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What trends worldwide are driving demand for responsible investment?

When you look at industry trends, there are many initiatives going on. For example, there is the United Nations Principles for Responsible Investment (UN PRI) initiative, which we have been signatories of since 2008.

Over the past year, the UN PRI has seen a huge increase in signatures. There is the Climate Action 100+ initiative and we are part of that.

There are also a lot of ongoing regulatory actions, as well as soft regulations, such as the Task Force on Climate-Related Financial Disclosures (TCFD).

In another major development, on 18 February, the PRI announced that TCFD-based reporting is to become mandatory for PRI signatories in 2020.

Overall, there are a lot of initiatives that are aligning now and really pushing the industry into disclosure.

I also believe there is a higher awareness by society of the importance of sustainability.

What does responsible investment mean? How do you define being a responsible investor?

At DWS, we integrate ESG (environmental, social, governance) information into every step of our investment process, such as in our own analysis and portfolio construction.

Our database, the ESG Engine, is our proprietary software, which combines data from six leading ESG vendors, so we get information for almost all liquid asset classes.

As well as receiving scores from the leading ESG vendors, we also perform our own deep company analysis to see which are the key impacts on the financials, valuation and investment case.

To produce our internal analysis, we ensure our analysts are trained about the core ESG key performance indicators for each sector and how to include that in a company's valuation and recommendation.

All this information is then accessible to our fund managers and research team.

We believe we are one of the first global asset managers to integrate ESG criteria into our CIO View.

We also look at ESG trends globally and analyse their financial relevance on different sectors.

For example, we started with climate change and have examined which business sectors could be positively and negatively financially impacted.

Overall, I would say disclosure levels in the small cap space and in emerging markets can still be improved, and we are pushing our investee companies to look at ESG topics and increase disclosure.

What have been the business benefits for DWS by being a responsible investor?

Many people claim if you run ESG funds or you integrate ESG into investment, you always sacrifice returns.

But Morningstar analysis published in January this year showed that ESG funds have proved resilient in the face of market turbulence.

The Morningstar analysis showed that sustainable funds performed well last year compared to their peers with the returns of 32 sustainable funds landing in the top quartile of their respective Morningstar categories, while 62 finished in the top half.

What's your view of the European Commission's sustainability action plan?

I think the plan is very useful because we have experience from other countries, such as the Netherlands or France, where we have seen that regulation is always a trigger to moving responsible investment in the right direction.

One of the most urgent tasks we believe is the robust classification and labelling system for sustainable investments and green finance.

Currently, there is a fear of green washing because we don't have a robust classification. Looking forward, there is discussion of climate-related benchmarks, like low carbon indices, and we believe that is a great starting point.

The benchmarks should not be too technical and it's important to have more transparency on the standards.

I also think the benchmarks should not stop with low-carbon or positive-carbon impact benchmarks and they should also integrate physical climate risk factors and ESG information as well.