On the other hand, the SNB employs ESG criteria in the management of its equity portfolio via a selective exclusion policy. Since 2013, it has refrained from acquiring shares in companies whose products or production methods seriously violate ethical principles – notably, firms that produce internationally condemned weapons, seriously violate fundamental human rights or systematically cause severe environmental damage. Such exclusions, which also apply to our corporate bond portfolio, enable the SNB to align its asset management with the fundamental values and norms of our country. How does the SNB go about identifying the companies to be excluded? It follows a clear and structured process, in which it draws on the knowledge of external experts. With respect to the environment and human rights, we regularly evaluate our investments in a two-step process. First, an expert consultancy collects all publicly available information and then draws up a warning list containing high-risk companies (i.e. companies that most likely meet our exclusion criteria). In a second step, another specialist firm evaluates these allegations in detail and prepares a full report for each high-risk company, accompanied by a recommendation. The final decision on whether or not to exclude a company is taken by the SNB. In addition, the SNB exercises its voting rights for a portion of the shares in its portfolio. It focuses on aspects relating to good governance. Good governance contributes to the positive development of a company, which ultimately improves the return on our investments.
Any attempt on the part of the SNB to hedge this risk would increase the demand for francs, which would run counter to its monetary policy objectives. The SNB’s risk profile therefore differs significantly from that of other institutional investors. While the currency risk (orange shading in chart 4) represents 78% of the total risk exposure of our investments, in the case of a representative Swiss pension fund, this proportion is only 16%. Due to its particular risk profile, the SNB is exposed to significant fluctuations in its investment result from one quarter to the next. Given these fluctuations, we exploit all available room for manoeuvre in order to diversify our investments. This allows us to optimise our risk/return profile and maintain the value of our reserves over the long term. To do this, we invest in equities and corporate bonds. Equities are an attractive asset class for the SNB. Their high degree of liquidity ensures the necessary flexibility in monetary matters, while their higher return potential helps to improve the risk/return profile. The SNB differs from other central banks in that it has a relatively high equity exposure (currently 20%, cf. chart 3). Our equity portfolio, which is worth more than CHF 150 billion, is highly diversified. We invest in some 6,700 corporate securities from more than 40 countries. We hold shares in companies which together account for more than 95% of global market capitalisation. Overall, our investments are denominated in some 30 currencies around the world, including those of emerging economies.