German private bank Metzler hires F&C for engagement for €12bn portfolio

Major win for F&C’s Responsible Engagement Overlay (REO) offering

Bankhaus Metzler, one of Germany’s most prestigious private banks and a signatory to the Principles for Responsible Investment (PRI), has hired UK asset manager F&C Investments as its engagement and voting agent for a portfolio of equities and corporate bonds worth €12bn.

The deal calls for F&C – acquired earlier this year by the Bank of Montreal – to represent Metzler’s ESG (environmental, social and governance) priorities with respect to the underlying companies in the portfolio. Financial details were not disclosed.

“With F&C’s Responsible Engagement Overlay (REO) we are better able to influence companies in terms of getting their business on a sustainable footing,” said Rainer Matthes, Chief Executive of Metzler Asset Management. “This complements the ‘best-in-class’ strategy that we have already implemented for our sustainably managed portfolios.”

This strategy, which overweights the most sustainable firms in a given sector, involves the use of a filter based on 400 criteria developed by German ESG research firm Oekom.

Beyond exclusionary criteria like banned munitions (i.e. cluster bombs) and child labour, companies are scored on the basis of their diversity, the environmental record, supply chain management, energy efficiency and corporate governance.Such priorities will now be reflected in F&C’s REO mandate from the private bank.
Until now, Metzler had been handling engagement and voting internally, as most of this action focused on the German market. Speaking to Responsible Investor earlier this year, the bank said that while it was a relatively small investor (total AuM: €30bn), German companies took its input very seriously.

“Of course the name Metzler opens doors, but a bigger reason is that they want to keep us as shareholders,” said Frank Heise, Director of Portfolio Management. Heise added that during the engagement visits, which totalled 180 last year, the bank speaks to a corporate executive 99% of the time.

But Metzler also said at the time that it planned to extend its engagement and voting to international companies, which is why it was looking to hire an external firm. It has now found one in F&C.

The win adds to the around €11bn of assets in Germany covered by REO and €112bn worldwide. F&C’s other big REO mandate in Germany is with the Bayerische Versorgungskammer, the country’s biggest pension fund. Under that mandate, which F&C won in 2011, the asset manager is engaging and voting on a portfolio of stocks and corporate bonds worth a total of €4.6bn.