The Evaluation process

How are enterprises getting identified, whose equity is taken up into sustainability Funds?

In practice there are different understandigs of sustainability and derived from that different ways of evaluation. An evaluation process then takes place when new enterprise shares are to be taken up to a fund.

The evaluation process starts with a pool (universe of the shares and obligations) of enterprises which could be suitable. Which enterprises are taken up to this pool, depends on the strategy of the fund. Some fund offerers lean on reference indices (e.g. the MSCI World) for their title selection. Therefore only those enterprises are suitable, whose shares are contained in the reference index. Other fund offerers even limit the enterprise selection following own criteria (e.g. only larger enterprises).

For the realisation of the social and ecological assessments of companies, the portfoliomanager needs information. Most fund offerers assign external specialists for that. Fund-specific valuation criteria thereby, which depend on philosophy and strategy of the fund form the basis for the evaluation and finally decide, whether an enterprise is taken up to a sustainable fund or not.

The social and ecological evaluation takes place in two steps for nearly all funds available in Switzerland. The primary research covers a questionnaire, which is sent to all the company having to be examined. Exceptions form thereby the funds, which concentrate on pioneers. The data of the enterprises are thereafter examined by means of secondary research. Medium search and information purchase via third sources (e.g. environmental protection federations) stand in the foreground. This way of evaluation aims to prevent shares of companies to be accepted, which have been or are implicated into problematic incidents. In addition, all institutes applicate a current Screening; i.e. all titles in the sustainability funds are newly judged in a bi-annual rhythm.

The economic investigation of the single shares does not take place in a different way between the sustainability funds and the conventional ones. All institutes, which offer sustainability funds, judge the selected shares always basing on economic criteria. The goal of a participation in sustainability funds, beside the ecologically and socially interesting commitment, is always the obtention of an appropriate net yield.


Difficulties of the data processing

There is presently no standard to measure transparently and comprehensively the sustainable economical acting of an entreprise. In addition comes, that the enterprises are not committed to publish environmental and/or social reports. By means of questionnaires and medium searches is tried to, the eliminiation of this information asymmetry is aimed at. Thereby the fact shouldn’t be underestimated, that ther is wuite often an information deficit concerning environmental and social key figures even within the enterprises themselves.[1]

The evaluation of the sustainability dimensions is usually based on subjective self-estimates of the company and foreign estimate by a Rating Institut. Qualitative aspects can only partly be standardized. Another evaluation problem is added to the above mentionned information problem. [2]



[1] vgl. Öko-Institut e.V., Darmstadt: Umwelt- und Nachhaltigkeitstransparenz für Finanzmärkte. Zwischenbericht. Darmstadt 2001, S. 49, 51

[2] vgl. Öko-Institut e.V., Darmstadt: Umwelt- und Nachhaltigkeitstransparenz für Finanzmärkte. Zw’bericht. Darmstadt 2001, S. 50/53