Bankia S A : publishes the first ‘impact report’ in Spain of a socially responsible fund

• Investment in 2019 in the 'Bankia Sustainable Future' fund has translated into savings of CO2 emissions equivalent to travelling around the world by train 300 times, among other positive impacts
• The product invests in companies that have a direct and quantifiable impact on 9 of the 17 Sustainable Development Goals established by the United Nations
• Its managers want to have a positive impact on five issues: 'clean water and sanitation', 'food and the fight against hunger', 'health and well-being', 'climate change and the environment' and 'poverty and inequality'

Bankia has published the first impact report of a socially responsible investment fund under the ASG criteria - environmental, social and corporate governance - implemented in Spain. This is Bankia Sustainable Future, the first 'impact fund' to be marketed in the Spanish market among retail customers. The product invests in companies that have a direct and quantifiable impact on 9 of the 17 Sustainable Development Goals established by the United Nations.

The impact report seeks to present an approximation to the real contribution of the fund to the achievement of the objectives set out in its prospectus. In this case, quantifying their contribution to achieving the selected UN Sustainable Development Goals.

This extra-financial report notes that the companies that make up the fund's portfolio 'have reduced their CO2 emissions in 2019 by 132.56 tonnes', which would be equivalent to '300 train journeys around the world', among other positive impacts.

'Bankia Sustainable Future' was created in 2017 with the aim of launching an initiative to support the objectives of the UN 2030 Agenda, approved two years ago by a group of 193 countries, which agreed on 17 objectives, known as Sustainable Development Goals.

The fund invests in companies that have an impact on any of the following five issues: 'Clean water and sanitation', 'Food and the fight against hunger', 'Health and well-being', 'Climate change and the environment' and 'Poverty and inequality'.

This seeks to impact nine SDGs: 'End of poverty', 'Zero hunger', 'Health and well-being', 'Quality education', 'Gender equality', 'Clean water and sanitation', 'Affordable and clean energy', 'Reduction of inequality' and 'Action for climate'.

'It is a fund that has two clear objectives, one is to make available to Bankia customers a vehicle through which they can invest directly in companies and funds that have a positive impact on the aforementioned issues, and the second, of equal importance, that this investment can yield them significant returns and in line with an equity fund', said Augusto Caro, director of Equity, Mixed and Employment Investment Funds of Bankia Asset Management (Bankia AM) and head of the fund management team.

Managers select assets with financial criteria, but do so within a universe based on the fund's socially responsible principles, previously defined by an external entity specialising in ASG investments.

External advice

For this task, Bankia AM has the advice of Portocolom Asesores EAF, a firm specialising in the consultancy, design and monitoring of sustainable portfolios. It is also responsible for preparing the fund's impact report.

'The objective pursued by the impact report is to provide the participants of the fund a real approximation to the contribution of their investments to the Sustainable Development Goals pursued by the fund', says Ana Guzmán, Portocolom's Impact Director.

'Our first step is to obtain a universe of companies in which Bankia Sustainable Future invests, both directly and indirectly through other collective investment institutions. In the latter case, we calculate the number of units that it would have if it were to invest directly in said companies. This allows us to know the stake percentage held by 'Bankia Sustainable Future' in each of the companies and to know the exact contribution of the fund to the sustainability impact these companies had', explains Guzmán as regards the methodology used when preparing the report.

To carry out the analysis of how the investments of the 'Bankia Sustainable Future' fund have impacted society through the five selected issues, the following aspects were analysed, among others: reduction of CO2 emissions generated by the companies in the portfolio compared to the previous year, decrease in energy consumption, decrease in water consumption, use of renewable energies, expenditure on R&D related to the environment, number of hours allocated to employee training, gender diversity and donations made to causes related to sustainability.

For each of the parameters, Portocolom has quantified the impact that the investments made by the fund have had during 2019.

The fund's impact in 2019

Thus, the report notes that the companies that make up the portfolio have cut their CO2 emissions by 132.56 tonnes. This reduction is equivalent to the emissions of 18 round-trip flights between Madrid and Sydney, to 300 train journeys around the world, or to prevent 86,300 tonnes of glacial ice from having melted.

Regarding energy consumption, companies in the portfolio have reduced it by 709,915 KW/h, equivalent to the consumption of 72 Spanish homes per year.

Regarding water consumption, the companies in which the fund has invested have managed to reduce it by 7,086.21 cubic meters. With this amount we could fill two Olympic swimming pools.

In the area of renewable energy use, companies in the portfolio have consumed 329,203 KW/h during the year, which is equivalent to the consumption of 33 Spanish homes per year in energy.

In the metrics of environmental R&D expenditure, the companies in which the fund invests allocated 6.6 billion euros during the past financial year, 65% more than the figure they reported in the previous year.

Additionally, portfolio companies increased their donations in 2018 by 21% compared to the previous year.

In addition to the impacts achieved by the investments made through the 'Bankia Sustainable Future' fund, which will increase on average as the fund's assets increase, the report also includes other types of information. Among them, the companies with the best results in each of the SDGs pursued, the fund's assets by subject or distribution by investment segment.

In the latter case, it is indicated that investment in the environment has the greatest weight in the fund, with 25% at the time of the analysis, followed by clean energy (nearly 10%) and medical tools and technology (with about 6%).

The impact report is completed with an in-depth analysis of the different themes of the fund and the most representative companies in the portfolio.

Financial profitability

In addition to this extra-financial return, investors have obtained a cumulative return of 8.20% (in universal class units) since its launch. Especially positive was the appreciation experienced by the fund over the past year, which reached 23.1%. And despite the drops experienced by the market after the Covid-19 crisis, the fund's behaviour during this year can be considered positive, as it only drops 1.81%. In addition, it should be noted that the fund has positive deposits in this financial year.

Bankia Sustainable Future is a Global Equity Fund, which invests a minimum of 75% in the stock market (either directly in shares or in other collective investment institutions) and a maximum of 25% in public and private fixed income, denominated in euros and belonging to OECD countries, with a minimum rating of 'BBB-'. Its maximum exposure in emerging countries cannot exceed 35% and it has currency risk.

In 2019, Bankia expanded the range of its funds with impact by launching the Bankia Sustainable Future Mixed fund, which invests, directly or indirectly, less than 30% of the total exposure in equity of companies with an impact on the same issues as its merger fund. In the rest of the investible assets, it allows the incorporation of other assets with a lower volatility impact, including the credit of the selected companies, green bonds, social bonds and government bonds, taking into account the SDG compliance rates.

Bankia has a Responsible Management Plan in line with its Strategic Plan and the Sustainable Development Goals. One of the objectives of this plan is the creation of a sustainable offer for investors and savers to have access to products and services that generate a positive environmental or social impact, hence in future the entity will continue to launch financial products and services along this line.

During the past financial year, Bankia joined the United Nations Environment Program. By adhering to the six Principles of Responsible Banking, financial institutions publicly assume the duty of aligning their activities with the SDGs and the Paris agreement, undertake to expand their positive impacts, reducing the negative ones, and working responsibly with their customers to foster sustainable practices, as well as involving stakeholders to achieve the objectives.