Equities: selection process

Our equity selection process

Our approach to equity investments goes beyond sustainability characteristics alone; we also have a clear sustainability objective that we pursue in the long term (such as investments that contribute to reducing CO2 emissions). When we talk about investing with sustainability characteristics, this means, among other things, that we do not invest in companies that are active in weapons, tobacco, gambling, and thermal coal. For other investments, we apply so-called ‘threshold values’, which determine which companies we do or do not invest in. For example, companies that derive a large part of their turnover from electricity production from coal, nuclear energy, and oil and gas are excluded. We also do not invest in companies or countries that do not treat human rights or working conditions well.

We do not try to predict the direction of the market or how certain stocks will react to the issues of the day. Instead, we invest in companies that are capable of generating above-average profitability over the long term. We believe that investments that are in line with our sustainable investment policy, as well as investments in companies with good financial and non-financial ratios, combined with a well-considered diversification of investments, add value to our investment portfolio and to society. In line with this conviction, we believe that investments that meet these conditions deliver both greater economic and social value. Moreover, they come with lower risk. That is why our strategy is based on this approach.

This method involves drawing up financial and non-financial ratios.

How we select our stocks

We carefully select companies through in-depth fundamental analysis, focusing on their ability to create sustainable value. This is determined by the attractiveness of the industry, competitive advantages, management stewardship, and how the company deals with industry-specific ESG factors. We then determine the intrinsic value of the company and compare it to the current market price. Our equity strategy is based on the belief that investments that are in line with our sustainable investment policy, as well as investments in companies with good financial and non-financial ratios, combined with a well-considered diversification of investments, add value to our investment portfolio and to society.

In addition to the general exclusions we apply based on our SRI policy, such as companies involved in the production of tobacco products or controversial weapons, we examine companies based on our four pillars of sustainable value creation:

• Is the industry attractive?
• What competitive advantages protect profitability?
• Is management capable of creating long-term value?
• How does the company deal with ESG aspects to create value?

All these factors ensure the long-term profitability of the company. In other words, they create a moat around the company to protect its stability and profitability.

By striking a good balance between stocks from different sectors and countries, we build a portfolio that can withstand market shocks.