Your money — our investment

The term “active ownership” or active ownership is synonymous. Delegation of voting rights to a proxy advisor or fund management company (compulsory in the case of collective investments) is referred to as proxy voting.

Engagement is defined as the activity to obtain a better common understanding of responsible entrepreneurship through a proactive and cooperative dialogue and to encourage these companies to implement measures and achieve goals that have positive effects in the area of ESG. It also makes the corresponding investment processes and decisions easier to understand for them.

When it comes to engagement, it makes sense for many institutional investors such as pension funds, investors and civil foundations to pool their forces and votes in so-called engagement pools. These pools are managed by specialized agencies, which then engage in dialogue with companies on behalf of their members.

The TRANSPARENTA Stewardship Committee is involved in this, drawing on recommendations from the sustainability agency Inrate responsible for efficient and expert implementation.

The Stewardship Committee consists of the following four members:

• Barbara Heller, Investment Commission Representative
• René Lüthi, Deputy Board of Trustees
• Fabian Thommen, Deputy Managing Director
• Alex Tobler, Investment Commission Representative

For each individual general meeting, the Stewardship Committee actively reviews Inrate's voting rights recommendations and determines the final vote. In 2023, 9 virtual meetings (previous year: 11) were held for this purpose. At 45 general meetings (previous year: 44), the vote was as follows:

• Total agenda items: 1,164
• Total rejections: 151
• Total assumptions: 1,013

In the interests of transparency, we publish detailed financial reports with the disclosure of voting behavior for each individual general meeting.

On behalf of RSG, Inrate Dialogues with listed companies in Switzerland on environmental, social and governance issues. The long-standing exchange is based on analytical facts and mutual trust.

RSG membership enables TRANSPARENTA to participate cost-effectively in this professional engagement process and, in addition to having a say, receives transparent insight into the processes and results. The Stewardship Committee brings the Foundation's point of view to each individual annual meeting with Inrate and at the RSG meeting and makes suggestions for the further development of the commitment.

• In 2023, Inrate carried out a total of 105 engagements (previous year: 112) from a universe of 169 companies, 14 of which were full engagements (previous year: 15) with personal meetings.
• The main topics defined by RSG were as follows:
  • Environmental: CO2 emissions Scope 3, sustainable products and services, biodiversity
  • Social: Human rights due diligence in the supply chain, psychosocial risks in the workplace
  • Governance: Board of Directors competencies, ESG criteria in the compensation system, corporate governance assessment

The details with specific examples can be found in Inrate's 2024 Engagement Report.

Sustainability assessments are carried out using so-called ESG criteria by various recognized rating agencies (MSCI, Inrate etc.).

In the relevant stock market indices, there are significant companies that are active in several business areas. In order to implement the exclusions efficiently and in line with risk, maximum turnover thresholds are used for classification as controversial. The thresholds vary depending on the business sector and exceeding them will result in the exclusion of the title. In general, the following maximum turnover thresholds are applied. For individual collective investments used, there may also be more restrictive thresholds, but never higher.

• alcohol (10%)
• Gambling (10%)
• Tobacco (5% production/15% turnover)
• Controversial weapons such as ABC weapons, mines, cluster bombs, etc. (0%)
• Conventional weapons and components (10%)
• Civilian firearms (5% production/15% turnover)
• Nuclear energy (10%)
• Thermal coal energy (5%)
• Unconventional oil and gas production (5%)

TRANSPARENTA excludes investment instruments that are highly speculative or non-transparent a priori. They contradict our understanding of sustainability. These are hedge funds or direct investments in fossil and agricultural commodities (crude oil, natural gas, coal, grains, soft commodities, the livestock sector).

The term ESG stands for looking at companies in three dimensions:

• Enenvironmental
• Social
• Governance

For example, criteria such as efficient energy consumption, compliance with workers' rights and the independence of the Board of Directors are assessed.

In the context of an index-oriented investment style, ESG integration aims to maximize the ESG rating value for the relevant investment categories — these are usually equities and bonds — given risk requirements (tracking error). This means that financial performance develops as much as with the base index, but that more capital is invested in the actual portfolio in companies with high rating values than in the base index (and no capital at all in those with very low ratings). This is also referred to as “positive screening.”

When it comes to foreign equities, TRANSPARENTA uses the MSCI ESG Leaders Index on a so-called best-in-class approach. This consistently favors companies that score best in terms of overall ESG ratings compared to their industry competitors. The selected index fund only invests in companies that achieve a certain minimum rating or are among the top 50 percent of their sector in their continental region. Because this still involves investments in over 700 companies, excellent diversification is ensured.