Sustainable investing is facing massive interest from all sides, resulting in growing market volumes and increasing debates about standards and definitions. In its market study, Swiss Sustainable Finance (SSF) is shedding light on the developments relevant for institutional investors and illustrating the dominant trends in the Swiss sustainable investment market as well as international trends influencing local players.

Catastrophe bonds have become a core holding in many multi-asset portfolios since the start of the asset class in the mid-1990s, mostly due to their low correlation to traditional financial markets. In the past 20 years, catastrophe bonds have delivered more than 7% return per year and the asset class has grown to more than USD40bn of notional value. As sustainability-related topics have become more important, catastrophe bonds have emerged as an asset class of special interest from an ESG/SI perspective. While they are exposed to certain ESG-related risks, mostly climate change, they provide the financial capacity needed to reinsure residential properties against the effects of climate change. Sponsoring by the World Bank and the World Health Organisation in recent years highlight the acceptance of catastrophe bonds as a sustainable asset class.

The future of real estate is green:

• Cities and the build environment in general have a massive environmental footprint, accounting for 39% of total carbon emissions – more than double the emissions of the transportation sector.
• Demographic, socio-economic and technological trends are reshaping the way we use Real Estate today. With the real estate industry being disrupted on all fronts, as investors we see undeniable opportunities created by this volatility.
• Urbanisation is growing rapidly, with more and more population concentrated in cities. Two centuries ago there were just two cities with over 1m people, by 200 there were 390.
• Meanwhile, rising wealth inequality drives the lack of affordable housing worldwide at a time when the need for rental housing is rising as millennials start having families.
• On the tech front, e-commerce, autonomous vehicles etc. are changing rapidly the context and utility of cities as we know them.

This presentation will focus on the practical application of sustainable investing in U.S. small cap stocks, highlighting some of the opportunities and challenges that are present in the asset class. Key topics will include:

• The value of ESG analysis
• The opportunity of ESG in small caps
• Sustainability and engagement drive growth and differentiation
• Challenges of ESG analysis in small caps
• Practical application for ESG investing in U.S. small caps