The two organisations have been chosen by the Federal State of Berlin to support its long term divestment for public pension funds management.
Oekom research AG, a leading expert in ESG research and analysis and Solactive AG, the German multi-asset index provider specialized in the creation of customized financial indices will aid the development of a sustainable equity index to aid the disinvestment.
Berlin is one of the latest capitals to join the movement that has seen cities, such as Oslo and Stockholm, commit to divestment as a response to climate change.
In summer 2016, Berlin announced a plan to divest its reserve funds from companies involved in the extraction of fossil fuels (i.e. coal, oil and natural gas), or operating in disputable industries such as nuclear and arms, or that do not comply with the principles promoted by the UN Global Compact. To put the plan into action, a sustainable equity index will be developed in a joint collaboration by Oekom research and Solactive. The index, which will be customized to the State of Berlin’s divesting policies, not only aims to achieve the aforementioned qualitative goals but will also allocate funds to ESG-related investment objectives, while ensuring the ease of tradability of the index constituents.
For this project, Oekom research and Solactive were selected among other contestants by the Senate Department for Finance of Berlin thanks to the compelling index concept which was jointly pitched. Both companies have a long track record of experience in their respective fields and this collaboration brings together the best of both worlds – expertise in ESG rating with an in-depth know-how of index construction – in a combined solution.
“We received numerous excellent applications and concepts which proves that sustainability becomes an increasingly relevant topic for the financial sector”, says Dr. Matthias Kollatz-Ahnen, Senator for Finance of the State of Berlin. “I am convinced that with the decision for oekom research and Solactive, Berlin found very strong partners and will be able to set a new benchmark for sustainable investment strategies for public funds.“
Robert Haßler, CEO Oekom research, adds:
We are very much looking forward to support the Federal State of Berlin with our sustainability research and data about company-related climate risks.
“With our expertise as divestment partner for municipal climate pioneers such as the cities of Stuttgart or Münster as well as the long lasting close cooperation with Solactive in regards to sustainability indexes we surely will be able to make a meaningful contribution to the climate plans of Berlin.“
Steffen Scheuble, Chairman and founder of Solactive, explains: “As index providers, we see a high demand for sustainability indexes. A number of studies have shown that companies that do not follow sustainability strategies might lag in relative performance due to ESG related risks. Therefore, we are very proud to support – together with Oekom research – the State of Berlin with our sustainability index. When defining the index concept, we put a lot of effort in coming up with the best possible combination of sustainability and tradability of the composing shares.”
Oekom research already supports the capital of the German Federal State Baden-Wuerttemberg, Stuttgart, with its carbon services and filters out all the issuers within an investment universe that breach specifically defined exclusion criteria. In addition, the city of Münster, which has become the country’s first local authority to commit to decarbonisation, has tasked the rating agency with analysing its medium- and long-term investments in potentially climate-damaging or non-sustainable companies and projects. With now supporting Berlin, Stuttgart and Münster, Oekom research is partner of the spearhead of Germany´s municipal divestment movement.
Solactive and Oekom research have already been partnering in regards to several projects for sustainable investments. In May 2015, the Solactive Oekom Ethical Low Volatility Index was launched, which was created to track the price movements of low volatility stocks passing the ESG screenings of Oekom research. The lasting success of that project and an increasing demand in sustainability-indices proves that sustainable and responsible investment pays off. It becomes increasingly important to exclude companies from investments that do not comply with the strict sustainability criteria.