Sustainable performance for T-Shares.
Investors concerned with social responsibility are mainly interested in long-term returns instead of short-term profit. That makes their investments (socially responsible investments, SRI) particularly important when it comes to securing long-term capital for Deutsche Telekom AG. Which is why we consider SRI investment decisions in favor of T-Shares an incentive to increase our sustainability efforts.
SRI investment products generally consist of securities from companies that have passed an audit conducted in accordance with ESG criteria in the areas of environment, social issues and good corporate governance. This is why the development of demand for T-Shares from socially responsible investors serves as an indicator for assessing our sustainability performance. We measure the percentage of our shares held by funds that partially or primarily base their investments on SRI/ESG criteria in relationship to the total volume of all T-Shares. This value experienced a considerable year-on-year increase in 2013 to 20.6 percent. This can primarily be attributed to positive development among funds that at least partially base their investments on SRI/ESG criteria.
Transparency for analysts and investors.
Investors and stock exchange indexes concerned with sustainability often refer to ratings published by specialized SRI analysts. That gives these ratings considerable influence on our company's reputation in the financial industry. Which is why the rating given to our company by SRI analysts plays a role in determining whether or not we will be able to achieve our goal of keeping the medium and long-term capital costs of our company down. We support SRI analysts by transparently reporting on key sustainability topics, making it easier for them to give our T-Shares a positive rating. Our CR and Investor Relations (IR) departments conduct joint financial market roadshows on the topic, for example. As we did in 2013, we are once again planning such events for 2014. We also responded to numerous direct requests for information made by analysts and investors in 2013, covering the entire spectrum of ESG criteria, from climate protection and human rights to diversity.
Interested investors can obtain information on sustainability topics via different communication channels. We have been publishing key Telekom CR KPIs in our Annual Report for years now, including prognoses regarding our sustainable development over the next two years for the first time in our 2014 report. We have also added the Socially responsible investment (SRI) section to our investor relations portal. Investors interested in sustainability can visit the portal to find out more about our Board of Management's position on Telekom's CR strategy and our ratings in key sustainability indexes.
The Socially Responsible Investment CR KPI indicates the percentage of Deutsche Telekom AG T-Shares held by investors who partially or primarily take SRI criteria into consideration in their investment strategy. In 2013, 19 percent of our shares were held by investors who at least partially base their investment decisions on SRI criteria. As in the previous year, around 2 percent of T-Shares were held by investors who give priority to SRI aspects when managing their funds.
Socially responsible investment strategy for Telekom pension funds.
At Telekom, we take an integrated approach to socially responsible investment. Investments in the capital market made by Telekom for company pension schemes and similar obligations in Germany are also based on our sustainability principles. These principles were integrated into our socially responsible investment strategy for Telekom pension providers, which we introduced in 2013, in the form of exclusion criteria. They prohibit investments in companies that produce NBC weapons, anti-personnel mines or cluster bombs or that trade in these or have repeatedly violated the UN Global Compact principles. Telekom pension providers are also prohibited from purchasing government securities from governments that are subject to sanctions in accordance with public international law. Our pension providers agreed to our socially responsible investment strategy in 2013.
We are convinced that putting this strategy into practice will help improve our financial risk indicators. This strategy will also promote perception of Telekom as a socially responsible company. It helps us avoid high-risk and controversial investments and, instead, invest in long-term, stable assets that comply with our sustainability principles. We are planning to review our socially responsible investment strategy in two years and, based on our experiences, possibly introduce new approaches to complement our exclusion criteria in 2016.
As in previous years, the T-Share was rated favorably by analysts interested in SRI issues during the reporting period. The T-Share was listed in important rankings such as the StoXX Global ESG Leaders Index and received the oekom Prime status. It was also included in the new UN Global Compact 100 and iSTOXX Europe 50 SD-KPI indexes, which were introduced in 2013. Both are based on ratings by the Sustainalytics agency.
Deutsche Telekom was also named the 2013 industry leader in the "oekom CR Review." Unlike the detailed oekom rating, this interim update is conducted annually without consulting the company. All companies are analyzed using a standardized procedure and on the basis of an extensive list of around 100 individual criteria. Other industry leaders included Marks & Spencer, Renault, Coca Cola, Philips and Swiss Re. During the reporting year we again improved our result in the SAM rating, which assesses sustainability management performance, compared with the previous year. This improvement was, however, not sufficient for re-admittance to the Dow Jones Sustainability Indexes (DJSI), since requirements for entitlement have again been raised and the criteria have changed. We are working on being included once again in 2014.
The following table provides an overview of the most important sustainability indexes in which the T-Share has been listed in past years. here.
The number and complexity of rating inquiries involving CR continued to increase in 2013. That is why we focused on selected ratings in order to keep the workload involved at a manageable level. In coordinating the necessary resources, we also focus on adequate mandatory processing times to respond to inquiries. We also set great store by adequate insight into the rating procedures to enable us to better identify and address optimization potential in the company from the viewpoint of external stakeholders. Our goal is to always come out at the top, creating a basis for inclusion in key sustainability indexes.
We are currently seeing an international trend toward integrating financial and non-financial reporting activities. That means that key sustainability activities such as environmental protection, employee concerns and green products are increasingly being included in traditional management reporting. Telekom welcomes this development. Integrating our reporting activities encourages different Group areas to share information and increases credibility thanks to standardized audit and review standards. That is why we have begun consolidating our reporting processes step-by-step.
Responsibility is an integral component of our business activities, which is why we report on the responsibility we assume in different sections of our Annual Report and make reference to how sustainability contributes to added-value in our corporate processes. One of the tools we use are special indicators (CR key performance indicators, CR KPIs). We have been using these in our Annual Report since 2011. We also made a qualitative trend prediction for our most important CR KPIs for the years 2014 and 2105 in our Annual Report 2013 with the objective of more effectively integrating our financial and CR reporting activities. This statement refers to the Energy Consumption, CO2 Emissions and Sustainable Procurement CR KPIs. With this step, we intend to meet the changing demands of the capital market on the one hand and integrate CR more effectively into the different Group areas as an overarching issue on the other. We held a cross-department workshop on integrated reporting in October 2013 to intensify the connection between our CR and annual reporting activities.
The fact that we use our own CR KPIs in our Annual Report shows that Telekom values more than just financial indicators. Our CR KPIs can be effectively used in our financial reports thanks to the quality of the recording process they involve. Not only do we commission auditors to review the CR KPIs published in our Annual Report, we also have them review all of Telekom's CR KPIs. We also report on additional data involving ESG aspects within the context of our CR reporting activities. The majority of this data is also reviewed by independent parties.