Sustainability at FPM Frankfurt Performance Management AG (as at February 2022)
The Management Board of FPM AG has developed a sustainability management system to ensure that sustainability aspects are taken into account in all areas of activity. Sustainability guidelines exist both for in-house operations-related environmental protection and for the management of our portfolios. The management of these two areas is to be further developed with regard to the Paris Climate Agreement and the SDGs. At the same time, climate risks, for example, have been firmly integrated into risk management. In addition to successful long-term business development, we are thus pursuing the goal of creating value for our customers, business partners and employees while at the same time meeting our social responsibilities.
In-house operations-related sustainability issues:
Even though our company is a "small" one, we make a positive contribution to reducing CO2 emissions. For this purpose, we recorded the emissions that are directly caused by our activities in the company. These include, for example, emissions from direct energy consumption in buildings (heating, electricity) or from the consumption of materials (paper, printer cartridges, etc.). Likewise, emissions that arise as an indirect consequence of corporate activities from sources that cannot be directly attributed to the company. We currently determine these for air travel, rail travel or car/rental car use by our employees for business trips and analyze the CO2 consumption using a tool by the provider MyClimate.org.
Half of our employees use a bicycle, public transport or walk to get to the office. All employees have been provided with a Bahncard 50. Our travel policy for business trips recommends the preferential use of rail over other modes of transport. Business trips within Germany are not made by air travel. In the table above, it is important to bear in mind that the low km figures for 2020 were pandemic-related and that increased travel activity is expected again in the current and subsequent years.
As a general rule, our electricity needs at the FPM AG office have been covered entirely by green electricity since December 2020. We have issued rules to save energy, in the use of lighting or air conditioning. Employees should always activate the energy-saving mode on electronic devices when they leave their workplace.
We have calculated the CO2 footprint of heating and electricity consumption using the CO2 calculator of the German Federal Environment Agency.
Switching the heating to an eco-rate is currently not possible due to the fact that the office space is rented and there is a central heating supply for the entire building.
New windows have been installed in the offices by the tenant. Even in summer, cooling is provided as best as possible by natural air exchange. The air-conditioning unit in the server cabinet operates in an energy-efficient manner.
IT or other electrical equipment is disposed of to social welfare organizations in the case of equipment in functioning condition, and to IT or equipment recycling providers in the case of defective equipment.
A survey of FPM AG's energy consumption is carried out at least once a year and constitutes for us the basis for a conscious and environmentally friendly use of natural resources. Based on this data, energy efficiency measures are planned and initiated and cost reduction measures are implemented.
We have been working paperless in the entire controlling and accounting processes since 2006. The exchange of data with our tax advisor, our bank, and our external auditors takes place entirely by digital means. In sales, all presentations or customer information are provided electronically. Exceptions are only made for regulatory requirements or explicit customer requests. The same applies to portfolio management and research, where processes are digitized. In the area of trading, there are still physical record-keeping requirements for trading documents. In this area, the amount of paper required cannot yet be reduced any further. As a general rule, our printers are set to black and white and double-sided printing.
The digitization of the office allows us to work more flexibly and productively. Our employees spend less time digging through files and can concentrate on key tasks. They need less space and materials. In addition, the digitization of the office made the migration to home office in 2020, due to the pandemic, faster and easier than in a traditionally organized office.
All employees are free to work from home offices at any time. Instead of traveling, many meetings take place via video call. These two measures also offer great potential for reducing monetary and environmental costs in the future.
In our purchasing, we pay attention to energy label certifications for new equipment. We reduce any small, inefficient orders to a minimum. By choosing main suppliers, we have reduced transport emissions and packaging waste. In addition to office supplies, this also applies to food consumed and cleaning products used in the office. Water usage in the office has also been reduced through efficient appliances and user awareness. In the area of food, emphasis is placed on local products, their resource-saving production and packaging in reusable materials.
According to our evaluations, our business trips and heating consumption produce the highest greenhouse gas emissions. By switching to green electricity, the CO2 footprint for electricity will be reduced by 90% next year. These evaluations serve as the basis for the annual survey of our greenhouse gas emissions.
We are currently reviewing several projects with the intention to compensate our greenhouse gas emissions on an annual basis.
Sustainability concept in portfolio management for the funds
Foreword: We provide our services as initiator for and manager of investment funds launched by capital management companies such as the Universal Investment Group. Our sustainability related topics in the products are integrated in the legal sales documents, especially in the sales prospectuses of the funds. Through the capital management companies, binding exclusion criteria, such as controversial weapons or exploitative child labor, were already agreed for the portfolios at the beginning of our cooperation.
As part of the investment process for the fund mandates we manage, the relevant financial risks are included in the investment decision and assessed on an ongoing basis. Relevant sustainability risks as per Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosure requirements in the financial services sector (Sustainable Finance Disclosure Regulation, "hereinafter the SFDR"), which may have a material adverse effect on the return of an investment, are also taken into account.
Sustainability risk is defined as an environmental, social or governance event or condition, the occurrence of which could have a material adverse effect on the value of the investment. Sustainability risks can therefore lead to a significant deterioration in the financial profile, liquidity, profitability or reputation of the underlying investment. Unless sustainability risks are already taken into account in the investment valuation process, they may have a material adverse effect on the expected/estimated market price and/or liquidity of the investment and thus on the return of the fund. Sustainability risks can have a significant impact on all known risk types and contribute as a factor to the materiality of these risk types.
As part of the process of selecting assets for the funds, the impact of risk indicators, including sustainability risks, are evaluated in addition to objectives and investment strategies. If sustainability risks materialize, portfolio adjustments can be made. In addition, the voting rights derived from the assets of the funds are exercised by the management company Universal-Investment in accordance with a voting rights guideline (for further information, see the participation policy on this website). This is based on the criteria of a transparent and sustainable corporate governance policy as well as further criteria from the areas of environment and social affairs, which aim at the long-term success of the assets held by the funds.
The risk quantification assessment includes aspects of sustainability risks and relates these to other factors (in particular price and expected return) in the investment decision.
In general, risks (including sustainability risks) are already taken into account in the investment evaluation process (price indication) based on the potential material impact of risks on the return of the funds. Nevertheless, depending on the asset and due to external factors, negative effects on the return of the funds may be realized.
Explanations of any adverse sustainability impacts pursuant to Article 7(1) of the SFDR will be included in the prospectuses and annual reports for the funds from December 30, 2022.
Currently, all funds managed by FPM AG are classified as Article 6 funds within the meaning of the SFDR, with the exception of the sub-fund Ladon, which is classified as an Article 8 fund within the meaning of the SFDR. For further information on the procedure in this sub-fund, please refer to "Ladon" on this website.
Strategies for managing sustainability risks
Negative environmental conditions, social disparities or poor corporate governance can have a negative impact on the value of our customers' investments and assets in several ways. These so-called sustainability risks can have a direct impact on the net assets, financial position and results of operations as well as on the reputation of the investment properties. As such risks cannot ultimately be ruled out completely, we have developed specific strategies for the financial services we offer in order to identify and limit sustainability risks.
To limit sustainability risks, we try to identify and, if possible, to exclude investments in those companies that show an increased risk potential. With specific exclusion criteria, we see ourselves in a position to align investment decisions (or investment recommendations) with environmental, social or corporate values. For this purpose, we generally apply valuation methods that are generally recognized by the market.
In addition to exclusion criteria, the sustainability concept of FPM AG provides for suitable sustainability filters. These are effective both in fundamental research analysis and in personal management discussions with company leaders.
In summary: We select those companies that meet and maintain high standards in terms of corporate, social, ethical and environmental criteria.
The portfolios are reviewed and, if necessary, adjusted on a quarterly basis. The decision to sell securities if their issuer does not or no longer meets the criteria described above is made by the portfolio management of FPM AG within three months, taking into account the interests of the investors, the capital management company, and the investment limits set out in the investment terms and conditions. Deviating decisions must be justified and documented.
Due to the different assessments of ESG rating agencies and the associated shortcomings, we are currently not using solely ESG scores from these providers as a guideline. Current research by ESG rating providers varies widely in their assessments for the same company, which is due to different perspectives of these providers. On average, the ratings are only 61 percent correlated. In contrast, in lending, the assessments of creditworthiness from different providers on a company are 99 percent correlated. Source: Aggregate Confusion; The Divergence of ESG Ratings
In addition, most smaller companies in particular have not been covered at all by ESG database providers in their analyses to date.
Failure to consider adverse impacts on sustainability factors
"We are required by law to make the following disclosures:"
Investment decisions can have adverse impacts on the environment (e.g. climate, water, biodiversity), on social and employee concerns, and can also be detrimental to the fight against corruption and bribery.
As a matter of principle, we have a considerable interest in fulfilling our responsibility as a financial services provider and in helping to avoid such effects in the context of our investment decisions (or investment recommendations). However, given the existing and upcoming administrative framework conditions, the implementation of the legal requirements specified for this purpose is not feasible at the present stage. In addition, major legal issues are still unsolved.
This also applies to the sub-fund FPM Funds Ladon classified in accordance with Article 8 (SFDR). The objectives of this sub-fund within the meaning of the Taxonomy Regulation are thus, among others, sustainable use and protection of resources, prevention and reduction of environmental pollution as well as protection and restoration of biodiversity and ecosystems. The sub-fund invests in companies whose services and products contribute to reducing CO2. Since there are no uniform standards for the actual measurability of CO2 reduction and it is therefore not possible to assess them reliably, many of the smaller target companies and start-ups in particular are not yet listed in the ESG databases of the renowned providers and the taxonomy regulation is subject to intensive political discussions, the investment decisions are made to the best of our knowledge without being able to rule out the possibility that the relevant facts could be assessed differently in the future.
However, we expressly declare that this handling does not change our willingness to contribute to a sustainable, resource-efficient economy with the aim, in particular, of reducing the risks and effects of climate change and other ecological or social grievances.