March 17, 2022
Our investment process: Combined expertise for an integrated view
Sustainable corporate success can only be achieved through responsible management and action that complies with the minimum social thresholds for a just society and does not exceed the maximum ecological limits of the planet. The term "sustainability" has become established in a wide variety of areas over the last 15 years. More and more financial institutions are also selecting their investments on the basis of sustainability criteria. However, as there is no generally applicable definition of the term, it is very difficult for investors to find out exactly how financial institutions implement sustainability. Since the company was founded, Forma Futura has had a multi-stage analysis process that companies have to go through in order to be included in our investment universe (see investment process). From our research provider's global pool of over 12,000 companies, only around 250 ultimately meet our strict criteria.
Future-proof companies contributing to sustainable quality of life
The path to the Forma Futura investment universe can vary greatly depending on the company. The Danish company Vestas Wind Systems, for example, is the world's largest manufacturer of wind turbines in terms of installed capacity. It employs around 35,000 people at locations in more than 30 countries. The company operates in an industry that is making a significant contribution to the transformation of our energy system.
Wind turbines for a renewable energy future: Offshore wind farm off the Danish island of Sprogø.
(Image source: Vestas Wind Systems A/S)
A single Vestas wind turbine with a service life of 20-25 years generates around 30 to 50 times more energy than it consumes during its entire life cycle. This level of efficiency creates enormous potential for reducing carbon emissions. Vestas also demonstrates strong innovative strength. In a pilot project in 2020, Vestas installed a high-performance charging station on the motorway outside Odense in Denmark. Here, electric vehicles are charged exclusively with wind power via a 900 kWh battery. This battery is digitally synchronized with the Vestas wind turbine, which is located about 100 kilometers away. The system is the first of its kind.
Vestas provides open and transparent information about its activities. The company also demonstrates many sustainable approaches internally. Particular attention is paid to issues such as work-life balance, health promotion, training and further education, and occupational safety. Gender diversity is also an area that is constantly being developed. This includes steadily increasing the proportion of female managers and efforts to reduce the gender pay gap as much as possible.
In other areas, such as supply chain management and recycling rates, to name just two, the results are also positive. There are only a few critical points, but these are being addressed in direct dialogue. A promising company in the Forma Futura investment universe.
Open dialogue completes the analysis
However, there are also companies whose sustainability performance is more difficult to assess due to a lack of publicly available information. Examples of this can be found among smaller Swiss companies operating internationally.
These companies' sustainability reporting is generally less advanced than that of large listed companies. However, thanks to our proximity to the Swiss corporate landscape, we are able to visit these companies in person to gain our own impression of their sustainability performance. We then complete our analysis of the company based on the information we have personally obtained about its sustainability efforts in various areas. This means that even a company whose sustainability reporting still has room for improvement can make its way into the Forma Futura investment universe.
In such cases, Forma Futura supports companies in their efforts to improve sustainability reporting and provides concrete input on how sustainability could be addressed even more systematically in certain areas. This dialogue requires an in-depth examination of sustainability issues within a company and the specific material topics. However, constructive exchange with companies is greatly appreciated, and for Forma Futura it is an important part of our contribution to an economic system that promotes sustainable quality of life.
From the investment universe to the portfolio
In addition to an in-depth sustainability analysis, all companies undergo a financial analysis before being included in the Forma Futura investment universe. Among other things, the portfolio managers analyze historical and expected sales and profit growth, as well as margin development. Cash flow and a stable balance sheet are also important factors. In addition to these key figures, the company's investment case is also central. Portfolio managers critically examine the extent to which the company's products or services will continue to be important in the future. We pay particular attention to how the company is positioned relative to its competitors. In particular, we look at market position, the power of suppliers and customers, and diversification across regions and products.
Whether a company ultimately fits into a particular portfolio depends on many factors. These include the current situation on the financial markets, geopolitical risks, interest rate developments, and, of course, the client's investment profile.
The risk capacity and risk appetite of clients is highly individual—they also have very different needs. This results in specific requirements for the sustainable investment of their assets. Forma Futura's client advisors respond to the individual situation of each client and then define ahttps://formafutura.com/wp-admin/post.php?post=431&action=edit#das investment profile. Based on this, the personal portfolio manager puts together a suitable portfolio for each client.
