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Integration of ESG criteria

Integration of ESG criteria in the investment approach for KfW’s liquidity portfolio

Since 2008, in addition to the credit assessment of the issuers, we have also been including their sustainability rating in our investment decisions for the liquidity portfolio.

The sustainability ratings for the issuers in the liquidity portfolio are provided by the sustainability rating agency ISS-oekom. ISS-oekom is the division of ISS ESG that is responsible for the generation of sustainability ratings within ISS group. ISS-oekom takes into consideration a variety of individual criteria, which are grouped into the so-called ESG criteria (Environment, Social und Governance).

Examples for ESG criteria for companies:

Best-in-Class approach (since 2017):

In 2019 we have methodically adjusted our Best-in-Class approach established in 2017. This approach now stipulates that for the liquidity portfolio we will only invest in bonds of issuers whose sustainability score is among the best 50% of the respective sector. Sovereign bonds are eligible, if the country has reached “prime” status with regard to its sustainability rating. This approach has the objective that only bonds of issuers with a relatively good sustainability rating within the respective sector are part of our liquidity portfolio universe.

Besides, we want to send out a powerful signal to the issuers, stating that an issuer‘s sustainability performance is a key criteria with regard to a potential bond investment for our liquidity portfolio.


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