ESG integration
A central element of our sustainability approach is the integration of environmental, social and governance (ESG) aspects into traditional financial analysis. zCapital carries out the assessment of the sustainability profile itself and does not rely on external ESG rating agencies. We have one of the largest research teams for the analysis of Swiss equities and are in close contact with executives of companies in the investment universe. The knowledge we have built up over the years forms the basis to comprehensively assess the sustainability of a company.
The structured analysis process is supported by a proprietary ESG monitor which incorporates data from Inrate, ISS, MSCI, RepRisk and Glassdoor. In addition, zCapital collects its own data.
Exclusions
In our view, certain products and activities are incompatible with a sustainable equity fund. The fund therefore excludes a wide range of products and activities. For instance, companies that manufacture controversial weapons or whose business practices contradict international standards, such as the UN Global Compact or the OECD Guidelines, are not eligible for inclusion.
Companies that generate a significant proportion of their turnover from activities such as nuclear or coal-fired power generation, coal mining, fracking, oil sands extraction, tobacco sales, the production of pornographic content, gambling, or the trade in armaments or civilian weapons are also excluded. Companies that grow tobacco or whose business is heavily geared towards fossil fuels (coal, oil and natural gas) are also excluded (PAB exclusions in accordance with ESMA guidelines). Whether a company violates the exclusion criteria is assessed using data from specialised providers, among other things.
Engagement
As co-owners of the company, shareholders have a responsibility. We therefore raise shareholder concerns and address relevant ESG issues in over 600 meetings with Executive Board Members each year. The aim is to motivate companies to act sustainably. When necessary, members of the Board of Directors are contacted, written questions are submitted or requests for items to be placed on the agenda of the annual general meeting are made. Increasingly, specific ESG meetings are also held in which zCapital exchanges views with the companies' ESG officers.
Voting
zCapital always registers shares in the share register and does not engage in securities lending. Voting rights are exercised consistently. zCapital thereby acts independently. The voting decision is based on internal guidelines and considers both financial aspects and ESG criteria. In the case of companies with weak corporate governance, zCapital tries to use its voting behavior to exert influence and achieve improvements. For example, inadequate compensation systems are rejected. In the case of a board of directors that is not independent, individual non-independent members are voted out.
