On 8 October 2020, Ethos and BCV announced the conclusion of a strategic partnership with the aim to offer investors sustainable investment products. The first stage of this partnership is the transfer of the assets of six Ethos funds to BCV. These funds will now be managed by BCV Asset Management and run by Gérifonds, the group subsidiary in charge of fund administration.

These changes, which remain subject to the approval of the competent authorities, may raise questions from current investors in Ethos funds as well as from investors interested in these funds. Ethos and BCV have therefore jointly prepared a FAQ in order to answer as many of these questions as possible, whether they are general on the motivations of the partnership or more technical on the operation of the concerned funds.

This document is available below and will be updated on a regular basis according to the partnership progress. You can also contact with our client advisors should you have any questions et further requests.

 


 

General questions about Ethos, BCV, and the partnership

Questions about the products covered by this partnership

 


Who is Ethos and what is its core mission?

Ethos, Swiss Foundation for Sustainable Development (“Ethos Foundation”), was founded in 1997 and aims to promote socially responsible investment (SRI) as well as a stable and prosperous socio-economic environment that safeguards the interests of civil society today and in the future.

To achieve its objectives, Ethos Foundation created the company Ethos Services SA (“Ethos”). Ethos has developed unique know-how in the field of SRI. It offers a range of products and services, all dedicated to sustainability, to more than 300 clients, mainly institutional investors. It currently employs about 25 people and has offices in Geneva and Zurich.

Its services include investment funds, indices, analyses of shareholders’ meetings with voting recommendations, dialogue programs with companies, as well as non-financial environmental, social, and governance (ESG) assessments and ratings of companies.

Range of Ethos' services (in French)

Who is BCV?

Since 1845, BCV has been Vaud’s leading bank for retail and business customers alike. Its focused business model, consistently strong performance, and solid balance sheet make it one of the few banks in the world to be rated AA by Standard & Poor’s despite not being backed by an explicit government guarantee.

BCV is a full-service bank with strong local roots, offering a comprehensive range of financial products and services through its Retail Banking, Private Banking, Corporate Banking, and Asset Management & Trading businesses.

What roles will Ethos and BCV play in this partnership?

Ethos and BCV will jointly manage several investment funds.

Drawing on over 20 years of experience in environmental, social, and governance (ESG) analysis, Ethos will serve as the fund advisor and will be responsible for carrying out ESG analyses on each of the companies in which the funds invest. It will also exercise voting rights at shareholders’ meetings in accordance with its own guidelines and actively engage in dialogue with investee companies to encourage them to improve their ESG practices.

BCV’s Asset Management department will contribute its expertise in financial analysis and portfolio management, and BCV Group subsidiary Gérifonds will manage and administer the funds.

BCV has been working in institutional asset management for over 40 years. Its 80 specialists manage over CHF 20 billion in assets for retail clients and over 500 institutional investors, through asset management agreements and some 60 investment funds.

What is Ethos’ approach to SRI?

There are three parts to Ethos’ SRI approach:

  1. Exclude companies whose products are incompatible with the values defined in the Ethos charter (weapons, tobacco, gambling, adult entertainment, GMOs in the agrochemical industry, nuclear energy, coal, and unconventional fossil fuels) or whose conduct violates the fundamental principles of ethics and sustainable development.
  2. Prioritize investments in companies that receive an above-average ESG assessment (ESG rating) and show low carbon intensity (carbon rating) thanks to a proactive strategy that addresses climate change.
  3. Exercise shareholder voting rights in line with Ethos’ proxy voting guidelines and engage in dialogue with company management teams to encourage them to improve their ESG practices.

More information about this approach can be found in the document Ethos’ eight Socially Responsible Investment Principles.

What is BCV’s approach to SRI?

BCV takes a responsible and sustainable approach to investing by incorporating ESG factors into its investment process, primarily through exclusion, reweighting portfolios to prioritize companies that implement ESG best practices, and active ownership. It also offers thematic funds that invest in companies whose products and services are designed to have a positive impact on society and the environment.

La BCV et l’investissement socialement responsable (in French)

What were the reasons for setting up this partnership?

By teaming up with Ethos – a pioneer and recognised leader in the field of sustainable finance in Switzerland and abroad – BCV is able to considerably expand and strengthen its range of socially responsible investments. The partnership completes BCV’s approach to SRI and, more broadly, with the bank’s commitment to being a responsible corporate citizen in all of its business activities. With Ethos’ in-depth expertise in sustainable investing, BCV is able to apply ESG criteria more quickly to most of its investment products.

For Ethos, BCV is the ideal partner: it has a strong track record in institutional investing in Switzerland, is close to its customers and, more than anything, remains dedicated to addressing the challenges inherent in sustainable development and responsible finance. Ethos and BCV are an excellent fit in terms of their respective skills and they are working to make sustainable investment funds available to as many institutional and retail investors as possible.

Which investment funds are included in the BCV – Ethos partnership?

The partnership covers five Ethos subfunds:

  • Ethos – Equities CH Indexed Corporate Governance
  • Ethos – Equities Sustainable World ex CH
  • Ethos – Bonds CHF
  • Ethos – Bonds International
  • Ethos – Sustainable Balanced 33

These five subfunds make up an umbrella fund that was managed and administered by and held with Pictet Group. The fund have been transferred to BCV Group on April 1st 2021.

Following the transfer, the bond subfund Ethos – Bonds CHF will be merged with BCV’s Swiss Franc Bonds. That merger is likely to take place at the beginning of the second half of 2021 at the latest.

A new fund, Ethos II – Ethos Swiss Sustainable Equities, has been launched on 19 November 2020. It uses an active management style and apply Ethos’ ESG criteria to select the Swiss equities in which it invests.

In the medium term, Ethos and BCV also plan to launch new investment products and apply ESG criteria to other existing products.

Except for the launch date of the new Ethos II – Ethos Swiss Sustainable Equities fund, the timeline given here is indicative, since the dates are subject to the approval of the Swiss Financial Market Supervisory Authority (FINMA).

Which investment products continue to provide historical data?

Historical data on the following Ethos subfunds remain available for:

  • Ethos – Equities CH Indexed Corporate Governance
  • Ethos – Equities Sustainable World ex CH
  • Ethos – Bonds International
  • Ethos – Sustainable Balanced 33

As the bond subfund Ethos – Bonds CHF will be merged with BCV’s Swiss Franc Bonds, historical data on this fund will no longer be available; the BCV fund into which it will be merged will provide historical data instead.

Finally, the new Ethos II – Ethos Swiss Sustainable Equities fund begun providing historical data on its launch date.

What do shareholders of the Ethos subfunds need to do if they want to continue investing with Ethos?

Nothing. Current shareholders keep their shares in the Ethos subfunds.

BCV’s terms for selling shares have come into effect since the transfer has been completed.

Are Vontobel-Ethos and Clartan-Ethos funds covered by the partnership?

No. The BCV – Ethos partnership does not cover the Vontobel Fund (CH) – Ethos Equities Swiss Mid & Small or the Clartan – Ethos ESG Europe Small & Mid Cap funds.

Are these investment products for all types of clients?

Yes, in line with the existing fund contract, the products remain available to both retail and institutional investors.

After the transfer of the funds, a new fee structure will be submitted to the FINMA in order to offer fee classes according to the volumes invested or the type of underlying service. The following structure is expected to come into effect from the third quarter 2021:

  • Class A: open to all investors
  • Class B: open to
    • Investors buying and keeping at least CHF 5 million of shares in the subfund
    • Ethos clients or Ethos Foundation members
  • Class C: open to investors buying and keeping at least CHF 30 million of shares in the subfund

All rules relating to the minimum investment and status required to invest in the subfunds will be set out in the corresponding fund contract.

The new fee structure is expected to come into effect at the beginning of the third quarter of 2021. Until then, the current tariffs are maintained.

What are the all-in fees of Ethos’ funds since the application of BCV's fee structure?

The intended total expense ratios (TER)* are as follows:

  • Ethos – Equities CH Indexed Corporate Governance: 0.30% (Class A) / 0.20% (Class B) / 0.15% (Class C)
  • Ethos – Equities Sustainable World ex CH: 1.25% (Class A) / 0.70% (Class B) / 0.50% (Class C)
  • Ethos – Sustainable Balanced 33: 1.25% (Class A) / 0.70% (Class B) / 0.50% (Class C)
  • Ethos II – Ethos Swiss Sustainable Equities: 1.15% (Class A) / 0.70% (Class B) / 0.50% (Class C)
  • BCV Swiss Franc Bonds: 0.60% (Class A) / 0.30% (Class B) / 0.25% (Class C)

The new fee structure is expected to come into effect at the beginning of the third quarter of 2021. Until then, the current tariffs are maintained.

* For existing BCV bond funds, these are the most recent published TER figures.

What management styles is applied to the funds?

The portfolio managers in BCV’s Asset Management department manage the portfolios of the funds covered by the partnership. These teams have tried-and-tested experience and currently manage over CHF 20 billion in assets, primarily for institutional investors.

The BCV teams that manage the Ethos funds and the management styles used are as follows:

  • Ethos – Bonds CHF and Ethos – Bonds International: Fixed-income team – active and discretionary management
  • Ethos – Equities CH Indexed Corporate Governance: Swiss equities team – passive management
  • Ethos II – Swiss Sustainable Equities: Swiss equities team – active and discretionary management
  • Ethos – Equities Sustainable World ex CH: Quantitative equities team – active and quantitative management

How is Ethos’ non-financial analysis used when building investment portfolios?

Ethos applies its eight SRI principles to all of its investment products. Those principles form the basis of sustainable investment policies specific to certain asset classes and investment styles.

For equity funds
The Ethos approach focuses on long-term value creation by the companies in which the funds invest. Using non-financial criteria, Ethos selects companies that adopt environmental, social and governance (ESG) best practices and whose products and services have a neutral or positive impact on the environment and on society as a whole. Companies’ carbon footprints and climate strategies are also taken into account.

For bond funds
The Ethos approach involves allocating capital to public- and private-sector issuers that adopt sustainability strategies as an integral part of their business model, and therefore contribute to and help promote sustainable development. Ethos also believes that issuers with effective ESG policies can reduce default risk over the long term and offer superior long-term financial returns.

Given the various types of bond issuers, Ethos has developed analysis processes specific to each.

What is the timeline for the various steps of the partnership?

The Ethos fund has been transferred to BCV on April 1st 2021.

The BCV fixed income - BCV Swiss Franc Bonds in which Ethos Bonds CHF will be consolidated - integrates Ethos ESG approach since January 1st 2021.