Inclusion of sustainability risks in investment decisions and disclosure of adverse effects
Please find below:
- relevant information pursuant to EU Regulation 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (“Disclosure Regulation”).
- relevant information regarding the engagement policy, engagement report and voting behavior of Oldenburgische Landesbank AG pursuant to Section 134b of the German Stock Corporation Act (AktG)
- OLB's disclosures on its role as a financial market participant in the context of financial portfolio management, especially the "statement on principal adverse impacts of investment decisions on sustainability factors", are not relevant for customers of Wüstenrot Bausparkasse and Württembergische Versicherung (W&W). The same applies to the information on insurance advice, which is not relevant for W&W. For customers of our cooperation partner W&W, only the disclosure on investment advice in the capacity of financial advisor is relevant.
Sustainability Compass
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Information pursuant to Art. 3 of the Disclosure Regulation
Change history:
Aug. 2, 2022: Addition of specific details on the inclusion of sustainability risks in investment consulting and financial portfolio management operations; removal of the respective outlook.
Dec. 30, 2022: Update of the process governing the incorporation of sustainability risks
Jan. 15, 2024: More specific description of the process governing the incorporation of sustainability risks
May 8, 2024: Clarification on the roles of financial market participants and financial advisors
This statement describes and explains the strategies OLB applies to incorporate sustainability risks into its investment decision-making processes and its investment and insurance consulting activities. The statement is updated on an ongoing basis and aligned with any progress made in the implementation of sustainability activities. According to Article 2 No. 22 SFDR, sustainability risks are environmental, social or governance events or conditions that, if they occur, could cause an actual or a potential material negative impact on the value of the investment. For example, environmental risks may arise from climate-related weather events such as heavy rainfall, storms and droughts (physical risks), or from the transition to a low-carbon economy, e.g. through increased carbon prices for emissions-intensive industries or changes in social attitudes and consumption patterns (transitory risks). In the social sphere, these include risks arising from non-compliance with labour standards and, in the area of corporate governance, reputational risks arising from breaches of anti-corruption rules.
As a financial market participant and advisor, the Bank is aware that sustainability risks may have a negative impact on the returns of the financial products it offers. It should be noted that these risks are difficult to quantify and affect, among other things, the industry risk, the price change risk, the issuer risk or the dividend risk of the respective investment product. For this reason, when recommending financial products, OLB relies on a broad diversification of investments in order to minimise the impact of sustainability risks on the client's portfolio. Different asset classes, sectors and regions are considered in order to achieve a customised risk/return profile.
The Bank uses information from a recognised external data provider (currently MSCI ESG Research) to assess sustainability risks. Using this data, the sustainability risks of financial products are assessed and compared with the MSCI ESG Research rating. This ensures an objective assessment of sustainability risks that is independent of OLB. The MSCI ESG rating model identifies the most important sustainability risks for an industry or sector on a scale from AAA to CCC.
Consideration of sustainability risks in financial portfolio management
As part of the investment decisions for financial portfolio management, sustainability risks are taken into account in the selection of individual financial products, in addition to diversification aspects. Financial products with a very high sustainability risk (MSCI ESG research rating "B" and "CCC") are excluded from investment. The absence of an MSCI ESG rating also leads to exclusion. In the case of certificates, sustainability risk is considered at the level of the underlying asset to ensure a comprehensive assessment.
In addition to the initial review, the financial products included are reviewed for changes in sustainability risk at least once a year, or every six months for complex products. A financial product will be divested from the financial portfolio management if the regular review of sustainability risks identifies a deterioration in the MSCI ESG rating to a very high sustainability risk.
Consideration of sustainability risks in investment advice
As part of the investment advisory process, sustainability risks are carefully considered through a product selection process that precedes the advisory process. This product selection process ensures that only products with no unreasonably high sustainability risks are included in the advisory universe. Financial products with a very high sustainability risk (MSCI ESG rating "B" and "CCC") are excluded from investment advice. The absence of an MSCI ESG rating also leads to exclusion. For certificates, sustainability risk is considered at the level of the underlying asset to ensure a comprehensive assessment.
Consideration of sustainability risks in the context of insurance consulting activities
As a tied agent (within the meaning of Sec. 34d (4) GewO/new version: Sec. 7 (1) No. 1), OLB offers advice and brokerage of insurance exclusively in the name and for the account of Allianz Lebensversicherungs-AG.
Allianz Lebensversicherungs-AG provides information on its strategies for taking sustainability risks into account when making investment decisions here.
Change history:
Aug. 2, 2022: Addition of specific details on the inclusion of principal adverse impacts (PAI); insertion of subheadings to improve legibility
Dec. 30, 2022: Update of the process governing the incorporation of principal adverse impacts (PAI) on sustainability factors
May 22, 2023: Editorial change
June 30, 2023: Publication of the statement for the 2022 financial year
Jan. 15, 2024: Update of strategy at company level and update of the statement for the 2022 financial year
May 15, 2024: Inclusion of the new policy decision on the consideration of adverse impacts on sustainability factors as part of due diligence obligations at the company level and publication of the statement for the 2023 financial year
Sep. 26, 2024: Reformatted publication and update of the statement for the 2023 financial year
As a financial market participant pursuant to Art. 4 of the SFDR, Oldenburgische Landesbank AG (hereinafter referred to as "OLB") considers the principal adverse impacts of investment decisions on sustainability factors as part of its due diligence at the corporate level. Pursuant to Art. 2 No. 24 SFDR, sustainability factors include environmental, social and employee matters, respect for human rights and the fight against corruption and bribery.
To consider the sustainability factors according to Art. 4 SFDR, OLB has developed a strategy that includes the identification, weighting and measurement of the Principal Adverse Impact Indicators (PAIs) according to Annex I-III of the Delegated Regulation (EU) 2022/1288. The strategy was approved by the management body as part of the ESG policy (basic decision of the management body).
In the context of financial portfolio management, not only the mandatory PAI indicators from Annex I of the Delegated Regulation are used, which always reflect the most significant adverse impacts, but also additional PAI indicators that are considered relevant for the respective financial market participant, i.e., at least one PAI indicator from Table 2 and Table 3.
The measurement and analysis of the PAI indicators for the required investment universe is carried out in cooperation with recognised ESG data providers, with MSCI Research currently playing a significant role. The determination and weighting of the optional PAI indicators is based on an in-depth examination of the corresponding data availability and quality.
The present statement is the consolidated statement on the principal adverse impacts on the sustainability factors of OLB.
Change history:
Sep. 26, 2024: Separation of the ' Statement on principal adverse impacts of investment advice on sustainability factors ' from the corresponding disclosures as a financial market participant and insurance advice.
In connection with its investment advice as a financial advisor pursuant to Article 4 of the SFDR, Oldenburgische Landesbank AG (hereinafter referred to as "OLB") considers the principal adverse impacts of investment decisions on sustainability factors as part of its due diligence. Pursuant to Art. 2 No. 24 SFDR, sustainability factors include environmental, social and employee matters, respect for human rights and the fight against corruption and bribery.
The adverse impacts, also referred to as Principal Adverse Impacts (PAI), include negative, significant or likely significant impacts on sustainability factors. They may be caused or exacerbated by, or directly related to, OLB's investment decision or advice.
In order to ensure that the investment products made available to investors are designed to avoid adverse impacts on sustainability factors, these products are classified in accordance with the regulatory information required from issuers or product manufacturers.
Based on the product data, the indicators listed in Table 1, Annex 1 of the Regulatory Technical Standards (RTS), and published by the respective product manufacturers/issuers, are broken down into the five main categories according to the industry standard: Avoidance of Greenhouse Gas Emissions, Reduction of Biodiversity, Water Pollution, Hazardous Waste, and Negative Social and Employee Concerns.
In addition, OLB assesses whether relevant financial products, such as real estate funds, disclose the inclusion of “Energy Efficiency” and “Fossil Fuels” indicators in the case of real estate companies.
This comprehensive transparency and classification of brokered financial products based on product data enables OLB to take substantial account of the principal adverse impacts on sustainability factors when providing investment advice.
Change history:
Sep. 26, 2024: Separation of the Statement on principal adverse impacts of insurance advice on sustainability factors ' from the corresponding disclosures as a financial market participant and investment advice.
In connection with its insurance advice as a financial advisor pursuant to Article 4 of the SFDR, Oldenburgische Landesbank AG (hereinafter referred to as "OLB") considers the principal adverse impacts of investment decisions on sustainability factors as part of its due diligence. Pursuant to Art. 2 No. 24 SFDR, sustainability factors include environmental, social and employee matters, respect for human rights and the fight against corruption and bribery.
As a tied agent (Section 34d (4) of the German Trade Regulation Act (GewO)/new version: Paragraph 7, Sentence 1, No. 1), OLB provides insurance advice and brokerage exclusively in the name of and for the account of Allianz insurance companies.
Information on the consideration of principal adverse impacts on sustainability factors in insurance advice by Allianz Lebensversicherungs-AG is available here.
Information pursuant to Art. 5 of the Disclosure Regulation
Change history:
July 11, 2022: Inclusion of qualitative targets for sustainable corporate development in the variable remuneration of executive board members and non-pay scale employees.
April 17, 2023: The targets for sustainable corporate development in the variable remuneration of Executive Board members and non-pay scale employees are no longer purely qualitative; the information in the first indent has been adjusted accordingly.
April 30, 2024: The remuneration policy statements have been clarified with respect to the integration of sustainability risks and the corresponding disclosures in the second bullet point have been adjusted.
- A share of 10-15% of the variable remuneration paid to executive board members and non-pay scale employees at OLB is linked to qualitative targets related to sustainable corporate development.
- OLB's remuneration policy ensures that the remuneration of its Board of Managing Directors and employees is consistent with their duty to act in the best interests of their clients. The remuneration structure does not encourage the recommendation of financial products that do not fit the client's investment strategy, nor does it encourage excessive risk-taking when advising clients. The (variable) remuneration of the Bank's Board of Managing Directors and employees is neither positively nor negatively influenced by sustainability risks associated with financial products brokered or issued by OLB.
- As a tied agent (Section 34d (4) of the German Trade Regulation Act (GewO)/new version: (7) Sentence 1 No. 1), OLB provides insurance consulting and brokerage services exclusively to, and for the account and on behalf of, Allianz insurance companies. In the case of insurance investment product brokering, the relevant company is Allianz Lebensversicherungs-AG.
OLB’s compensation as an agent is based on commissions (included in the insurance premium) and is not linked to the sustainability risks associated with the brokered insurance investment products. This also applies to the remuneration paid to OLB’s employees.
Change history:
June 22, 2023: Completion of the information on the occasion of the regular update
OLB provides financial portfolio management services to its clients. However, OLB does not exercise any shareholder rights pursuant to Section 134b (1) AktG on behalf of its clients as part of these financial portfolio management services. OLB defines the mandate entrusted to it by its clients as the professional management of the clients’ assets. In this context, the main focus is on risk-appropriate growth of the clients’ assets. OLB does not regard itself as a legitimate representative of shareholder rights. Apart from this, the bank would not be in a position to do justice to the diversity of its clients’ interests when it comes to exercising shareholder rights.
Our engagement policy has thus been defined as follows:
- OLB does not exercise any shareholder rights within the meaning of Section 134b (1) No. 1 AktG. The bank exercises the right to a share in profits as defined in Sections 60 ff. AktG and to subscription rights in the interests of its clients.
- Important matters relating to the companies within the meaning of Section 134b (1) No. 2 AktG are monitored via the statutory disclosure of information by the companies in their financial reports and ad hoc announcements.
- An exchange of opinions with the company’s corporate bodies and/or stakeholders pursuant to Section 134b (1) No. 3 AktG does not take place.
- Collaboration with other shareholders pursuant to Section 134b (1) No. 4 AktG does not take place.
- In the event of conflicts of interest within the meaning of Section 134b (1) No. 5 AktG, such conflicts will be disclosed to the parties concerned in accordance with the statutory provisions.
- Annual reporting on the implementation of the engagement policy pursuant to Section 134b (2) AktG is not required, as the bank does not exercise any corresponding rights.
- Voting behavior within the meaning of Section 134b (3) AktG is not disclosed as the bank does not participate in any voting.
OLB does not pursue an engagement policy in accordance with Article 3g of Directive 2007/36/EC of the European Parliament and of the Council. For the reasons stated above, the financial portfolio management strategy does not provide for an adjustment of the engagement policy if no reduction in the principal adverse impacts is observed over several reporting periods.