can thus be strengthened and weakened based on the sustainability analysis.
Limitations to methodologies and data
A limitation to methodologies and data lies in the quality and, consequently, the reliability of the gathered data. Sustainability factors are challenging and intricate to compute, requiring large resources. As a result, a significant proportion of the data is still reliant on estimations.