dvfa_logo_reflex_blue      Ralf-Frank-DVFA


The German Financial Analysts Society DVFA is one of the most respected analyst & investment professionals societies in Europe. The managing director Ralf Frank explains here the history of the association and its ESG (environment, social and governance) issues in Germany. The association is located in Frankfurt and this interview was made in the late of January 2015.

Managing director of the DVFA Ralf Frank could you briefly describe your society history and the main focus areas?

DVFA started in 1960 as a professional association of financial analysts i.e. equity sell-side analysts. Throughout the years the association grew into a network of investment professionals meaning that to an increasing extent fund managers and other functions such as Financial Engineering, M&A, Risk Management joined DVFA. Today, the organization hat 1,400 individual members. Employers i.e. banks or asset managers cannot become members of the association. Membership is reserved for individuals who have to commit to a code of conduct and provide evidence of their continuous development and training. DVFA operates its own training school with more than 5,000 alumni in the German market.

DVFA is also one of the forerunners in ESG integration in investment decision processes and asset management. How would you describe the situation in Germany and the stage of ESG analysis?

ESG is a niche topic in the German market. This is due to the fact that institutional investors allocate most of their AuM (assets under management)  into non-equity asset classes. As ESG is predominantly a topic geared to stock-listed companies, demand of ESG in general has been very low. This said the small but brave ESG community looked into modeling ESG into investment decisions very early and has produced some convincing approaches as to how to integrate ESG into investment modeling.

What areas do you find the most interesting ones for ESG in Germany?

In the course of the Japan nuclear power station Fukushima accident German government has prescribed an energy transition (“Energiewende”) to the German economy, aiming at increasing the proportion renewable energy sources and at the same time stimulating the industrial sector of so-called green energy technology. However, some of the most needed enablers of the energy transition are high-scale and big dimension projects such as smart grids, or storage technology. These require large scale financing which institutional investors could potentially embrace as part of their ESG strategy.

You have developed also an ESG education & training/ how do you see the situation in Europe in general?

We have seen over the last 8-10 years that many investment professionals got more and more interested in sustainability, but failed to see as to how to integrate ESG data into their investment calculations and models. Full-fledged ESG integration into, say, DCF models or  WACC calculations are commonly described as the “holy grail” of ESG. The training program which we developed for the European Federation EFFAS takes into account that there is no silver bullet, one way of integration of ESG into conventional investment decision-making but rather a way of building a firm judgment by approaching a potential investment from several avenues.

How integrated reporting and ESG fit together?

Integrated Reporting is an approach that seeks to integrate conventional financial performance data with ESG data. While as an idea it sounds convincing, conceptually, it is quite challenging. Unless companies want to simply staple their financial and CSR packages together (which would not qualify as an integrated report!), they are faced with the difficult task of determining a) which ESG factors to choose (materiality), and b) how to describe how ESG aspects do influence the economic performance of the company (connectivity).

You have also developed ESG KPIs for some industry and service sectors. Could you tell more about this as well?

DVFA developed “KPIs for ESG” in 2008 and subsequently received an endorsement by EFFAS (the European umbrella organization of investment professionals’ associations). KPIs for ESG follow an investment approach as KPIs for 114 subsections are being defined following the Stoxx Industry Classification Benchmark. This allows investment professionals to use the sets of proposed KPIs when selecting stocks for sector-based strategy. By the same token KPIs for ESG provide companies with sets for their specific sector activities including formulas as to how to calculate the KPIs. Stoxx, a leading builder of indices used the DVFA/EFFAS KPIs as a base for their ESG Leaders Family of Indices.


See also this ESG education by European Federation of Financial Analysts Society (EFFAS):



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