Swiss ESG firm Ethos teams up with Pictet for global low-carbon equity fund

Influential pension fund-backed advisor also signs Montreal carbon pledge

Ethos, the pension-backed Swiss proxy and ESG (environmental, social and environmental) firm, has launched a new fund that targets low-carbon companies outside of Switzerland and signed the Montreal Pledge obliging it to disclose its carbon footprint.

The new fund, called ‘Ethos – Equities Sustainable World ex CH,’ starts with a universe of 400 companies that Ethos says are best-in-class in terms of ESG and emissions of carbon dioxide (CO2). Sectors that Ethos excludes outright for moral reasons include weapons, nuclear power, tobacco, genetically modified goods, gambling and pornography.

Swiss private bank Pictet, the fund’s manager, then applies its own ESG and financial analysis, yielding a final group of 120 investable companies. The benchmark for the fund is the MSCI World excluding Switzerland. According to Ethos, the fund’s carbon footprint equals 54 tonnes of CO2 compared with around 237 tonnes for the benchmark.

“Our selection included some companies from the energy sector but these did not make the final cut due to Pictet’s financial analysis,” Ethos CEO Vincent Kaufmann told Responsible Investor.Kaufmann said examples of companies that did make the final cut were Danish health care firm Novo Nordisk, US tech giants Apple and Microsoft, US telecoms giant Verizon and MTR, the listed operator of Hong Kong’s public transit system.

Kaufmann also said the new Ethos fund was starting with CHF40m (€36.7m) in seed money, adding that it was targeted to all Swiss institutions that wanted to invest sustainably. Ethos is backed by 215 Swiss pension funds and foundations for whom it provides proxy advisory services and fund management.

Apart from the latest product, Ethos offers three other sustainable funds to Swiss investors. One invests in small- and mid-cap Swiss equities and is managed by Pictet’s peer Vontobel. Another invests in large-cap Swiss equities and is managed by Pictet. The third fund concentrates on North American equities.

Coinciding with Ethos’ latest fund launch is the announcement that it has signed up to the Montreal Pledge which was unveiled during the PRI in Person conference last year. Reporting on its carbon footprint, Ethos said the combined carbon emissions of its four equity funds, including the latest product, were almost 70% below the level for the relevant benchmarks.