Germany’s DWS has said it will enforce stricter ESG investment criteria in its funds by using forward looking data to identify and engage issuers with high climate transition risks and those that violate international sustainability standards.
The firm’s “smart integration” system was developed before the Covid-19 pandemic, but is expected to become increasingly important during the fallout of the coronavirus and the need to rebuild the global economy, according to the asset manager.
Chief executive Asoka Woehrmann said: “The dialogue with companies on corporate strategy – engagement – is the most powerful tool we have as a fiduciary asset manager to make a positive impact on ESG practices.”
As an initial step, the new process will apply to approximately a fifth of DWS’ total global assets under management, targeting non-ESG focused funds in particular.
Over the course of the year, it will be further rolled out to ensure greater ESG integration across the broader investment platform of DWS.
In a statement the firm said that avoiding companies with excessive climate transition risk may lead to lower carbon intensity in its active investment platform.
Severe ESG risk takers tend to be associated with a higher likelihood for significant adverse consequences on their financial position or reputation, the fund house said.
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