18. Integrating Sustainability into Commodity Investing Alex Tobler, CFA
Head of Sustainable Investment, Berner Kantonalbank*
Dr. Marco Haase
Head of Research Sustainable Finance, Center for Corporate Responsibility and Sustainability (CCRS), University of Zurich
Peter Sigg
Senior Investment Strategist, LGT Capital Partners*
Introduction Generally, commodity investments can be divided into direct and indirect investments. Direct investments include real productive assets, such as agricultural land or physical commodities (e.g., gold), whereas indirect investments include debt or equities from commodity-related companies and commodity derivatives (see Figure 22). A main discussion concerning commodity investments and ESG or sustainability issues revolves around the impact of physical and derivative investors on commodity prices. Numerous organisations and political parties claim that commodity investments influence commodity prices, especially food commodity prices, which may, in turn, adversely affect food security in developing countries. This chapter focuses on ESG issues related to physical and derivative commodity investing, while leaving aside investments in real productive assets as well as debt and equity investments in resource companies.1
Commodity Derivatives Investing in commodity derivatives, which is done mainly via futures, is the most common way to gain commodity price exposure in an investor’s portfolio without buying or selling the physical underlying.3 Although investments are not directly made in physical markets, managers should still consider ESG issues. ESG concerns mainly relate to possible adverse effects *Authors’ Note: This chapter partially reflects the personal judgments of the authors and may not always be congruent with the opinions of Berner Kantonalbank or LGT Capital Partners.
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